What a Potential US Airways/American Merger Might Mean for Frequent Flyers
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News is swirling at a fever pitch about an imminent American Airlines/US Airways merger as soon as next week. I’ve reported on the possibility in the past as well as answered reader questions about what this might mean for both airlines. Although a deal seems to be close, a lot of things do fall apart at the last minute, but if this does happen, I wanted to lay out my thoughts on what we can all expect and how you can prepare.
Who Will Be In Charge?
Although it’s a larger airline with a more global reach, American Airlines seems to be the weaker link in this scenario, especially after a contentious bankruptcy filing that the airline is still dealing with. It’s no secret that US Airways has been courting American’s management and unions, and because of that I think that when the two merge, it will be US Airways’ senior management that takes the joystick. Reportedly Doug Park (current US Airways CEO) will lead the new airline and AA’s chief Tom Horton will be the “non-executive Chairman”, which basically means he politely steps to the side. Not that surprising since he has only been at the helm of American since November 2011, when then CEO Gerard Arpey stepped aside on the same day the bankruptcy was filed.
The new airline, which I suspect will continue to be called American Airlines, will go with the Oneworld alliance, which American is a part of, rather than the Star Alliance, which US Airways currently belongs to. That means it will go from having 27 partners down to just 11, but that still includes great partners like British Airways, Cathay Pacific and Qantas.
Frequent Flyer Program Changes
In terms of mileage programs, I think the merged airline will continue to use American’s AAdvantage program with its earning and redemption rules since it’s much more sophisticated than US Airways. However, I would predict that the new airline will take US Airways’ model for elite status and expand its program to include four tiers (25,000/50,000/75,000/100,000) instead of the three (25,000/50,000/100,000) that American currently has.
I don’t think we’d see a complete merger of AAdvantage and Dividend Miles until about 12-18 months after the formal announcement (probably toward the longer end of that time frame), so there would be no immediate changes to the mileage programs, although perhaps the two would let members transfer miles between their accounts like United and Continental did.
For that reason, it could make sense to buy US Airways miles cheaply if they run any more buy miles promos and then use them to redeem through AAdvantage. In terms of buying miles, it’s really up to you. I think buying miles at 1.9 cents each (with a 100% buy-miles bonus) is a questionable value proposition even if you really know how to maximize their award chart. I personally prefer to buy them at a lower rate like 1-1.1 cents each through methods like their Mileage Multiplier.
Although many folks (myself included) groaned at the issues surrounding the merger of Continental OnePass and United MileagePlus, when they merged, it can be argued that the final program did combine some of the best aspects of each original program. For instance, prior to the merger, you could redeem United miles for one-way awards, but not Continental miles, but that changed after the airline merger but before the joining of the two frequent flyer programs. Prior to the merger United.com hardly showed partner award availability, but after they switched to the continental.com software that made online booking of awards much easier. Clearly, there were some negative changes as well- including the loss of some solid partners like Virgin Atlantic and Qatar, but I don’t think the end result was a huge devaluation of United/Continental miles.
I’m hopeful that post-merger, features of US Airways’ program – such as the fact that you can’t redeem for one-ways and that once you commence travel you can’t make changes to your award itinerary – would change for the better. I also hope that the new airline adopts American’s lower fee structure on award tickets and with a larger route map, the systemwide upgrades given to Executive Platinum members will be more useful.
That being said, I can’t imagine some of the amazing US Airways redemptions (like 90,000 miles roundtrip to Northeast Asia in business class or 110,000 miles roundtrip to South Africa or Australia in business) will last forever. With a new merged frequent flyer program, I’d expect them to align their redemption rates to be in line with partners, so I’d recommend redeeming your US Airways miles at your favorite redemptions sooner than later. As with all great deals, they don’t last forever. Check out this post for maximizing US Airways miles and this one on leveraging American’s international gateway stopover “trick,”, which might also go away.
You might have been following American’s recent rebranding launch with newly painted planes and plans to bring new 777-300ER’s and 737-800’s into service along with new premium class products. I don’t think a merger will affect those plans – in fact, I think the airline will try to make sure those stay on track since it’s a good bid to bring back customers.
US Airways already has a great international premium product with its Envoy class – it was actually US Airways that introduced this business class configuration on its international fleet of A330’s with lie-flat beds, though Cathay got most of the attention – so I don’t think there would be an immediate push to standardize products across the fleet and to make US Airways planes three-class like American’s.
Currently US Airways has hubs in Phoenix, Charlotte and Philadelphia. With a merger, I see them winding down their Charlotte and Phoenix hubs in favor of American Airlines bases like Los Angeles and Dallas while maintaining Chicago and New York to match what competitors like United have going. US Airways is also a huge presence at Philadelphia international airport and while I don’t see them unwinding that hub, I bet they continue to build up their New York hub since that is key to scoring the lucrative business and premium international market.
Update: The public offer for the Chairman’s Preferred US Airways Dividend Miles Premier World Mastercard has expired, but you still might be able to apply for it – check out this post for more information on it as well as a version of the card that comes with 35,000 bonus miles and the first year’s annual fee waived. The current offer is 30,000 bonus miles with first purchase and up to 10,000 bonus miles for a balance transfer within 90 days and an annual fee of $89 that is not waived.
This is obviously an important consideration since travel credit cards are a huge source of frequent flyer miles in both programs. Right now, the US Airways Chairman’s Preferred Premier World Mastercard is one of the best airline credit card offers out there at the moment with a first-use bonus of 40,000 miles, a 10,000-mile bonus for making a balance transfer within 90 days, and 10,000 bonus miles each year upon the account anniversary. I think it’s a good deal anyway, so whether the merger goes through or not, I’m thinking about getting this card in a future churn.
That said, if you already have a US Airways card and need to wait a while before applying again, you could consider getting a Citi American Airlines card since offers on the Platinum Select Visa, the Citi Select Amex and the CitiBusiness are all up to 50,000 miles when you spend $3,000 in 3 months at the moment. These links are “unofficial”, but many people have reported getting in on them in this Flyertalk thread, but I can’t personally vouch since it has been over a year since I’ve gotten one.
That way, you’re potentially doubling your sources of bonus miles for if or when a merger of the Dividend Miles and AAdvantage programs does take place.
Positive or Negative?
Although I think competition in the airline marketplace is great for the consumer, I do think that several positive things could come out of a merger between US Airways and American. American is set to get a fleet of new planes over the coming years, and this move would inject the new company with the cash to keep those planes flying to American’s extensive route network while expanding US Airways’ reach.
I love using US Airways miles for Star Alliance awards like I recently did on my trip to South Africa, but I appreciate the flexibility of being able to book one-way award using American miles even more, and I love some of American’s Oneworld partners like BA and Cathay, so there would still be great ways to put those miles to use.
At the end of the day, I wouldn’t make a lot of decisions based on a merger at this time, because even if happens, will take a while till we know what the details are, so I’m going to operate as though it will be business as usual for a while to come.
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