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American-US Airways deal creates world's largest air carrier
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It's the name that has dominated the skies of Pittsburgh for more than three decades. And it soon may be gone for good.
US Airways, the carrier that built its largest hub in Pittsburgh and then systemically dismantled it, will disappear -- at least in name -- if its merger with bankrupt American Airlines wins regulatory approval.
Under the proposed $11 billion deal, which would create the world's largest airline, the combined carrier will go by the name of American. When the new airline becomes official it will mark the first time in 34 years that neither the USAir nor US Airways name will be in the region's skies.
The carrier's predecessor, Allegheny Airlines, changed its name to USAir in 1979. In 1997, USAir became US Airways. Both changes coincided with the airline's rapid growth in Pittsburgh, where it peaked before the Sept. 11, 2001, terrorist attacks, with 539 daily flights to more than 100 cities, before the carrier dismantled its hub amid two bankruptcies.
"It may well be the end of an era," said William R. Lauer, an Allegheny Capital Inc. principal who has followed the airline industry for years.
Beyond the loss of the US Airways name, though, the impact of the merger should be negligible in Pittsburgh, at least in terms of flights. The carriers share just one market, New York City. But American flies into John F. Kennedy International Airport while US Airways uses LaGuardia.
Overall, the two airlines fly to 12 cities from Pittsburgh, including Boston, Chicago, Miami, Dallas-Fort Worth, Philadelphia, Phoenix, St. Louis and Charlotte.
With so little overlap, "I think a reasonable expectation is that not much will change in Pittsburgh with this," said Darryl Jenkins, chairman of the American Aviation Institute in Washington, D.C.
The bigger concern may be the state-of-the-art US Airways operations control center, which opened in 2008 and employs nearly 700 people. The $25 million center in Moon was built with the help of $16.25 million in public incentives.
American has its own operations center in Dallas-Fort Worth, and some believe the Pittsburgh facility could be vulnerable as a result.
"That could be a casualty, although with an airline this size, I think they would be wise to make a decision to retain some redundancy," Mr. Lauer said. "I say that biting my tongue because typically when businesses consolidate, they look to cut costs. When you find clear duplication like that, the concept of operational redundancies doesn't survive."
Danny Persuit, president of Transport Workers Union Local 545, which represents 165 workers at the facility, said union officials have tried to talk to the airlines about the center's future but haven't gotten any answers.
"The uncertainty, I wouldn't say it's wearing on people, but the sooner we know the better. Whether we're staying or going, we're a very seasoned group. There are 15,000 years of experience in that building," he said.
Todd Lehmacher, a US Airways spokesman, said it's "premature to discuss specifics" related to the operations center. "That all needs to be evaluated. No operational decisions have been made," he said.
Allegheny County Executive Rich Fitzgerald said he and others have been in discussions with the airlines about the center and other issues related to the merger. He said local officials plan to "put our best foot forward" and make a case for keeping the center in Pittsburgh.
Mr. Jenkins, of the American Aviation Institute, believes it has a good chance of surviving.
"Certainly, if it were my say, I would keep that. That's one of the newer, nicer operations centers. It's a perfectly good one and I think that's something they're going to hang on to," he said.
US Airways also does heavy maintenance work in Pittsburgh under a lease that runs until the end of 2015, affecting about 900 workers. Bill Hollowood, chairman of Potomac Air Lodge 1976 of the International Association of Machinists and Aerospace Workers, said he couldn't say what impact the merger could have on that work.
"We're kind of sitting back and waiting for the dust to settle," he said.
Largely the result of overall US Airways cuts and the loss of the hub, Pittsburgh has gone from 633 flights a day and 114 nonstop destinations to 137 and 33, respectively, over the last decade.
But Mr. Lauer believes the merger could, under the best of circumstances, bring more flights to Pittsburgh if the airport authority is able to lower fees to the airlines. He saw some potential for the new airline to shift some traffic through Pittsburgh, particularly to the West Coast.
"If a mini version of that is reconstructed, it could create an environment conducive to bringing some of the old hub structure back to Pittsburgh," he said. "Now is the time for all of these newly minted bureaucrats [in the airport authority] to really get to work. There will be a golden opportunity for them in the next few weeks and months."
Mr. Fitzgerald said he and others already are on the case. He believes the recently announced $500 million deal to drill for natural gas at the airport, which will help to lower airport rates, coupled with a strong local economy and overcrowding on the East Coast, could get American's attention.
"It provides us with a golden opportunity to get some of these flights," he said.
But Mr. Jenkins doesn't see much of a chance of more flights or a mini-hub. He said the new airline will have hubs in Dallas, Phoenix, Los Angeles, Charlotte, Miami, Philadelphia, New York and Chicago.
"You've certainly got a lot of collection points and you don't need any more," he said. "I think the probability is quite small."
The combined airline, to be based in Fort Worth, will have more than 6,700 daily flights to 336 destinations in 56 countries. It also will have more than 900 planes, about 95,000 employees and an estimated $40 billion in annual revenues.
US Airways CEO Doug Parker, who led the charge for the merger, will be the CEO of the new airline. He said Thursday the airline intends to keep all of its hubs and that there will be little reduction in service because the two carriers overlap on just 12 routes.
While the boards of the two airlines signed off on the merger Wednesday, it still must be approved by antitrust regulators and the judge in the American bankruptcy. The deal should be finalized in the third quarter as American emerges from Chapter 11 protection.
Mr. Jenkins believes the merger would allow American to compete more effectively against United and Delta, both of which have grown bigger through consolidations.
"This kind of evens up the playing field for all of the partners. You have equal competitors here now," he said.
While Mr. Jenkins doesn't see much impact on fares, Mr. Lauer believes they could "rise at the margins" as a result of the merger.
First Published February 15, 2013 12:00 am
