I finally had a chance to listen to American’s second quarter earnings call. I’m over a week late to that party, but it’s been a very busy week.
After American’s formal remarks, there were a few questions that touched on the integration and mentioned the frequent flyer program (which they see as a key competitive differentiator and how they’ll win competitive business).
There was a recurring implication that the US Airways and American programs wouldn’t be combined imminently. I had long assumed that we’d be looking at a cutover to a single program in late February or early March of 2015 — because cutovers usually happen during that travel lull, and because there’s a strong desire to see integration happen quickly, to begin to recognize the ‘merger synergies’ that were the argument for the merger in the first place and upon which senior management bonuses are supposed to be based.
American’s Chief Information Officer, Maya Leibman, mentioned that each airline brings to the table over 700 systems apiece that have to be integrated. They’re whittling those down as they go. She reiterated the general decision to go with legacy American systems as it’s the path of least resistance, they’re larger and scale better, and means fewer employees and customers to transition to new systems (since legacy American has more of both).
Chief Operating Officer Robert Isom made a few things clear that I hadn’t seen referenced publicly before.
They’re midway through the process of preparing for a single operating certificate. Having a single operating certificate is necessary to operate as a single airline, schedule planes and routes across the airlines, and operate under a single carrier code (“AA”).
He says that it will be late in the second quarter of 2015 or shortly thereafter when they will begin work with the FAA on getting a single certificate.
He then goes on to say that moving to a single reservation system for the two airlines will take place late next year, hopefully.
“Late next year” puts them smack into busy holiday travel, and they’re not going to ‘turn a switch’ the Wednesday before Thanksgiving or the Sunday after.
They don’t have a date yet for when the two airlines combine, but it’s clearly the end of 2015… or the beginning of 2016.
Who says earnings calls are boring? Well, they mostly are. And they’re mostly perfunctory at least for folks familiar with the business. But they do shed some insight as well.
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Spell Check is wonderful too for a blogger…
” schedle planes and routes across the airlies,”
It couldn’t be that busy of a week if you had time to post about a free beer. 😉
I kid…
The late 2015 combination of the 2 airlines means that I (and maybe you) better add some miles to our account, so the miles won’t expire. Time to go shopping. 😉
As I do integrations for a living, no surprise here. The question is, with that many systems, what is the timing in 2016 when they will be done. This could be done earlier, if the companies were willing to take some risk. Having seen earlier experiences of “taking risk”, it appears they are trying to get it right, and take the time needed to minimize customer impact. This is an incredibly complex integration even if they just transition to AA systems. This also means that little work will get done to AA core systems while the integration is moving forward. This may push revenue based out a little longer than we all expected.
For most people on these travel sites, what matters most is when there is a single Frequent flyer program.
I think we can safely assume that’ll be 1Q some time. If the airline cannot finish all the IT related work by 2015 it will have to be 2016. A single PSS system or SOC should not be heavily coupled w/ FF profiles.
I’d be happy if they could fix notifications between the two carriers. Right now, if I book in AA.Com with part of the leg on an AA and and another part on US I don’t get notified for US portion (gate changes, delays, etc). I understand it is basically just a video have but they should have my info to make this happen?
In regards to the frequent flyer programs merging, when do you think that will occur? Do you think a devaluation will occur in 2015 or 2016?
@Ken given what’s been discussed there is no way the frequent flyer program is combined in first quarter 2015. I originally thought when the merger was announced that this would be a gimme, it is really costly to delay doing this. But that’s not how it has turned out.
On the flip side, while it’s a painful delay, it gives them more time to prepare so they can avoid the nightmare that occurred with UA.
The longer they drag out combining the FF programs while expanding cross-fleeting will not make for a pretty outcome.
I can’t get true reciprocal benefits, forced to fly the “other” airline due to cross fleeting, and don’t know what the merged program will look like?
What then was the hurry to get rid of the 10k PQM benefit for the US Barclays cards?
I can understand is they were 1 airline and did not want confusion among eqms
Otherwise, what was the problem with keepig US as it was with FF buy ups, elite benefits and challenges, if we are to wait till 2016 anyway?
I think Dougie is ruining AA
I also think despite the devaluations that made me fly UA less, I am still forced to fly them for work and I see it is getting better all the time.
By the time AA/US merge and get their act together, I might be back full time on UA
Honestly, you can merge FF programs to one even before you have a single certificate
Look at Austrain, Swiss and LH
or BA and Iberia
They all have a single FF program running for different companies
In the light of this when would you expect one would be able to transfer miles between programs?
Good. More time for me to get those f**kers over at Barclays to give me a US card or two!
Sabre is working towards a cutover of US to AA for next October
Will this have an adverse effect on the offering of the US Barclay card? Many pushing to sign up for it NOW before it’s gone. Seems like there is still some time (into 2015) where the merger to Citi will still be pending. I want to apply for the card but don’t want to force it until absolutely necessary. Thoughts?