Closing their long-awaited merger, American Airlines and US
Airways on Monday embarked on the daunting multiyear process of shedding their
former skins and forging the identity of the "new" American Airlines.
Day-one communications from executives repeated the phrase
"business as usual" to describe the early weeks. But after a deliberate
start to integration, deeper coordination and customer-facing benefits should begin
to appear in the new year.
In a memo to employees, new American Airlines CEO (and head
of pre-existing US Airways) Doug Parker set his initial sights on getting past
this month's peak travel period. "With the closing delay behind us, and
the busy travel season right around the corner, we have made the decision to
focus our attention on ensuring both airlines run a superior operation during
the holiday travel season," he wrote.
Parker anticipated that come January, "changes to the
customer experience will start to accelerate." First up would be the
establishment of a reciprocal code share between the carriers, which he called the
first steps to "align the combined network schedule."
The carriers next month also expect to enable passengers
"to earn and redeem miles when traveling on either American Airlines or US
Airways," and make available "reciprocal American Admirals Club and
US Airways Club benefits and reciprocal elite recognition," according to
the company, now called American Airlines Group.
Among other near-term goals, US Airways on March 30 plans to terminate
its participation in the Star Alliance and shift to Oneworld. The airline
already had stopped selling tickets via Star carriers, president Scott Kirby
said last month.
AA and US Airways in a presentation earlier this year indicated
the first six months following merger close would be marked by
"no-regrets" moves, which in addition to frequent-flyer benefits and
code sharing also would include the first efforts to optimize their combined
fleet. The airlines also had expected to harmonize some onboard offerings,
focusing on "easy-to-do stuff" like beverages and inflight food
services, according to presentation slides during a media presentation in April.
The company, however, has yet to put firm timelines around
other customer-facing initiatives, including a singular website, a truly
combined frequent-flyer program, co-located airport facilities and harmonized
products, among others. But they expect to quickly begin addressing the
corporate market as one entity.
The Sales Plan
Leading corporate sales and account management efforts, the
incoming management team in July appointed AA vet Derek DeCross to
maintain his role as vice president of global sales for the merged carrier.
In a Dec. 9 memo to corporate and agency clients, DeCross noted
that contracts with each carrier for the near-term would "remain the
same," with more detail emerging "in the coming weeks and months as
we work toward providing you with an enhanced combined network and
contracts."
Yet, the plan is to quickly "provide you with a single
point of contact in the U.S. market" to represent both carriers, DeCross
wrote.
The combined sales force already is taking shape, and DeCross
in a separate memo to staff noted that the company "early next year" would
reveal "an interim organizational structure for U.S.-based employees"
to deliver single points of contact to clients. "At this time, there will
be no changes for our internationally-based colleagues," he noted.
"I'll ask that you please do not overanalyze these
interim account assignments," he wrote to staff, "which we hope to
announce internally in the coming weeks. They were made pragmatically, starting
with a few key data points such as revenue and proximity to the account, with a
second review to create balanced territories. The goal is to establish a
workable structure, removing the burden of coordination from our customers.
Because you will be doing the coordinating behind the scenes, we expect
everyone to be very busy."
DeCross, meanwhile, told clients, "We expect to share
more details soon about the changes each airline’s customers will see in early
January, which will include information on loyalty program benefits, codeshare
implementation, proposed co-location efforts across the network, and proposed
policy and procedural changes."
For Better Or
Worse
Collecting responses for its Annual Airline Survey in the
summer and fall this year, BTN asked corporate
travel buyers to describe the impact they expected from the merger.
The responses were mixed, with quite a few bracing for
service cuts, diminished competition, fare hikes and reduced leverage for
buyers.
"I'm assuming the merger will eliminate and reduce
routes where both American and US Airways are currently flying," according
to one. "That likely will result in less flexibility and higher prices for
our travelers. The merger will hinder, rather than grow, our market share with
these carriers."
University of Texas director of travel for intercollegiate
athletics Kevin Maguire can be counted among the pessimists. "I do not
expect fares to be lower," he said during a BTN conference in Dallas last month. "That’s the great promise
when you have these mergers. I expect to see change to customer service in the
negative. You'll start to see more fees to pop up. Fares will hold steady for a
couple of months then move up very quickly."
Others responding to BTN's
survey were a little more optimistic. One buyer noted that as the merger
increases the scope of the combined AA, additional routes would become eligible
for corporate discounts.
Another respondent expected "a very positive
impact," as the merged carrier would "provide a third competitor"
to Delta and United, whose networks were far larger than those of standalone
American and US Airways. As such, the merger likely would "improve fare
options and network choices," another buyer wrote.
Noting that US Airways did not offer a small business program
to match the American Airlines Business Extra program and similar programs from
other carriers, one corporate buyer was optimistic that "we will now be
able to capture our US Airways volume under the AA program, assuming they keep
that as is."
AA would appear to have a better standing than US Airways in
the corporate market, judging from its second-place finish in BTN's airline survey. US Airways placed
fifth. Quite a few buyers indicated a preference for AA's approach to the
corporate market and its personnel, but there were exceptions. One buyer
pointed to "a really great relationship with our current US Airways rep—AA
not so much."
As for the ultimate impact, one buyer "won't know until
we try to negotiate with them." For others, the merger's impact hinges on execution.
One respondent noted an intention to "wait and see how painful and bumpy
the actual merger is." Another, representing a Dallas-based company,
fretted that "the impact on our program will be severe if the merger is
not handled well."
When it comes the complex task of integrating two major
airlines, the consensus among buyers and industry analysts is that Delta and
Northwest succeeded while United and Continental stumbled.
One survey respondent summed up the view by writing that if
new AA "can follow the Delta/Northwest merger, it will be fine."
Longer-Term
AA and US Airways expect the process of obtaining from the
U.S. Federal Aviation Administration a single operating certificate to take 18
to 24 months—after which they would effectively operate as a one airline.
"In the meantime, customers should continue to do
business with the airline from which travel was purchased just as they did
before the merger," according to a company statement.
Another key task in tying the airlines together is
consolidating to a single passenger services systems and establishing of a
common IT backbone.
Parker on the day the AA-US Airways transaction was announced
said that he anticipated shifting to AA's reservations platform, and
generally would defer to using the systems of the larger carrier to ease
integration.
In past airline mergers, "there has been a sizable
impact on the traveling public, and it came about with res migration," said
new AA COO Robert
Isom in April.