American Airlines creditors and shareholders have now put their stamp of approval on the merger with US Airways. But what does that mean for you?
Airline mergers can be good or bad for consumers in different circumstances, experts say. After all, frequent fliers can range from million-mile jetsetters to rewards card holders who just want to buy enough groceries and gas to get a free ticket to visit mom once a year.
“There are going to be some people who wind up better off and some people who wind up worse off,” says Gary Leff, cofounder of MilePoint.com. ”It depends on who you are and what you value.”
Although it remains unknown what exactly the hybrid of American and US Airways will look like, there are several things rewards program members can expect — and prepare for.
What happens when airlines merge?
Many frequent fliers and credit card holders with both American and US Airways are wondering what will happen in the coming months and years. There are three things that typically occur when airlines merge:
1) Credit cards change. A big credit card issuer typically signs an exclusive deal to provide rewards credit cards for an airline. When two airlines merge, one card issuer typically wins out, experts say. Right now, Citi issues American Airlines rewards cards while Barclaycard puts out US Airways credit cards. While it looks like American plans to keep Citi — which spent $1 billion to purchase American frequent flier miles secured with American Airlines assets in 2009 — as an issuer, no exclusive deal has been made final, Leff says. Plus, he says, there's a chance Barclaycard also could remain an issuer. In any case, Citi obviously wants to keep its relationship with American, Leff says and could get even more aggressive in its benefits offerings to consumers.
“Competition is always good,” Leff says.
2) Miles combine into one loyalty program. In mergers, two frequent flier programs become one. According to American Airlines, that won't happen until the merger is complete. At that point, experts say, the members of US Airways' Dividend Miles frequent flier program will be moved into American's AAdvantage program. That could be a plus for frequent fliers who have “orphan miles floating around in one program or the other,” says Eric Rosen, managing editor for ThePointsGuy.com.
“It will put more awards within reach,” he says.
Though it's not yet clear how this will work, the merger might allow consumers to combine miles that count toward elite status that they earned on both airlines, Rosen says. That might make it easier for more travelers to get elite-level perks, such as priority boarding and premium seats, he says.
It's also still unclear what the new program's reward chart — which shows how many miles are needed to book flights to various places — will look like, Rosen says, noting it will probably resemble American's current chart. That means some good deals offered by US Airways, such as 110,000 miles round trip for a business class trip to the South Pacific, including Australia and New Zealand, could go away.
Whether you like the new loyalty program or not will depend on your flying preferences, Leff says.
“There are some things each [program] offers that will wind up being lost,” says Leff.
3) One alliance wins out. An alliance is a partnership between U.S. and international airlines that allows frequent fliers in one member airline's program to earn and redeem miles on the affiliated member airlines. When a merger happens, the resulting airline becomes a member of just one alliance. Now, American is part of the Oneworld Alliance, which includes 12 airlines, including British Airways, Cathay Pacific and Qantas. US Airways, meanwhile, is part of the Star Alliance, which includes 28 airlines, including Lufthansa, Air China and Thai Airways International. Because Oneworld is a smaller alliance, that will mean fewer airlines and routes on which frequent fliers can use their miles, Rosen says. However, he adds, Oneworld has some premier carriers, such as those listed above, and will have some more members joining in the next few years.
How to get ready for the merger
So, what should you do to prepare for the American/US Airways merger? Experts have two suggestions:
- Consider a credit card. If you have one airline's card but not the other's, now might be a good time to apply for the card you don't have and get a sign-up bonus, Leff says. Then, when the frequent flier programs combine, you'll have even more miles. If you decide to go this route, act quickly — the chance to get a US Airways card could soon disappear. One example of sign-up bonus you can get now: the US Airways Premier World MasterCard is offering 40,000 miles after the first purchase and a balance transfer.
- Consider using miles now. In some cases, it might make sense to buy a ticket with your US Airways miles now because the airline likely will leave the Star Alliance by January 1, 2014, Rosen says. For example, maybe you know you want to cash in your miles for a flight on one of US Airways' partner airlines, such as Lufthansa, Singapore Airlines, South African Airways or United, Rosen says. Or maybe you want a flight that costs fewer miles on US Airways — such as a U.S.-to-Hong Kong business class flight for just 90,000 miles, Leff says, noting that a similar flight on American would set you back 110,000 miles.
Aside from co-branded credit cards, frequent flier programs and alliances, there's one other major factor that will affect fliers: the overall experience, from booking a ticket to landing at your destination.
In general, many frequent fliers view American as the superior airline, with more knowledgeable and helpful agents, a better in-flight experience and even more meals for passengers, Leff says.
Still, no one knows exactly what the new American Airlines will be like after the merger.
“They will have to figure out, are they going to be more like American, more like US Airways or somewhere in between?” Leff says.