According to Arnie McClellan, the looming merger between American Airlines and U.S. Airways could provide a huge boost to the lagging airline industry.
Two airlines are currently considering a merger agreement beneath the AMR Corporation, their mutual parent company. Initially, the airlines had only until December 17th to close the agreement. However, according to Arnie McClellan, a noted Merger & Acquisition consultant, a recent deadline extension of a full month—to January 18th—should give American Airlines and U.S. Airways the time they need to appeal a United States Department of Justice antitrust lawsuit and complete paperwork to close the merger agreement.
The primary obstacle currently standing in the way of the American Airlines/U.S. Airways merger is the Department of Justice, which is currently claiming that a merger between the two airlines would create a monopoly of sorts within the air travel industry. Currently, the Department of Justice is holding that the prospective merger between the two airlines has been designed with the goal of increasing airfare prices and shutting out competition from the airline industry.
In order to go ahead with the merger, then, U.S Airways and American Airlines need to show the government that their intentions are not so venomous, but rather that they are seeking to re-brand the airline industry and boost its overall bottom line in terms of profits and passengers. In short, the two airlines need to show that their partnership has been designed to get people interested and excited about flying again.
According to McClellan, the airlines are doing a good job of fighting the Department of Justice, both in the courtroom and outside of it. Recently, pilots, baggage handlers, flight attendances, and other airline professionals from both companies rallied on Capitol Hill to show their unanimous support of the merger. For McClellan, this protest was a sign that the U.S Airways and American Airlines merger is something that will not only benefit the corporate higher-ups for the airlines, but everyone employed by them as well.
In all likelihood, the Department of Justice will eventually concede its case and allow the two airlines to merge with one another. In the past, other airlines—such as the NorthWest Airlines and Delta Air Lines merger of 2008—have merged without trouble. In addition, the claims that a merger between U.S Airways and American Airlines will boost revenues and create jobs all over the country will likely prove too sweet a proposition for the government to block.
If, however, the merger does not go through, it could mean that things will only become more dire for the airline industry. In 2011, American Airlines declared bankruptcy, and the air travel industry in general has experienced great troubles since the events of September 11, 2001 led to a nationwide fear of flying and a huge increase in airport security and passenger regulation. If the merger should fail, American Airlines at least will likely have to sell off its assets and bow out of the airline industry—an event which would remove, competition, jobs, and revenues from the industry all in one fell swoop.
Arnie McClellan Discusses the Consolidation of the Airline Industry
While the Department of Justice lawsuit has caused many to wonder about whether or not U.S. Airways and American Airlines are working to create a monopoly, Arnie McClellan believes that the two airlines are not, in fact, shooting for industry domination, but rather for industry revitalization.
Of course, the Department of Justice does have a point with its antitrust case. American and U.S. are two of the largest airlines in the nation, with substantial presences in certain sectors throughout the nation. If the two airlines pooled their resources, several parts of the United States would be left with only one real airline option—reducing competition and giving the merged airline superpower free reign to raise airfares.
However, previous mergers in the airline industry have taken place without causing huge airfare price increases. Instead, the mergers have created a sort of imbalance in the American air travel industry, with several huge and powerful airlines and several smaller, struggling entities.
In some ways, the only action that can assure the continuation of fair competition in the industry is to allow the smaller, struggling airlines—American Airlines and U.S. Airways among them—to merge with other airlines to create larger, more competitive units. Quite simply, the airline industry is consolidating, and the only way some of the older airlines will survive to see another decade is to follow that consolidation trend.
Regardless of the Department of Justice and their antitrust reservations, the CEOs of both American Airlines and U.S. Airways are still fighting for their merger. In a press release that followed the recent merger deadline extension, the two expressed their resolve to bring their companies together and to present a strong defense to the court. As Arnie McClellan observes, the airlines hope that the government will drop its antitrust case and allow the merger to proceed without difficulty.