Does this mean the deal is done? Hardly. There are other creditors in the American bankruptcy proceedings that have to agree as well.Let’s not forget US Airways’ own unions as well as issues like seniority, work rules, integrating ground/maintenance/flight crews.
But, it was an important step towards a merger. What happens next? More court proceedings for American, more meetings between US Airways and other American bankruptcy creditors, and then, of course, there’s the bankruptcy judge and some upcoming rulings. Last but not least, federal regulators have to determine if a merger like this violates anti-trust rules or creates a major restraint trade issue. For the moment, the regulators seem to be the smallest challenge to the proposed merger, since there is very little overlap or additional market concentration formed by the merger.
About the only thing that is likely to happen, if a merger occurs is that the resulting airline would be called American and it would remain based in Dallas. Phoenix, where US Airways is based would most likely continue as a major west coast hub for the airline.
What does it mean for you? In the short term, absolutely nothing. At the very earliest, a merger probably wouldn’t happen for at least a year. First, American Airlines is likely to fight this — or insist on tougher terms. American doesn’t even expect to come out of bankruptcy until the end of this year, and a growing number of analysts are now projecting 2013 at the earliest.
It’s the long term impact that worries me. I have yet to see a merged airline substantially increase its routes or fleet of planes or improve service except on highly competitive overseas routes where they can make money in the business and first class cabins. I have yet to see a merged airline start–or even maintain–low fares.
The name of the game today is capacity reduction: fewer planes, fewer flights. And that translates to fewer seats. The law of supply and demand is quite unforgiving here — airfares have nowhere to go but up.
If you’re a member of either US Airways or American’s frequent flyer program, a combined new program may boast more routes, but the reality is fewer available award seats. My advice is to start planning ahead as much as you can so you can start to redeem those miles as quickly as you can. There is every reason to believe that no matter what happens — whether there is a merger or it never happens — those miles will be devalued in the days and weeks and months ahead.
For the time being, there’s no need to fasten your seat belts, but this could eventually be a very bumpy ride.
For more American Airlines history, check out:
- Peter’s CBS This Morning report on What American Airlines Job Cuts Mean for Consumers
- Peter and Terry Maxon look Behind the Scenes of American Airlines’ Bankruptcy
- Peter’s Travel Detective blog on American Airlines’ Bankruptcy, Mileage Programs & Industry Changes
- Peter’s CBS News Report on American Airlines Announcing the Largest Order in Aviation History
By Peter Greenberg for Peter Greenberg Worldwide
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