I keep going back and forth on AA and mergers. On the one hand, sometimes I think that AA HAS to merge with someone with lots of China access. Sometimes I think that maybe CO with its two (plus HKG) would be good enough combined with AA's two, giving it four daily flights to China and one to HKG. And sometimes I think that AA can go it alone, especially if it can win some more China flights in 2010-2012 when a whole boatload of them become available.
The third option usually comes up when it looks like NW-DL and UA-CO are done deals.
Here's my new prediction with $110/bbl oil: AA+NW+CO and UA+DL+US
Two giant legacy airlines that would compete everywhere. And WN, B6, F9, FL and all the rest to help keep those two honest.
The UA+DL+US would probably have to divest enough slots at LGA, DCA and BOS to enable the AA+NW+CO behemoth to operate a true shuttle. And incompatible aircraft types could be traded between the two, much like what was proposed when UA and US were discussing their merger in 2000.
Each would have tons of China, tons of NRT, lots of Europe, lots of S America and very extensive domestic coverage. Despite popular opinion, you don't need lots of competitors to force price competition - I think two is enough. And my economist spouse and all our economist friends agree. But Congress and the DOJ all too often think that two firms would mean the end of price competition.
AA still wouldn't have Australia, but I like Qantas. They kick UA's ass to Australia, and I think they'll do the same to all new entrants now that Oz is open skies.
A few thoughts on the matter (and regardless of what you think, I'm not a castaway from airliners.net... notice how I've been a member of this forum just as long as you have been).
1) I doubt US regulators would allow for just two jumbo airlines on the scale that you predict. Anyone who controls both DFW and IAH would control all of the international traffic out of Texas as well as most of the internal traffic in the state. Same goes for AA's major operations at JFK and LGA combined with CO's EWR hub; there are just too many antitrust issues for that to get by authorities (especially NY/NJ state regulators).
2) UA/DL isn't going to want to deal with the mess that is USAirways. The only way that someone is going to make a play for that airline would be try to buy the East operation and leave the west to self destruct by its own managerial incompetence (if you think AA's management sucks try Tempe for a couple of days). Furthermore, USEast would bring nothing to the table that UA wouldn't already get from Delta in the merger.
- Massive southeast hub - Atlanta.
Major NYC presence- Delta at JFK and LGA and Delta Shuttle
Massive European Network - Delta
Extensive Heathrow Access - UA
Latin network - Delta
Pacific Network - UA
At best USAir East just duplicates those strengths and does nothing to address the fundamental weaknesses of such a merger (they still have a large whole in the route map in the south and southwest).
3) So what would make sense for American? The most obvious answer from an international standpoint would be Northwest. They have the Pacific routes that everyone but United has spent the past 20 years salivating over. I still don't believe that American isn't going to make a bid for Northwest to try to get it, or at least force Delta to pay more for it.
If American can't get Northwest, then it might just try to buy Air Mike for the slots it currently has in China and south east Asia, basically shutting down Air Mike and getting enough 777's to make those all TransPac flights. It probably could make such a demand contingent upon a sucessful UA/CO merger as part of their divestment for approval. American also has the option to try to build up transpacific service themselves with the 2010-2012 slot awards and could further tighten their codesharing/partnerships with JAL, Cathay, and Qantas to make do until they get those slots.
Domestically, it just depends as to what American wants to do. We have repeatedly heard that AMR isn't interested in expanding mainline capacity (a significant mistake in my opinion as the mainline product is far superior to the Eagle/Connection product not to mention the costs per seat mile are significantly lower).
If they would like to expand on the Eastern seaboard to further solidify their presence and to effectively compete against a UA/DL merger, they might look at USEast. USEast would, on paper, bring a lot to AA's east coast route structure; such as a hub that can compete with ATL with CLT, an actual northeast hub with PHL (sorry the LGA/JFK combo is just a pain in the ass for everyone who isn't O&D to the NYC market which is who the operation is currently set up to serve) as well as the "lucrative" shuttle routes. USEast's customer base of frequent business travelers who buy those high yield tickets could be very appealing and many of them would come back to a AA/USEast combo since the bozos in Tempe wouldn't be running the show anymore.
On the west coast, there is the option of buying Alaska, which has already been discussed hear ad nauseum. There are significant cost structure issues that would need to be worked out (B-scale perhaps?). But the hub in SEA would provide AA with a good base to launch a transpacific expansion from. A more reasonable suggestion would be to tighten the partnership between AA and AS, expanding codesharing, merging FF and AC programs and bringing Alaska into OneWorld.
