How’s the American Airlines Merger Doing?

American Airlines CEO Doug Parker gave good marks for merger progress so far with plenty of work to do.

He cited progress implementing “the world’s largest code-sharing arrangement” between American and US Airways; US Airways joining oneworld and the transatlantic joint venture ith British Airways, Iberia, and Finnair; and re-banking the Miami hub to make for more attractive flight connections.

They’ve co-located facilities for the two airlines at 80 airports are “are negotiating for new contracts covering workers from both carriers.” (I’m not sure how it’s an accomplishment already to be negotiating as opposed to, say, ‘have negotiated’).

The airlines are profitable, though there are certainly some gaps in the operation like weakness in South America that American has bet heavily on.

I’d paint a slightly different picture. If the standard were simply, are flyers better off now than they were a year ago? the answer would clearly be no.

American miles are worth less due to the April 8 changes.
US Airways miles are worth less because of the elimination of the 90,000 mile business class North Asia award, tougher routing restrictions, and the loss of Star Alliance partners which offered better award availability in business class to Europe and Asia.
US Airways increasing the price of shared miles
Cross fleeting — US Airways operating some ‘American’ routes and vice versa. This means they put what they view as the right aircraft on the right and it’s part of integration for sure, but without status reciprocity it makes things very tough for flyers including changing flights when some in a given day are operated by one airline and some by another.

It’s not all bad, some news is mixed. US Airways is serving more food than before, while American is serving less.

And some changes were inevitable — which is why a simple ‘before and after’ comparison really isn’t fair. The death of the double miles award was going to happen no matter what. American was the last holdout charging ‘only’ double for extra (last seat!) availability on (most of) its flights. There was no way that was going to be sustained.

And the merger has probably given us at least a temporary reprieve from the programs going revenue-based. US Airways supposedly had such a program in the queue, shelved due to the pending merger. And now they’re more focused on integrating than changing.

The downsides for flyers are not all consolidation-driven per se, it’s that

American was probably too generous. Anything that’s more than one standard deviation better than the median in the industry isn’t going to last. The America West-ization of US Airways grows to American. Doug Parker sees little value beyond safe and on-time, and Scott Kirby sees little value in things that can’t be quantified clearly. That’s what gave us US Airways – a profitable on-time bus in the sky that used to charge for water. They know American is a different beast with different customers but they also believe (probably correctly) that American was wasteful and bloated.
Mergers don’t actually deliver. There are big promises to customers and to investors, but it’s very rare that a merger materializes with the potential promised — it’s like an IT project, I have never seen one that was delivered under budget and before deadline. Mergers don’t usually produce the ‘synergies’ they’re sold under. And they will always disappoint members from both airlines, members choose their frequent flyer programs in many cases because of the characteristics of those programs so necessarily changing to “take the best from each” (cough) is going to disappoint members that had chosen the benefits that they find changed, whichever direction most changes go.

I never saw a particularly strong legal case against the merger and I said so, because the rule of law matters and being honest rather than just self-serving matters. But I expect many more unhappy campers to come because that’s what airline mergers deliver.

That said, I still choose American because Delta runs a good operation but a lousy frequent flyer program and doesn’t work well for my routes, and United runs a lousy operation and a program that’s less good for my needs than American’s.

The best top tier status, delivering upgrades and 8 confirmed international upgrades valid on any fare.
The best first class awards with partners — United’s are too expensive, and there’s little availability in first class on Star Alliance partners to and from the US outside of the occasional Asiana flight and Air China. American’s awards are cheaper and first class is doable on several partners.

I always expect regression towards the mean, I’m glad I started flying American right before United and Continental’s big bang of their programs and passenger service systems. And I will keep focusing there at least until the current value proposition shifts materially.

You can join the 40,000 people who see these deals and analysis every day — sign up to receive posts by email (just one e-mail per day) or subscribe to the RSS feed. It’s free. You can also follow me on Twitter for the latest deals. Don’t miss out!

The post How’s the American Airlines Merger Doing? appeared first on View from the Wing.