American, US Airways may marry out of need

American is emerging from bankruptcy. US Airways needs a big brother. Will the latest deal to create the biggest airline happen this time?

Only in the world of American capitalism can you add four and five together -- and come up with the number one. That would be the math if reports of a merger between American Airlines, the country's fourth biggest carrier by passengers, and US Airways, number five, pan out. The combined company would be the biggest carrier in the world.

But is it possible this is a match not of love but of necessity? Last man standing. Two drunks holding each other up. There are so many choices of metaphors for this potential merger between American and US Airways.

Henry Harteveldt,  a travel industry analyst with Hudson Crossing, offers another: “American Airlines is fine dancing by itself, but US Airways really needed to find a partner to dance with.”

Harteveldt notes that American has hubs in five major cities and flights to Asia, Europe and Latin America. But with hubs in smaller cities and less international presence, US Airways is not in the same position of strength. As both a wooer or wooed, Harteveldt says US Airways has been out of luck.

“Remember, US Airways tried to merge with Delta a few years ago, and that didn’t happen. United pursued US Airways, that didn’t happen,” he says.

Now it may be a case of love the one you’re with. Delta married Northwest and United got Continental. There’s no other big catch for US Airways or American. But American has been standoffish about the match. It’s turning itself around and expects to come out of bankruptcy -- on its own.

Yet mergers can have major financial pluses -- which could tempt American. Bijan Vasigh, professor of air transportation at Embry Riddle College of Business, says if you buy your competition, you have a powerful opportunity to set prices. Which can mean higher airfares and increased profits, because when companies combine there are opportunities to cut costs.

“Two airlines, they have two CEOs, two CFOs and two COOs,” Vasigh says.

If the merger between US Airways and American does happen, it will create a giant airline -- serving 167 million passengers. But that doesn’t mean you’ll be able to get a seat. Mergers can also mean fewer flights.

About the author

Sally Herships is a regular contributor to Marketplace.

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