(Reuters) – AMR Corp and US Airways Group yesterday sealed an $11 billion merger, but before they can welcome their first passenger onboard they have to get regulators to sign off and then integrate a web of intricate systems.
Creating what will become the world’s largest airline, with 6,700 daily passengers, will require AMR’s American Airlines and US Airways to unite two workforces totaling 113,000 and meld together reservation and baggage handling systems, computer networks, and terminals – a process that has complicated other marriages in the airline industry.
“So far it’s just been pushing paper,” said Robert Mann, head of R.W. Mann & Co of Port Washington, New York, which provides industry consulting and analysis. “The next 18 to 24 months is the hard work of implementation.”
Integrating the airlines’ reservations systems is a big challenge, said Basili Alukos, a Morningstar airline analyst. He said the previous US Airways and America West merger was “one of the worst” integrations in the industry, but that US Airways has likely learned from that experience.
“It seems as if (American-US Airways) has the benefit of history on its side,” Alukos said, adding that the new American can learn from the growing pains of Delta-Northwest and United Continental.
United Continental Holdings Inc made a number of changes following its 2010 merger. As it shifted to a single reservations system and implemented other new processes, United’s on-time arrivals suffered and mishandled baggage rates went up. United said in January that customer satisfaction scores were improving.
US Airways Chief Executive Doug Parker, who will head the newly merged company, said his experience with America West was a plus.
“Integrating airlines can be difficult sometimes, but we’ve (already) done one at US Airways,” he told Reuters. “We know what to do and know what mistakes to avoid.”
Labor integration could also be a challenge for the new American, where union representation issues will need to be resolved. “The good news is the people they have in the unions now are trying to work with the company,” said Darryl Jenkins, chairman of the American Aviation Institute in Washington. “I think they will be able to get through labor issues reasonably quickly now.”
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The tie-up is the fourth major merger in the U.S. airline industry since 2008, when Delta Air Lines bought Northwest. United and Continental merged in 2010, and Southwest Airlines bought discount rival AirTran Holdings in 2011.
The merger could help speed up the recovery of the U.S. airline industry as carriers will have more power to boost fares as yet another competitor is eliminated.
