American to unite with US Airways to create No.1 carrier

Thu Feb 14, 2013 5:49pm EST
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By Soyoung Kim and Karen Jacobs

(Reuters) - AMR Corp AAMRQ.PK and US Airways Group LCC.N on Thursday sealed an $11 billion merger, but before they can welcome their first passenger onboard they have to get regulators to sign off and then integrate a web of intricate systems.

Creating what will become the world's largest airline, with 6,700 daily passengers, will require AMR's American Airlines and US Airways to unite two workforces totaling 113,000 and meld together reservation and baggage handling systems, computer networks, and terminals - a process that has complicated other marriages in the airline industry.

"So far it's just been pushing paper," said Robert Mann, head of R.W. Mann & Co of Port Washington, New York, which provides industry consulting and analysis. "The next 18 to 24 months is the hard work of implementation."

Integrating the airlines' reservations systems is a big challenge, said Basili Alukos, a Morningstar airline analyst. He said the previous US Airways and America West merger was "one of the worst" integrations in the industry, but that US Airways has likely learned from that experience.

"It seems as if (American-US Airways) has the benefit of history on its side," Alukos said, adding that the new American can learn from the growing pains of Delta-Northwest (DAL.N: Quote) and United Continental.

United Continental Holdings Inc (UAL.N: Quote) made a number of changes following its 2010 merger. As it shifted to a single reservations system and implemented other new processes, United's on-time arrivals suffered and mishandled baggage rates went up. United said in January that customer satisfaction scores were improving.

US Airways Chief Executive Doug Parker, who will head the newly merged company, said his experience with America West was a plus.

"Integrating airlines can be difficult sometimes, but we've (already) done one at US Airways," he told Reuters. "We know what to do and know what mistakes to avoid."   Continued...

A view of two US Airways Express planes next to an American Airlines plane (background) at the Ronald Reagan Washington National Airport in Arlington County, Virginia, February 10, 2013. REUTERS/Mike Theiler