American Airlines-US Airways merger: Integration will likely be painful

Skift Take

If US Airways and American Airlines merge and they don't heed the lessons of past blunders, then the integration process could set back the new American Airlines for years, new logo and livery or not.

-Dennis Schaal

Get ready for a possibly painful, problem-ridden, and prolonged merger of American Airlines and US Airways if the deal goes through.

But, some could argue that on the positive side, at least the paint job and uniform issues likely have been settled.

The integration of the two airlines, with all of the labor, technological and logistical issues to sort out, will undoubtedly take years, and the stakes are extremely high, as United-Continental’s bumpy track record in their merger highlights.

Getting a handle on integrating US Airways’ and American Airlines’ pilots, flight attendants and other labor groups will be an overriding issue, as former American CEO Robert Crandall and numerous analysts point out.

Pilot deal could ease some of the pain

Although the details aren’t publicly known, the pilots unions at American and US Airways have made significant progress toward a framework if their respective boards seal the deal.

The potential complications are exacerbated, however, because at US Airways itself, two pilots groups still exist, a legacy of the 2005 AmericaWest-US Airways merger, so there has been a lack of a true melding more than seven years after that acquisition.

“US Airways and America West pilots still aren’t integrated, almost a decade later,” says Scott Hamilton, managing director of aviation-consulting firm Leeham Co. ”Pissed-off employees can screw up a merger for years.  See Texas Air Corp. as the worst example.”

A big job without reservation

In early March 2012, United abandoned its decades-old Apollo reservations system and migrated to HP’s SHARES platform, which had been handling Continental for years. Four months later, in July, United’s flights notched just a 64.1% on-time arrival rate in as problems persisted with the reservations systems transition, although United recently seems to have moved past the worst of it.

The problems have been so acute that United CEO Jeff Smisek recently made a plea for straying business travelers to return to the airline.

That serves as a warning to the management of a merged American Airlines-US Airways: a botched merger can alienate your most important customers and really screw up the bottom line for a long time to come.

The relatively problem-free Delta-Northwest merger and migration may serve as a case study for American and US Airways to emulate, in some respects, at least.

Delta moved the Northwest PARS reservations system to Deltamatic, both of which were operated by Travelport’s Worldspan unit, at the end of January 2010, and there is now a single revenue management system for the combined airlines.

Beyond the nuts and bolts of getting the technology right, Delta did a great job of retaining key people from Northwest and sharing best-practices and procedures across both airlines, says Henry Harteveldt, travel industry analyst at Hudson Crossing.

On the other hand, Continental ran the show in the United-Continental merger, and was dismissive of a lot of what United was doing, including its Economy Plus seats, which the merged United eventually adopted.

“There was a huge amount of arrogance on the part of Continental Airlines,” Harteveldt says.

A little from column A, a little from column B

American Airlines is by far the larger of the two airlines, but US Airways has been the more profitable and scrappy carrier. All signs point toward Doug Parker and Scott Kirby, US Airways CEO and president, respectively, heading the new American Airlines, with a role for current American Airlines CEO Tom Horton likely a sticking point and being negotiated.

Some reports have speculated that Horton may emerge as the chairman of the merged airline.

US Airways currently runs on the HP SHARES reservation system, the same basic system that United uses, and it’s likely in the event of a merger that US Airways would migrate to SabreSonic, which hosts American Airlines’ reservations. Before it merged with AmericaWest in 2005, US Airways used Sabre so this would be a homecoming of sorts.

Parker and Kirby, if they are heading the combined American Airlines-US Airways, would be wise to take the best of from US Airways, including their skills in turning a profit, and also take advantage of American’s superior attributes, including technology infrastructure and marketing prowess.

Harteveldt believes that the merger of the two airlines could take up to four years to complete after the transaction closes.

Hamilton of Leeham Co. recalls that both US Airways and American have experience in mergers, although American “screwed up” mergers with Reno Air (1999) and TWA (2001).

Those blunders, coupled with American’s decision not to file for bankruptcy right after September 11, 2001, as competitors did, “have fueled labor discord among pilots and flight attendants to this day,” Hamilton argues.

Says Hamilton: “US Airways has been through this before and so has American so hopefully there should be lessons learned.”

That’s if the much-hyped merger becomes a reality.


  • Bill Payne

    DL, NW and AA are oddly intertwined in their “Reservations” system: TWA was the original user of the PARS system when reservations systems first became automated. PARS became WORLDSPAN, and NW adopted the PARS/WORLDSPAN system in upgrading their original and antiquated res system. DL then integrated much of PARS into Deltamatic, and acquired an interest in the WORLDSPAN venture.

    AA divested themselves of SABRE and acquired TWA. There was an odd if costly opportunity to integrate SABRE and PARS, but SABRE had the larger market share in what had then become known as “GDS” or Global Distribution Systems.

    Side note, Eastern also used PARS back in the day. PARS was an IBM product, “Programmed Airline Reservation System”. SABRE was developed at AA, as the “Scheduled Airline Booking/Reservation” system.

    There are vestiges of the original “native Sabre” still to be found out there. They rely on the input of cryptic character strings – many many odd strings for simple things such as booking a seat or looking up a fare. Some old airline hands still know these strings of characters, especially if they worked in Airport Operations or Reservations. (Some will recall: “1 JFKLAX 28DEC 9A” as looking for available flights from JFK to LAX on December 28th at 9am!

  • cheyennecowboy

    Continental shoved it’s arrogance down the throat of United employees, because their president was running the show. You really can’t do that and expect loyalty on the part of the UAL folks, and this certainly effects the interaction employees have with valued passengers. Continental brass need to do a lot of fence building with United people. This may never happen to the detriment of the new United. Customers leave and they may never return when they see descension in the ranks. And, as far as the way Continental treated the retired people from United….well, they don’t even exist in the eyes of CO. And this is supposed to be progress?? It’s a lot like obamacare being pushed off on the citizenry of the USA. Not very popular.

  • Wings367

    Us air’s profits can be largely attributed to smaller and cheaper hubs and lower wages than its competitors. If they continue to operate in this vein after the merger, I wonder if the AA group will still be excited about management after the honeymoon period wears off. Especially the “restore and more” crowd.

  • resbackoffice

    I still use native Sabre every day, as do all of my co-workers. I think that most of Res went to Windows based, point and click years ago but there are still some areas that have to use the old-fashioned version. In some ways I actually find it better, especially for checking flight availability like you showed above. Strangely, I can find what I need much more quickly using the “long strings” than I can with the newer version. That stuff still runs in the background so we will still have to have some people that know and use it until the day comes when they completely change to a different system. I think that is still a long way off.

  • http://twitter.com/bustransform Martin Hedley

    SABRE originally stood for Semi Automated Business Reservations Environment.

  • http://www.facebook.com/rjligh Ronald Light

    The reason for the bankruptcy for American is due to the pilots and flight attendants because of their attitude such as: September 11, 2001, as competitors did, “have fueled labor discord among pilots and flight attendants to this day,” Hamilton argues. Instead of being proud of American for not declaring bankruptcy during the worst terrorist attack in America, the pilots and flight attendants have an attitude—it just might come back and bite them when the picking and choosing who is going to stay and the ones going out the door—THEN the former pilots and flight attendants just might realize what they had and what they don’t have from here on out.

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