US Airways, American Merger Moves Closer

The possible merger of US Airways and American Airlines is a step closer. Three of American's biggest unions—pilots, transport workers, and flight attendants—announced they've agreed to support the merger. That's a big step because labor resistance is typically an initial impediment or a source of ongoing difficulty in airline mergers.

Here's some background: For some time, US Airways' management has been actively seeking a merger with American. Financially, this would be a minnow-swallows-whale merger, with US Airways nominally taking over the larger line. US Airways management has some experience with this process. The airline is the product of a similar takeover by much smaller (but financially adroit) America West.

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As in the earlier case, public reports say that the combined line would retain the American Airlines name. That's a no-brainer. American is by far the better known brand and, despite a recent bankruptcy, still has more value than the US Airways name. Reports also indicate that the company headquarters would remain in Ft. Worth; this is expected, given American's large corporate infrastructure in Texas.

But a merger still isn't a done deal. American's management, which wants to come out of the bankruptcy process before making any significant moves, is still opposing an immediate deal. And the U.S. government may get into the act. But American's just-posted $1.7 billion quarterly loss puts some real pressure on getting a deal done sooner rather than later.

As noted, pre-acceptance by labor is a big step toward a merger. And, despite the opposition of American Airlines management, US Airways has been trying an end run by wooing some of AA's major creditors. The game is on, for sure.

The outlook for you, as travelers, remains as we've said from the start: The losers in this deal will be employees, creditors, and stockholders. You won't lose frequent-flyer miles, frequent-flyer status, or any advance ticket payments.

But some of you could face an interesting challenge: Given its importance, you can bet that American will remain in the Oneworld Alliance. Your existing US Airways miles will therefore be used with Oneworld rather than Star Alliance partners, and that could be a problem if you normally build US Airways mileage by flying Star Alliance lines or use your miles for Star Alliance flights. We haven't yet seen any serious discussion of this problem, but there is at least some possibility of an approach that would allow you to continue with Star Alliance, at least for a while. We'll keep you posted.

Overall, however, the main change will be a different team running the show. And given the performance of the current team, that might not be so bad, either.

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