Respected airline consultant and research engineer Bill Swelbar has recently taken a swipe at the idea of a merger between US Airways and American Airlines in a blog post.  Swelbar suggests there may be more benefits to a full integration between AA and JetBlue and Alaska Airlines who just as adequately (if not more adequately) cover areas where American is weak (the West and East Coasts).

Swelbar is factual and correct about AA’s weaknesses in these areas with respect to its network and market shares.  He’s also correct in that those two smaller airlines do operate in the weakest portions of American’s network.

I see significant problems for that kind of approach.  First, Alaska Airlines is increasingly under the influence of Delta Airlines these days and enough so that I do not think it can afford to ignore Delta’s desires entirely and Delta would like competition to go away.  Second, JetBlue already has some agreements in place with American Airlines that do bring a benefit but it also has little incentive to cooperate with American Airlines as AA doesn’t bring much to the table for JetBlue.

Both Alaska and JetBlue are working hard to be all things to all carriers in the form of interlining, codeshares and alliance agreements and that works for both airlines very, very well.  Alaska works at this from a domestic perspective and JetBlue plays more on the international side of things but they’re both pursuing the same strategy and it’s a strategy that works well for both.  Why give up success for the risk of fully integrating with AA and under AA’s management?  If I’m a shareholder for either airline, I don’t like the idea.

Furthermore, at this point, this isn’t about what AA leadership wants.  It is already rapidly becoming much more about what AA’s creditors want and what their shareholders want.  And what they want is performance.

A marriage with US Airways can be disrespected over and over but there are two exceptionally important things to be mindful of.  US Airways knows how to run an airline well and earn money despite labor issues.  They also know American’s business pretty well and they’ve got an established track record that didn’t exist in the same form back when they made a bid for Delta.  Creditors will listen to them carefully today.

US Airways also has the strengths that are complimentary to AA’s network.  They aren’t the most optimal strengths but they are one hell of a lot better than American Airlines standing alone.  Philadelphia, Phoenix and Charlotte are very complimentary to AA’s strengths.  No, there isn’t much overlap that would result in “synergies”.  I would argue that the so called “synergies” of reducing capacity via a merger are harder to obtain than generally appreciated, overvalued and largely non-existent today as a result of consolidation and capacity restraint that has gone on for the past 4 years.

New mergers will benefit from scale and operational expertise.  They’ll benefit from having a more diverse fleet that permits “right size” flying on routes.  They’ll benefit from international alliances.

There is a great example for that last part.  US Airways is now the awkward partner in the Star Alliance with United filling that role on a far greater scale within the United States than US Airways does.  US Airways could benefit a great deal more from Oneworld than it does Star at this point and a merger with American makes Oneworld very competitive in the United States again.  A great reason for Oneworld partners to stand aside and look at these issues with less emotion and more reason.

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