Sunday, April 11, 2010

United-US Airways Merger Talks Continue

From the Hat Trick's perspective this is not great news but better compared with my post on this subject yesterday. According to an article in The Street published last night merger talks between United and US Airways have become "very serious" and are at a "very sensitive stage" at this juncture. The deal could still fall apart, particularly given the opposition to the merger from the pilots and flight attendant unions, but could also very easily go forward given the strong interest in consolidation by both airline CEOs. The United States Department of Justice may also have some concerns given that US Airways has a large mini-hub at Washington Reagan National Airport and United's East Coast hub is located at Washington Dulles International Airport. A combined carrier would have a real choke-hold on this particular market and that might give pause to Justice. Remember when United tried to merge with US Airways in 2000? It eventually was shutdown after serious anti-trust concerns in were raised in 2001 by the Bush Administration's Justice Department...and a Republican department at that!

One positive note in the article is that it appears that United would be the surviving carrier in this merger. This is good news from the Hat Trick's perspective but I still have concerns. Mergers always seem to look good on paper but in actual implementation can be exceptionally tricky and have long lasting effects on the newly merged company and consumers. Recent history illustrates this quite well when America West Airlines merged with US Airways to become the new US Airways in 2005. Five years later the company is still dealing with significant labor and customer service issues. Other examples from the annals of airline history include (surviving carrier/name is listed first) the following:
  1. American-TWA
  2. Northwest Orient-Republic (Northwest)
  3. US Air-Piedmont
  4. Continental-Frontier (first incarnation)/New York Air/PEOPLExpress.
Even the recent merger of Northwest into Delta had its moments. Another serious concern for the Hat Trick is also the reduction in competition that takes place in any airline merger. Not every airport in the country can benefit from having a Southwest/Air Tran/jet Blue serve the city and at least some competition by major carries creates competition and keeps them honest.

So we will continue to monitor this story and see what happens...and at least be thankful that it appears the current US Airways management will not be running the merged carrier if this all goes through.

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