Wednesday, February 20, 2013

US Airways promises employees to keep hubs, but not livery

US Airways' latest employee update on its merger plans is out, and the company has some interesting things to say about maintaining its hubs and whether or not it will keep American Airlines' new livery.

American and US Airways announced their merger last week, and plan to close on the deal in the third quarter. The new American livery has been a source of much derision, and people have wondered whether the merged airline will keep the tail design.

US Airways CEO Doug Parker will lead the merged airline, and it seems like the US Airways team could be open to a change. American adopted its new branding and livery while the carrier was in Chapter 11 bankruptcy protection.

Here's the company's response from a Q & A in the employee update:

Q. What will happen to the American Airlines and US Airways branding and livery? 
A. American Airlines is one of the most iconic brands in the world, and we are excited to operate under that globally recognized brand name. More specific branding and livery decisions will be made in due course as we move forward in the integration-planning process 

The company also reiterated its promises not to do major cutbacks - a crucial issue for both travelers and employees.

Q. Will you be downsizing any hubs, reservation centers or facilities?
A. This is a merger premised on growth . Our synergies are derived primarily from the revenue benefits of American Airlines’ and US Airways’ complementary networks . Importantly, we expect to maintain all hubs and service to all our current destinations.

Monday, February 18, 2013

Merger roundup: It started with a phone call

There's still plenty of news emerging about the just-announced merger of US Airways and American Airlines. Here are the best pieces to catch up with the latest developments.

Andrea Ahles in Fort Worth has a story in the Star-Telegram about how the deal came together: "It started with a phone call on Nov. 29, 2011, the day that AMR Corp. filed for bankruptcy
US Airways Chief Executive Doug Parker called his former cubicle mate at American Airlines, Tom Horton, to congratulate him on his promotion to CEO of the Fort Worth-based carrier.
Parker believed that a union with American Airlines was the next logical step in industry consolidation. But a merger was the furthest thing from Horton's mind."

The Arizona Republic has an article about how the split leadership between US Airways CEO Doug Parker and AMR Corp. chief executive Tom Horton will work. Parker will be CEO of the new company and Horton will be non-executive chairman for about a year, with largely ceremonial duties. But don't feel too sad for Horton: He'll be eased out with almost $20 million in severance and lifetime flying benefits.

The Los Angeles Times has a generally pessimistic take on how the merger will affect frequent fliers and business travelers. "These guys didn't merge to make our lives better," a travel analyst in the story said. "They merged for their own purposes."

And Jon Talton, a former Observer business editor and columnist, is not happy about Parker's plan to headquarter the new American Airlines in Fort Worth, Texas and move out of Tempe, Arizona. "Parker was never a Phoenix business leader in the mold of Walter Bimson, Gene Pulliam, Dick Snell or even Del Webb. Flawed as they were, they were deeply committed to the city and its progress. Parker is one of the stateless imperial chief executives; Paradise Valley is just one of the places where he hung his hat.

Bonus observation: A transcript of Doug Parker's employee meeting is posted on the Securities & Exchange Commission website. Companies generally don't have to disclose those things, but since it's a merger, there are a lot more documents they have to file with the SEC now. You can read it here. Can you find Parker's Pulp Fiction reference?

Read more here:

Friday, February 15, 2013

Parker non-committal about new American livery

US Airways CEO Doug Parker was non-committal when asked about American Airline's new livery at an employee meeting Thursday regarding the merger, a transcript shows.

"I just don’t know. I think that’s the kind of thing you want to go spend some time on, talk about what’s the right branding for the combined airline," Parker told employees Thursday.
The new American Airlines brand, unveiled just weeks before the merger, has drawn a lot of derision. So far, Parker and AMR Corp. chief executive Tom Horton have suggested in public that the new livery would stay with the new merged airline.

Horton was pretty firm on Thursday with my colleague Andrea Ahles in Fort Worth. Here's what he said about keeping the livery:

"Horton: It looks like something you would design if you were going to put American and US Airways together. But it is a new look. We are rolling it out very quickly. In fact, we have 60 new airplanes coming this year that will be delivered with the new livery. ... And I think it's a great presentation of the new American going forward.

But with US Airways employees Thursday, a securities filing shows Parker isn't so sure. Here's what he told employees: 

John McDonald:
Doug, lots of questions about that tail and that design right behind you.

Doug Parker:
That is the American Airlines livery and that’s the US Airways livery. I got a lot of questions on this today and I don’t have a great answer, mainly because this is the kind of – kind of a detail we just don’t have answers to yet. I’m not suggesting by any means that we won’t be able to [inaudible]. I just don’t know. I think that’s the kind of thing you want to go spend some time on, talk about what’s the right branding for the combined airline. I haven’t seen the work they’ve done to come up with the branding they have, but I know they spent a lot of time on it and they’re proud of it, so I don’t want to prejudge one way or another. I just want to – that’s a detail that still needs to be worked out and one that we’ll work out together.

Read more here:

Wednesday, February 13, 2013

Fitch: US Airways-American merger could affect hubs

Analysts Fitch Ratings, which rates revenue bonds issued by Charlotte Douglas International Airport and the city, now say they're concerned that an impending US Airways - American Airlines merger could affect traffic at the combined company's hubs.

Charlotte Douglas would be the combined company's second-largest hub. Most analysts have said they believe the hub is safe, even though US Airways operates 90 percent of the daily flights and US Airways connecting traffic accounts for more than 75 percent of the airport's passengers.

Fitch writes: "As seen in recent mergers, some hub airports will likely be strengthened through industry consolidation while others are weakened.

To the extent a merger consummates between American and US Airways, the combined carrier would effectively maintain six hub airports in Dallas-Ft. Worth, Miami, Chicago, Philadelphia, Charlotte and Phoenix. Separately, the combined carrier would maintain a sizable presence in markets like New York, Los Angeles and San Francisco. 

While geographic location and separation helps support a rationale for hubs, it is still fair to ask whether maintaining as many as six hub airports at the same level of operations will be necessary to maintain an efficient single network."

Here's why that matters. The airport issues revenue bonds, backed by money it makes from the airlines who use its facilities, to fund expansion project. Those bonds are rated by Fitch and other agencies, which helps determine the interest rate the airport gets, and how cheaply (or expensively) it can borrow money. Fitch bases its ratings, in large part, on how healthy the airport is likely to be in the future. If its future flight levels are uncertain, ratings could go down, and the cost of borrowing money and expanding the airport will rise.

Five things to know about the US Airways-American merger

The boards of directors of US Airways and American Airlines are reportedly meeting today to vote on a merger deal. Assuming they approve the deal, the merger announcements would formally roll out Thursday - on Valentine's Day.

Of course, a deal could fall apart right up until the last minute. But as aviation reporter Terry Maxon writes in Dallas: "Okay, there’s going to be a merger between American Airlines and US Airways. I know it, they know it, you know it. The only question is when. It’s like a pregnancy: Show us the baby, already."

So here are five things to keep in mind, assuming the merger goes through:

  1. Charlotte Douglas International Airport will be the second-largest hub for the nation's biggest airline. The airport will be behind only Dallas/Fort Worth for the number of daily takeoffs and landings by the new American Airline, and would be one of the largest single airline-dominated hubs in the entire world.
  2. The combined company will retain the American Airlines name and brand, and will be based in American's current headquarters in Fort Worth, Texas. The company would stay in American's oneworld global alliance, meaning US Airways would leave the Star Alliance. Frequent flier programs would be merged after a few months.
  3. US Airways CEO Doug Parker and his management team are likely to lead the merged airline, with AMR Corp. chief executive Tom Horton getting a ceremonial role as a non-executive chairman for a year at two. Since Parker and his team are usually very pro-Charlotte, that's viewed as a big positive for the city's future in the new company.
  4. Speaking of Charlotte's future, most analysts believe that the city's place as a hub airport is safe in the combined company. Charlotte Douglas is the only southeast alternative to Delta's megahub in Atlanta, and Charlotte has the lowest operating costs for airlines of any major hub. But with 90 percent of flights at Charlotte Douglas operated by US Airways, and more than 75 percent of the passengers at Charlotte Douglas connecting to other flights, the airport is uniquely dependent on one airline. Any changes here could be very bad news for Charlotte.
  5. Employees are waiting to see how they'll be affected. The combined company will have more than 100,000 workers. More than 7,100 are based in Charlotte. Parker has said the combination is about growing the airline, not cutting flights, but some cutbacks are inevitable - otherwise, there wouldn't be any cost savings. This story in the Winston-Salem Journal about 850 US Airways call center workers waiting to see if their jobs are safe gives a flavor of what's to come.

Monday, February 11, 2013

Monday news roundup: Merger coming soon (probably)

Monday, Tuesday, Thursday, maybe next week: Rumored merger dates for American Airlines and US Airways are flying around in the media echo chamber. But enough details of the proposed deal have leaked to make it appear a certainty at this point, and most reports are saying it's likely to be announced this week.

After reports last week that the boards of directors of both companies would meet Monday to take a final vote on a merger, Reuters came out Sunday with a news story that both companies had delayed their meetings until mid-week. An announcement is likely in the later part of the week, anonymous sources say.

The New York Times said the boards are meeting sometime this week, and a deal "could be struck this week or possibly next week."

Bloomberg agrees that "any announcement would come no earlier than midweek. And Terry Maxon of the Dallas Morning News reports that there could be an announcement later this week.

As Maxon wrote: "Again, this all assumes the boards of AMR and US Airways Group approve a deal. And until there’s a deal, there’s no deal."

But The Wall Street Journal has already leaped ahead and reported that antitrust regulators are likely to approve the deal.  The Journal is also reporting a deal is likely to come following a Wednesday board meeting. The federal government is trying to block other mergers for competitive reasons, such as the marriage of brewers InBev and Grupo Modelo.

US Airways and American have little direct overlap, and every other mega-merger in the aviation industry has been approved this decade, so a deal probably won't face a legal challenge. Antitrust approval would likely take several months.

Wednesday, February 6, 2013

Reports: US Airways-American merger could come next week

A local television news station in Dallas is reporting that a US Airways-American Airlines merger could be announced as early as Monday. The Wall Street Journal is hedging a bit more, and writes that a merger is in the final stages and could be completed "within the next week or two."

Jason Whitely of WFAA-TV says the announcement could come after the board of directors at AMR Corp., the parent company of American Airlines, meets to consider the deal again on Monday.

The Journal, on the other hand, cautions that, "the merger negotiations remained fluid and could fall apart...Significant points of the deal, including how to split ownership of the airline and how to arrange board seats and management ranks, remain unresolved."

The combined company would still be called American Airlines and be headquartered in Fort Worth, but would likely be led by US Airways CEO Doug Parker and his management team.

But, as aviation analyst Henry Harteveldt told me recently: "I'll believe it when I see it." The second week in February has been the rumored merger date for some time. However, at least four other rumored merger dates have slipped past with no news, so until it's public, travelers and employees will remain in a holding pattern.

Twitter lit up with reaction to the news Wednesday evening:

I really really hope the US Airways / American Airlines mergercreates a company called U.S. Americans Air. Miss South Carolina is a prophet

Soon only one airline:"Delta United American US Airways"

US Airways and American Airlines merger happening soon. Can't wait to sit back and watch this one.