They’ve said it will happen for months now, and it seems like the story of the airline who cried wolf.
New reports show American Airlines and U.S. Airways are closer than ever to a deal to merge. It could be announced as early as next week.
I’ll get into what this means for fliers in a moment, but first, what would this merger mean?
For starters, it would create the world's largest airline.
The new company would have a market cap of more than $10 billion. The market cap would be much higher than that of the current title holder, United Continental.
In fact, the new American would be nearly 2.5% larger by capacity and more than 2% larger by traffic.
But, who would own who?
Those details are still being worked out, but reports say American creditors would own about 75% of the new company and U.S. airways shareholders would own about 25%.
Notice I said creditors versus shareholders.
American has been wallowing in bankruptcy since the end of 2011, and in the first quarter of this year they posted a $1.7 billion loss. This deal would bring them out of that hole. As a result of a string of bankruptcies in this industry, mergers have become the new black.
"No carrier that has gone into bankruptcy since 2000 has survived without a merger".
United merged with Continenal.
U.S. airways merged with America West.
Delta and Northwest both filed Chapter Eleven and ended up merging with each other.
So the good news for consumers is that this has happened many times before so many travel experts know what to expect.
First off- any changes resulting from this merger won't be felt for some time. If you've already booked a flight for your spring break, don't panic!
According to the Wall Street Journal, the airlines wouldn't be able to start making changes until after the merger gets approved by a bankruptcy judge and the department of justice. This could take months.
But when those changes do happen, the biggest one you'll see is rising airfares.
Since there will be fewer airlines to choose from, competition will be less, thanks to the principles of supply and demand, and if you couple that with rising fuel prices you get higher ticket prices!
You probably don't have to worry about draw downs in service like with other mergers. The two carriers' routes are very similar and the new American will likely maintain services to its 320 combined destinations.
The big questions surround the frequent-flier programs because American and U.S. airways have very different approaches to customer perks.
It needs to be said. You will not lose the miles you've already racked up.
When programs have merged in the past, miles from both merged into a single account. This is actually good news if you've accrued miles from both airlines. Since it's going to remain "American Airlines" (according to smartertravel.com) the most likely scenario is American's "Oneworld Alliance" will be the awards program that stays in place.
However, since the management team from U.S. Airways is most likely going to be in control, it could mean a serious lack of award-seat availability, something American practices, but U.S. Airways treats as an unwanted expense.
As I said, this could all be moot if the deal doesn't get approved by the big wigs in Washington.
Either way, these big airline mergers are here to stay and that could only be bad for us in the long run.