cloudboy
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AA/Us Merger - Two Airlines, One Parent?

Sat Dec 29, 2012 4:37 am

With all the talk about an AA/US merger, the focus has been on combing the two companies into one. Certainly this addresses teh issue of being as big as UA and DL. But, seeing that the UA/CO merger is going less than swimmingly, that US still hasn't completely managed to combine with the old American West let alone plunge ahead with AA, and there being some obvious major obstacles in getting both AA and UA pilots to agree, I am wondering if there is another option.

Could AMR holdings combine with Us Air, and operate two airlines - AA and US - under separate flags? Air Canada is launching Rouge as a discount carrier - I am wondering if this strategy might work for AMR. AA would be the "premium" offering, with US being the discount option. This allows the airline to get the benefit of both the premium and discount markets while tailoring both their product and their pay scales to the appropriate market.
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TWA772LR
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RE: AA/Us Merger - Two Airlines, One Parent?

Sat Dec 29, 2012 4:46 am

For some reasons companies in the US, unless the company being bought by a lesser company dates back to the 1800s and has a GIGANTIC brand recognition, don't like to do that.
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UA787DEN
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RE: AA/Us Merger - Two Airlines, One Parent?

Sat Dec 29, 2012 4:52 am

US companies don't really like that. For one, oblivious public wouldn't get the fact that they are one big company. Two, why? The AC rouge works based off of cold Canadian hubs and warm Caribbean islands. US and AA might have to consolidate hubs still, and a full interline agreement is more easily booked, navigated, and understood on one company and website. Plus, I think US pilots might like a pay raise with this deal. Also, two seperate express brands would be interesting.
 
doug_or
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RE: AA/Us Merger - Two Airlines, One Parent?

Sat Dec 29, 2012 4:55 am

I'm pretty sure union contracts would prevent them from operating as separate entities.
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bill142
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RE: AA/Us Merger - Two Airlines, One Parent?

Sat Dec 29, 2012 5:45 am

Quoting doug_Or (Reply 3):
I'm pretty sure union contracts would prevent them from operating as separate entities.

Or union contracts might make them look at two entities.

There are plenty of instances of two airlines under one parent around the world. The more relevant examples would be AF/KL or BA/IB
 
UA787DEN
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RE: AA/Us Merger - Two Airlines, One Parent?

Sat Dec 29, 2012 5:54 am

Europe works differently than the mess known as the US airline and government and merger system.
 
PHX787
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RE: AA/Us Merger - Two Airlines, One Parent?

Sat Dec 29, 2012 6:11 am

It's feasible but the least bit probable. I'd think it'd be a better way to do it though.
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Byrdluvs747
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RE: AA/Us Merger - Two Airlines, One Parent?

Sat Dec 29, 2012 7:39 am

Quoting doug_Or (Reply 3):
I'm pretty sure union contracts would prevent them from operating as separate entities.

Separate entities is something AA should have included in the term sheet. If it didn't, AA management committed another strategic error.

The ability to operate a separate carrier would be an absolute necessity if AA ever considered a merger with an airline with lower costs(B6 or AS)
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DocLightning
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RE: AA/Us Merger - Two Airlines, One Parent?

Sat Dec 29, 2012 7:50 am

Quoting Bill142 (Reply 4):
There are plenty of instances of two airlines under one parent around the world. The more relevant examples would be AF/KL or BA/IB

Not comparable. AF has one main hub at CDG. KL has one main hub at AMS. US airlines are multi-hub operations. While certain airlines have stronger representation in a given part of the country, most major US airlines have decent penetration into most markets.

Americans think of themselves as Americans and they think of US and AA both as American carriers. They are not going to have deep-seated nationalistic loyalty to one brand vs. the other (usually). Thus, there isn't a point in keeping both brand names as such.

However, one interesting idea is to keep the US brand as an LCC-type carrier operating North American flights and the AA brand for premium routes (eg. JFK-LAX/SFO/HNL) and international service. You could even arrange for separate FF programs: one that is optimized for customers who fly mostly domestic legs (Dividend Miles) and one that is optimized for frequent customers who fly mostly international/premium legs (AAdvantage), but with cross-redeemability.
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DLPMMM
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RE: AA/Us Merger - Two Airlines, One Parent?

Sat Dec 29, 2012 8:47 am

Quoting Bill142 (Reply 4):

The primary reason for keeping the different companies in the AF/KL and IB/BA situations is the bi-lateral air services agreements for Europe are still in individual countries names in many cases.

IAG would love to have a single airline as would AF for the cost savings.
 
AADC10
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RE: AA/Us Merger - Two Airlines, One Parent?

Sat Dec 29, 2012 9:47 am

Quoting cloudboy (Thread starter):
Could AMR holdings combine with Us Air, and operate two airlines - AA and US - under separate flags?

It is certainly possible, but it will not happen. Both DL and UA tried marketing low fare subcarriers (Song and Ted) not long ago but they did not work out. Offering a consistent unified service apparently had a better appeal than marketing sub-brands. A combined AA/US would operate under the American Airlines name even while many aspects of the carriers are still separate, with some remnants of the old America West still around (I have not read someone calling it American West for a while now).

As I keep saying, Doug Parker was an AA executive under Bob Crandall and I am sure he wants to take the old master's spot. He would be more than willing to roll everything up into AA, as long as he is in charge.
 
USAirALB
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RE: AA/Us Merger - Two Airlines, One Parent?

Sat Dec 29, 2012 4:45 pm

I suppose your asking if US and AA can merge in a way similar to KL/AF, BA/IB, LA/JJ. The answer is no, unfortunately, for a number of reasons. Airlines in the US (and most companies as well) don't really merge like they do in other parts of the world.

Quoting cloudboy (Thread starter):
AA would be the "premium" offering, with US being the discount option

I am confused about your discount/premium option. AA and US are both major international airlines, offering service to high-yielding destinations around the world. It would be difficult to change US from a full-service airline (I know they are traded as LCC but like it or not they are a full service legacy carrier) to an LCC. Airlines within another airlines DO NOT work well in the US, we can look at Continental Lite, Delta Express, Shuttle by United, Metrojet, Song, and Ted. It just doesn't work. Starting a LCC that operates both domestic and long haul international routes would be a risky move IMHO.
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deltal1011man
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RE: AA/Us Merger - Two Airlines, One Parent?

Sat Dec 29, 2012 7:28 pm

Quoting cloudboy (Thread starter):

no union with any intelligence would allow it.

Quoting Bill142 (Reply 4):
Or union contracts might make them look at two entities.

no. Union contracts would make one of the airlines be nothing but RJs as it would be against scope to have anything larger than 86 seat jets (on the US side) or 76 seats (on the AA side). (all of which have a hard cap limit also). No judge is going to force that on a union.

Quoting Bill142 (Reply 4):

There are plenty of instances of two airlines under one parent around the world. The more relevant examples would be AF/KL or BA/IB

Europe is not a country. Not apples to apples.

Quoting Byrdluvs747 (Reply 7):

Separate entities is something AA should have included in the term sheet. If it didn't, AA management committed another strategic error.

uh...you think the APA would allow for complete outsourcing? You do know that AMR didn't force terms on any of its unions right? All have agreed to contracts.....

Quoting DLPMMM (Reply 9):

The primary reason for keeping the different companies in the AF/KL and IB/BA situations is the bi-lateral air services agreements for Europe are still in individual countries names in many cases.


this
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cloudboy
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RE: AA/Us Merger - Two Airlines, One Parent?

Sat Dec 29, 2012 7:57 pm

I am not talking about an airline within an airline, aka TED or "Song. Both of those had problems separating themselves from their parent, and that is one of the big things that kept them from being successful. I am talking two separate airlines, owned by one holding company. You could establish codeshares and JVs and whatnot, but the two operations would be kept separate. I know US's cost structure is higher than WN and B6, but it is lower than AA's. More importantly, the airline image differentiates the two - you average passenger considers US to be a cheap airline, while AA is considered the "professional, upscale" airline.

Obviously this will negate some of the benefits of merging - eliminating hubs and duplicate routes. But the gain would be two market presences. I know US pilots would love the chance to get a pay raise, but I have a feeling management would be just as happy if they didn't get one. I would probably keep the same FF program across both, but... for instance on AA, if they focused on higher fares, would get better accrual rates and offer upgrade options, where as with US you would get lower accrual rates and perhaps only an economy plus section.
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toltommy
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RE: AA/Us Merger - Two Airlines, One Parent?

Sat Dec 29, 2012 8:08 pm

Quoting AADC10 (Reply 10):
It is certainly possible, but it will not happen.

Actually it is not possible. The scope clause in the pilot contract prohibits it. Each carrier has its own agreement regarding which aircraft must be flown by the parent carrier/company. In theory, I like the idea, but the unions would won't. The AA pilots wouldn't want to see growth at US, causing furloughs on one side vs the other.
 
Flighty
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RE: AA/Us Merger - Two Airlines, One Parent?

Sat Dec 29, 2012 8:43 pm

Nope. The primary gains from an AA/US merger are as follows (in order of importance)

1. Eliminate many cost items from AA's cost structure by piggybacking on US.

2. Improve the revenue of AA by adding US's side of the network (more schedule, faster service).

3. Rebalance traffic across all hubs, leading to automatic 3-5% efficiency gain (aka cuts).

The cross-fleeting you see at the other merged carriers is a major component. Also, a single IT system is a huge deal. That stuff can't really happen if you keep 2 certificates and operations alive indefinitely.

The labor situation would be no better than it is now. It would be more expensive. This is to be more than offset by cost savings outlined above. Humans are unpredictable -- and labor tensions natural -- that aspect won't be going away anytime soon. Labor issues are never truly resolved in the real world.
 
CIDFlyer
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RE: AA/Us Merger - Two Airlines, One Parent?

Sat Dec 29, 2012 11:06 pm

Many wondered if DL/NW were going to go that route ala KL/AF but they didnt. Sounds good on paper but in reality if or when they merge they will go under the American name, makes it less confusing for passengers.
 
jmc1975
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RE: AA/Us Merger - Two Airlines, One Parent?

Sun Dec 30, 2012 12:08 am

Quoting cloudboy (Thread starter):
that US still hasn't completely managed to combine with the old American West let alone plunge ahead with AA,

What the heck is American West????
.......
 
capri
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RE: AA/Us Merger - Two Airlines, One Parent?

Sun Dec 30, 2012 1:51 am

The air fares are high and getting higher anyway, bring back regulations and maybe the government will subsidize fuel and we could see lower prices, who knows.
 
bluejuice
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RE: AA/Us Merger - Two Airlines, One Parent?

Sun Dec 30, 2012 2:15 am

Already been done by SouthTran Lineways errr... Southwest Airlines/AirTran Airways.
  
 
PHX787
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RE: AA/Us Merger - Two Airlines, One Parent?

Sun Dec 30, 2012 2:33 am

Quoting jmc1975 (Reply 17):
Quoting cloudboy (Thread starter):
that US still hasn't completely managed to combine with the old American West let alone plunge ahead with AA,

What the heck is American West????

Are you kidding?
The airline that bought US to bring them out of BK
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Jerseyguy
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RE: AA/Us Merger - Two Airlines, One Parent?

Sun Dec 30, 2012 2:36 am

Quoting jmc1975 (Reply 17):

What the heck is American West????

The new name of the airline when American and WestJet merge. I heard that AA Unions aren't happy with US's preposal and are in talks with WestJet..   
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Jerseyguy
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RE: AA/Us Merger - Two Airlines, One Parent?

Sun Dec 30, 2012 2:41 am

Quoting PHX787 (Reply 20):

Are you kidding?
The airline that bought US to bring them out of BK

You must be confused, other than America West I can't think of any other airline US has bought recently.
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Jonathanxxxx
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RE: AA/Us Merger - Two Airlines, One Parent?

Sun Dec 30, 2012 2:45 am

Quoting PHX787 (Reply 20):
Are you kidding?
The airline that bought US to bring them out of BK
Quoting Jerseyguy (Reply 21):
The new name of the airline when American and WestJet merge. I heard that AA Unions aren't happy with US's preposal and are in talks with WestJet..   
Quoting jmc1975 (Reply 17):
What the heck is American West????

He is right, there is no such thing as American West  

P.S. America* West...
 
Wingtips56
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RE: AA/Us Merger - Two Airlines, One Parent?

Sun Dec 30, 2012 2:55 am

He meant the former America West (no -N), under the IATA code HP. That's actually the Phoenix (Tempe)-base company that bought the original US Airways, taking on the better known US Airways name for the combined company.
Worked for WestAir, Apollo Airways, Desert Pacific, Western, AirCal and American Airlines
 
cloudboy
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RE: AA/Us Merger - Two Airlines, One Parent?

Sun Dec 30, 2012 4:55 am

Geez - one little typo. I am glad I am not writing about the Southwest/Air Tran merger. Hate to see what I might have mistakenly written for Air Tran!
"Six becoming three doesn't create more Americans that want to fly." -Adam Pilarski
 
Cubsrule
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RE: AA/Us Merger - Two Airlines, One Parent?

Sun Dec 30, 2012 6:16 pm

Quoting DocLightning (Reply 8):
However, one interesting idea is to keep the US brand as an LCC-type carrier operating North American flights and the AA brand for premium routes (eg. JFK-LAX/SFO/HNL) and international service.

I don't see how this would work. What happens in a city like STL, where there are higher-yielding routes with more of an O&D focus (LGA, DCA) and then more traditional spoke-hub routes (CLT, DFW)? Does the left side of the plane say "AA" for the STL-CLT-LHR passengers and the right side of the plane say "US" for STL-CLT-RSW passengers?
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PHX787
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RE: AA/Us Merger - Two Airlines, One Parent?

Sun Dec 30, 2012 7:40 pm

Quoting Jerseyguy (Reply 22):
You must be confused, other than America West I can't think of any other airline US has bought recently.

Read it wrong    stupid ipad
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