America West and US Airways last week officially cemented their merger. The new US Airways—now the nation's fifth-largest airline—last week began trading on the New York Stock Exchange under the 'LCC' symbol. This week, it continues to work through the complexities related to initial codesharing and to assess corporate contracts.
"We will be going out to our corporate accounts very shortly and giving them an interim proposal, and each one is different," said Travis Christ, an AWA executive who is the combined company's new vice president of sales and marketing. "There are cases where we think the contract AWA has would continue to make the most sense for a particular company and there are situations in which the US Airways contract makes the most sense. In other situations, we may try to adopt components of each."
Owing to competition laws at play even as the merger progressed, the two carriers have not had much time to analyze each other's corporate sales data covering hundreds of accounts. Nevertheless, Christ said, "Nobody is going to be left hanging on day one."
Longer-term corporate sales and contracting strategies won't be set until the two carriers settle on pricing structures and revenue management techniques. "AWA pricing and yield management is slightly different than US Airways', and that is a big piece of what happens with corporate contracts," Christ explained.
In an update on its Web site, Carlson Wagonlit Travel said, "The merged carrier will continue to partner with companies willing to shift share based on close monitoring of contract performance and the carrier's designation as a low-cost, full-service airline."
Meanwhile, the two carriers yesterday were scheduled to begin cross-selling each other's services across the combined network, for the first wave of codeshare flights scheduled for this week. That first wave includes 25 citypairs and will be followed by additional waves through December.
Global distribution systems present challenges not only in loading codeshare flights but also in the context of distribution agreements. Legacy US Airways, for example, this summer extended a content-for-discount deal with Sabre that requires the airline to list all fares and inventory in the Sabre GDS
(BTN, Aug. 1). America West has announced no such commitment and it is unclear how those two strategies can co-exist.
"There are a lot of decisions yet to be made," Christ said. "There are many dozens of large contracts that are still being discussed."
He added that the combined entity still is developing longer-term strategies for travel agency and corporate booking portals, two channels with which legacy America West had been happy. "There may be lots of hybrid products, as well," Christ noted. "This is the first airline merger since the Internet became a major distribution channel."
Both AWA and US Airways each distribute about one-third of their tickets through the Internet.
Meanwhile, the carriers have begun to co-locate facilities at many airports. In some cases, America West will move to gates occupied by US Airways. In other cases, the opposite will occur. At the same time, frequent flyer programs also are beginning to gel. The first reciprocal benefits are scheduled to kick in this week.
Other aspects of the airlines' businesses will remain separate for now, including their reservations systems, Web sites and operating certificates.
"Airline mergers always tend to be messy, but both airlines need this one," said Calyon Securities analyst Ray Neidl. "Although there is an experienced team at America West and they are getting additional market mass and equity financing, getting the merger to work and being competitive in the long term will be a major challenge."
Helane Becker, analyst with The Benchmark Co., said the combined company "is not likely to be profitable until the second half of 2006 at the earliest."