American Airlines And US Airways Merger?

Via Reuters, a very interesting development today from the American Airlines bankruptcy proceedings. AMR unions have had an extremely nasty public feud with management the past several months, and it only looks to deteriorate further next week as the company seeks permission in bankruptcy court to void labor contracts and impose new terms for restructuring.

In a dramatic twist, however, the unions representing American's pilots, flight attendants, and ground workers have struck a deal with US Airways that supports a merger between the two airlines. The deal would preserve 6,200 of the 14,200 jobs American says it would cut if they proceed with current plans. According to airline consultant Robert Mann, a scenario where airline unions actively support a merger is virtually unheard of, since it almost always means job cuts. He goes on to say, "For the American unions, it's a real indictment to the company's plan. In fact, they are casting their lot with the devil they don't know rather than the devil they do." Yikes.

US Airways has been actively exploring the possibility of a merger with American Airlines since news of the bankruptcy broke last fall, hiring advisers and even giving a presentation to representatives of AMR's unsecured creditors detailing the benefits of integration. But despite the support of the unions, any eventual deal will still require approval from AMR creditors, the management team, and its board of directors - which, at this point in time, seems highly unlikely.

As for the technical aspects of a potential merger, David Bates, president of the Allied Pilots Association, said in a letter to its members that a combined carrier would be branded American Airlines and be based in Fort Worth, Texas, which is where AMR is currently located. More importantly, the new airline would remain in the OneWorld global alliance. In addition, American's orders for narrow-body aircraft would proceed and the former US Airways system would be aligned with American Airlines routes to add more cities.

Personally, I don't see a huge downside to a merger. American is still quite a bit larger than US Airways, with a more well-known international presence, so it does make sense to maintain the branding. And with US Airways's reputation as the ugly stepchild of Star Alliance, and American's dominance of OneWorld, it's only logical that the combined airline would remain within OneWorld. I just hope they continue American's relatively generous award availability rather than follow US Airways' lead in tightening inventory. It's all speculation now though, as we'll see in the coming months what exactly will happen to American Airlines.