It’s being reported that American Airlines is now evaluating potential mergers with US Airways Group Inc., JetBlue Airways Corp, Alaska Air Group, Republic Airways’ Frontier Airlines, and Virgin America. If you were CEO of American which merger would you proceed with? Or not merge at all?
US Airways, if you read the press, is the most talked about option. After reaching a deal with three of American’s big unions (Allied Pilots Association, the Association of Professional Flight Attendants and the Transport Workers Union) in April on merged contracts negotiations, US Airways has made it known that it would like to merge. The big losers in this merger are the employees of the combined HP/US. And the upside of this merger? Well 1) American would be bigger and 2)… well there is no 2.
A merger with Alaska has long been rumored, not only for American, but Delta and others. Alaska’s heavy northwest route structure has always been complimentary to American’s east / south coast structure. However, Alaska Airlines is like Switzerland, having partnerships, codeshares and (I can only assume) lots of passengers from many of American’s competitors. The passenger loads could be dramatically changed in a merger.
In addition, American has a terrible track record in west coast mergers – quickly closing routes and hubs. (Reno Air, Air Cal, and how I miss the SJC Admirals Club)
American and JetBlue have started codesharing on short regional flights that American doesn’t serve from JFK such as: Portland, Maine; Rochester, N.Y.; or Richmond, Va. However, as the two heavyweights at JFK and with JetBlue soon breaking ground on an expansion of their terminal, a merger seems unlikely.
I’m not even sure what to say on this one. American needs to grow its international routes the same way Delta has over the past few years. I don’t see how Frontier’s heavy domestic presence provides any synergies with American’s routes to allow that type of expansion. In fact their Denver hub is way to close to DFW to make any sense.
And last, but not least VX. While a possibility, I think this suffers from the same lack of benefit as Republic. Additionally I think the global Virgin brand would not consider a merger as their long term goals are quite different.
What do you think? One of the above? Or none at all? Don’t forget, as virtual CEO for the day, the “none at all” option comes with a giant payday that you might want to include in your decision.
Mr. Horton and his management team stand to receive somewhere between $300 million and $600 million if he can make it through bankruptcy court without merging first with a rival like US Airways.
Weigh in on your decision below or on twitter!