American, US Airways merger won’t make big impact at O’Hare
By tina sfondeles Staff Reporter November 12, 2013 10:28AM
Updated: December 14, 2013 6:21AM
The merger of American Airlines and US Airways will have a greater impact on other airports around the country than on operations at O’Hare International Airport, an airline consultant says.
The Justice Department said Tuesday it has reached an agreement to allow the two airlines to merge, creating the world’s biggest airline. The agreement would require American and US Airways to give up takeoff and landing rights or slots at Reagan National and New York’s LaGuardia Airport and gates at airports in Chicago, Boston, Los Angeles, Dallas and Miami to low-cost carriers to offset the impact of the merger.
At O’Hare, American Airlines will give up two gates, according to American Airlines spokeswoman Mary Frances Fagan.
Robert Mann, an airline industry consultant, said the merger “is not very meaningful,” considering the number of slots other airports will have to give up to low-cost carrier airlines.
Overall, Mann called the merger good for both airlines. At Washington National, the new American will end up with eight more slots than US Airways alone had. But that’s still 44 percent less than what combined carriers had.
In a statement, Mayor Rahm Emanuel praised the agreement, saying it solidified Chicago’s place as “the premier aviation market in the country” and the only city with major hubs for three of the top four domestic airlines. In addition to the American and United, Chicago is also a major destination for Southwest Airlines.
In August, the government sued to block the merger, saying it would restrict competition and drive up prices for consumers on hundreds of routes around the country.
The airlines have said their deal would increase competition by creating another big competitor to United Airlines and Delta Air Lines, which grew through recent mergers.
Tom Horton, CEO of American Airlines called the settlement a “common sense solution which addresses regulator concerns while allowing us to create the world-leading airline with the world-leading network this will be for our customers, our people and our investors. It’s a win-win-win.”
The two airlines will begin operating as one Jan. 7, said Scott Kirby, president of US Airways.
Kirby said both pilot unions have signed a memorandum of understanding, as have other major labor groups within both airlines.
“We hope for a smooth process and we used the last three months to get even further ahead on getting integration moving from Day One,” Kirby said.
Mann also said the deal getting done in 2013, as opposed to the first quarter of 2014 will be positive for the carriers because it will not affect the financial benefits of the merger at the network level: “It’s a very big deal. The idea that you can do this and still achieve the financial benefit is big.”
But Mann worried about the lack of emphasis on international revenue.
“The Department of Justice seems to ignore the fact that almost 40 percent of network revenue comes from the international market, and it was never addressed, certainly not in the settlement,” Mann said. “…This goes to the fundamental nature that the DOJ was really short on an understanding of how airlines compete.”
The settlement reached Tuesday would require approval by a federal judge in Washington.
Attorney General Eric Holder said the agreement would ensure more competition on nonstop and connecting routes throughout the country. The department called the slot and gate divestitures at key airports “groundbreaking.”
Horton said US Airways’ final bankruptcy court hearing is scheduled for Nov. 25, which he called the next major milestone in the merger process. He said the merger is expected to be closed in early December.