By Joe Brancatelli
February 13, 2013 --For at least the 40th time since I warned you last April to ignore the media hype surrounding a potential merger of US Airways and American Airlines, the media hypesters are suggesting that this will be the week when a deal is finally announced.

For a variety of tactical, technical and contractual reasons, we may actually get genuine news this week from US Airways and bankrupt American. I'm still not convinced it'll be a merger announcement, you understand, but I think we'll know more soon.

Let's discuss what might happen if once-mighty American and the Mousy Airline That Roared actually do get together.

Now wait some more...
No matter what legal and financial form a merger may take, the announcement of a deal will mean absolutely nothing to business travelers for most of this year. Why? Because it'll take months for any proposed combination to clear various regulatory hurdles.

The 2008 combination of Delta and Northwest that created what is now Delta Air Lines (NYSE: DAL) took almost seven months to get the needed approvals. The 2010 deal between United and Continental that created what is now United Airlines (NYSE: UAL) required five months. The 2011 deal that allowed Southwest Airlines (NYSE: LUV) to purchase AirTran Airways needed seven months. A potential US Air-American deal, however it's structured, will require the approval of the Justice Department, the Transportation Department, American's bankruptcy court and the European Community. Even if all the pieces fall perfectly into place, it'll probably be the end of the third quarter before American and US Airways can become a single financial entity. And I wouldn't be shocked if the approvals didn't come until the end of the year.

All airline mergers stink
Regardless of what you might think of the financial and competitive angles of a US Air-American tie-up, all airline mergers stink from the perspective of business travelers. Why? Because operations crumble when the carriers attempt to merge crucial computer and passenger-service systems.

In March, 2007, when what is now US Airways merged systems with America West, travelers were inconvenienced for weeks. The website crashed, check-in kiosks failed, airport lines snaked out doors and on-time performance plunged. It was all made worse by US Airways' pre-emptive arrogance ("We get to demonstrate that these transitions aren't as big and as difficult as historically has been proclaimed," boasted its then-vice president of customer service) and the carrier's contemporaneous denials that anything serious was going wrong. The Delta-Northwest combination went a little more smoothly, but, by the end of 2010, Delta had fallen to the bottom of government rankings for on-time performance. It had to pad its schedules (industry jargon for adding minutes to scheduled flight times) to get back on a timely track. Last year's United-Continental combination was so awful that United continues to lag the industry in all key passenger-service and economic indicators.

When would US Air and American try to merge operations? I can't tell you what year—although I'd bet on 2015 before 2014—but it will almost surely come during the first weekend in March, when traffic is at its annual low point. So beware the weekends just before the Ides of any March.

What about the miles?
Although most experts expect that US Airways boss Doug Parker will emerge as chief executive of any combined company, it's virtually guaranteed that most commercial touchstones—name, branding, international alliances, credit-card partners—will come from American. That includes the mighty American AAdvantage frequent flier program, which dwarfs US Airways' Dividend Miles plan.

Historically, merged airlines ensure that no traveler loses their miles when the frequency programs combine. But several external factors will complicate any mashup of the American and US Airways programs.

For starters, US Airways has been a member of the Star Alliance and Dividend Miles has been useful for claiming lower-cost premium-class awards on Star partners. But post-merger American Airlines will almost certainly remain in the Oneworld Alliance. That'll be a substantial change in players—and probably some higher award prices—for current US Airways fliers.

Then there's this: Earlier this year, Delta Air Lines made the first move to convert its SkyMiles plan to one that rewards travelers based on revenue you contribute rather than miles you fly. The move that Delta made—imposing minimum-spend thresholds to achieve elite status—was similar to what United Airlines planned for the combined United-Continental MileagePlus program it rolled out in 2012. United scrapped the revenue requirement at the last moment. But by the time a merged US Airways-American begins looking at a combined frequency plan (probably for the 2015 calendar year at the earliest), I think revenue-based models will be standard industry procedure. That can radically change how travelers view and value their existing miles and the value of any combined program.

Let's get small
If and when American and US Airways do a deal, the boiler-plate patter from the carriers will surely be that the combination will make the new airline large enough to compete on a world scale. That's baloney.

History has shown that any merger between legacy carriers has eventually resulted in a smaller airline. In fact, the entire commercial airline industry is shrinking.

A combined US Airways-American would almost surely be smaller, too. An obvious places to cut: Phoenix, the current hometown hub of US Airways. Just as Delta found it impossible to maintain the size of Northwest's Memphis hub because it was sandwiched between Delta's Atlanta/Hartsfield hub and Northwest's larger Detroit/Metro hub, the new American would be hard-pressed to justify PHX because it sits between American's hometown hub of Dallas/Fort Worth and its crucial operations in Los Angeles. US Airways' large international hub in Philadelphia would also be a target. American and its Oneworld partners need to keep their operations at New York's Kennedy Airport. It's very hard to justify two international hubs just 90 miles apart.

The Humpty-Dumpty factor
Outside talking-head experts never fail to mention American's "toxic" labor environment. In fact, it was the American unions' move to cut the framework of a deal last year with US Airways chief executive Doug Parker that really began to move merger discussions along. But Parker is hardly a champion of the working man. The labor situation at US Airways is no less "toxic" than at American. For example, he has never successfully cut a contract deal with his admittedly fractious and quarrelsome pilots. They continue to work under separate contracts from the days before America West and US Airways merged in 2005. The airline's flight attendants are also working under pre-merger deals because rank-and-filers have voted down two negotiated post-merger agreements. They are currently voting on a third.

What's it mean for travelers? Potential labor chaos. If the "memorandum of understanding" that the unions of both carriers have agreed with Parker doesn't yield actual ratified contracts, job actions and possible strikes are inevitable. There'll be so many moving pieces—old-line US Airways employees, former America West workers, old-line American rank-and-filers and even a rump group of TWA workers, who were merged into American more than a decade ago—it's hard to see which of King Parker's horses and which of his men could put it all together again.

ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.

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