American Airlines Takeover Would Bring Turbulence to US Airports

American Airlines Takeover Would Bring Turbulence to US Airports

On 12 January, widespread news reports speculated that Delta Airlines (B2 stable) and US Airways (Caa1 stable) were each considering acquiring AMR (ratings withdrawn), parent of American Airlines (Baa3 review for downgrade), out of bankruptcy. Either company’s acquisition of AMR would be negative for several US airports because it would likely result in reduced enplanement, as seen over the past several years of airline consolidation.
AMR has a minimum of 120 days to submit a plan of reorganization, and neither Delta nor US Airways has publicly commented on the news reports.
If either of these mergers materialize, the credit implications for US airports rest with the economics behind passenger volume concentration. While certain American hubs, such as Chicago O’Hare (A1 negative) and Dallas/Fort Worth (A1 negative) serve cities large enough to support multiple carriers, smaller city airports with overlapping markets and routes are apt to see greater effects. Both Delta and US Airways would benefit from American’s Los Angeles (Aa3 stable) hub as a primary gateway to the Asia/Pacific and its Miami International (A2 stable) hub as a gateway to Latin America.
We examined the potential implications for selected airports in two scenarios: one in which Delta acquires American, the other in which US Airways acquires American.

If a merger with Delta materializes, Delta and United would control more than half the nation’s passenger traffic. This large concentration in the industry would give the major players more bargaining power, which could mean service cutbacks at certain airports, as well as higher fees and fares. Delta could consolidate its flights from certain hubs, especially Chicago O’Hare and Miami International. Delta already has large operations at a number of the nation’s major airports. But a Delta-American merger would also mean consolidation of routes at certain origin and destination (O&D) airports that have high concentration of both airlines. Such O&D airports include Atlanta-Hartsfield Jackson International (a1 stable), Des Moines International (A2 stable), Huntsville (A2 stable) and Jackson Municipal Airport Authority (A3 stable) in Mississippi, which would all have more than 50% concentration of Delta and American airlines.

If a merger with US Airways materializes, American’s airport hubs could have fewer problems passing through the Department of Justice guidelines since the concentration would be smaller than a merger with Delta. US Airways could extend its national presence and gain the Latin America network. Therefore, rather than closing hubs, a US Airways-American merger could lead to shrinking their presence or limiting growth at certain airports, such as Piedmont Triad Airport (A3 stable) in North Carolina, as the airport is already served by both airlines. A consolidation of flights could occur in US Airways hubs such as Charlotte/Douglas (Aa3 stable) and Philadelphia International (A2 stable).

Primary US Airport Hubs by Airline carrier