US Airways and American merger: What it might mean for Los Angeles

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Soon, American Airlines and US Airways will merge to form the world’s largest airline – assuming the deal is approved by regulators. The new carrier will be called American, but much of its top management, including chief executive Doug Parker, will be from US Airways.

What does this merger mean for Los Angeles?

American operates a hub at Los Angeles International Airport, while US Airways has its West Coast base in Phoenix. There’s a lot of speculation on how the combined carrier will approach its Western operations. It’s early, so it’s not clear that anyone knows how the two hubs will coexist.

Two months ago, I visited US Airways in Phoenix. I spoke with Andrew Nocella, senior vice president for marketing and planning, about the approach the new American could take in Los Angeles. The conversation is a tad stale — hey, I didn’t have the blog in April — but it should give a decent idea of what the future might look like.

In recent history, what has been US Airways’ approach to LAX?

We have had a strategy at US Airways that has focused around four key hubs. In our case they are Phoenix, Charlotte, Washington, DC and Philadelphia. They are points of strength for us. They have a lot of connectivity for us. As we looked at our business, and we looked at the margins we needed and where we needed to be and where we wanted to go, we found that has been working for us. I tend to think it was a long transition out of a bunch of markets that we were big in, but as a somewhat niche player in the marketplace we knew we couldn’t be big in every market. We focused efforts in the places where we thought we could be most profitable. In this particular case, Los Angeles is a great spoke for US Airways today. It’s a profitable operation for US Airways so we are very happy with it.

How might the future look?

In the future, things will be a little bit different, as we’ll be one of three large mega carriers here in the country. Los Angeles is a top business market – No. 2 in the country behind New York. We intend to make sure we will keep the operations in all nine (new American) hubs going forward. Los Angeles and New York are a very important to the strategy. The strategy of a stand-alone US Airways is different than the strategy of a merged US Airways and American. Times change and we will adjust our business philosophy and strategies accordingly.

No airline dominates Los Angeles, and the domestic market is shared among American, United, Delta and Southwest. Why doe you suppose that is?

I think it’s because it’s such a large business center. Also, it has unique geography. As a domestic hub, Los Angeles’ geography is not optimal. It’s as far west as you are going to go, basically – other than going to Hawaii. Because it doesn’t have the same type of centralized geography as most of the other hubs in the country, you wound up with a situation where multiple airlines are kind of going after the same bread and butter. As a result, you have the market divided amongst really four major players – the three legacy airlines now and Southwest.

How has this L.A. market been for US Airways?

It’s a lucrative operation for US Airways. I don’t know the economics of American Airlines. I haven’t seen the numbers. But I am optimistic that LAX is going to be a growing part of the combined company and hopefully a bigger Asian gateway for the company over time. I’m bullish on its role for the future. Really, the question mark for LAX in the future is going to be its facility constraints. Today, one thing I do know is that American is completely full in their concourse. The new (Tom Bradley International Terminal) is a little bit late, which has some cascading implications. We are soon moving to Terminal 3, which is across the horseshoe, so we are going to have to figure out how to rationalize LAX issues so we can create a level of convenience for our customers and a platform for growth.

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