This week, American Airlines said that it would formally begin reaching out to potential merger partners, reportedly including competitor U.S. Airways, which has been relentlessly pursuing a merger for months. The announcement from parent company AMR marks an about-face for CEO Tom Horton, who has long insisted that the company first emerge from bankruptcy proceedings, which it began in November, before considering a merger. However, Horton has been under pressure from AMR unions and creditors to team up with U.S. Airways, which would create the country's largest airline and a formidable competitor for United (which recently merged with Continental) and Delta (which combined with Northwest). Should AMR merge with U.S. Airways?
Yes. A merger is American's only option: "Virtually everyone in the industry believes that American, the third-largest airline in the country, and U.S. Airways, the fourth-largest, will eventually have to merge to stand a chance" against United and Delta, says Andrew Ross Sorkin at The New York Times. The airline industry has moved toward consolidation in recent years, in order to keep costs down and maximize profits, and American won't be able to withstand the trend for long. "The question is when, not if."
"American Airlines and U.S. Airways dance around a merger"
No. American could stand on its own: Investors scoff at the idea that American can remain independent, but in recent months the struggling company has shown "encouraging signs," says David Koenig at The Associated Press. American is posting "better revenue per mile flown by each seat than its rivals," meaning it's "able to raise fares while filling seats." The airline says it has boosted business in the "all-important corporate-travel" area, and its bankruptcy proceedings should help it reduce its labor costs, which are the highest in the industry. Put all that together, and it's possible that Horton can keep American from U.S. Airway's clutches.
"AMR CEO says it's time to weigh merger options"
And it would be bad for travelers: The most likely outcome of an American-U.S. Airways merger is higher fares for travelers, says ABC News Radio. The recent trend of combining independent airlines into behemoths has led to a spike in ticket costs and fees, since airlines have less competition than before, which gives them little incentive to offer cheaper prices. What the country needs is fewer airline mergers, not more.
"An American Airlines merger could mean higher fares for travelers"
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
- The 11 worst fast food restaurants in America
- 7 things the world's happiest people do every day
- 7 grammar rules you really should pay attention to
- Why are so many parents being arrested?
- 9 things you probably didn't know about the moon
- Israel has only two choices: Eliminate the Palestinians or make peace
- What if The Purge was real?
- The biggest lesson Obama failed to learn from Bush
- Why America is duty bound to help Iraqi Christians
- 29 adorable slang terms for sex (from the last 600 years)
Subscribe to the Week