Once an iconic company, American Airlines has arrived at a chapter no business wants to see: 11 – as in bankruptcy. Though the airliner had a long reign as industry royalty, it now has naught but lint left in its pockets. That’s where US Airways comes in. Since AA is a trusted, household name, the company is seeking permission to reconstitute what’s left of the ailing enterprise, before absorbing it into a new, super-airline.
We’ve heard plenty about powerful rivals partnering up in the sports world (cough .. Miami Heat .. cough), but the problem is, in business, that kind of thing can be frowned upon. Not just frowned upon actually, it can be illegal. Fortunately for the newly buddy-buddy airlines, a New York Bankruptcy Court Judge gave the go-ahead to the merger on Wednesday; but what does that mean for you?
Well, it’s hard to tell at this juncture. Frequent fliers, for instance, have tended to survive similar mergers without getting fleeced, and being affiliated with a new airline with new destinations, could actually make unused miles more valuable. On the other hand, however, the melding of two enormous entities means fewer power players in the industry. If you’ve ever taken macroeconomics, you know that if the number of suppliers decreases, while demand remains static, price tends to go up.
Both airlines insist that won’t be the case, but those fearing a rate hike can take heart in the fact that there are still hurdles left before the finish line. The plan still needs the approval of regulators and US Airways shareholders before it’s OK’d for takeoff, but yesterday’s decision certainly cleared the runway. At this point, it’s hard to deny that the weather looks favorable for two airlines, both of which have said they expect the merger to be completed by September.
So what do you think? Is this good news or bad news for air travelers?
By Adam Poltrack