American, US Airways prep for merger bumps

Charisse Jones, USA TODAY | USATODAY

American Airlines and US Airways expect their merger to be officially sanctioned by fall. Then the hard part starts: making the marriage work.

If previous U.S. airline mergers are any guide, the new partners may face some rough patches as they mesh booking systems, frequent-flier programs and eventually getting pilots familiar with new aircraft — all while persuading passengers to stick with them for the ride.

Being the last pair of big network carriers to wed — after Delta and Northwest merged in 2008, and United and Continental in 2010 — the new American can take notes from the earlier mergers on what went right and what went wrong, and potentially avoid some of the same pitfalls.

"They've been able to sit back and watch how Delta handled their merger and how United handled their merger, and I think there are lessons to be learned," says industry analyst Holly Hegeman, founder of PlaneBusiness.com. "Are there going to be glitches? Sure. ... Is it going to be smooth sailing? No."

The American merger must clear government hurdles before it's final to ensure it won't be anti-competitive. Approval is expected by most industry analysts, likely by fall. But it won't come without the airline proving it won't hurt fliers.

The new airline's leaders, for instance, were called before a House Judiciary subcommittee last month, where they said service would continue to most communities and that mergers don't necessarily mean fares will go up. Questioning before a Senate committee is scheduled for March 19. Most important, the Justice Department must sign off on the deal.

Only then can the work of putting all the pieces together begin, and travelers can start learning what the frequent-flier program will look like, what routes are available and what type of planes they'll fly. Scott Kirby, president of US Airways and a leader of the transition team, says merging the airline will take about two years.

Speed bumps are pretty much inevitable. Consider United's absorption of Continental: Many passengers had long waits to talk to a ticket agent last spring, when a switch to Continental's reservations system suffered computer glitches. United and Continental still work in separate terminals at nearly two dozen airports. Hegeman says some employees seem to have more allegiance to their previous bosses than to the combined carrier.

United spokeswoman Megan McCarthy says the carrier has turned the corner: It's beaten its goals for getting flights to their destinations on time. Gates and check-in counters have been combined in 125 of 148 airports. New uniforms will be introduced this year, which can help build team spirit.

"Airline mergers are incredibly complex," McCarthy says. "There were definitely challenges, particularly in 2012, but we now are in a great position to really focus on delivering all the benefits of the merger to our customers going forward."

American's new leaders — including Doug Parker, the US Airways CEO who will be head of the new American — say they've got some advantages in making the marriage go more smoothly.

Chief among them is the support of American's pilots, flight attendants and mechanics, whose unions made agreements with US Airways before the merger deal was struck. Parker has been through this before, having presided over the 2005 merger of US Airways and America West

"While we know it won't be perfect, we have a lot of confidence that it will go smoothly because, first, we have the employees and labor on board," Kirby says. "Additionally, we have experience at both American and US Airways with mergers in the past, of what went well and what went wrong."

Are my miles safe?

Perhaps most important to fliers, and an early sign of how they'll be treated by the new airline, is how the loyalty program will work.

"It's important everyone knows that all frequent-flier miles at either airline will survive intact and will move into the new program," says Kirby.

He says details of the new "Aadvantage" rewards program will likely be revealed around the time the merger closes.

Gary Leff, co-founder of the frequent flier community Milepoint.com, says the new program probably will blend aspects of the two existing ones, each of which has its pluses.

American, for instance, gives one-way award tickets for half the miles required for a round trip, a perk that US Airways doesn't offer, Leff says. US Airways, meanwhile, has low-price awards to many tourist hot spots and unlimited free upgrades for elite fliers; American doesn't.

Diluting either benefit carries risks. Fliers often grow attached to perks that fade when airlines combine. For instance, American Express Platinum and Black card holders used to have automatic access to Continental lounges. They lost that privilege after the merger with United.

Frequent flier George Fiscus, who has racked up hundreds of thousands of miles flying US Airways, appreciates the automatic upgrades to first class and doesn't want to lose them.

"As someone who typically flies over 100,000 miles a year, the only perk of that experience is the more comfortable ride," Fiscus says. "If they take that option away or make it more difficult to upgrade, it will be very disappointing after years of loyalty."

Quick action expected

If the deal is approved, passengers should see US Airways and American housed together at most airports sooner rather than later. "That one tends to get resolved very quickly," Kirby says.

John Thomas, head of the global aviation and travel practice at L.E.K. Consulting, says passengers also should see coordinated flight schedules quickly. "One of the first things that happens is harmonization of the schedules and fleet," he says.

American and US Airways mirror each other on only 17 non-stop routes.

With so little overlap, the airlines' leaders say they plan to hold onto both carrier's hubs and expand service rather than dramatically slash flights to certain markets — a plus, they argue, in getting government approval for the merger.

But Thomas suspects US Airways' hub in Philadelphia could be vulnerable, given its proximity to New York's JFK, a major portal for American's trans-Atlantic service. Other industry watchers wonder whether the US Airways hub in Phoenix may lose some service to American's bigger international gateway in Dallas.

Losing some service out of Phoenix wouldn't sit well with Sue Hershkowitz-Coore of Scottsdale, Ariz., a frequent, high-status flier on both carriers. It was US Airways' non-stop service out of Phoenix that enticed her to shift some of her business from American in the first place.

"I was an American devotee until US Airways came into Phoenix," she says. "It's just so pleasant to take one flight instead of connecting through Dallas."

A change is gonna come

It's likely some aircraft will change. American has been under bankruptcy protection since November 2011, which allows for contracts for new planes to be altered or even canceled.

"Anything they can change before the airline comes out of bankruptcy, they will," analyst Hegeman says.

For instance, American has ordered Airbus A319's, but Hegeman says that order might be modified, because US Airways prefers bigger aircraft such as the A321.

Whatever planes the new airline flies, pilots won't have to worry about learning to fly each other's jets immediately, union officials say.

"For the short term, pilots for US Airways will continue to fly their aircraft and American pilots will continue to fly American's aircraft," says James Ray, spokesman for the US Airline Pilots Association, which represents US Airways pilots.

Such protections are put in place to keep pilots from slipping to the back of the line in terms of pay, perks and schedule. For instance, US Airways doesn't currently fly the 777, but American does, and there may be a set period in which American pilots continue to fly that plane exclusively. Likewise, US Airways flies A330's, while American does not.

"This has been practiced in other mergers," Ray says. "They don't want a more senior group going over ... and bumping ( a more junior group) off the airplanes."

But, Ray says, "Eventually, we will meld these two groups into one pilot group, and we'll all be on one seniority list."

When that time comes, the training will take time and money.

"These equipment are not like cars, where you can just jump out of a Ford and go drive a Chevy," Ray says, adding that it can take roughly six weeks to train a pilot on a new piece of equipment. "You may be able to fly a Boeing 737 but not be able to even start an Airbus 320. ... It's like learning a foreign language."

Questions of seniority and which unions will represent a unified staff aside, many analysts including Hegeman agree that the big labor issues that could derail a smooth merger already are solved.

Last month, US Airways' flight attendants reached a deal that will have them all working under a single contract for the first time. Previously, flight attendants who'd worked for US Airways or America West before their merger had separate contracts.

"Now that the flight attendants have ratified their agreements at US Airways, all the major unions are on board," Hegeman says. "This is going to give this particular merger a real head start."

Who's in charge here?

A big key to a successful merger is which corporate culture will dominate.

Workers have to feel unified and content to take good care of customers, and given the tense relationship that a pre-merger American had with its employees, US Airways' culture is expected to prevail, Hegeman says.

But American likely will set the pace in other, visible, ways — from a more perk-filled flying experience, to continued use of its branded credit card and reservations system.

"Given the scale and complexity that American manages today with their systems," says industry consultant Thomas, "you know that system is capable of absorbing a US Airways."

Whatever the new American looks like, and however long it takes for that transition to be completed, Blane Aarup is looking foward to it.

"I like the American routes and additional places I can get to (now) without switching airlines," says Aarup, an Internet company CEO based in Greenville, N.C., who's an elite flier with US Airways "I see nothing but positives from this merger."