Marking the climax of a long and convoluted odyssey through bankruptcy court and an antitrust lawsuit, American Airlines today emerges from bankruptcy and merges with US Airways to become American Airlines Group Inc.
Still, the road ahead is lined with many months, even years, of fusion challenges that earlier airline merger partners met with varying degrees of success and failure.
Stocks of both AMR Corp., the longtime parent of American, and US Airways were traded for the last time on Dec. 6, with shareholders of both companies receiving equity in the new corporation, which will trade under the ticker symbol AAL. But it could be many months before management strictures imposed by the bankruptcy court fully give way to shareholder priorities.
In the short term, the merger reshapes the aviation market significantly. It leaves the U.S. with four major carriers — Delta Air Lines, United Airlines, American Airlines and Southwest Airlines — plus seven smaller carriers: Alaska Airlines, Allegiant Air, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, Spirit Airlines and Virgin America.
“There are 10 jet airlines out there — that’s all that’s left,” said Michael Boyd, president of Boyd Group International of Denver. (Boyd did not include Allegiant in his tally because he considers Allegiant a travel company, not an airline.) “They have their own strategies; they are not trying to compete with each other and take over each other’s turf.”
As a result, Boyd said, smaller markets like Sarasota, Fla., and Bangor, Maine, will gain access to the broader American network and thus better service. American, in turn, he said, will be able to tap into markets such as Sarasota, to which it previously did not have access.
Getting a single operating certificate from the FAA will take from 18 to 24 months, but travelers will see more immediate changes as early as January. American said in a statement that reciprocity between the two frequent flyer programs would begin early next month.
“AAdvantage members will be able to earn and redeem miles on US Airways and vice versa,” the statement said.
Jan. 7 appeared to be a key date, with US Airways President Scott Kirby saying in a November conference call that the new American will take the “first step in being a single airline for customers” on that day, resulting in a more “seamless customer interface.”
Aviation analyst Robert Mann predicted that the two carriers would move quickly to keep their best customers happy.
While American said it would not pin dates to what changes will happen when until sometime this week, industry observers predicted that other early moves will include sharing booking codes, which would enable the two carriers to place passengers on each other’s flights.
Moving US Airways from the Star Alliance to the American-led Oneworld alliance should happen early next year, though again, American said it would not be able to peg a specific date until this week.
Another big challenge will be synchronizing aircraft liveries and services. Harmonizing in-flight service should take about six months, Mann estimated, adding that the process should start in the spring and be complete by fall.
Repainting planes will come last, he said. Aircraft that US Airways has on order will be configured according to American’s layout as part of bringing the services offered by the merged carriers into sync.
The merged airlines also face the daunting task of merging their back-office commercial and financial systems, which will have to be made to conform to the established systems of one carrier, embrace new standards or replaced, Mann said.
Joining reservation systems and passenger systems will mark major milestones but will also be especially tricky, Mann said, because “that is when customers and travel agents look for perfection.”
The two airlines also must integrate employee work groups, aircraft and route networks, all of which add up to “a very detailed process,” Mann said.
AMR Corp.’s and US Airways’ antitrust lawsuit settlement with the Justice Department and the attorneys general of six states adds another set of to-dos. Under that settlement, the airlines will, among other things, divest 52 slot pairs at Washington Reagan and 17 at New York LaGuardia. The new American will cut 44 of its 290 departures from Reagan and 12 of its 175 out of LaGuardia.
Another condition of the settlement included protecting service to small and midsize markets, but that goal remains somewhat fuzzy. Boyd pointed out that service to small communities is falling victim not to mergers but to the economics of aviation, which has become increasingly expensive.
“Twenty-five years ago, you could operate a 19-seat aircraft,” he said, but with the rising cost of flying, such planes have become too expensive to operate.
At least one aspect of the merger — changes in management — will be immediate. Doug Parker, former chairman and CEO of US Airways, is now CEO of the new American Airlines Group. Tom Horton, AMR’s former chairman, president and CEO, now serves as the new company’s chairman.
Follow Kate Rice on Twitter @krtravelweekly.