Chris Jasper/WASHINGTON DC
Though United Airlines' planned takeover of US Airways, announced last month, is remarkable for several reasons, its essential characteristic is size. United is already a "super-carrier", and by absorbing US it will move to another level, with an annual turnover almost a quarter greater than its nearest rival, AMR/American Airlines.
Despite United's already considerable bulk, it would be wrong, however, to dismiss the takeover as inspired solely by the desire to further add to its own mass, because for the Chicago-based giant, the US Airways deal is really about attaining national coverage. When US chairman Stephen Wolf describes the merger as "a milestone in commercial aviation" he is talking not so much about the transaction's size - total value $11.6 billion - but its impact. UAL chairman James Goodwin says that through it United will become the country's first truly national airline - by which he means "the first carrier with a strong presence across the USA".
Goodwin says that his airline "had a strategic void on the east coast", a deficiency it attempted to address through a takeover bid five years previously, only to be frustrated by the smaller airline's "poor fitness" and a failure to reach agreement at the highest level.
United president Rono Dutta adds that the airline lacks clout in the east, and also is too clearly structured along east-west, transcontinental lines. "United is a rather strong airline west of Chicago," he says. "In the west we have a 20% plus market share, but in the northeast we are a very weak player, with less than 8% market share - and that particular region is the most important aviation market in the world. Our hub structure of Chicago, San Francisco, Denver and Los Angeles secures customers going into the west coast, but not the east. Also, we may be strong east-west, but we are not north-south, which is where US are strong."
Dutta says a secondary motivation is the need to grow into smaller markets. "Some 10-15 years ago most growth was between major cities," he says. "But we have since seen growth in secondary markets, and to serve that market we need lots of hubs across the country, as well as around the world."
The 'new United', should it clear unions and the regulators, will indeed be a "national" airline, strong in all directions, with a nationwide regional operation (likely to be formed through the merger of United Express and US Airways Express), a low-cost operation in both the east (MetroJet) and west (United Shuttle) to take on Southwest Airlines and Delta Express, and a commuter subsidiary in the lucrative eastern corridor (US Airways Shuttle). As such, it will change the face of the entire US airline industry.
Source: Flight International
