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American, US Airways Merger: The Battle Continues

Following American’s possible merger is like waiting out election results late on a Tuesday night. And right now, the two sides involved, American and US Airways, are about as polarized as the Democrats and the Republicans.

American’s management wants to complete the bankruptcy and rebuild as a profitable carrier on its own, whereas US Airways wants to merge sooner rather than later and basically orchestrate the rebuilding process.

    Both parties are courting the major players: American’s unions, its creditors, and Wall Street. US Airways is ahead of that game to the extent that it has already enlisted most of American’s labor in favor of the merger.

    In an effort to bolster its credibility, American just announced details of its business plan for an independent revival. Those details consist of a “usual suspects” list of airline financial strategies: lower labor costs, fly larger regional jets, do more international flying, and do more code sharing with other airlines.

    American’s financial projections look rosy, but making projections is a lot easier than actually making them happen. Much of American’s plan will require either getting labor’s cooperation—not likely—or unilaterally cancelling union contracts.

    This situation’s resemblance to an election doesn’t go as far as exit polls. We won’t see Wolf Blitzer make any calls. But as far as I can tell, Wall Street is betting that the merger will proceed. Stay tuned.

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