Everyone in Dallas knows someone who works for American Airlines. I worked for its in-flight magazine off and on for years, and I still write freelance articles for it. My grandfather built airplane engines for AA in Tulsa for nearly three decades. I want whatever is best for the company, which, like most airlines, is struggling.
So, as the bankruptcy/US Airways merger talks continue, a few thoughts on what I think has to happen and why for the company to move forward.
Airlines have lost something like $50 billion in the past dozen years. Unless you’re Southwest Airlines (for whom I also work, through a vendor, on creating in-flight content), it’s almost impossible to go it alone now.
What you saw with Delta merging with Northwest and then United merging with Continental is the industry's attempt to fix the big problems that face airlines: high costs, too much pricing competition, and the usual struggles with running a "high degree of difficulty" business. Running an airline is closer to rocket science than it is running a travel company.
So it’s pretty obvious a merger between US Airways and American makes lots of sense, because US Airways, while a profitable airline, has no “end game.” It can't get bigger without AA, for many reasons. But, says a person who knows a thing or two about a thing or two:
[The merger] runs headfirst into [AA chief] Tom Horton's need to get paid, and Tom gets paid pretty much only one way: get shares of the reorganized AA. Every single decision his team has made in the past year has been aimed at one thing: making sure they get those shares and whatever juicy bonus they'll gin up for getting the airline out of Chapter 11.
And that has put management in the position of arguing against something everyone else knows should happen — and has to happen. As a result, insider-observer person says, “American used to be the most-respected carrier in terms of management talent and strategic thinking. Now it's the least. By a country mile.”
I think and hope the merger will happen, despite some pressure from outside forces. (See Terry Maxon’s post this morning.) Because the creditors don’t give a damn about the internal politics. If they think a reorganized company can get them more cents on the dollar, that’s the way they’ll go. Like the elections, the winning argument is very simple: math.
Bigger is better in terms of pricing, economies of scale, flexibility, appeal to business travelers — the whole megillah. Sure, US Airways HQ loses jobs in Phoenix and Tempe. But screw Arizona. DFW comes out on top in this deal, which needs to happen. And North Texas once again will be home to world’s largest airline.
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Giggle, from Channel 8’s weatherman.
Dale was just telling me that he bought a pair of jeans today. He says it's the first pair he's ever owned! I asked if they're skinny jeans!— Pete Delkus (@wfaaweather) November 15, 2012
Lodowick Allison is a great writer and thinker, so you should read this column. I just wish he had a local blog or magazine or something to write about Dallas issues.
Always up for subtle phallic Startlegram infographics. Well, not "up" in this case.