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The airline industry in the United States has changed significantly over the past twelve plus years. Several big name players are altogether gone or have merged with other carriers. Gone are names like TWA, Continental and Northwest Airlines in what became merger mania within the ranks of the major US carriers. Ironically, with its 2001 combination with Trans World Airlines, American not only claimed temporary bragging rights of the largest airline in the world, but also instigated a rash of mergers that would not only remove that title, but also created several formidable competitors in the process.
Before the US airline industry began to consolidate, long term stability and profitability was almost inconceivable. With the possible exception of Southwest Airlines, a company that consistently managed a particularly annoying (for anyone who didn't work there) streak of profitability, every other airline in the US struggled through cyclical ups and downs that became the accepted norm. The American Airlines bankruptcy in 2011 marked the 100th time a US carrier moved to reorganize its finances since 1990 and the 40th bankruptcy filing since September 2001. [1] No longer inconceivable, it is now a very real possibility that the American Airlines and US Airways merger could put the US airline industry as a whole in a position for long term stability and profitability.
But who should be the recipient of the trophy for largest airline in the world? The answer isn't as simple as it may seem and depends on what metric is used to measure the size of these enormous airlines. As you can see from the charts below, the New American still lags behind in several metrics. For example, American has stated in merger related documents that the combined airline will serve 336 destinations, that number lags behind United Airlines and barely beats out Delta Air Lines for the number two spot.
If size really does matter, then American gets to brag about the size of its fleet, which is rapidly becoming the youngest in the industry as new Boeing and Airbus jets arrive every month. As of today, the new American Airlines has a total of 1,494 jets, which puts the carrier squarely on top of the fleet size chart.
Revenue Passenger Miles measures airline traffic by multiplying the number of revenue-paying passengers by the distance they traveled. Once gain, United Airlines comes out on top of the chart. In 2012, US Airways didn't make the top ten, but if the RPMs of American Airlines and US Airways are added together, the New American comes in second place, once again, just barely out-flying Delta.
Once again, it all depends on which metric you decide to use as the New American takes a significant lead in passengers carried. These number are, however, full year 2012 numbers. As part of its settlement with the DOJ, American has already agreed to reduce flying in several key markets and will almost surely reduce frequency in some cities where the two airlines have overlapping flights. Officials from both carriers have repeatedly pointed out that they only compete on 12 out of 680 nonstop routes flown by the two airlines, but the full year numbers for 2014 and beyond will be a better indication of passengers carried.
Facts about the new airline:(Information from court documents and SEC filings)
- Following the closing, AMR will change its name to American Airlines Group Inc., or AAG, and will operate its airlines under the American Airlines brand, principally through its mainline operating subsidiaries, American and US Airways.
- AAG is expected to integrate American and US Airways into a single airline, under a single FAA operating certificate, within two years following the closing, subject to receipt of FAA approval.
- After the merger, AAG is expected to offer more than 6,700 daily flights to 336 destinations in 56 countries.
- Out of the more than 680 domestic nonstop routes that American and US Airways fly, only 12 nonstop flights overlap.
- American serves 130 cities not served by US Airways, and US Airways serves 62 cities not served by American.
- US Airways will withdraw from the Star Alliance and join the oneworld Alliance.
- AAG will maintain all nine hubs currently served by American and US Airways.
- AAG will be headquartered in Dallas-Ft. Worth and will maintain a significant corporate and operational presence in the Phoenix area.
- AAG will employ approximately 100,000 people around the world.
- AAG is scheduled to take delivery of more than 600 new aircraft through 2022, including 517 narrow-body aircraft and 90 wide-body international aircraft.
- Doug Parker will serve as CEO of AAG from the closing date, Monday December 9th.
- Tom Horton, the current AMR CEO, will not continue as an officer or employee of AAG following the closing, but will remain as chairman of the board. Mr. Horton will have no transition role at the new American and had his last day as CEO on Friday, December 6th.
- The New American will have hubs at the following cities: Dallas, Charlotte, Chicago, Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington, DC.
Facts about the DOJ settlement:
Slot reductions at DCA and LGA are roughly 14% and 7% of the combined "New" American Airlines.
- Given the size and scope of the "New" American, these divestitures are manageable with little or no reduction in mainline service.
- Capacity reductions at DCA and LGA represent less than a quarter of a percent of the "New" American's 2013 total system capacity — in other words, 112 of ~6,700 daily flights total.
- The reductions in DCA and LGA will have an impact on regional jet flying performed mostly by US Airways contract regional carriers operating 50-seat regional jets.
- American Airlines currently holds ~14% of DCA slots, and US Airways holds ~55% of DCA slots. Following these divestitures, the "New" American will hold ~57% of all DCA slots.
- The settlement agreement with the DOJ impacts ~14% of the daily departures operated at DCA by US Airways and American prior to the merger.
- At DCA, the agreement calls for divestiture of 52 slot pairs. This includes 8 slot pairs currently owned by AA and leased by JetBlue.
- Taking into account these leased slots, the settlement will result in an actual reduction of 44 slot pairs.
- To put this in perspective, at DCA today, US Airways and American together operate 294 daily network departures (243 US Air and 51 AA).
- After the DCA slots are divested, the new AA will jointly operate ~250 daily weekday departures.
- At DCA, the agreement calls for divestiture of 52 slot pairs. This includes 8 slot pairs currently owned by AA and leased by JetBlue.
LGA:
- The settlement impacts less than 7 percent of the daily departures operated at LGA by US Airways and American prior to the merger.
- At LGA, the agreement calls for 17 slot-pair divestitures. This includes the 5 slot pairs currently owned by American and leased to Southwest.
- Taking into account these leased slot pairs, the agreement requires the divestiture of only 12 slot pairs.
- At LGA, US Air and AA together operate 175 daily network departures (65 US Air and 110 AA).
- Post-divestment, US Air and AA will operate 163 daily network departures at LGA.
- At 5 additional airports, the settlement agreement calls for the transfer of 2 gates and associated ground facilities (which includes things like ticket counters, hold-rooms, jet bridges and operations space):
- BOS: 2 gates out of 28 (7 AA/21 US Air) currently operated by US Airways and American, pre-merger. (24 gates are currently operated by the airlines.)
- DAL: 2 American gates out of 2. Those gates are currently leased to Delta.
- LAX: 2 gates (expected to be 31A and 31B in Terminal 3) out of 26 (23 AA/3 US Air) currently operated by US Airways and American, pre-merger.
- MIA: 2 US Airways gates in Terminal J out of 67 (65 AA/2 US Air) currently operated by US Airways and American, pre-merger.
- ORD: 2 American gates on Concourse L out of 71 (68 AA/3 US Air) currently operated by US Airways and American, pre-merger.
- In the settlement agreement with the state attorneys general, the "New" American has agreed to maintain its hubs at CLT, DFW, JFK, LAX, MIA, ORD, PHL and PHX consistent with historical operations for a period of 3 years.
- In addition, with limited exceptions, for a period of 5 years, the "New" American will continue to provide daily scheduled service from 1 or more of its hubs to each airport in each of the states involved in the original lawsuit that has scheduled daily service from either American or US Airways. This agreement does not include service that is discontinued as the result of the divestitures required as a condition to completing the merger.
- A previous settlement agreement with the state of Texas will be amended to make it consistent with those entered into today with the other states.
- The "New" American will not end service to any cities. All cities currently served by American and US Airways will retain service.
- The divestiture of slots will, of course, require the "New" American to discontinue nonstop service from DCA to some destinations currently served by American Airlines and US Airways. Those cities are not yet known, but "New" American plans to announce the service changes that will result from the divestitures in advance of the sale of the DCA and LGA slots so that the airlines acquiring those slots have the opportunity to maintain service to those communities.
- DOJ agreement term is 10 years.
- Process for divesting DCA and LGA slots calls for the sale of slots to occur as quickly as reasonably possible, with full transfer of slots to occur within 90 days of merger close to acquirers that the DOJ must approve; other gates must be transferred within 90 days after the related slot sale.
- Process for divesting key airport gates allows for 180 days post-merger close. Again, DOJ must approve final acquirers.
