After months of negotiations, American Airlines and US Airways are expected this week to announce a merger, which would create the nation’s biggest airline and concentrate even further a once-fragmented industry.
A merger would expand American’s domestic network, particularly in the Northeast and the Southwest, and create a more formidable competitor internationally. The combined airline would jump ahead of United Airlines and Delta Air Lines, both of which have grown through mergers of their own in recent years.
The combination would probably bring to an end the wave of consolidation that has swept the industry. Since 2001 there have been five large mergers, reducing the number of airlines to three main carriers, along with a handful of low-cost carriers like Southwest Airlines and JetBlue, and regional carriers.
These mergers have led to cuts in service to many smaller cities around the country. But they have also created healthier and more profitable airlines that are able to invest in new planes and products. Faced with rising fuel costs, and losing tens of billions of dollars in the last decade, airline executives argued that the only way to survive was to consolidate capacity.
American, which has been in bankruptcy protection since November 2011, is currently the nation’s third-largest airline with domestic and international flights; US Airways is the fourth.
The boards of both carriers are expected to meet on Monday to approve the combination, which then needs to be approved by a bankruptcy judge in New York. A tie-up also requires the approval of federal regulators and antitrust authorities. But analysts expect regulators to approve the deal since there is little overlap between the two networks and no hubs in the same cities.
Even if the deal clears all these hurdles, the merged airline still faces a range of challenges. Airline mergers are often rocky — involving complex... [continues]
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