The legal battle surrounding the potential merger between US Airways (NYSE: LCC ) and American Airlines parent company AMR (NASDAQOTH: AAMRQ ) will play a critical role in the future of commercial aviation.
On the opposition side is the Department of Justice, several state attorneys general, and many consumer groups, while those supporting the merger include the management, stakeholders, and unions of both airlines, the Oklahoma attorney general, many members of Congress, and several key mayors. But more key parties are joining in support of the airlines.
Among the concerns of those opposed to the airline merger is a loss of service to certain US Airways hubs. As I have mentioned in previous articles, this concern is reasonable given the past records of other major airlines after mergers.
Once a Northwest Airlines hub, the Memphis International Airport has become a shell of its former self after the merger between Northwest Airlines and Delta Air Lines (NYSE: DAL ) in 2008. Proximity to Delta's massive Atlanta operations made maintaining Memphis as a hub uneconomical for Delta. As a result, Memphis flights have been slashed, jobs cut, and even the airport's coveted hub status removed.
While the Memphis International Airport has suffered as a result of the Delta-Northwest merger, airport officials for the Phoenix Sky Harbor International Airport and the Philadelphia International Airport have a different view on the prospects for their respective airports following a merger between US Airways and American Airlines.
Some of the airports with the largest financial stakes are now registering their support for the airline merger and have even applied for amici curiae, or friend of the court, status. Together the airports of Dallas/Fort Worth, Charlotte, Phoenix, and Philadelphia have noted their support of the tie-up, but it's the support of the Phoenix and Philadelphia airports that may play the biggest role.
The support of the Dallas/Fort Worth and Charlotte airports is certainly welcome in this case but was to be expected much more than the support of Phoenix and Philadelphia. Dallas/Fort Worth International would become the largest hub of the new American Airlines Group and would probably see a greater number of flights. Charlotte-Douglas International Airport forms a major southeastern hub for the new American Airlines Group and has not involved the same loss of service discussions as Phoenix and Philadelphia.
The support of the Phoenix and Philadelphia airports carries another benefit: Arizona and Pennsylvania are both challenging the airline merger alongside the DOJ. These airports' perspectives show that both states are far from in agreement, increasing the possibility that the attorneys general of either state may look to settle before the Nov. 25 trial begins.
Support continues to build for the merger of US Airways and AMR, with several key mayors joining the push along with some of the most contested airports. While the merger battle is far from over, the support of airports that are key to the position that the merged airline would cut service shows that the merger does have a chance in Arizona and Pennsylvania. And that is a strong positive for US Airways and AMR.
2 airlines without merger issues
Warren Buffett has claimed that investing in airlines is a surefire way to lose your hard-earned cash. But two airlines are breaking all the rules by keeping costs low and avoiding direct competition -- leading to enviable profits. Click here to learn how these two airlines are leading a revolution in the industry, and discover whether they can keep delivering big gains for shareholders!