Lessons Learned from the American Airlines merger

Go Lean Commentary – Lessons on Delivery Arts & Sciences

Lessons Learned 1Tourism is the number one economic driver in the Caribbean region. But the eco-system has cracks …

More and more tourists are travelling to the Caribbean…by cruise ships. Less and less are travelling to the region by airplane. Therefore no air-flights, no hotels, no restaurants, no taxi cabs, no job multipliers, and no full economic “chain-link”.

The 2008 financial crisis placed a heavy strain on the US’s largest carrier: American Airlines. On July 2, 2008, American announced furloughs of up to 950 flight attendants, in addition to the furlough of 20 MD-80 aircraft. American’s hub at Luiz Muñoz Marin Airport in San Juan, Puerto Rico (PR) was truncated from 38 to 18 daily inbound flights. The holding company, AMR Corporation, filed for Chapter 11 bankruptcy protection on November 29, 2011, and the airline made cuts in July 2012 due to the grounding of several aircraft associated with its bankruptcy and lack of pilots due to retirements. American Eagle, the regional carrier, (the Caribbean’s largest), was to retire 35 to 40 regional jets as well as its entire Saab turboprop fleet. [b] American Eagle PR ceased operation in March 2013. This status created dysfunction for the entire Eastern Caribbean region.

This dysfunction has created the urgency for permanent change. This is a prime directive of the book Go Lean … Caribbean, to optimize the region’s economic engines, including enhancements for Caribbean tourism, cruise and “long stay” visitors.

The delivery story continues…

By summer 2012, American Airlines considered merging with another airline as part of a restructuring plan.

On February 14, 2013, AMR Corporation and US Airways Group officially announced that the two companies would merge to form the largest airline (and airline holding company) in the world, with bondholders of American Airlines parent AMR owning 72% of the new company and US Airways shareholders owning the remaining 28%. The combined airline would carry the American Airlines name and branding, while US Airways’ management team, including CEO Doug Parker, would retain most operational management positions, and the headquarters would be consolidated at American’s current headquarters in Fort Worth, Texas. The merger would create the world’s largest airline, which, along with United and Delta Air Lines, would control three-quarters of the US market. US Federal Bankruptcy judge Sean Lane approved the merger in March 2013.

The United States Department of Justice filed a lawsuit in August 2013 seeking to block the merger, arguing that it would mean less competition and higher prices. On November 12, the airlines reached a settlement (eliminating certain routes and hubs) with the US Justice Department to settle the lawsuit and allow the merger to be finalized. Thus restoring the public “trusts”.

AMR and US Airways Group completed the merger on December 9, 2013, with the new holding company American Airlines Group, Inc. being listed on NASDAQ that day. [b]

In a January 2014 letter [a] to frequent flyers of both airlines, it was announced: “It’s an exciting time at American Airlines, and we’re kicking off the new year with you — our most loyal customers in mind. For now, we’ll continue to maintain our separate loyalty programs — Dividend Miles and AAdvantage® — with rules and benefits of each program still applying, but rest assured your mileage balance and elite status are safe, secure and will continue to be honored”.

There remains a lot of work to do as both airlines are combined, and since the close of the merger, the two airlines have been working to deliver the first phases of enhanced benefits to their customers … and communities. Here are some highlights:

1. Pick “low-hanging fruit”

Lessons Learned 2Earning and redeeming miles – Members can now earn and redeem Dividend Miles (US Airways) when flying on American or US Airways with their Dividend Miles number. All miles and segments earned when flying on either airline will count toward elite status qualification in the program of your choice.

Elite benefits – Elite members of each airline can now enjoy select reciprocal benefits when flying on either airline, including First and Business Class check-in, complimentary checked bags, priority security and boarding, and many more.

More lounge access – In addition to the US Airways Clubs, club members can now access 35 Admirals Club® locations in major airports worldwide.

2. Intermediate goals and plans

On March 30, US Airways exited the competing Star Alliance. The initiation with the oneworld® alliance started on March 31, giving customers opportunities to access the widest array of destinations around the globe. More and more benefits will emerge as the merger (and the oneworld alliance) consummates. Coming soon, customers will enjoy access to an enhanced network through the American/US Airways code-share, allowing for the seamlessly booking of travel on either airline.

3. Long-term objectives

The actual integration of the airlines under a single air operator’s certificate will not be completed until a much later date. The combined airline will carry the American Airlines name and branding, and will maintain the existing US Airways hubs in Charlotte, Philadelphia, Phoenix, and Washington DC for a period of at least five years under the terms of a settlement with the US Department of Justice.

4. End Game

The resultant single-branded airline will operate an extensive international and domestic network, with scheduled flights throughout North America, the Caribbean, South America, Europe, and Asia. Its route network will center around the five American “cornerstone” hubs in Dallas/Fort Worth, New York, Los Angeles, Miami, and Chicago; plus some US Airways hubs.

oneworld Alliance

What exactly is an airline alliance? It’s an agreement among multiple airlines to streamline, make customers travel experience more seamless. The oneworld alliance is particularly good at this. So much so that it’s been named the Best Airline Alliance by Global Traveler magazine’s 2013 Reader Survey for the fourth year in a row. A passenger can be checked (boarding passes and luggage) right through to the final destination when traveling on oneworld carriers. Other benefits include airport lounge access, priority check-in and priority boarding, and of course, a large number of destination choices.

The new alliance means more ways to get to top destinations. Here are the summary options…by the numbers:

981 destinations served
151 countries
14,244 daily departures
3,283 aircrafts in the fleet
474,825 million passengers flown annually

The oneworld Alliance Member Airlines:

Airline Base Country / Region
Airberlin Germany – Central Europe
American Airlines USA – North America
British Airways United Kingdom, Western Europe
Cathay Pacific Airways Hong Kong (China), Far East Asia
Finnair Finland – North Europe
Iberia Spain / Portugal – Southern Europe
Japan Airlines Japan – Far East Asia
LAN Airlines Chile/Peru – South America
Malaysia Airlines Malaysia – Southeast Asia
Qantas Australia – Austra-Asia
Qatar Airways Middle East
Royal Jordanian Middle East
S7 Airlines Russia – Siberia
TAM Airlines Brazil – South America
US Airways USA – North America

Go Lean Commentary … cont’d

Considering one specific country, there is now something wrong in Barbados. [d] In July 2013, Barbados recorded the lowest number of long stay visitors (47,953) during the same period for 13 consecutive years. This is thusly expected to affect the traffic for the annual festival of Crop Over (a traditional harvest celebration connected with Barbados sugar cane plantation culture) [e] for 2014. Long stay visitors usually travel by airplane. This is the issue; there is a supply problem with air travel in the Eastern Caribbean and there is a demand problem. The end result: airline dysfunction and higher prices.

The issue of declining tourism spending is tied to dysfunction in the airline industry. Has the Crop Over event become less attractive or is the blame on the higher airfares that has resulted due to the airline (American Airlines) dysfunction? The analytical conclusion is the problem is with the airline industry.

The 2008 Financial Crisis continues to wreak havoc on the economy of the Caribbean. This is a consistent theme in the book Go Lean … Caribbean; it serves as a roadmap for the introduction and implementation of the Caribbean Union Trade Federation (CU), an alliance of 30 Caribbean member-states.

The Go Lean roadmap calls for regulating and promoting the Caribbean’s aviation industry. We need American Airline and US Airways to deliver on their merger, and then deliver on facilitating air passengers to the Caribbean region.

This is how the CU will optimize the region’s economic engines. This is change!

The Go Lean book presents a series of community ethos that must be adapted to forge this change. In addition, there are these specific strategies, tactics, implementation and advocacies to apply:

Community Ethos – Job Multiplier Page 22
Community Ethos – Lean Operations Page 24
Community Ethos – Cooperatives Page 25
Community Ethos – Ways to Help Entrepreneurship Page 28
Community Ethos – Impacting the Greater Good Page 37
Strategy – Customers – Visitors Page 47
Strategy – Competitive Analysis –  Event Patrons Page 55
Strategy – Core Competence – Tourism Page 58
Strategy – Anecdote – Caribbean Hotel & Tourism Assoc. Page 60
Tactical – Fostering a Technocracy Page 64
Tactical – Commerce – Tourism Promotion Page 78
Tactical – Aviation Administration & Promotion Page 84
Implementation – Ways to Deliver Page 109
Implementation – Trade Mission Objectives Page 116
Planning – Ways to Improve Trade Page 128
Planning – Lessons Learned from 2008 Page 136
Planning – Lessons from Egypt Page 143
Advocacy – Ways to Enhance Tourism Page 190
Advocacy – Ways to Impact Events Page 191
Advocacy – Ways to Market Southern California Page 194
Advocacy – Ways to Promote World-Heritage-Sites Page 248

There are lessons from the evolution and delivery of the American Airlines / US Airways merger in considering the quest for Caribbean optimization:

• When possible, Caribbean solutions should come from the Caribbean.

• When not possible, Caribbean solutions should be serviced by alternate sources, with no one player holding more than 50% of market share.

• Many Caribbean islands have close proximity, so there must always be alternative transportation modes, like ferry-boats.

• Do not “bite the hand that feeds you”; the Caribbean region must protect the engines that drive the economy.

Now is the time to lean-in to this roadmap for Caribbean change, as depicted in the book Go Lean…Caribbean. We cannot afford another American corporate giant, (i.e. Lehman Brothers) mishandling their public trusts. The Caribbean can – and must – be less elastic to American woes.

The Caribbean should be less of an American parasite and more of a protégé.

Download the book Go Lean … Caribbean – now!



a. Andrew Nocella, American Airlines Senior Vice President and Chief Marketing Officer. AAdvantage Frequent Flyer Status Email. Retrieved January 5, 2014.

b. Wikipedia treatment on American Airlines. Retrieved May 6, 2014 from: https://en.wikipedia.org/wiki/American_Airlines

c. Titcombe, Tara. “The World at your fingertips”. US Airways Magazine. Retrieved May 6, 2014 from: http://tjt0325no2pencil.files.wordpress.com/2014/04/aprilfeature_oneworld_final.pdf

d. “Commentary: Tourism Matters: A better analysis is needed”. Caribbean News Now Online Magazine. Retrieved May 6, 2014 from: http://www.caribbeannewsnow.com/topstory-Commentary%3A-Tourism-Matters%3A-A-better-analysis-is-needed-20985.html

e. Wikipedia treatment on American Airlines. Retrieved May 6, 2014 from: https https://en.wikipedia.org/wiki/Crop_Over


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