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There are lots of comments about the US Airways / American merger coming under review, but the biggest nuggets are hiding in the text of the Justice Department’s filing itself. And they make it clear the feds have a problem with the fee pain US Airways wants to impose on American flyers after the merger.
Problem is, the Feds are working with some old information, and some of what they thought would only happen with the merger is actually happening without it.
1. The Award Processing Fee. A merger problem…
US Airways charges a $25 – $50 Award Processing Fee for every mileage ticket issued. Makes you think of paper tickets and someone in a room piecing together your travel documents doesn’t it? In reality, most awards are booked online as e-tickets with no real extra cost to generate. And if you think this fee is because some people book over the phone, think again. There is a separate ‘Call center award ticketing fee’ of $30 – $40. These fees are waived for the highest of elite members of the frequent flyer program, but that’s it.
American has no ‘Award Processing Fee,’ just a $25 ticketing charge for using the phone.
The Justice Department revealed “US Airways also plans to institute its fees ($40 on average) for the redemption of frequent flyer tickets on American’s existing frequent fliers, who currently are not charged for mileage redemption. ”
So the cost of an AAdvantage award would go up by up to $75 for people who book over the phone. And everyone but the highest elite members would pay an additional $30-$40. This is a direct loss to consumers that would happen if US Airways management took over.
2. More bag fees? No merger needed…
The Justice Department says…”A US Airways presentation from earlier this year analyzing the merger identifies American’s lower bag fees as a “value lever” that US Airways “will likely manage differently with tangible financial upside.” The analysis concludes that “[i]ncreasing AA baggage fees to match US creates significant revenue impact.”
Well, actually, since then American made its own changes. American raised its bag fees on International flights as of June 6th, with Europe checked bags increasing to $100 from $60 for the 2nd bag, and American now charges the same or more than US Airways for baggage. American doesn’t charge for the first checked bag to Latin America, something US Airways charges $25 for. That’s some pain US Airways could impose on American’s Latin stronghold.
3. The attitude. Big problem….
While the fee facts aren’t as black and white as the Justice Department claims, the fact is US Airways management has a reputation for taking a dim view of decisions that benefit customers while adding cost to the business. Which is fair when your job is to maximize profit. But emails like this..
“In a 2011 email exchange lamenting the need for US Airways to deploy wireless internet on all of its airplanes, a senior US Airways executive groused:
[N]ext it will be more legroom. Then industry standard labor contracts. Then better wines. Then the ability to book on Facebook. Penultimately, television commercials. Then, finally, we will pay the NYSE an exorbitant fee to change our ticker symbol [from LCC].”
Get the feds on your back and make the intent of what’s being done hard to hide.
In the meantime, not a lot of flyers are disappointed this merger is under review. Means more time to earn US Airways Dividend Miles bonuses separately. It means AAdvantage miles will for now remain among the most valuable for first and business class travel.
And it means a delay to the disruptions mergers cause when you try to piece together two large 24 hour operations.
Longer term, impossible to tell if both can survive alone the next time a down economic cycle or energy price increase hits. For now, they are both enjoying profitable years.
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