Merger could create integration issues

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

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.