Merger could cre­ate in­te­gra­tion is­sues

Com­bin­ing Amer­i­can and US Air­ways into world’s big­gest air­lines likely to face hur­dles.

Austin American-Statesman - - BUSINESS - By Hugo Martin Los An­ge­les Times

A global re­ces­sion and a surge in fuel prices sparked a frenzy of air­line merg­ers and ac­qui­si­tions in the past decade, as car­ri­ers joined forces to stay air­borne amid eco­nomic tur­bu­lence.

Merger ma­nia is not over. The big­gest yet might now be in the works, com­bin­ing Amer­i­can Air­lines and US Air­ways into the na­tion’s largest air­line with up to 1,500 planes in its main line and re­gional fleets and more than 120,000 em­ploy­ees.

An­a­lysts say a merger be­tween Fort Worth-based Amer­i­can and Tempe, Ariz.based US Air­ways could be an­nounced as soon as Jan­uary. It would pro­duce a mega-air­line with an es­ti­mated value of about $8 bil­lion.

Air­line ex­perts de­bated the fi­nan­cial mer­its of a merger, but they agreed pas­sen­gers

could face some short­term headaches if a deal hap­pens.

“Merg­ers are never good for pas­sen­gers be­cause there are al­ways dis­rup­tions,” said Joe Bran­catelli, an air­line ex­pert and on­line colum­nist on busi­ness travel.

If merger his­tory is any guide, the in­te­gra­tion of Amer­i­can and US Air­ways could lead to reser­va­tion sys­tem glitches, la­bor dis- putes and a cut in ser­vices to some mar­kets, ex­perts say. Air­line merg­ers, they add, mean fewer com­peti­tors and thus higher fares.

“I be­lieve merg­ing the two com­pa­nies would be at least a two-year dif­fi­cult pe­riod with many chal­lenges,” said Ray Neidl, an air­line an­a­lyst for Maxim Group, a New York in­vest­ment bank­ing firm.

Ex­ec­u­tives of the par­ent com­pa­nies of US Air­ways and Amer­i­can Air­lines are meet­ing be­hind closed doors and de­clined to com­ment pub­licly on a po­ten­tial merger. But the union for Amer­i­can Air­lines pi­lots, which sup­ports a merger, says an in­te­grated Amer­i­can-US Air­ways would fly more ef­fi­ciently and of­fer more des­ti­na­tions.

Still, Tom Hoban, spokesman for the Al­lied Pi­lots As­so­ci­a­tion, con­cedes that “there are al­ways go­ing to be some op­er­a­tional chal­lenges.”

In­deed, air­line merg­ers rarely run smoothly.

Dozens of United Air­lines flights have been de­layed over the last year be­cause of com­puter glitches, ap­par­ently re­sult­ing from ef­forts to switch over to the reser­va­tion sys­tem for­merly used by merger part­ner Con­ti­nen­tal.

In­te­grat­ing la­bor groups, such as pi­lots, can also lead to prob­lems, such as strikes and job ac­tions.

US Air­ways com­pleted a merger with Amer­ica West Air­lines in 2005 but has yet to get pi­lots and flight at­ten­dants from the two air­lines to agree on in­te­grated em­ploy­ment con­tracts.

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