Former American CEO Bob Crandall told the pilots they needed the details of a transition approved in advance. It had to be clear how the pilot work groups between American and US Airways would be merged, how seniority would work, and — he suggested — even what would happen to their pilot bases.

They made clear that they agreed, it did need to be sorted in advance, and that was seen as a barrier to a merger happening prior to American exiting from bankruptcy. After all, US Airways’ pilots weren’t able to agree on these issues amongst themselves after the America West merger. The work groups still haven’t merged. Was this all going to be universally agreed-upon in the coming weeks?

Apparently it looks like that may have already happened. The American Airlines pilots union board has voted a ‘memorandum of understanding’ which would be the framework for an agreement if the airlines merge.

Now, the memorandum of understanding has been approved only by the American pilots. It hasn’t been approved by the relevant airline management or by US Airways pilots. But presumably this isn’t just a publicity stunt – one imagines it’s an actual agreement, made in consultation with these other parties, that they intend to ratify as well. It’s just that either the American pilots went first (and I’d want them to go first, too..) or that they’ve reported on it first.

Pilot agreements were a huge potential stumbling block to any deal, given the havoc that unhappy pilots can wreak and the history of pilots at both airlines doing just that. If they were unhappy in any deal, they could raise the costs and make the whole exercise prohibitive.

But that’s hardly the only stumbling block in the deal. It all comes down to price. When Doug Parker first swept in and expressed his interest in acquiring American a year ago, reports are that their thinking was American’s creditors would get 50% of the combined company. More recent reports are that the offer in November was 70%, while American management and some creditors have leaked suggesting 80%.

My own belief is that if the deal gets done it will be because Parker was willing to overpay.

And if it happens, what effect for frequent flyers?

  • For US Airways frequent flyers, a short-term positive. I believe that US Airways has had intentions of devaluing the Dividend Miles program in the near-term, either through award chart price increases or shifts towards a more revenue-based program. A merger with American should shelve those plans at least temporarily, not least of which is why invest in revamping a program that will disappear in a year? AAdvantage will be the surviving program.
  • For US Airways frequent flyers, better access to international first class availability through American’s partners, but less access to international business class availability to Europe and Asia… while more to South America.. again as a result of the move from Star Alliance to oneworld.
  • For American frequent flyers, despite assurances to the contrary, expect a degradation of the inflight product — fewer and less expensive meals, and can we really continue to expect our pre-arrival mints under US Airways management?
  • For American frequent flyers, I would guess that unlimited complimentary upgrades for elite tiers below Executive Platinum are on the horizon (as management won’t take this benefit away from US Airways elits) — that’s good for Platinums, not good for Golds, since every Platinum will now be trying to get upgrades making upgrades more difficult. Expect your 8 confirmed international upgrades from any fare to get revisited, but not in the first year because during the honeymoon period they won’t want to chase away top tier flyers.
  • For me, I’d get to fly the largest carrier out of my home airport (Washington National, US Airways) as a top tier elite — so I win.

  1. Miles said,

    My greatest hope for the merger is that the lifetime AAdvantage status held by the Mrs. and me will remain in force.

  2. Corey said,

    Typically how long after a merger announcement do you think it would take for US Elites to receive EQM’s on AA metal?

  3. Why I’ll Be Switching Back To American Airlines As My Primary Carrier, And Why That Might Change « Pizza In Motion said,

    […] View From the Wing has some updates as well as some good thoughts about what might happen in a AA/US….  For me, I think it comes down to one thing.  If Doug Parker is in charge of a combined airline, service levels will decrease and the in-flight product will suffer.  I’m optimistic that since AA will almost certainly get the lion’s share of a combined entity that somehow the AA management will survive and preserve the levels of service I’ve grown accustomed to.  It’s anyone’s guess and we’ve still got a ways to go before we’ll have answers. […]

  4. robertw said,

    Miles-same for me as an AA Lifetime Plat. Even though Plat doesnt get you that much with AA anyway I dont want to lose it.

  5. DaninSTL said,

    Maybe oneworld will feel the pressure and put more award space out there in the short run to keep them from moving to Star alliance. I’m sort of a fan of the merger but I’m afraid my 60k Europe off peak dividend miles trips will go away :(

  6. Jacob said,

    Don’t forget how medium term (2-3 years) everybody (pilots, staff, and passengers of both airlines) lose out due to integration hassles, unrest, and errors. And either passengers get hit with higher fares or the merger fails financially.

  7. Damon said,

    Sorry for sounding ignorant, but where can I find the confirmation that US airways would be joining OneWorld with the coming of the merger?

    I am curious as when I was booking a flight via Singapore airline from Houston to Seoul, it was giving me American Airline as a connecting flight, making me think that it is AA that will be joining Star Alliance.

  8. Brian L. said,

    @DaninSTL – Dougie has already said, repeatedly, that if the merger goes through, the combined airline will stay in oneworld.

  9. MilesFromBlighty said,

    The biggest risk has to be loss of status for AA Million Milers who have not flown the required mileage. Not sure that the merger will be positive for us.
    AA Lifetime Plat gets me in to BA lounges in Europe and if that goes away it’ll be a problem.
    So I am firmly ‘NO’ on the merger.

  10. Dave said,

    I love the thought of US Air’s east coast short haul network priced in avios. Probably wouldn’t happen though.

  11. Kevin said,

    Most “memorandums of understanding” are used for posturing and are devoid of any nitty gritty details that could create conflict or success.

  12. Gary said,

    @MilesFromBlighty – can’t see why they would take that away

  13. Plop said,

    They wouldn’t take away lifetime status from AA members. That would be absurd to alienate loyal customers. Not worried about it.

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