American and US Airways merger could affect hubs: Fitch

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London
Source: Flightglobal.com
This story is sourced from Flightglobal.com

Fitch Ratings questions in a research note whether six hub airports will be needed in the expected merger of American Airlines and US Airways.

"While geographic location and separation helps support a rationale for hubs, it is still fair to ask whether maintaining as many as six hub airports at the same level of operations will be necessary to maintain an efficient single network," says Fitch.

To the extent a merger consummates between American and US Airways, the combined carrier would effectively maintain six hub airports in Dallas-Fort Worth, Miami, Chicago, Philadelphia, Charlotte and Phoenix, says Fitch.

Also, the combined carrier would maintain a "sizable presence" in markets like New York, Los Angeles and San Francisco, the ratings agency adds.

In Fitch's view, some hub airports will likely be strengthened through industry consolidation while others are weakened.

In addition to the hub airports, smaller regional airports may be "at risk" for service reductions particularly if there is an overlap of destinations and frequencies across the two merging carriers, Fitch adds.

"Given the fierce competitive nature of the airline industry from other network and low-cost carriers, both yield maximisation and cost savings are constantly driving service adjustments at airports," says Fitch.

"Further, as history has indicated, carriers have demonstrated a willingness to pare or eliminate large-scale hubbing services in airports such as in Pittsburgh, St Louis, Cincinnati, and Memphis. Therefore, it would be a reasonable assumption to anticipate additional operational shifts over time."

Fitch notes "one positive outcome" from these capacity controlling actions across the industry has been load factors. For American and US Airways, load factors improved consistently over the past five years to 82.2% and 83.7% in 2012, respectively.