Here’s what I told Conde’ Nast’s Daily Traveler — that essentially we don’t know enough yet to have any basis for worry.
The frequent-flier programs of US Airways and American will also merge, bringing the AAdvantage membership to a whopping 100 million members after it absorbs US Airways’ program. But considering that the airline is going to be bigger too, miles expert Gary Leff (a top travel specialist and a contributor to CondeNastTraveler.com), doesn’t think that number is out of proportion. “It’s only about 10 to 15 percent bigger than United’s program, and probably 30% bigger than Delta’s,” he says. How will the union affect fliers? Leff lays out the pros of each program as it stands now: “US Airways doesn’t seem to have as many elite members as the rest of the legacy airlines, and they do a great job upgrading their elites as a result. American has more rows of first class though and also is much more generous with their premium product (US Airways doesn’t serve meals on three-hour flights, American serves meals DC–Chicago).” As a result, he explains, “Plenty of American flyers are nervous about losing the frills they’ve become used to.and the generous international upgrade policy extended to top elite flyers. Whidonle US Airways flyers are nervous that they’ll lose some of the sweet spots of their program like cheap business class awards to Hong Kong and Australia.” However, he concluded, we don’t know much about how the programs will end up working, so while there will likely be winners and losers, it’s hard to tell much yet.
Interestingly, Horton gets $20 million when he walks away from American plus lifetime flight privileges.
Earlier I characterized the merger, and ability to do it before emerging from bankruptcy, as requiring paying off existing interests. Now we know the price to avoid insider opposition and even to get an incumbent Chairman and CEO as a cheerleader for the deal.
I do wonder about making a payment to someone on their way out the door, the company has already capitalized the gains made under Horton’s leadership so I’m not sure the value in paying $20 million for something they’ve already gotten and when they don’t even need to (and are explicitly not going to) retain his services.
But he may well have earned the money both for success in driving through cost reductions at the airline, taking all of the heat from unions so that new management could come in and make a fresh start, and navigating what I consider to be an amazing deal for American’s stakeholders. I have to believe that US Airways is overpaying for American, and this represents a very small commission to Horton for making that happen.
In any case, Horton sure knew where his towel was!