CHARLOTTE, N.C. ( TheStreet) -- It's not his fault, but AMR ( AAMRQ.PK) CEO Tom Horton is fighting history now, trying to turn back the tide of consolidation that began to sweep over the airline industry four decades ago. Since airline deregulation in 1980, 150 carriers -- starting with Pan American World Airways, once the greatest airline in the world -- have disappeared, many swallowed up by consolidation. By the 1990s, it had become clear that the U.S. would one day be home to three surviving legacy carriers with vast global networks.
Of the three, American is the one that has been least able to master consolidation. Rather, it seems to have managed to incur all of the negative impacts -- principally overpaying for deals that turned out to have no value, and incurring labor's wrath -- while deriving none of the benefits. Partially as a result, while Delta ( DAL) and United ( UAL) made major acquisitions in 2008 and 2010, American sat tight. Now it is battling a takeover bid by US Airways ( LCC), a smaller carrier that is a product of many mergers. Those mergers haven't all been pretty. The 1989 combination of Piedmont and USAir has long been cited as a model of how not to do a merger. As Jerry Orr, aviation director at Charlotte Douglas International Airport, said, "When you buy somebody, you ought to save the good parts and throw away the bad parts, but USAir did the opposite," he said. The feeling was that Pittsburgh-centric USAir wanted to expunge the Piedmont culture. When Steven Wolf became CEO of USAir in 1996, one of the first things he did was to change the name, partially in an effort to unite a divided work force. The 2005 merger between US Airways and America West combined two historically unprofitable airlines into one that is generally profitable, even as it unleashed a continuing battle over pilot seniority. In this respect, it resembles the 1972 merger between US Airways predecessors Allegheny and Mohawk airlines, in which labor issues are an important part of the deal's legacy, having lent the extinct carriers' names to an often-cited protocol for protecting workers impacted by airline mergers.
The point here is that US Airways has long led the way in airline industry consolidation. Some of its mergers were rancorous; some were overly costly and none were perfect. But in the end, the result was an airline with a culture in which mergers weren't only accepted but also continued to be pursued. By contrast, American hasn't benefited from its mergers. In the late 1980s, American, Delta and USAir all bought California airlines, then subsequently preceded to reduce their West Coast operations in the face of competition from Southwest ( LUV). Delta, however, benefited the most from its West Coast deal. In 1999, AMR made a second try on the West Coast, acquiring Reno Air. It essentially paid $124 million to buy conflict with its pilots union, which led to an intensive battle over pilot seniority, including a pilot sickout that caused thousands of cancellations resulting in $225 million in losses. Perhaps the worst merger of all came in April 2001, when AMR paid about $2 billion for TWA, a deal inspired by a desire to keep pace when United bid for US Airways. The latter deal eventually collapsed. At the time, the airline industry was already in a recession, which was exacerbated by the Sept. 11 terrorist attacks. In 2009, AMR closed TWA's St. Louis hub and Kansas City maintenance base. Mergers are often ugly. They had little appeal for American, which suffered not only from the syndrome of unsuccessful efforts but also from a belief, appropriate throughout much of the two decades immediately following consolidation, that it was the best airline and did not need to merge with anyone. Now it is being hunted by a hungrier, more nimble foe that has history on its side. -- Written by Ted Reed in Charlotte >To contact the writer of this article, click here: Ted Reed >To follow the writer on Twitter, go to http://twitter.com/tedreednc.