American Airlines is a pretty conservative organization.  It doesn’t hire from outside the airline very often and it manages itself pretty closely.  It is, in many ways, the IBM of the US Airline industry.   Well, the IBM of the 1970’s anyway. 

 

Mergers and acquisitions haven’t been a very successful pathway for American.  One look at the TWA “merger” which was really a purchase and you’ll understand why.  They tend to focus on their core strengths and it is particularly difficult for them to adopt new staff and destinations.  Purchases, for them, seem to be more about keeping dominance in a particular area rather than growing their business. 

 

When Delta and Northwest started off on their merger, it was easy to understand why AA was unruffled by the development.  There was no assurance of success on any level be it financial or operational.  Being the biggest isn’t AA’s game nearly as much as being the strongest and I’m sure their management corps looked at that merger and decided it wasn’t something to worry too much about. 

 

But Delta has had better financial success than AA and it seems to be “right sizing” aircraft to routes and enjoying better yield and that has got to be attention getting on some level.  It got Continental’s attention apparently.  If the Continental / United deal does go through, I have to wonder who AA starts to look at.   It’s one thing to have an aberration in Delta but it is a whole other bag of bananas to have Delta/Northwest and United/Continental next door to you.

 

So, is it US Airways?  They aren’t just the logical choice because they’re the only legacy airline left.  There is a certain sensibility to the idea.  AA has no hubs out west (just a large presence at LA) and, in fact, has no dominance in any of the areas where US Airways does operate.  Well, Philadelphia is close to Washington DC and NYC but it isn’t the DC or NYC market either.    AA has no southeastern presence either.  Miami is a hub but it isn’t an regional hub like Atlanta or Charlotte. 

 

There isn’t much fleet compatibility there and I’m not sure there needs to be.  Delta has shown that as long as you have an economy of scale in the aircraft type, you can have it in the fleet and use it to your advantage by rightsizing your aircraft to the route. 

 

Labor problems?  Well, AA is kind of used to labor problems and their labor unions are so strong that I kind of wonder if they wouldn’t smack all those US Airways EAST/WEST conflicts into shape.  If nothing else, it would give the EAST/WEST unions something to unify over. 

 

Say, did you know that US Airways CEO Doug Parker used to work for AA?  His wife still does.  Guess who US Airways’ President Scott Kirby used to work for?  Sabre when it was a division of AMR, the holding company for AA.   Two more of the executive team come from Northwest Airlines from an era when they really weren’t that different from AA culturally speaking. 

 

Both airlines have a lot of debt.  The US Airways team has actually proven itself to be pretty scrappy in many areas.  They cleaned up the Philly problem from US Airways EAST, managed their finances carefully and have continued to be a player despite unresolved challenges.   Neither has really made money though. 

 

However, a real merger, not just a purchase and dissolution but a merger, has some potential even if AA’s team retains most of the control.  It has some of the same potential that Delta / Northwest had and fewer of the risks that a United/Continental merger has.  It helps the Oneworld alliance as well. 

 

While I think AA could do it, I also think the chances for them to screw up a real merger are far higher than I would give many other airlines.   I think they would approach it as a takeover and attempt to dominante everything.  And as a result, I think we would see the hubs in Phoenix, Philadelphia and Charlotte slowly fade away over time with nothing much to show for its effort after 10 years.

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