My name is Marc Prosser and I will be writing about business travel and entrepreneurship for allBusiness. I was lucky enough to be the first employee of a company that went public on the New Stock Exchange. However, it was no overnight success. It took eleven years of hard work. During that time, I did a good amount of business travel visiting remote offices, clients and vendors. Also, I managed a team of people that traveled. As an employee, I never liked business travel. As a manager, travel was a fairly large budget item that seemed to cost more than it should. Despite the importance of business travel, most media coverage of the topic is basically limited to articles about which travel apps you should download or what you should pack. This column is meant to cover topics with more substance than the usual. My first article is about the American Airlines / US Airways merger.
How will the American Airlines / US Airways merger impact you?
First of all the merger, which will result in one airline operating under the American Airlines name, is not a done deal. Because of the size of the companies involved and the potential impact it could have on competition, the merger must be reviewed and gain approval from the US Justice Department. While eventual approval is expected, the process could drag on until September or October of this year. Until then, the two airlines can work together on planning their integration.
What will happen to your frequent flyer miles?
You will not lose any miles as a result of the merger. However, once the merger occurs there are expected to be significant changes in the frequent flyer programs for everyone. One of those changes has been announced in advance, US Airways will be dropping its participation in Star Alliance and joining the program used by American Airlines. The merged company will be part of oneworld,
How could the frequent flyer programs change?
American Airlines AAdvantage is considered one of the most generous and easy to use frequent flyer programs. One perk of the AAdvantage program is the ability to “purchase” a one-way ticket for exactly half the miles that a round trip “costs”. While not considered as good as the AAdvantage frequent flyer program, US Airways’ Dividend Miles program does offer great deals on traveling to places like Europe during off-peak times of year. At this point what elements of each program will continue is pure speculation. There is an excellent discussion of the decisions that will have to made in the blog, The Points Guy.
Will there be changes to the routes currently offered?
There is very little overlap between the flight routes offered by American Airlines and US Airways. Of the more than 900 routes offered by the two airlines, only 12 routes overlap. However, the combined airlines will have eight major operating hubs. In past airline mergers, the number of hubs has been reduced. There has been some speculation that the US Airways hub in Philadelphia might be on the chopping block. So potentially, there could be less flights going in and out of Philadelphia from the new American Airlines.
Are fares expected to go up?
There seems to be mixed opinions on this question. As mentioned earlier, there is little overlap of routes. With the exception of Ronald Reagan International Airport, the two airlines will not be significantly increasing their market share of flights for any particular airports. So, many don’t believe that American Airlines will be able to raise prices as a result of combining with US Airways. However, those who believe prices will rise point to the statistic that only 4 airlines will now control 70% of US commercial air travel. While open collusion is illegal, its easier to raise prices when dealing with larger, predictable competitors that value higher profit margins rather than more increasing market share.
The most likely place for prices to rise is indirect flights offered by US Airways for cities which it does not offer direct flights to and American does. These flights can be 40% cheaper than the direct flights. American will want to encourage people to book the more expensive direct flights.