A US Airways and American Airlines Marriage: Good for Charlotte?

A US Airways and American Airlines Marriage: Good for Charlotte?

By Mark Carolla

            Snobs from elsewhere in the US sometimes refer to Charlotte, North Carolina as “Mayberry with an Airport.”  (Mayberry being the rural North Carolina town of an Andy Griffith Show and Mayberry RFD television comedy series of the 1960’s.)  Charlotte, with its financial and business presence with several Fortune 500 firms located there, including several such as Chiquita Brands with international operations and equities isn’t exactly Mayberry.  Notably, there are 194 German-owned firms in the Charlotte area including 59 U.S. headquarters; making Germany the most largely represented foreign country in the region. Charlotte Douglas Airport (CLT) is the sixth largest airport in the United States when it comes to flight operations, but about 90 per cent of passenger traffic is US Airways hub traffic connecting through CLT.  CLT is home to over 15,000 direct airport jobs.

            What will happen to CLT if US Airways takes over American?   An excellent April 9, 2012 article by Ely Portillo in the Charlotte Observer  quoted Aviation analyst Henry Harteveldt of Cambridge, Mass.-based Atmosphere Research Group, as stating it’s risky to invest in more capacity with the future of the airport’s No. 1 carrier up in the air. “Charlotte’s future is so heavily tied to US Airways’ status as an independent airline, and right now there is a lot of uncertainty,” he said. “There really is a risk.”   (Read more here: http://www.charlotteobserver.com/2012/04/09/3158982/airport-bets-a-billion-on-future.html#storylink=cpy  )   According to the same Observer article respected and veteran CLT Airport Director Jerry Orr “says he’s not concerned about the possibility of a US Airways merger. He said there always will be room in the Southeast for a hub besides Atlanta, and Charlotte Douglas can be that hub as long as it is well-run and stays low-cost for airlines. US Airways CEO Doug Parker says the airline remains committed to a Charlotte hub, even in the event of a merger. “I suspect in any sort of individual scenario that involves US Airways or any other airline in the future, that Charlotte will be a hub airport,” he told the Observer.”   I hope that is the case.

                                                This American livery + This US Airways livery =

                                                  This American livery and change for CLT?
        Other communities in the United States have been shortchanged and hurt by the consolidation and formation of oligopolies in the airline industry in the advanced throes of deregulation.   (Note: I am neither a fan of deregulation nor consolidation of the US Airline Industry and believe those factors have adversely affected customer service, the economics of aviation, jobs and professionalism and the availability of decent air transport to many communities.)   As, I am currently associated as a political risk and international transportation and security advisor with Edna Chirico of Green Moose Consulting in Charlotte I find this history interesting if not compelling.  Although my current specialty is transportation security, as a former Indications and Warnings analyst with the US Intelligence Community and keen observer of the airline industry I would respectfully advise Edna, Mr. Orr and others who care about and serve Charlotte to not be sanguine or Pollyannaish and to have a “Plan B” regarding the status of US Airways’ hub at CLT if the merger takes place.   Here, again according to the Observer is what happened elsewhere in the US when airlines “consolidated:”

·         Pittsburgh International Airport, a former US Airways hub, was stuck with a new, $1 billion terminal after US Airways cut hundreds of flights there. Airport officials have said they expect to be paying back debt for the expansion until 2018. That, in turn, has kept its operating costs high.

·         Lambert-St. Louis International Airport started on a $1 billion expansion plan in 2001, the same year American Airlines bought bankrupt TWA, which had dominated the airport. Despite pledges to keep St. Louis as a hub, American cut hundreds of flights there and soon discontinued the hub, costing St. Louis direct service to many destinations.  I am very familiar with that disaster for St. Louis and consumers.  I used to fly between Washington Dulles on a comfortable MD-80 on TWA and for a bit after the hostile takeover on American.  Soon you could only fly on United or American Eagle subcontracted “regional carriers” in cramped small commuter jets. 

·         Closer to home at Raleigh  when American Airlines closed its hub in 1995 it was by far the airport's biggest tenant, at one point flying 73 percent of its passengers and offering about 200 daily departures.   Raleigh’s airport managed to attract Southwest Airlines and other carriers, but never regained major hub status.

           

            There are some geographic, operational and even historic airline considerations we need to consider if US Airways swallows American.   First of all, there is opportunity in chaos, if the merger takes place it will take months if not years to rationalize American and US Airways respective route structures.  CLT leadership or somebody working for and with them should be studying those now and thinking of this now.   Also, CLT needs to be preparing a case as to why it should remain a hub.

             Second, consider US Airways history: For Charlotte, there is one important word regarding the history of US Airways: Piedmont, the iconic North Carolina-based local service carrier of the 1950’s through the 1980’s.  US Airways has a family tree of many former local service carriers such as Allegheny (which served mainly Pennsylvania and adjacent states) which merged in 1967 with Indianapolis-based Lake Central Airlines then in 1971 with Upstate New York and New England’s Mohawk, in 1987 the West Coast’s PSA; and in 1987 with Piedmont (a marriage Jerry Orr is quite familiar with).   Then, in 2005 America West of Phoenix bought out and merged with US Air and became US Airways.  The thing to consider is that US Airways is a hodge podge of a multitude of local service carriers that has taken decades to rationalize.   Charlotte, as a former Piedmont hub might “go back to the future” and serve as a smaller American (US Airways + American, that is) hub for the Southeast utilizing for the most part “regional airlines” subcontracted aircraft in American livery.    A review of flights out of Charlotte show that many with a US Airways flight number and painted in US Airways colors are not “real” US Airways flights but rather regional airlines contracted to US Airways.  The opportunity in this chaos is that many passengers hate transiting through Atlanta.

                                                      ( A Piedmont Martin 404)  *             


            Third, we should consider operational geography.  In US Airways acquisition of American US Airways would gain two important hubs at New York’s JFK and at Miami that are closer and less costly for fuel to Europe and Latin America and the Caribbean respectively than Charlotte.  When we look at an airline route map a Mercator Projection is misleading as flights from Asia, Europe and the Middle East don’t come from the east over the Atlantic over Kitty Hawk, but follow a polar great circle.  In some circumstances using Charlotte as a hub could cost a lot more in expensive fuel. 

            Fourth, consider the important German market.  US Airways is a member of the Star Alliance, but not the IS Star Alliance linchpin that United is.  American is the US bulwark of the Oneworld Alliance, and the new carrier would probably affiliate that way.  That raises questions on Lufthansa’s flight from Munich to Charlotte if there are no Star Alliance regional connections to connect with in Charlotte – shifting connections to United at the closer to Europe Dulles Airport (IAD) hub in Northern Virginia.

            Consider Latin America, Chiquita and Brazil. Will 700 Chiquita staff in Charlotte justify non-stops daily from the Caribbean and South America rather than using the myriad of current American flights into their fortress Miami?  Unfortunately Miami’s role as “the Capital of Latin America” and cultural and immigration heritage links mitigate against a shift in many American flights to Charlotte especially as it would cost more in fuel costs.  Then again, the opportunity in this chaos is that many passengers hate transiting through Miami with its awful Immigration and Customs lines, and perhaps the Latin American Chamber of Commerce in Charlotte can play a role in influencing future US Airways decisions.

            In short, Charlotte remaining a US Airways hub in its current state is not a done deal.  There will be an uncertain course for the Charlotte Airport and its boosters (which I regard myself) to navigate in coming months.  We have a lot of work ahead of us.

*  Postcard available from Aviation Hobby Centers http://tamcosystems.com/store/index.php?main_page=product_info&products_id=466 )