The Merger of American Airlines and US Airways

The Merger of American Airlines and US Airways

Ever since the Deregulation Act was passed in 1978 airlines have been merging with one another to reduce costs, avoid bankruptcy, increase revenues, and remove redundant and competitive flight schedules.  The benefits from a merger is intended to outweigh the consequential aspects such as combining aircraft types and labor forces, and differences in technologies onboard each company’s aircraft.  Consideration must also be made in regards to the consumer, and how a merger will change his or her air travel experience and ticket price.  Once American Airlines and US Airways are combined, there will be substantially less competition, and may cause ticket prices and baggage fees to increase.  Consolidation of the two airlines could cause airport hubs in relatively smaller cities to close as flights are cut, costing jobs and downsizing suburban airports.   Opponents of the merger are chiefly concerned with the potential raise in airfare and the reduction of in-flight services; all costing the consumer more money for less service.  In contrast, the Government Account Office determined there are only twelve routes that overlap between the two companies, making the two airlines complimentary to one another.  Additionally, once the merge is concluded the airline network created will offer more choices to customers for both domestic and international connections.  As the airlines combine their respective connections they will be able to offer more efficient routing options, providing a better service to customers.

A significant task when merging two airlines is integrating the seniority lists of both company’s pilots.  A commercial pilots’ place on the seniority list determines what schedules and routes are available to them, income levels, types of aircraft flown, and upgrades to captain.  It is clear why pilots of merging airlines do not take this issue lightly.  There are four essential goals when merging the seniority list of two companies.  The first is to preserve jobs and avoid any and all layoffs or furloughs.  Second, do not favor the seniority of one company’s pilots over the other, it creates a hostile environment.  The third goal for pilots merging is maintain their status at the very least, if not improve it.  Finally, do not hinder a pilot’s career expectations once the companies are successfully combined.  It is painfully obvious not all of these goals will be achieved in the process of merging two airlines, as was the case with US Airways and American West airlines.  The merging of these two companies took place in 2005 and is yet to compile a pilot seniority list that fairly represents pilots from both airlines.  Proposed agreements have strongly favored those of American West airlines, causing US Airways pilots to create their own union in opposition.  Integrating seniority lists cannot be given the same approach to each merger and with the four goals above in mind a dynamic solution can be reached.  Some aspects to consider when making a seniority list as fair as possible include pilot status and category before the merger, and avoid placing them lower in order if possible.  A pilot’s longevity with the company is also important to note, and includes time in service, date of hire, and furlough time (if any).  If any substantial safety record exists on a pilot’s record, this too may be a factor affecting their seniority. 

As the American Airlines and US Airways merger continues toward completion, the next process will be gaining approval from the Department of Justice (DOJ) Antitrust Division.   This is an essential step in determining economical outcomes from the merger include public interest.  Specifically, the Antitrust Division will decide if the combining of these two businesses will lessen competition to the extent the mergers are in a position to create a business monopoly.  It is likely the merger will happen and although the competition will be considerably less, it will also potentially benefit the consumer sufficiently to consider it a sound economical action. 

For anyone aspiring to a career in the airline industry, this merger is welcome news.  US Airway’s profits will very likely increase with the absorption of their chief competition.  The outcome will be an increase in routes, passengers, and aircraft, all of which demands more jobs to support this flying.  New pilots will be needed to fly an expanding fleet, which is complimentary to the looming pilot shortage we will possibly experience concurrent to the merged airlines acquisition of new aircraft and routes.  This means more baggage handlers, flight attendants, Boeing mechanics, and many more qualified personnel will be in demand throughout the next decade.

References

Perez, E. (2013, August 13). US government seeks to block American-US Airways merger. Cable News Network. Retrieved from http://www.cnn.com/

Reed, T. (2013, August 9). US Airways pilots look to endgame in seniority dispute. The Street. Retrieved from http://www.thestreet.com/

Steenblik, J. (2006, May). Managing the inevitable: What every pilot needs to know about mergers. Air Line Pilot, 14-17.

U.S. Government Accountability Office. (2013). Issues raised by the merger of American airlines and US airways (NIH Publication No. GAO 13-403T) Retrieved from http://www.gao.gov/assets/660/655314.pdf