U.S. Airways-American Merger to Spur Robust Competition, Better Customer Service: UMD-Smith Expert

COLLEGE PARK, Md. – Improved customer service driven by robust competition lies ahead of the new U.S. Airways-American Airlines merger, says Michael Ball, a University of Maryland expert on transportation systems and airport operations.

(Ball co-directs NEXTOR, the National Center of Excellence for Aviation Operations Research. He oversees the Collaborative Decision Making research project for the center, which is funded by the FAA, NASA and other airline industry members.)

The move creates the world's largest carrier in a market dominated by four airlines. "The merger is a natural, almost inevitable evolution of the U.S. airline industry. The newly combined carrier, together with Delta, United and Southwest, will represent a strong group of competitors – each having a robust national footprint," says Ball, associate dean for faculty and research and Dean’s Chair in Management Science in UMD's Robert H. Smith School of Business.

Fares could increase in a limited number of markets due to reduced competition. But overall, and especially long-term, the merger will be advantageous for passengers, Ball says. "The four strong competitors will generally expand their national footprints, creating greater competition. In addition, as the airlines individually become healthier, they will be able to focus more on improving customer service and providing more innovative services, which should improve the customer experience."

Look for consolidated service and fewer flights in some markets, such as Charlotte-LaGuardia, he adds. "This is consistent with the impact of previous mergers and generally should be viewed as positive, reducing overall congestion and delays."

Ball also projects realignment of the combined U.S. Airways-American network, including some consolidation of the existing Dallas and Phoenix hub operations. "Most likely operations will be reduced at Phoenix with some potential increase in Dallas. No doubt there will be some rethinking of the combined strategy at Philadelphia and (New York) Kennedy, especially service to Europe with associated connections," he says. "The eventual outcome is hard to predict, but certainly changes will take place."

While the combined U.S. Airways-American corporation has potential to be much stronger than the two as individual carriers, Ball cautions "a successful merger is by no means an easy task."

He says each airline today has different union representation, different sets of policies and procedures, different fleet characteristics and different operational control and planning systems. "A high degree of care and flexibility on the part of management and employees and investment of time and resources will be necessary. While it is unlikely that poor performance in these areas would derail the merger, it is certainly possible to induce a very long lag before a strong and robust combined airline would emerge."

Ball can be contacted at 301-405-2227 or mball@rhsmith.umd.edu.

About the Robert H. Smith School of Business
The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, MS in business, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.