There is a report floating around that CEO Tom Horton was actually the first one to suggest a US Airways / AA merger and that he made the pitch to US Airways CEO Doug Parker last September.   It’s entirely possible that a union was discussed in September between Parker and Horton.  I will suggest that US Airways has been aggressively evaluating merger partners and options for industry consolidation since 2006.  You can bet that AA has always been a part of those discussions.  I will point out that even US Airways didn’t really find the AA option that attractive but did find both the United and Continental options very attractive as well as the opportunity to buy Delta out of bankruptcy.   In short:  I guarantee you that US Airways knows much more about mergers and has done real homework on the subject of American Airlines.  The same is not true from the perspective of AA and Tom Horton.

AA has announced new aircraft and seating for transcontinental flights.  It will use its A321 aircraft order to replace existing (and very old) 767-200 aircraft on these flights.  Curiously, AA is promising things like seat back video and lie flat seating for business and first class.  It’s also notable that all the other airlines have not gone that far in their product and have not seen revenue consequences for that decision.  I have a feeling that this AA on a PR campaign which will see *some* of these options realized.  Also notable is that these domestic trans-con 767 have about 168 seats and the new A321 aircraft will have 102 seats.  That’s a drastic reduction in capacity for routes that are robust earners for all classes of seating.  Either AA will boost frequencies which is somewhat challenging given that some of those trans-continental flights depend on slots at restricted East Coast airports or AA is hoping that just serving business and first class customers will result in a better revenue and profit yield.  This is what people are referring to when they say that AA has as much of a revenue problem as a cost problem.   The scenario of great reduce capacity on these routes doesn’t coincide with how  the industry is executing on those same routes and earning money.

Finally, US Airways gets to crow about record quarterly profits.  It’s a timely endorsement of the US Airways management and I have no doubt that American Airlines executives reached into their desk drawers for their roll of Rolaids upon learning of US Airways success.

Filed under: Airline News by ajax