All right – so they’re talking

You’d have to be suspended in another dimension to have avoided the frenzy set off by The New York Times reporting that United and US Airways were in “deep” discussions about a potential merger. 

 

The flurry of speculation triggered by two carriers that most likely routinely talk merger largely failed to acknowledge the fact the article also stated the discussions between United and US Airways could sputter out.

 

So before you start toiling over your Mileage or Dividend Miles status, let’s just think about what has to happen for the carriers to tie the knot. I’ll preface this by saying that one, I’m a sceptic, and that more often than not I’m wrong!

 

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Labour buy in – Five years after the US Airways-American West merger pilot seniority remains unsettled, with former “East” pilots breaking off and forming their own union in 2008. And let’s just candidly say the relationship between United and its pilots isn’t exactly a bed of roses.

 

What was key for Delta in its merger with Northwest was getting the two pilot groups to agree to seniority prior to the deal’s consummation.  Pilot seniority of the two groups at US Airways isn’t exactly keeping its management up at night, so it doesn’t seem like that’s a priority for US Airways and United. But they should take some time to study Delta’s astute decision to ensure the one thing pilots value the most was in the clear before anything else took place.

 

Even if United and US Airways use that playbook, Delta had an advantage neither of those two airlines has. Delta CEO Richard Anderson was a known quantity at Northwest Airlines, having had the same position at Northwest from 2001 to 2004.  Anderson had experience with both pilots groups, giving him an advantage in navigating through resolving the complex seniority issues.

 

Regulatory endorsement – If Delta and US Airways have challenges getting a slot swap at National and LaGuardia airports through the regulatory machine unscathed, how could you think the US Justice Department will rubber stamp this possible deal?  This Justice Department is really prickly about competitive issues, so you better believe United and US Airways should be ready to agree to some relinquishment of their strong presences on the US East Coast.

 

Now onto the curiosity raised by these “deep” discussions. What does United gain?  Not much in the way of a footprint in Asia, Europe or Latin America. Does this mean US Airways will be relegated to a glorified feeder for United’s international network?  Does that create shareholder value?

 

No doubt as long as the speculation hovers United’s and US Airways’ stock prices will put on a strong showing, which might be why the “deep” discussions were leaked to the Times in the first place.

 

Photo credit  –AP Photo/The Arizona Republic, Cheryl Evans 

 

 

 

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