Sunday, April 22, 2012

Merger between US Airways and American may be close

A merger between American Airlines and US Airways may be imminent.  Reuters reports that three of American’s unions have expressed support for the proposed merger.  The Allied Pilots Association, the Association of Professional Flight Attendants, and the Transport Workers Union issued a joint statement in which they said that a merger with US Airways would be the fastest way to bring American out of bankruptcy.

At the same time, US Airways filed federal disclosures that stated that no agreement had yet been reached between the two companies according to CNBC.  American’s filings state that it has reached collective bargaining agreements that would govern treatment of its employees in a merger.

The reports of the merger come at a time when high fuel costs are exacting a toll on airline profits.  American Airlines entered bankruptcy in November 2011 in an attempt to restructure and cut costs.  Since 2001, Delta, Northwest, United, and US Airways had all filed for bankruptcy.

The quest to lower costs and achieve maximum efficiency has already fueled a wave of airline mergers.  US Airways merged with America West in 2004.  Delta and Northwest merged in 2008.  More recently, United and Continental merged in 2010.  The trend even reached smaller, niche airlines as Southwest acquired AirTran in 2011.

In theory, airline mergers allow companies to see greater efficiencies from larger fleets.  They also mean that there is less competition on specific routes.  As the number of available seats decreases, the price of each seat can increase.  This can lead to greater revenues that help offset the rising costs of fuel and labor.

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