flyinghippo
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Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 2:57 pm

Before all the M&A happened to the airline industry, when it was TWA, NW, DL, CO, UA, US & AA, a few proposed mergers were attempted (UA + US, for example)...

Back then, I've always thought wouldn't it be great if UA and AA merged? AA has a great presence in Latin America and Europe, UA in Europe as well as in Asia.

UA is strong in the west coast (DEN, SFO) while AA is strong in the middle part of the country in ORD and DFW, and both had JFK as one of their focus cities.

The combined company would have complemented each other every well in terms of routes, and the potential name might be even better: United American.

I heard from this forum that there AA and UA could never merge, not sure if it was regulation, historical or other reasons. Could anyone shed some light as to why those two airlines could not have merged into one?

Thanks.
 
floridaflyboy
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 3:02 pm

Quoting flyinghippo (Thread starter):

I heard from this forum that there AA and UA could never merge, not sure if it was regulation, historical or other reasons. Could anyone shed some light as to why those two airlines could not have merged into one?

Just thinking out loud, but I'd imagine ORD may have been a regulatory sticking point.
Good goes around!
 
dirtyfrankd
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 3:19 pm

Off the top of my head, way too much overlap at ORD.
 
flyingalex
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 3:31 pm

I'm sure the competition regulators would have had a lot to say about all that overlap. Also, until very recently, AA and UA were the only US carriers with rights to operate to LHR, so I am sure European regulators would have made some noise as well.

Also, don't forget that UA and AA are founding members of competing alliances. It's one thing to leave an alliance you joined at some point, but to leave an alliance you had a hand in founding? That's a much bigger step.
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william
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 3:37 pm

Quoting flyinghippo (Thread starter):
Before all the M&A happened to the airline industry, when it was TWA, NW, DL, CO, UA, US & AA, a few proposed mergers were attempted (UA + US, for example)...

Back then, I've always thought wouldn't it be great if UA and AA merged? AA has a great presence in Latin America and Europe, UA in Europe as well as in Asia.

UA is strong in the west coast (DEN, SFO) while AA is strong in the middle part of the country in ORD and DFW, and both had JFK as one of their focus cities.

The combined company would have complemented each other every well in terms of routes, and the potential name might be even better: United American.

I heard from this forum that there AA and UA could never merge, not sure if it was regulation, historical or other reasons. Could anyone shed some light as to why those two airlines could not have merged into one?

Thanks.

Fly through Ohare and notice who is occupying most of the the gates in Terminal 1,2 and 3 and you will have your answer.
 
mia305
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 3:44 pm

Ord would be monopolized and there would be too much
overlap in flying. Not too mention 2 founding fathers
of two different alliances.
 
FriendlySkies
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 3:52 pm

Quoting dirtyfrankd (Reply 2):

Off the top of my head, way too much overlap at ORD.

While I agree this is definitely the biggest reason, it's often not made sense to me. I guess the purpose of the anti-trust laws is to prevent removing competition that already exists, but if you consider the consolidation that would take place, there would likely be opportunity for increased competition from other airlines (DOJ would have easily made a UA/AA combo give up ORD slots).

But lets say DOJ didn't do anything, and AA/UA owned ORD to the same extent they do today. How is that any different from DL at ATL, AA and DFW, UA at IAH, etc? If those aren't monopoly hubs I don't know what is.
 
mia305
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 4:18 pm

That is correct. They would have to give up slots at Ord & Lax
both have a good presence. What would happen to the
two different alliances?
 
flyinghippo
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 4:31 pm

I don't think ORD is a valid argument as UA/AA would be forced to give up a huge chunk of slots, same for LHR. I don't think either AA or UA, or combined, would create a monopoly in LAX.

As for alliances, if CO can go from Sky to Star, I'm sure UA or AA would move to another alliance (after paying a stiff penalty, I'd imagine)

So... Still no valid reason, IMHO.

If UA and AA would have merged, I think it will be the only US carrier that has a robust routing structure that reaches to all corners of the globe, except Africa.

UA - Asia, Europe
AA - Latin America, Europe
 
BigGSFO
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 4:32 pm

Quoting mia305 (Reply 8):
They would have to give up slots at Ord & Lax
both have a good presence.

There are no slots at ORD and LAX.
 
flyingalex
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 4:35 pm

Quoting FriendlySkies (Reply 6):
But lets say DOJ didn't do anything, and AA/UA owned ORD to the same extent they do today. How is that any different from DL at ATL, AA and DFW, UA at IAH, etc? If those aren't monopoly hubs I don't know what is.

The crucial difference is that the examples you mention had... natural causes, for want of a better term. Those hubs evolved as hubs over time, simply because that's where the airline in question happens to have based a lot of operations. They've grown into what they are today.

The situation at ORD is quite different. UA and AA have independently grown large operations, which means there is a good competitive environment at ORD right now. If UA and AA were to merge, that current environment would be replaced by an artificial near-monopoly (as opposed to one of the two going bankrupt, handing the other a naturally occurring near-monopoly). That first scenario (where a concerted action by two market players weakens competition) is the point at which antitrust regulators would step in.
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flyinghippo
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 4:38 pm

Quoting flyingalex (Reply 11):
The situation at ORD is quite different. UA and AA have independently grown large operations, which means there is a good competitive environment at ORD right now. If UA and AA were to merge, that current environment would be replaced by an artificial near-monopoly (as opposed to one of the two going bankrupt, handing the other a naturally occurring near-monopoly). That first scenario (where a concerted action by two market players weakens competition) is the point at which antitrust regulators would step in.

I still don't get it... If the merged entity voluntarily sells 1/2 of their slots/gates at ORD to DL, for example, wouldn't that prevent a monopoly?
 
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mayor
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 4:53 pm

Quoting flyinghippo (Reply 9):
As for alliances, if CO can go from Sky to Star, I'm sure UA or AA would move to another alliance (after paying a stiff penalty, I'd imagine)

Except that CO was not a founding member of Skyteam and a reluctant member, at that.
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brilondon
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 4:53 pm

Quoting flyinghippo (Reply 12):
I still don't get it... If the merged entity voluntarily sells 1/2 of their slots/gates at ORD to DL, for example, wouldn't that prevent a monopoly?

There would be more to that merger than just what happens at ORD. There would still too much control in one airline, I believe for the regulators to allow such a merger today.

Quoting flyingalex (Reply 3):
I'm sure the competition regulators would have had a lot to say about all that overlap. Also, until very recently, AA and UA were the only US carriers with rights to operate to LHR, so I am sure European regulators would have made some noise as well.

I don't think regulators from Europe care that much about the American airline industry. Until the end of Bermuda 2, The only airlines allowed to fly to LHR, were UA and AA, inherited through their respected acquisitions PA and TWA slots at LHR. European regulators would love nothing more then to have less competition from the US. Their airlines would then be able to have more control over the pricing structure of flights between North America and Europe.
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dirtyfrankd
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 5:04 pm

Quoting flyinghippo (Reply 12):
I still don't get it... If the merged entity voluntarily sells 1/2 of their slots/gates at ORD to DL, for example, wouldn't that prevent a monopoly?

Since there are no slots at ORD, or at any airport except DCA, LGA, JFK, and EWR for that matter, would there be anything to sell / give away?
 
flyingalex
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 5:20 pm

Quoting brilondon (Reply 14):
I don't think regulators from Europe care that much about the American airline industry. Until the end of Bermuda 2, The only airlines allowed to fly to LHR, were UA and AA, inherited through their respected acquisitions PA and TWA slots at LHR. European regulators would love nothing more then to have less competition from the US. Their airlines would then be able to have more control over the pricing structure of flights between North America and Europe.

European regulators take action when European consumers would be adversely affected. Before the end of Bermuda II, a merger of UA and AA would have had a massive adverse effect on travellers between the UK and the USA. Since the UK is in the EU, a move that would have reduced competition to that extent would definitely have raised red flags with the EU's Competition Commission.

If you seriously believe otherwise, you need to stop drinking O'Leary's Kool-Aid.
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BigGSFO
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 6:09 pm

Quoting dirtyfrankd (Reply 15):
Since there are no slots at ORD, or at any airport except DCA, LGA, JFK, and EWR for that matter, would there be anything to sell / give away?

There isn't. The feds can't say "oh you're too big so stop 20% of your flights at LAX" et al. Slot regulated airports are the only places they can seek divesture and ORD and LAX aren't. Aside form all of this, the DOJ/DOT wouldn't have ever/would never approve such a merger, overlapping markets or not. The critical mass of the new airline would be bad for consumers.
 
PHLBOS
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 6:24 pm

I've said this in the AA/US Merger Hubs thread and I'll say it here. How about waiting to see whether or not DOJ approves this AA/US merger first. If they ultimately approve it (most do not see any reason why they won't) and barring a carrier heading towards Chapter 7, I don't see any mergers w/the remaining legacy carriers happening anytime soon.

I think we're done w/mergers among US carriers for a while especially those involving the legacy carriers.
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mia305
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 7:40 pm

[quote=flyinghippo,reply=9][/quote If UA and AA would have merged, I think it will be the only US carrier that has a robust routing structure that reaches to all corners of the globe, except Africa.

UA - Asia, Europe AA - Latin America, Europe

I agree with that. It would be a strong airline.
If that did happen what flying cert would they keep and what name would
stay.
 
flyinghippo
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 7:46 pm

Quoting mia305 (Reply 21):
I agree with that. It would be a strong airline.
If that did happen what flying cert would they keep and what name would
stay.

Not sure about the cert, but wouldn't matter much in the combined airline.

The name could be combined as well... United American Airlines... That would've been a cool name, wouldn't it?  
 
mia305
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 7:56 pm

I like what was mentioned above United American or American United.
Both have a nice ring to them.
 
BD338
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 8:28 pm

Such an entity would have over 50% of the US domestic market, and eliminate competition in dozens of markets. No way that would get past the DOJ.

Quoting PHLBOS (Reply 19):
I think we're done w/mergers among US carriers for a while especially those involving the legacy carriers

  

Absolutely, once US/AA completes then three large carriers will have around 75% of the US domestic market between them. (WN takes that to just under 90% of the market) Can't see any further mergers getting approved among the top three at least. The market needs to grow substantially before any further mergers could likely be considered, and as the US domestic market is a mature market that won't be for quite a long while.
 
jayunited
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 8:49 pm

While most people are focused on ORD and to some extent LHR if UA and AA had merged then what would have happened to the rest of the U.S. industry because had this happened these two airlines would have made on heck of an airline with a reach no other U.S. carrier on its own could even match route wise.

Had AA and UA merged then in my opinion in order to even things out in the U.S. aviation industry DL, CO, and NW would have had to merged just to be able to match the global reach of the combined AA/UA because where AA/UA would be forced to cut flights they could easily use those wide bodies to launch new international routes to places where the combine airline didn't fly already.
 
AADC10
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 9:07 pm

The regulators would never allow any of the big 3 (AA, DL, UA) to merge with each other. DL and UA made more sense and it was allegedly discussed but was quickly shot down by the DOJ.

Quoting floridaflyboy (Reply 1):
Just thinking out loud, but I'd imagine ORD may have been a regulatory sticking point.

I think LHR would have been a bigger issue. Although ORD was slot restricted, it is easier to shift things around a domestic hub. Before the open skies agreement, only AA and UA had LHR slots (purchased from TW and PA). The combined carrier would have had to divest probably all of one of the previous airline's slots, something very costly at LHR. They would probably have to hand the slots to DL, which would kill many of the advantages of the merger.
 
bobnwa
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 9:35 pm

Quoting flyinghippo (Thread starter):
Back then, I've always thought wouldn't it be great if UA and AA merged?

Who would it be "great"for? Surely not the employees or the public
 
tommy767
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 9:45 pm

Back in the 80s there were definitely more interesting merger proposals than AA/UA. NW nearly merged with PA, TW, and EA on several different occasions
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cschleic
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RE: Why Couldn't AA And UA Merge?

Wed Mar 06, 2013 11:10 pm

Quoting dirtyfrankd (Reply 15):
Since there are no slots at ORD, or at any airport except DCA, LGA, JFK, and EWR for that matter, would there be anything to sell / give away?

Don't LGB and SNA have slots, too?
 
UA787DEN
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RE: Why Couldn't AA And UA Merge?

Thu Mar 07, 2013 1:12 am

Quoting cschleic (Reply 28):
Don't LGB and SNA have slots, too?

LGB is super-restricted: it has only 41 pairs of airline slots total. 31 are used by B6, and neither UA nor AA flies there.
SNA (at least last year) was slot restricted, but nowhere near to the extent of LGB.

The difference is that they handle plenty of GA traffic, especially smaller planes, but the NYC and DC airports mentioned handle almost completely big jets, mostly airline traffic.
 
steeler83
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RE: Why Couldn't AA And UA Merge?

Thu Mar 07, 2013 2:50 am

Quoting PHLBOS (Reply 18):
I've said this in the AA/US Merger Hubs thread and I'll say it here. How about waiting to see whether or not DOJ approves this AA/US merger first. If they ultimately approve it (most do not see any reason why they won't) and barring a carrier heading towards Chapter 7, I don't see any mergers w/the remaining legacy carriers happening anytime soon.

I think we're done w/mergers among US carriers for a while especially those involving the legacy carriers.

Agreed. I'd like to think that once this merger happens (God willing) that we'll really see some stabilization in the airline industry.

For kicks tho, here's why UA and AA cannot merge. Some if not all were mentioned before

Chicago and LA were already mentioned, but what about New York (UA at EWR; AA at JFK/LGA)?
AA founded One World while UA founded Star Alliance.
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NASCARAirforce
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RE: Why Couldn't AA And UA Merge?

Thu Mar 07, 2013 4:19 am

Quoting flyinghippo (Thread starter):
Back then, I've always thought wouldn't it be great if UA and AA merged? AA has a great presence in Latin America and Europe, UA in Europe as well as in Asia.

HELL NO. Why do you want mergers? Yeah its better than airlines going into Chapter 7 like Eastern. Whenever there are mergers people lose jobs, some routes get cut, some hubs get downsized and its worse for the passengers as less options. I wish we were back in the 80s when there were still 50+ domestic airlines left, most low cost but still.
 
flyinghippo
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RE: Why Couldn't AA And UA Merge?

Thu Mar 07, 2013 6:32 pm

Quoting steeler83 (Reply 28):
Chicago and LA were already mentioned, but what about New York (UA at EWR; AA at JFK/LGA)?
AA founded One World while UA founded Star Alliance.

UA got EWR through merge with CO, my question is meant for before the recent airline consolidation took place where there were UA, DL, AA, US, CO, and NW.
 
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mayor
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RE: Why Couldn't AA And UA Merge?

Thu Mar 07, 2013 6:42 pm

Quoting NASCARAirforce (Reply 29):
Whenever there are mergers people lose jobs, some routes get cut, some hubs get downsized and its worse for the passengers as less options.

All of which happen whether there are mergers or not.
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steeler83
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RE: Why Couldn't AA And UA Merge?

Thu Mar 07, 2013 9:12 pm

Quoting mayor (Reply 31):
Quoting NASCARAirforce (Reply 29):Whenever there are mergers people lose jobs, some routes get cut, some hubs get downsized and its worse for the passengers as less options.
All of which happen whether there are mergers or not.

Heck, PIT lost its hub prior to the US/HP merger. They were restructuring their costs in 2003, during I think their 1st trip to ch11, and told the ACAA to piss off pretty much. Even before that, US had a hub at BWI; closed it in 2001. Wasn't DL in the process of downsizing CVG even before the merger with NW as well?

We could go on and on about hub openings/closures outside of mergers. The point is, as NASCARAirforce pointed out, that it does happen; I was providing evidence of that.
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kordcj
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RE: Why Couldn't AA And UA Merge?

Thu Mar 07, 2013 11:17 pm

I honestly don't think ORD would have been a big deal to the DOJ, at most UA/AA controls 75-80% of the capacity at the airport. Compare that with CO at EWR/IAH, DL at ATL, or even WN post TZ at MDW. Pre EU open skies, LHR would have been an issue as I'm sure the SkyTeam trio would have certainly cried foul. A merger would probably make ORD a more profitable hub, and reduce the ungodly amount of RJs flying thru there. To appease regulators they could have sold the K concourse in T3 to JetBlue.
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