The effects of the American Airlines merger
The new American Airlines will have a vastly improved menu of destinations, but is also likely see more reservation problems, lost luggage and frequent flier glitches. (Brian McDermott/AP)
Last week’s American Airlines-US Airways merger was considered a win-win for both companies, creating the world’s biggest airline, valued at $11 billion. The new combined organisation will retain the American Airlines name and offer more than 6,700 daily flights to 336 destinations in 56 countries (to compare, United, the second largest airline, flies to 186 destinations in 69 countries).
But while the statistics surrounding the alliance are impressive, the merger may not be a win-win for passengers too.
The logistics of a merger – combining two airlines’ reservation, luggage and frequent flier programs, not to mention integrating management and personnel – is usually messy at best. Industry watchers often point to the 2010 United-Continental union as an example, during which passenger experience suffered when reservations and frequent flier accounts were lost during the computer system integration.
Similarly, over the next year or two, American will likely see more reservation problems, lost luggage and frequent flier glitches than usual, as passenger information is misplaced during the transition. But there could be a silver lining amid all the turbulence – if all goes smoothly, passenger experience should eventually improve from its low 2012 rankings. Here’s what travellers can expect:
Because the American-US Airways merger removes one player from the already heavily consolidated US market and decreases competition, air travellers can expect modest increases in ticket prices industry wide, especially in smaller markets where there’s less competition, such as the Midwest or upstate New York. Prices may rise between 5% and 10% once the airlines merge, according to Seth Kaplan, analyst with Airline Weekly magazine, although on popular routes, such as New York to Los Angeles, competition is already so fierce they may not go up at all.
“At this time”, the two companies said in a statement, “American Airlines and US Airways remain independent airlines and all tickets will be honoured as such.”
In other words, nothing should change in the short-term, though travellers will likely have longer waits in reservation lines, as well as more computer glitches and scheduling snafus as the airlines begin to integrate their systems.
Delays and cancellations
American Airlines has long been ridiculed for its high rates of delays and cancellations. According to a January 2013 Wall Street Journal survey of the major US airlines, American had the highest rate of late and cancelled flights. The new alliance should help alleviate that, wrote Associated Press writer Scott Mayerowitz. “The AA-US merger will elevate both airlines to the same level as Delta and United. That’s because American can now take advantage of US Airways’ scheduling strategy, which is one of the best in the industry.”
Frequent flier programmes
For now, each company will maintain its current loyalty program and travellers will continue to earn and redeem miles through each individual airline. When the merger is complete in the third quarter of 2013, the frequent flier programmes will most likely combine, giving some fliers who have programmes with both airlines enough miles to cash in for a free ticket or upgrade to a higher status.
But American’s OneWorld Alliance has fewer partners than US Airways’ Star Alliance, giving travellers fewer options when cashing in miles. What’s more, as thousands of travellers see a sudden boost in their miles, American’s frequent flier program will be inundated with new elite fliers, potentially making it more difficult to upgrade.
Increasing destinations was one of the main reasons the two airlines decided to merge, and the new American Airlines should have a vastly improved menu of destinations. There is little overlap between the two airlines in terms of routes, so each will benefit from the other’s strengths: US Airways passengers will gain access to American’s international destinations, especially in Latin America, while American passengers will be able to connect to smaller US cities that are US Airway’s specialty.
In theory, the airlines will have more money to invest in better service thanks to increased profitability as a result of the alliance. So travellers can expect a better flying experience in the future – think newer planes, better seats, upgraded entertainment technology and more widely available wi-fi.