Expert: Years before LAX flyers feel impact of American Airlines, US Airways merger

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if its merger with US Airways is approved, American Airlines will retain the new company's name.

American Airlines and US Airways are on their way to becoming the world’s biggest airline after announcing a merger deal Thursday morning.

In the jigsaw puzzle of airline routes, American Airlines and US Airways are two pieces that fit together almost perfectly.

Of the 50 busiest domestic routes, the two carriers compete directly on only one: Los Angeles to Phoenix, according to OAG, a company that tracks airline routes and schedules. And on hundreds of less traveled routes, they only overlap a dozen times, mostly between their hub cities. For instance, both carriers fly Charlotte, N.C. to Miami, Dallas to Philadelphia and Chicago to Phoenix.

The combined airline will offer more than 6,700 daily flights to 336 destinations in 56 countries.

The complementary nature of the markets they serve should help the airlines avoid any major hurdles with antitrust regulators, industry experts say. And it will serve the merged company especially well in today's airline business, which is all about scale.

Commercial aviation is increasingly dominated by mega-carriers that promise to whisk passengers around the globe with ease. They offer frequent flights to faraway destinations, often with just one change of planes - sometimes none.

The first of these giant carriers was created in 2008 when Delta Air Lines bought Northwest, creating what was then the world's largest airline. Two years later, United leapfrogged ahead when it merged with Continental.

American Airlines and US Airways languished in the shadows as these new behemoths lured away highly profitable corporate travel accounts. But by teaming up they'll take the crown as the world's largest airline and have a shot at winning back business travelers.

Each airline brings something different to the table.

American has a strong presence in Dallas, Miami, Los Angeles, Chicago and New York. It is also the dominant U.S. player in Latin America. In Brazil alone, it has 111 weekly flights to seven different cities. American also has a lock on flights into London's Heathrow Airport, one of the world's key financial capitals.

US Airways is the principal carrier in Philadelphia, Charlotte, Phoenix and Washington, D.C. It also has routes into key European cities that American doesn't directly serve, such as Amsterdam and Brussels.

US Airways doesn't fly to Asia and American's presence there is dwarfed by United and Delta's substantial footprint.

But the real key to the merger is US Airways' comprehensive service to small cities along the East Coast.

The airline's CEO, Doug Parker, proudly told investors at the company's June annual meeting that if his airline combined with American, it would have the largest market share east of the Rockies.

Both airlines need to capitalize off passengers traveling from those small cities, such as Allentown, Penn., Elmira, N.Y., and Lynchburg, Va.

For instance, American can charge high fares for flights to London but can only make money off the flight if it can fill it with enough passengers. Those passengers can come from US Airways' network.

"US Airway (currently) loses money on that short segment, but if they can carry that passenger to another major hub or fly them internationally, they capture that incremental revenue," says Vaughn Cordle, an airline analyst and co-founder of Ionosphere Capital.

American would also gain US Airways' lucrative shuttle service between New York, Boston and Washington D.C.

American Airlines is dominant carrier at LAX, fare increases likely

The new company will keep the American Airlines name, but will be run by US Airways CEO Doug Parker. American’s CEO, Tom Horton, will become chairman of the new company, sources said.

The deal has been in the works since August, when creditors forced American to consider a merger rather than remain independent. American has been restructuring under bankruptcy protection since late 2011.

American Airlines is the dominant air carrier at Los Angeles International Airport, carrying about 15 percent of the passengers there, according to LAX data. US Airways holds the 9th largest market share of passengers.

A merger could mean prices will go up on overlapping routes between the two airlines because they will reduce service, said George Hobica, president of Airfarewatchdog.com, a consumer airfares website. For example, both airlines have flights from Miami to Charlotte and Dallas to Phoenix, Hobica noted.

“Those routes will go higher,” Hobica said.

Rick Seaney, CEO of website FareCompare.com, said the merger could raise fares on connecting flights to smaller cities. For example, if you're traveling from LAX to Columbus, Ohio,  airfares may go up 8 percent in the future, he said.

"On any given day, an airline can fire out an airfare sale, and all the airlines are forced to match," Seaney said. "You now have one less airline to initiate an airfare sale. That's going to affect prices in the higher direction."

But Hobica said he doesn't think price increases will impact many markets. American and US Airways only overlap in non-stop service on about 12 routes and it’s possible that when the merged airline cuts routes, discount air carriers such as Spirit Airlines and JetBlue will increase their flights in those areas, Hobica said. That will help offset any increase in prices for passengers.

It is also possible that overall fares may go down once the airlines merge, because American Airlines will be able to get rid of some of its fuel-inefficient planes and may pass along the savings to consumers, Hobica said.

Hobica said he doesn't think the merger will have a "huge impact" on prices at LAX because of the variety of airlines that fly out of the venue. 

At LAX, American Airlines and US Airways have around 30 duplicate destinations. But there's no overlap in direct flights at the airports in Orange County or Ontario--and American doesn't fly out of Burbank or Long Beach. 

American Airlines said in an e-mail that it does not speculate on future pricing.

If the deal is approved by American’s bankruptcy judge and anti-trust regulators, the new American will have more than 900 planes, 3,200 daily flights and about 95,000 employees — not counting regional affiliates. The merger will expand American’s current reach on the East Coast and overseas. 

Just five years ago, American was the world’s biggest airline. It boasted an 80-year history, going back to the beginning of air travel. American popularized the frequent-flier program and developed the modern system of pricing tickets to match demand.

But years of heavy losses drove American and parent AMR Corp. into bankruptcy in late 2011. The company blamed bloated labor costs; its unions accused executives of mismanagement.

Hobica said there's one positive outcome from the merger: it could cause passengers to receive better service.

“We have seen grouchy airline employees and dirty planes and just generally a bad flight experience because these airlines have been in bankruptcy and I think that may change,” Hobica said. “Perhaps once the airlines become profitable and reduce costs through consolidation, we will probably see better service and not necessarily higher airfares.”

This story has been updated.

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