Chicago would benefit from combined US Airways-American: experts
BY FRANCINE KNOWLES Business Reporter email@example.com February 13, 2013 3:30PM
UAL Terminates US Air Merger
Updated: March 11, 2013 6:46AM
With reports flying that an American Airlines and US Airways merger appears imminent, BestFares.com Chief Executive Officer Tom Parsons says if it happens, Chicago-area travelers will see benefits, and prices shouldn’t spike here.
Bloomberg News reported that the two airlines had reached agreement and that American’s board was meeting Wednesday afternoon, after which US Airways board was expected to meet. Airways magazine quoted sources as saying a merger would be announced Thursday morning.
US Airways CEO Doug Parker would run the combined airline, and its headquarters would be in Dallas, rather than Phoenix, where US Airways is based, according to reports.
Such a mega-merged airline would edge past Chicago-based United Continental Holdings to usurp it as the world’s biggest carrier by revenue, and it would have an initial combined workforce of more than 113,000.
“This will probably give folks in Chicago under the name of American more options, especially to the eastern part of the United States, and also probably more non-stops to the Caribbean right now,” Parsons said.
“You’ll have more one-stop service out of Chicago into Europe. You’ll either be able to fly non-stop or one-stop to a ton more cities than you did before.”
Business travelers and other frequent fliers who want to stay on the same airline to build up brand loyalty to get upgrades and perks will be happier with the deal, because it will give them more opportunities to earn miles everywhere they fly, except maybe Asia, he said, where United and Delta will remain the biggest U.S. players.
The new airline would boast at least 69 million frequent fliers.
US Airways executives told the Chicago Sun-Times last July that Chicago would benefit more than any other market if the airlines combined. Their merged networks would offer improved service through 539 daily departures with nonstop flights to 114 destinations around the world from Illinois.
A US Airways-American merger would make it possible for passengers flying out of Chicago to connect to more markets on the West and East coasts than American as a standalone airline currently offers, and it would support international growth, particularly benefitting business customers, said Scott Kirby, president of US Airways Group Inc.
Over time, it means “more service, more cities that you can serve. You create a third competitor” to United and Delta, whose networks are currently much bigger than American’s, he said.
American, which has 480 flights out of Chicago and employs 9,250 employees in the metropolitan area, including workers at American Eagle, declined to comment on merger plans.
US Airways spokeswoman Michelle Mohr also declined comment. The airline signed a non-disclosure agreement with American last year, but the agreement expires Friday, fueling speculation that a decision could arrive within the week.
US Airways has long pushed for the merger, pursuing what had been a reluctant partner in American. American filed for bankruptcy protection in November 2011 and is looking to strengthen its brand to compete with the other behemoths. Likewise, smaller US Airways stands to gain from the partnership.
While American lost roughly $10 billion over a decade, US Airways has been more consistently profitable, hitting a record last year with a net profit of $537 million.
Parsons noted there is little overlap on routes served by the two carriers nationally. American and US Airways overlapped on only a dozen non-stop routes as of January, and hardly at all on routes linking Chicago O’Hare and New York’s LaGuardia, the nation’s busiest markets.
Due to the competitive landscape in the Chicago market, Parsons doesn’t foresee prices rising here if the airlines ink a deal.
“You still have competition from several different airlines,” including Virgin America, Spirit Airlines and most importantly Southwest Airlines, which with its subsidiary AirTran Airways serves 100 U.S. cities, he said.
“That still will put pressure on the other airlines to follow whatever pricing Southwest does,” Parsons said.
But looking across the country at small regional airports, where there is no competition, “I think they’ll get stuck with higher airfares,” Parsons said.
Others price watchers shared similar views.
“It does remove a future competitor from the mix ... which will ultimately drive prices up,” says Rick Seaney of FareCompare.com, noting that a combined carrier would likely lead to a paring of seats and flights.
“Bottom line is, prices will go up long range and capacity will be cut if it follows the lead of other mega mergers.”
Contributing: Sun-Times wires