SOURCE, Dallas Morning News
By TERRY MAXON
Staff Writer
Published: 03 June 2013 11:20 PM
Updated: 03 June 2013 11:38 PM
Even though it’s been nearly four months since American Airlines Inc. and US Airways Inc. announced their merger, we still know little about what the new company will look like when the deal closes later this year.
The two airlines have put together 29 teams to work on the transition and the thousands of questions involved in a merger, from whether to serve the whole can of cola to passengers to a timeline for combining the two carriers’ frequent-flier programs.
We do know that the company will be called American Airlines Group Inc. Its chief executive will be Doug Parker, currently chairman and CEO of US Airways. American’s chairman and CEO, Tom Horton, will be non-executive chairman for up to a year after the merger.
But what will the airplanes look like a year from now? Who will be on Parker’s team? Will the unions of the two carriers still be getting along next Christmas?
We have questions. We don’t have many answers.
Which AA executives will keep their jobs and in what roles?
We don’t believe that William the Conqueror kept many Anglo-Saxons in high governmental posts in England after the Battle of Hastings in 1066. Nearly a millennium later, it remains to be seen how much better the current executives at American will fare after Parker takes over American Airlines.
Indications are that the two airlines are close to announcing the top layer of executives. Horton and Parker told employees last month that Parker’s senior team would be announced by early June. At an industry meeting Monday, they amended that to mid-June, according to Bloomberg News.
We would expect that the only reason US Airways president Scott Kirby and other top US Airways executives would not hold similar spots in American Airlines Group is if they choose not to move from Arizona.
In favor of high-ranking American executives is the fact that they’ve had several months to impress Parker and improve their standing.
Will the new management change the livery?
Denise Lynn, American’s senior vice president of people, told American managers in February that it was “a safe assumption” that the new logo and livery that American unveiled in January would be unchanged.
“And even though it wasn’t planned this way, the flag on the tail actually is a nice representation of the combination between American and US Airways,” Lynn told managers.
Maybe yes, maybe no.
Parker has praised the livery and the planning process that went into it. What he has not done is promise to keep it unchanged.
“We have a lot of details we need to work out, and it may make sense. I have no idea if it makes sense or not,” Parker said recently.
One question is how the livery can recognize the heritage of US Airways, a product of a number of mergers, most recently with America West Airlines Inc. in 2005.
US Airways planes have a circle of four logos by their left passenger doors that represent the predecessors: America West, Piedmont Airlines, Allegheny Airlines and Pacific Southwest Airlines.
“The reality is customers, you know, get on the airplane, and they care about where you fly, they care about the kind of service that they get on the plane, they care about the product, they care about the price,” US Airways president Kirby noted in late March. “They don’t care as much about the livery.”
What will be the fate of regional airlines at the new American?
American brings American Eagle to the party, while US Airways contributes two regional carriers: Piedmont Aviation and PSA Airlines. Officials have said that for the time being, those airlines will operate as separate carriers, as they had been.
As of the first quarter, American Eagle operated 252 aircraft with 12,780 seats, and American had contracted with four other regional airlines that operated 38 aircraft with 1,810 seats. US Airways’ two regional carriers flew 93 airplanes with 4,459 seats; it contracted with six other regional carriers to operate 192 airplanes with 12,222 seats.
Add it all up, and 40 percent of the airplanes and 45 percent of the seats in American’s and US Airways’ regional flying are operated by carriers that aren’t owned by either American or US Airways.
And the share contracted out to third parties will increase this summer when Republic Airways Inc. begins flying under the American Eagle brand.
How long will it take before the US Airways brand goes away?
We sometimes think of mergers as a process where one day there are two companies and the next day there is one. If only it were that easy.
The new company will attempt to coordinate as many things behind the scenes as quickly as possible so that American and US Airways customers can have a common frequent-flier program, connect between each carrier’s flights and see a common presence.
However, they will operate as different airlines until the Federal Aviation Administration issues a certificate that allows all operations to be combined under one airline. Kirby has told employees that he expects that to be issued about 18 months after the merger.
Even then, the new American Airlines will have hundreds of US Airways airplanes that need to be repainted; thousands of pilots, flight attendants, bag handlers and mechanics who will need new uniforms; dozens of airports that will need new signs at the old US Airways gates or relocation to AA gates, and so forth.
The hardest task is expected to be technology, specifically the combining of American’s and US Airways’ reservation systems into one. That could take one to two years after the merger.
How many jobs will be eliminated in the merger?
The official answer from the carriers is that few jobs will be lost, almost all in management and support staff.
“We are going to have redundant management,” Parker said in a March appearance on the Charlie Rose Show. “But that’s OK. I mean, it’s not OK, we don’t like that. But we’ll make sure the management people — who are a little more mobile than pilots and flight attendants in terms of their ability to move into other jobs — are taken care of. So we’ll have management reductions in staff.”
“You’re not talking about, like 5,000 people?” Rose asked.
“Goodness, no. A thousand, maybe,” Parker replied.
That’s not many from the combined workforces of AMR and US Airways Group, which totaled 105,838 full-time equivalent employees as of March 31: 73,700 at AMR and 32,138 at US Airways.
How long will the labor peace hold out?
The answer may have already been answered, as the International Brotherhood of Teamsters stirred up things last week. It angered a few other unions when it filed a petition with the National Mediation Board asking for an election to represent mechanics at American and US Airways.
That set off a round of name-calling from the Transport Workers Union, which currently represents American’s mechanics, and the International Association of Machinists and Aerospace Workers, which represents US Airways mechanics.
Before that, TWU and IAM had worked out a deal to jointly represent many ground workers at the two carriers post-merger.
The two airlines have memos of understanding with TWU and with the unions representing pilots at both carriers about how they’ll handle issues such as integrating seniority lists after the merger.
Parker and others have described the degree of management-labor cooperation going into a merger as unprecedented as they have — so far — avoided the nasty fights that can disrupt an airline marriage.
How long will it take for consumer advocates and congressmen to complain that fares have gone up and service has gone down?
In some markets, fares will go up, and in some markets, American will cut service. We know this because fares would have gone up or service would have been cut in some markets regardless of the merger — it’s a dynamic business.
Parker, Horton and other officials at the two airlines have touted the position that the American and US Airways networks are complementary, with very little overlap, and that there’s no need to eliminate redundant service.
However, the history of airline mergers is that the carrier will over time rearrange its network to fit the situation. For example, Delta Air Lines Inc. operates only a shadow of Northwest Airlines’ hub in Memphis, Tenn., today.
Things change.
What will Tom Horton do after the merger?
Horton, who just turned 52, will become the youngest ex-CEO in American’s recent history when he departs later this year.
Maybe his immediate predecessor, Gerard Arpey, will invite him to join Arpey as a partner in the Houston-based investment firm led by former Continental Airlines Inc. chairman Larry Kellner.
If Horton wants to stay involved in airlines, perhaps Donald Carty, who preceded Arpey, can serve as an example. Carty has been involved in several airlines, including serving as chairman of Virgin Airlines Inc. and Toronto-based Porter Aviation Holdings Inc.
However, assuming Horton gets the $19.88 million severance in cash and stock that he negotiated, he won’t have to do anything.