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How airline merger might benefit Chicago
Here’s how US Airways President Scott Kirby says a proposed merger between his airline and American Airlines could benefit Chicago.
In a meeting of Kirby, US Airways Chairman and CEO Doug Parker and representatives of American unions with the Chicago Sun-Times Editorial Board Tuesday, Kirby said Chicago could gradually lose American as a major competitor with United and Delta because mergers have made those airlines significantly bigger.
An American-US Airways merger would create a third major competitor in Chicago, which in theory would lead to more competitive fares and better service, he said. As it is, American has been downsizing in Chicago by flying smaller and smaller airplanes, he said.
After merging with other airlines, United and Delta are “network” businesses that offer more connections than American, Kirby said.
“Just being a little bit bigger means you disproportionately benefit,” he said. “When you fly from Chicago to Los Angeles, you can fly American or United. On American, they can connect customers to 30 destinations, but on United they can connect customers to 35 destinations. … [That] puts eight to 10 customers on the plane that American simply cannot compete for, and you multiply that by 500 flights a day. … In our business, that is the difference between being really profitable and losing a lot of money.”
Also, customers like to fly with one airline to consolidate their frequent flier miles, he said.
Parker said a merger with US Airways would restore American’s ability to compete for all customers.
“You can create a lot more value, and make a lot more profits, over a billion more dollars a year, than either of us can make independently,” he said.
Tempe, Ariz.-based US Airways has been pushing a consolidation, and this week American’s chief executive – after pooh-poohing the idea for months – said in a letter the airline is willing to consider a merger.
An American Airlines spokeswoman says American has a strong position in Chicago and intends to grow.
Read a July 11 Sun-Times story here.
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