grahampros

Highly unlikely in this case so i wouldn't count on that in the least. This has been in the planning for a while so if the boards sign off, it's pretty much done. Parker did a great job of lining it all up.

CubsFanJohn

It depends. If everything goes right AA could be a force to be reckoned with then they would running scared if not well then... But we need to remember lower-yielding PHX will be cut and the higher-yielding AMR network will help the PHL & CLT hubs.

grahampros

Implementation will be the biggest key in how this works out. It's what DL/NW did well and what UA/CO have done poorly. I've accepted it's a done deal so now the real questions move on to how this whole thing is going to be implemented. That will be the driver of how successful they are. Those details are a ways off yet.

FWAAA

DL leads the industry in pilot wages, not in overall labor costs. Having just that one union (the pilots) helps a lot, as the DL FAs and other employee groups are not all that well paid and thus, somewhat low cost. About the bolded portion, you're right, but the improvements promised by Parker to the AA pilots return to them a fair portion of the cost-savings that were achieved in the Ch 11 case by increasing productivity and reductions in benefits. Horton claimed that the concessions cut AA's labor costs by 17% for all workgroups. And Parker's raises give back a bunch of that 17%. Therein lies the potential problem.

Parker had almost eight years of very low pilot and FA costs and failed to grow the airline despite those low costs. And now, just as those productivity cost savings are realized at AA, he's jacked up the AA labor expenses. Had to do that, of course, to get labor on board.

The changes to scope have nothing to do with costs - they will enable AA to achieve higher regional revenue.

MetricFlyer

Is there any chance that the US-AA merger will be denied by the USA or EU?

DL-NW and UA-CO were approved... look at how little that benefited the
public. They got away with it because there were still AA, US, plus other
airlines around. If US-AA merger is approved, it will create the largest
carrier and stifle whatever competition is left in the airline industry.

CubsFanJohn

I'd say about zero.

colmc

I'd say very unlikely.

ClipperDelta

Both Smisek (UA) and Anderson (DL) have been on record saying they actually welcome a AA-US merger as the last piece of the consolidation puzzle to fall into place. Parker has shown himself to be a "capacity discipline" kind of guy rather than a market-share-chasing CEO. Most carriers have been able to exercise capacity discipline in the last few years, and reap the resulting rewards - continued profits despite record fuel prices.

grahampros

The biggest cost issue that the combined will have to address is the snapping up of US's wages to AA's level. That likely means that a sizable portion of the US network will have to change ( ie downsizing PHX is the obvious example).

Scope has a lot to do with costs. It's why DL agreed to higher wages to get increased scope. Lot of flexibility to put larger regional jets on current mainline routes.

MAH4546

I welcome the merger, as long as it brings US Airways' service and programs up to AA's levels. I'm actually somewhat optimistic that that exactly will happen.

What about it? On board service on intra-Europe that is on par with everybody else, and a new, much heralded long-haul product that it shares with Etihad.

ClipperDelta

One can easily argue that the public benefits from having a stable and healthy industry -such as not having to worry about whether the airline from which you just bought your European honeymoon tickets for four months from now,will still be in business by then......

Post-merger Delta has been achieving some of the best operational metrics (completion factor, on-time performance, etc.) in its entire history - how has that not benefitted the customer?

Customers of the post-merger Delta and United are now able to stay on one airline pretty much for all of their travel needs (and hence accumulation of FF benefits) to all corners of the world - how has that not benefitted the customer?

grahampros

Few points. No little chance it wont be approved. Very little overlap in the network and that would be the only real reason for objections. There is little argument to be made it reduces competition. There is a much stronger argument to be made it actually increases competition with a carrier now on par in size with DL and UA.

2nd point, is there is and will remain plenty of competition in the industry. You will have 4 very large carriers ( which i include SW in this now since they are now essentially a legacy carrier) and the likes of Spirit etc if you're purely price driven.

3rd point,, more competition when it's reckless and bleeding red ink in the end doesn't really benefit consumers. It doesn't benefit the consumer when it's unsustainable and leads to bare bones service since their is no money to invest in a decent product/network etc.

FWAAA

Never in my entire life of several decades have I ever read a report that a CEO was scared or worried about their competition becoming stronger, so a "we think that merger will be good for the industry" would of course be the standard response from any CEO. CEOs tend to not publicly admit to being scared, frightened or worried that their competition is getting a leg up on them - as that would reflect weakness, and CEOs don't admit to weakness.

Understatement of the day. Certainly can't disagree with that, as I posted above, Parker has spent nearly eight years with the lowest pilot and FA costs among the legacies and didn't grow the airline. He has been all about capacity discipline.

That's a separate challenge for Parker as the MOU improvements to his pilots and FAs will cost in excess of $310 million annually for six years. My post was about Parker giving back a bunch of the cost savings just achieved by Horton.

My point was that scope has nothing to do with lower costs. Scope relaxation enables the airline to try to increase revenues. Delta agreed to higher wages for the pilots as the price exacted by that workgroup for changes that permit DL to fly more 76 seaters. So yes, that change in scope increased some of DL's costs. It certainly didn't lower them.

diver858

Regulatory agencies are primarily concerned with complaints from potential competitors over the public (particularly in the US), difficult to see where any major objections might arise on either side of the pond.

The DL-VS partnership is likely a better comparison. Branson was responsible for delaying the AA-BA alliance, current effort to obtain regulatory approval for DL-VS should mute any possible objection to AA-US from VS, any Sky Team member.

AS, B6 and Republic are all partners, stand to benefit from increased volume, difficult to see any objections from this direction.

Can't cite specific stats, but I believe that *A has a larger TATL network, removing UA or LH.

Effectively no overlap in US hubs, merged entity would likely give up some domestic PHL, PHX service if WN was able to get in the way.

Merged entity is not a serious player to Asia, so that flank should also be favorable.

grahampros

Exactly. I count these a big benefits to me as a consumer. Many seem to overlook the bigger picture that if you create a situation where none of the players can make a reasonable return on investment, eventually the service will no longer exist. Fares on an inflation adjusted basis even in this consolidating era are still FAR below what we saw in the period of regulation. You can just no longer expect fares that dont even cover costs.