US Airways Holds Ace in AMR Merger Scenario
CHARLOTTE, N.C. (TheStreet) -- The world has three global aviation alliances. The U.S. has three global airlines, one in each alliance. But the Southeastern United States, home to about 80 million people, has just two airline hubs.
Currently, two of the big three U.S. carriers lack Southeast hubs. In fact, American doesn't even have an East Coast hub. J.P. Morgan analyst Jamie Baker has written that American is weak in the East, compared with its two rivals, because it cannot gather enough passengers in small cities: It has neither the aircraft nor the hubs to serve those cities. United peripherally serves the Southeast from a Dulles hub and also operates a Newark hub.
Delta, which according to reports has studied a merger with US Airways, could make a lot of money if it operated the only two Southeast hubs in Charlotte and Atlanta: Opinions vary on whether antitrust regulators would allow that. In fact, when US Airways sought to merge with Delta in 2006, its attorneys argued that regulators would readily approve the deal.Jerry Orr, the outspoken director of Charlotte Douglas International Airport, does not believe Delta would be allowed to operate both hubs. "That would stifle competition, and when you stifle competition, it's called a monopoly," he said. . "There will always be two competitive hubs in the Southeast," said Orr, airport director since 1989. "Atlanta is one and it's our destiny to be the other one. "We have an effective airfield here and an effective cost structure," he added. "As long as we maintain that, Charlotte will be attractive to any airline that operates a hub." US Airways operates 631 daily departures at Charlotte, the third largest U.S. hub operation after Atlanta, with about 997 daily departures, and Dallas, with 740. [Houston has 620.] US Airways President Scott Kirby has said that Charlotte is the fourth most profitable major airline operation in the country, after Newark, Washington National and Houston. In other words, United has two of the most profitable major airline operations and US Airways has the other two. If you happen to be in the merger market, such assets represent an obvious advantage.
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