Tough issues ahead for American-US Airways merger

American Airlines CEO Doug Parker said the first year since US Airways and American officially merged "has gone really well, but we are by no means done."

Since the merger was completed a year ago Tuesday, operations have been combined in more than 80 airports. Dozens of aircraft have been painted in the new American colors.

Passengers can access both airlines' networks through "codeshare" ticketing. Frequent fliers can earn and redeem travel miles on US Airways and American flights.

But the biggest challenges are still ahead - merging computer reservations into a single system, and achieving joint contracts with separate American and US Airways labor groups.

"Putting two airlines together is at least a two-year process. We are only one year into it," Parker said Monday. "The bigger items are still ahead of us - getting a single operating certificate, merging the two frequent-flier programs, combining the computer reservation systems, and getting to joint labor contracts. All four should happen next year."

American announced a plan Monday to spend $2 billion on upgrades to planes and hub airports, including new lie-flat business seats on trans-Atlantic planes, in-flight entertainment, and power outlets and WiFi on large aircraft.

Hub airports, including Philadelphia, will get updates to Admirals Clubs for frequent fliers, new kiosks to speed check-in, and worktables with power outlets to charge electronic devices in waiting areas near gates.

By the end of December, American will take delivery of 100 new aircraft. It will receive 112 more planes next year, and 84 in 2016. Among the new aircraft will be 42 Boeing 787 Dreamliners, capable of long-haul flights to Asia.

Will Philadelphia finally get a nonstop flight to Tokyo, Beijing, or Shanghai, as hoped for by city officials and the hospitality industry?

"Philadelphia is our key gateway on the East Coast to Europe and will continue to be at American Airlines," Parker said. "But as to anything more than that, we simply don't know yet."

George Hobica, founder of airfarewatchdog.com, said, "I think they are taking it very slowly compared to previous mergers with other airlines.

"They've learned lessons from the mergers of Continental and United, Delta and Northwest, and especially the US Airways-America West merger, which was really messy," Hobica said. "The reservation systems got screwed up; unhappy employees, seniority list problems. So far, American has had very few problems."

Parker and his executive team engineered the 2005 merger of America West and US Airways.

American has produced strong profits - nearly $2.3 billion in the first nine months this year - and in July announced its first dividend in 34 years to give cash back to shareholders and a $1 billion stock buyback plan.

In 2015, the airline will seek a single operating certificate from the Federal Aviation Administration.

The move to a single frequent-flier program will happen between April and June. The Dividend Miles program will go away, and US Airways customers will go into the AAdvantage program.

In September, the flight attendants' union for American and US Airways announced a tentative joint labor contract. But on Nov. 9, members voted it down by 16 votes out of 16,000 cast. The dispute has been submitted to binding arbitration.

On Nov. 12 the union for American and US Airways pilots criticized management's contract offer, which proposed a pay rate similar to what Delta pilots earn, but without the 15 percent annual profit-sharing that Delta pilots receive. If the union and company cannot agree, the matter will go to binding arbitration as well.

Employees have been pressing for profit sharing, but Parker said he wants to have "a higher base wage and not have the variable component. We are working to get contracts where people make more than their peers, and they don't have it tied to the profitability of an airline."

6,700

The merged American Airlines' daily flights.

339

Destinations.

54

Countries served.

100K

Employees.

475

Daily American and US Airways flights at Philadelphia International Airport.

124

Destinations from Philadelphia.

7,700

Employees in Philadelphia.

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