The big news this evening is actually just a rumor, gone mainstream by way of the New York Times Deal Book blog, that US Airways would be buying United.
The title of the post was changed to say the two carriers were ‘in merger talks.’ But in fact the rumor has very much been that US Airways would be making an offer for United. I’m not really clear on where they get the cash to do that (Track It Back-funded merger???). But that is the rumor.
And I believe this would be bad for everyone. Consumers already get the benefits via the Star Alliance partnership. And the downsides from the perspective of a frequent traveler are myriad.
1) Bad for United flyers, United has a better product and the US folks aren’t about quality in-flight product. And will US Airways really want to keep international first class and economy plus?
2) Bad for US Airways Dividend Miles members, no doubt the United brand and mileage program survive and that likely means continued Starnet blocking. US miles blocked AND UA miles blocked. Now, when United refuses to book an award seat being offered by a partner, I can book that seat with my US Airways miles. Nowhere left to run…
From a business perspective, this seems bad all the way around.
3) Bad for Continental, presumably they lose the United anti-trust immunity as part of the merger approval process. Would it really be granted for a combined Continental – United – US Airways entity?
4) Bad for mid-Atlantic and Northeast hub cities. Chicago stays, does Philly still make sense along with DC [i]and[/i] Charlotte? And hubs at Dulles and DCA? Hubs way too bunched together, basic rule you don’t want to overfly your hubs, something goes here. Continental (dropping Cleveland) and United (downsizing Dulles) makes a whole lot more sense for a tie-up.
5) Bad for labor relations, US Airways pilots already created a separate union for the express purpose of battling amongst themselves, the former America West pilots and US Airways pre-merger pilots already hate each. Presumably the larger United pilots group re-establishes dominance through ALPA, then again putting both the old American West and US Airways pilots in the minority could finally quell things…
If this was a US Airways acquisition, it makes sense — Doug Parker expands his empire further, Glenn Tilton gets his big payday. But for shareholders? United and US Airways just don’t seem better off together than apart, the integration costs are huge, there are few barriers to entry in most markets where it makes better sense to grow organically than to merge cultures and take on legacy obligations.
But really – for me – when it comes right down to it I want to keep United and US Airways separate. I want to fly United, and burn my US Airways miles sans Starnet blocking.
the reason it would be US is a levered debt for equity swap, and UA has WAAAY too much debt for this, so US would be the acquirer in the eyes of the lender.
Now that I think about it though, this COULD mean the re-entry of UA into a low cost carrier operation. Take some of the premium routes and shift them to UA metal, and move everything over to a UA “us ted” product to compete with VA and JB. Might actually make sense in the long run, and also based on SOME of the hubs.
Gary – could you comment on whether you think a CO/UA merger, with CO being the acquirer and UA being the surviving brand, as I believe has been rumored, would be different for consumers?
Your note above suggests that from a business perspective CO+UA is smarter than US+UA, but I wonder if the consumer implications are the same (ie. likely loss of First Class and E+, and StarNet blocking) even with CO+UA?
“Nowhere left to run.”
There is still Continental. And they seem to be coming out with some very good free offers of miles (credit cards – Continental and Saphinre and American Express Membership Rewards), Chase bank accounts, etc.
I’d love this merger to happen! I don’t fear a decrease in quality… I think it will spur them to keep up with their ever-dwindling pool of peers. It will also make it easier to get status on the airlines that serve your airport… focus on a couple and you’ll cover most of the bases. Better routing options domestically, etc. Love it.
@Larbo – US AIrways flights count towards United status and vice versa already no merger necessary. They’re both Star ALliance members…
@AS – I’m a bit less worried about CO acquiring UA, though purely speculation, CO at least views itself as more of a premium carrier and has been committed to no blocking (rather than just lacking the IT capacity to block). CO acquiring UA could be just as bad but my hunch is it wouldn’t be.