United-US Airways Merger Talks Set to Trigger Industry-Wide Bidding War

April 8, 2010 at 8:32 AM | by Omri | Comment (1)

It's been a little more than 12 hours since the New York Times roiled the airline industry by disclosing that United and US Airways were taking another stab at merging, their third attempt since 2000. Americans woke up to the story splashed across the paper of record's dead tree front page, the Times having decided that it's Very Big News indeed. Both airlines opened way up in the market, and—especially now that this shoe bomber thing is a verified snoozefest—it's all anyone's talking about this morning.

The airline world now faces the very real prospect of an all-out bidding war for either United and US Airways, with Continental and maybe even American Airlines getting into the mix. That would put into play the four biggest traditional North American airlines that aren't already recovering from mergers, which is to say the top airlines after Delta-Northwest and Southwest. And while the Twitter back and forth has entertainingly ranged from the creative to the snarky to the outright bitter, we can't help but point that just six week ago Reuters published a huge state-of-the-industry article headlined "Airline alliances becoming the new 'mergers.'" Oops!

To the meat of it, after the jump

Citing a bevy of industry experts, the article asserted that US airlines had given up on mergers and were instead "seeking to expand their alliances and trying to extend synergies within current partnerships." We should have known better than to trust anything that uses the word "synergies."

For what it's worth, any number of industry analysts are suggesting that United would be far better off going with Continental, since US Airways doesn't bring as much to the table and has a lot of overlapping hubs with the Chicago-based airline. A new Continental-United merger, on the other hand, would instantly create the world's biggest airline.

That's a little too glib since hubs can be consolidated—which is after all the point of a cost-cutting, efficiency-boosting merger—plus US Airways' presence in the Western US nicely complements United's Midwest and Pacific routes. And while it's true that objectively Continental is probably a better fit, keep in mind that the industry consensus was that JAL would dump American/oneworld for Delta/SkyTeam because they were an objectively better fit. That prediction, of course, turned out to be the exact opposite of true.

The punchline to all this? Go back and check out the very last paragraph of that ever-so-slightly-wrong Reuters article. Here's the link again. We won't spoil the surprise for you, but like we said..."oops!"

[Photo: PhillipC / Flickr]

Related Stories:
· United Is in Talks About a Merger With US Airways [NYT]
· Airline Industry [Jaunted]
· Airlines [Jaunted]

Comment (1)

Return to » United-US Airways Merger Talks Set to Trigger Industry-Wide Bidding War

I remember the last merger attempt. From what I remember, the deal was that United would take over US Airways' routes, except for the ones from National Airport. Those US Air routes from National would be called "Air DC", and be owned by the same guy that owns BET. As someone who has lived in the DC area all my life, I would have been slightly scared to fly something called Air DC. Personally, I think something like Washington Airways or Capital Airways would have sounded better, and you'd be less scared of getting shot on the plane.

But on to the subject at hand. I don't think it makes sense for United to buy US Airways. I would think that a merger with Continental would make more sense since it would give it a base in New York. On top of that, Continental and United's networks don't necessarily compete with each other. US Air and United share a DC hub (albeit in different airports). The one thing that I'd be concerned about would be whether or not United would shut down their hub at Dulles, which I use regularly to fly to Europe.

That merger would free up US Airways for American Airlines, which to me makes a lot of sense. American has a hub in New York, and is very strong in the Midwest. US Airways is strong on the East Coast and in the west from their Phoenix hub.

Normally, I think competition is good, but the airlines have failed to provide good service in one of the most competitive markets in the world. I wouldn't mind some mergers if it means better service.

Jaunted

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