Friday, February 15, 2013

The US Airline Industry: It was always going to come to this.

With yesterday's news that US Airways and American are going to stop courting and get around to the hanky panky of merging it seems that almost every travel blogger worth their salt is taking the opportunity to weigh in on what this means for the consumer or, more accurately, what they hope it means.

As with any merger we're hearing talk, from the airlines, of stunning new efficiencies that are going to open up a world of possibilities and wonderful new flight options powered seemingly by fairy farts and unicorn pee.  This great new behemoth of an airline (the combined airline will replace United as the US largest carrier) will suddenly gain advantages over its competitors that did not previously exist (some of this is true due to scale) and flying will, once again (?) become a kumbaiyah moment for customers once they get past the gauntlet of TSA security theater.

The travel bloggers seem to be taking a more modest tack on this one, hoping for the best while expecting the worst and, to be honest, you really can't blame them.  After all, many are still reeling from the United/Continental merger which has resulted in fewer routes, reduced benefits, higher prices, and the beginnings of a gutting of one of the best loyalty programs around. Of course, you have to give United a small break, since they're spending a lot of time working with their vendor to keep their newest flagship plane from melting.

To my way of thinking this merger was the final step into the long path of inevitability once the airlines decided that networked alliances were the right thing to do.  The problem, after the United/Continental merger, was that you had three alliances, OneWorld, SkyTeam and Star Alliance working with four US Domestic airlines:  American, Delta, United and US Airways.  Since US Airways was tucked in under "United's" Star Alliance they always felt like the little guy jumping up and down in the corner desperately vying for attention.  And while I don't think that this merger will do much good for the consumer long-term, I do believe that it will be good for the respective airlines and will position them to really leverage stronger hubs to higher prices across the board. I think we'll see the first true revenue-based "loyalty" program emerge from this, and I truly believe that the budget carriers are going to benefit the most due to some new flexibility that they're going to have in marketing "bargain" pricing. As the ceiling raises, so does the floor.

In Houston I don't think we're going to fell much of anything from this merger, neither airline has much of a presence here and there's little chance they'd take whatever combination emerges and make a strong run at United.  The power of the hub is strong and will become even more so after this.  If you're a United Premier member you have to think that Star Alliance will take a small hit, as US Airways was always good for the occasional cheap fare to Europe but not much else.

Dallas is going to be where all of the Texas fun is.  I haven't seen or heard where the new airline is going to be headquartered but I'm guessing Dallas is going to be the location.  If they do move to South Carolina however it will be fun to see if Big D reacts in the same childish manner as did Houston when Continental left town.  The routing is also going to be interesting from there,  as are what the new livery looks like (I can't imagine them sticking with American's new disaster*) and the make-up of the management team.  It's assumed that US Airways management will run the combined company and I wonder whether or not they're going to really try and brand this new company as a tail-flag brand?

Besides that everything "fits" now in the US Airline industry.  This is something that may, or may not, cause some stability to take over for a while.  Whether or not this is a good thing remains to be seen but, in my experience, there's nothing more dangerous than a VP with some extra time on their hands and with mergers probably off the table for a while they're going to have a lot of that.

*For the record: I don't HATE American's new livery but I'm not terribly excited about it. The problem that their having is that most of their customer base DOES hate it. I'll be surprised if it survives.

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