Karen Walker

Caution is the key word in the American Airlines and US Airways alliance proposal, but some wonder whether early tiptoeing might lead to a full merger further down the road.

The two airlines describe their marketing alliance as 'broad and innovative', but provide few other details. By late summer, they expect to link their frequent flyer programmes and they also plan to allow reciprocal access to airport lounges and to cooperate in areas such as purchasing.

The airlines believe domestic and international codesharing will be 'beneficial', but say that further discussions with pilot unions are necessary before more precise plans are made. Codesharing with the airlines' regional partners, American Eagle and US Airways Express, is set to begin 'shortly' on certain routes.

As with the other proposed USdomestic alliances, namely Delta Air Lines with United Airlines and Continental Airlines with Northwest Airlines, this one is likely to attract regulatory scrutiny. There is greater overlap of networks in the US than with the other two alliances. But even with codesharing, this alliance would trail behind that of Delta and United in both revenues and US marketshare, although it would be larger than Continental/Northwest.

American and US Airways have 25 per cent of the US domestic market, compared with Delta/United's 32 per cent and Continental/Northwest's 17 per cent. Group revenues last year were $18.6 billion for American and $8.5 billion for US Airways.

The tight-lipped attitude of American and US Airways over long-term future plans indicates the caution each feels about pilot union reaction to the deal, say analysts.

Source: Airline Business