Monday, February 18, 2013

Hwo the US Airways and American Merger Will Affect You


In 2010 US Airways planned to merge with United but the merger was blocked by the Justice Department who felt the merger would have created the world's largest airline, reduced competition, raised fares and harmed consumers.  On February 14, 2013 it was announced that US Airways would merge with American Airlines. The merger is expected to complete in the third quarter of 2013.  American Airlines filed Chapter 11 bankruptcy on November 29, 2011.  My how things change.    

American Airlines has more than 3,500 daily flights going to North America, the Caribbean, South America, Europe, and Asia and serving 56 countries.  American Airlines is the third largest airline next to Delta and United Airlines and has over 87,000 employees. The merger will expand flights to the West Coast and increase flights in Latin America and the Caribbean.

I am a rewards member of American and US Airways and received emails from both companies regarding the merger. Both companies assured customers that they will continue to receive the identical service and benefits from the rewards member programs with more opportunities to earn and use miles. The merger will keep the American Airlines brand.  Currently the companies will remain separate and maintain their own rewards member programs. 

The advantages of a company merger can include: financial leverage by freeing up cash and credit, increased market share, lower cost of production and operation, greater competitiveness, increase in stock value, acquired research and development information and patents, support from the other company through advice and name recognition, additional equipment and improved profitability.  

The disadvantages of a company merger can include: termination of employees, elimination of equipment, process time – mergers can last for year, legal expenses, merger costs, intangible costs, consumer and shareholder drawbacks, tax laws, short-term opportunity costs, potential devaluation of equity, diminished corporate performance and/or services, potentially reduced industry innovation, suppression of competing businesses, and decline in equity pricing and investment value.

The possible disadvantages for customers can include: reduced airline competition, fewer flights to smaller cities, increased costs, elimination of rewards programs, reduced rewards program perk, flight delays and a short-term decline in  customer service.

Don’t listen to the chatter from the media about the merger; wait until the merger has been finalized to get all the facts. Gain knowledge of airport jargon and listen how airline employees talk to each other. Ask the agent, “Where’s the equipment?” The agent will go to the computer and find out where your plane is and when it will arrive. If the plane is already at the gate ask the agent, “When are we scheduled to push back?” This means when will the plane take off.  If you want an upgrade ask, “How are the loads today?” This means how many empty seats do you have and the agent will let you know your number on the upgrade wait list or upgrade you immediately if there is no wait list.   

This knowledge will be to your benefit because you will not be viewed as just the average customer and the agent will be prone to provide you with more information.  We will just have to wait until the merger plays out to see if customers truly benefit as both companies have promised.

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