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US Airways Merger Wouldn't Help AMR, Transportation Expert Says

Stocks in this article: AAMRQ.PK DAL LCC UAL

CHARLOTTE, N.C. ( TheStreet) -- A transportation expert blasted US Airways (LCC), saying the carrier has ignored long-term growth for short-term profits in order to gain support for a merger with AMR (AAMRQ.PK) that would not add any value for American Airlines.

A merger "would benefit US Airways a hell of a lot more than it would benefit American," said Aaron Gellman, a professor of transportation at Northwestern University, during a conference call with reporters on Thursday. "It may be they are counting on merging with AA and thereby getting (international) growth opportunities under their belt. (But) their strategy did not early enough look at these other opportunities.

" I think, if they were to be able to merge with AA, they would gain a lot globally, but at the same time they would have real problems with (integrating) management," he said. "I'm not sure what benefit would flow to AA from such a merger."

Gellman's general topic was that while capacity discipline has benefited U.S. carriers in the short-term, it has caused them to ignore the long-term value of expanding into the most rapidly growing emerging markets in China and South America. In his view, US Airways is a primary practitioner of this failed strategy. Gellman has consulted for AMR in the past.

US Airways CEO Doug Parker has said repeatedly that US Airways' principal hubs in Charlotte and Philadelphia are not sizable enough, when compared to Atlanta, Chicago, Dallas and Newark, to support vast international flying. But Gellman said: "I don't think their hubs are too small. Charlotte and Philadelphia are not small hubs."

Among his criticisms, Gellman said US Airways did not begin to pursue major growth opportunities until after the AMR bankruptcy. He said US Airways "had the right to fly to China (and) didn't do anything with it." He said US Airways has not sufficiently pursued growth opportunities in South America. Rather, "they stayed a domestic airline and chose to go heavy into Europe which is fine, but they ignored the really big growth opportunity to the south (South America) and in the far west, China," he said.

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