Era of airline merger mania comes to a close with last US Airways flight

SAN FRANCISCO – An era of airline consolidation concludes Friday night when US Airways Flight 1939 takes off from San Francisco. The red-eye flight to Philadelphia is the last-ever departure for the airline.

Come Saturday morning, US Airways reservations system will go dark as merger partner American presses ahead with its integration of the two airlines.  For consumers, it’s the last domino to fall in a series of mergers that has squeezed nine of the USA’s biggest airlines into just four since 2005.

That has reshaped the pecking order of the U.S. industry, creating a quartet of very large airlines that dwarf the rest. Those four airlines – Delta, United, Southwest and the “new” post-merger American – now control 80% of the U.S. market. In other words, 4 out every 5 U.S. passengers flies on one of those four airlines or their regional affiliates.

American CEO Doug Parker has been at the center of two of the five megamergers since 2005. He was at the helm of America West when it acquired and took the name of US Airways in 2005. And US Airways under Parker helped initiate the merger with American.

“It really comes full circle,” says Seth Kaplan, editor of the Airline Weekly trade publication. “This whole era of consolidation really started with the management team that’s now running American.”

US Airways' final flight closes curtain on another major airline

The transformation has been remarkable for the flying public. A decade ago, customers could choose from a variety of large and medium-sized carriers. There were industry-leading carriers, but – overall – the market was fragmented.

There has since been a shakeout. Of the 11 biggest airlines by revenue in 2004, only six are still flying today. The other five disappeared via mergers.

Experts say that has cut both ways for consumers.

Brett Snyder, author of The Cranky Flier blog, says that “with fewer competitors, there’s a better chance that fare increases will stick.”  But Snyder also says the airline profits that have accompanied airline consolidation also has an upside for fliers.

“Airlines are more stable,” Snyder says. “They now are able to invest in operations, to invest in a better product, all that kind of stuff that we’re seeing happen now.”

The change at airlines in recent years has been palpable, Kaplan adds. As recently as late last decade, carriers routinely were in and out of bankruptcy. Some were struggling to survive.

“Now you feel like you’re flying an airline that isn’t just struggling to get through the day anymore,” Kaplan says.

A decade of merger mania; How 9 become 4

US Airways-America West (2005)

Liquidation loomed as a real possibility for then-bankrupt US Airways, but the merger with America West helped stave off that threat. The deal combined then-No. 8 America West and then-No. 7 US Airways to create the USA’s sixth biggest carrier.  It also made a truly national carrier by stitching together the western-focused America West and eastern-focused US Airways.

The company initially struggled with the integration but soon improved the airline’s performance and transformed it into one of the USA’s most-profitable outfits. It gave CEO Doug Parker a platform to try to engineer even bolder mergers. A hostile bid for Delta failed and later talks with United fizzled before a deal with American was struck.

Delta-Northwest (2008)
This merger knocked longtime leader American out as the USA’s No. 1 carrier and signaled the wave of consolidation that was soon to wash over the industry. The company took Delta’s name in what was then the largest U.S. airline deal ever.

Despite Northwest’s reputation for uneven customer service, Delta’s management team engineered what’s considered to be the gold standard of modern airline mergers. Today, most industry experts point to Delta as the one other big airlines are chasing in terms of customer service and operations.

United-Continental (2010)
It quickly was apparent the Delta-Northwest deal would spur more mergers. Continental, which long had insisted it wanted to go it alone, responded just a day after the Delta news by telling employees it would have to reconsider staying independent to "make sure we remain a strong long-term competitor."

Indeed, Continental agreed to merge with United in 2010, assuming the title as the world’s biggest airline.  But the new United has been plagued by operational glitches. New CEO Oscar Munoz acknowledged the “rocky” integration earlier this month, pledging "that's going to change” in an open letter to both customers and workers.

Southwest-AirTran (2011)
It took Southwest more than three years to completely fold AirTran’s operations into its own, with the deliberate pace helping avoid integration snafus that plagued some other mergers.  The deal helped Southwest grow, pushing it into AirTran’s hometown of Atlanta and paving the way for it to begin flying its own international flights. But the deal also essentially eliminated one of Southwest’s leading low-cost rivals. By the merger’s end, Southwest dropped service to more than a dozen cities that had been served by AirTran and got rid of nearly a third of the planes it acquired in the merger.

American-US Airways (2014)
The merger came as American worked to exit Chapter 11 bankruptcy, and – once completed – restored American’s status as the world’s biggest airline. It also secured a spot for US Airways. Even after its 2005 merger with America West, “US Airways was the marginal competitor,” Kaplan says. It also was important for American, which had slipped to No. 3 and was at risk of being dwarfed for corporate contracts by merger-enhanced rivals Delta and United. The US Airways merger put American back on par with those carriers, leaving it the biggest among a group of four super carriers to have emerged from consolidation.

“This completes the round of big mergers,” Kaplan says. "It’s unimaginable that any other merger among the big four would be approved" by government regulators.

The merged industry now is facing new pressure from one of the regulatory agencies that helped allow the five big mergers to happen. In July, the Justice Department announced it was probing the USA's big four airlines for possible collusion. At the heart of the probe, which is ongoing, is whether the airlines were attempting to coordinate to restrain capacity and pressure fares higher.