Comparison Between American Airlines And US Airways (AWE)

Executive Summary

1. Introduction

This comparison between American Airlines (AA) and US Airways (AWE) starts from the year ending report in 2008 after AWE finally completed embedding America West into their operations in October, a process begun in 2005. Neither has taken part in any mergers or takeovers since then and, despite AWE briefly flirting with the idea of taking over United Airlines in 2008, merger and acquisition plans for both had been subordinate to recovering from the Global Financial Crisis (GFC).

They have been operating as passenger and freight carriers, albeit under different corporate identities, since the beginning of commercial aviation in the 1930’s. They have weathered the cycles encountered by airlines and the aviation industry in general – political, economic, environmental and social; as well embracing the technological progress afforded the industry.

Both airlines are Legacy Carriers (Holloway, 2008), each having a domestic American network and an international network. Each operates a hub and spoke network; American from hubs at Dallas Fort Worth, John F Kennedy NY, Los Angeles, Miami and Chicago O’Hare: US Airways from Charlotte, Philadelphia, Phoenix and Washington DC and have many competing sectors and market segments.

Unlike Low Cost Carriers (LCC) (Wensveen, 2011), both offer the full range of services expected of Legacy Carriers; three class cabins (two on some sectors), full meal services, in-flight entertainment (IFE), airport lounges and Frequent Flyer programs and, unlike LCCs, they are members of global alliances.

AWE has managed to exit the GFC and improve its balance sheet while AA has consistently made losses until at the end of 2011 it sought Chapter 11 bankruptcy protection fr...

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...yment. Competitors began to record profits and apply competition throughout their network. Creditors, customers and investors were becoming increasingly concerned with the performance of AA. Finally in November 2011, American Airlines filed for bankruptcy protection: the first time it had ever done so.

Throughout this period, all comparisons show that US Airways was in a better economic position than American Airlines: except for a few metrics in select years where AA was able to improve due to Chapter 11 protection. AWE consistently produced higher revenues per ASM combined with lower CASM – the recipe for a sustainable competitive advantage.

With few overlapping routes, a domestic network improvement for AA, as well as an international improvement for AWE; anti-trust courts had few reservations and approved the merger creating the world’s largest airline.