Bank of America, which is being replaced by Juniper Bank as issuer of USAirways’ co-branded credit card, is suing the airline for breach of contract.
Bank of America claims it has exclusive rights to offer a co-branded card through December 2008. Juniper Bank has been sold the exclusive right after December 2008… but their deal with USAirways involves a two-year “transition period” in which both banks can issue a card.
When the USAirways-America West merger was first announced in May I noted that a key detail was a planned cash infusion from a credit card partner in the neighborhood of $300 million.
It was curious that the partner wasn’t named, while Bank of America was already partner to both airlines.
So, despite the Charlotte Observer calling the news “somewhat unexpected”, it shouldn’t be all that surprising that Juniper Bank (which issues Frontier and Airtran cards) will become the issuer of the USAirways card.
As expected, USAirways is essentially being acquired by America West, though the airline will operate with the USAirways name.
Significant cash will be added to the merged airline through the deal, including $75 million from Air Canada. This participation suggests to me that the combined airline will be a member of the Star Alliance.
Of particular interest to me,
Bank of America currently issues the affinity cards for USAirways and America West both.
Now, this is the part of the press release that I simply don’t believe:
Heh. $600 million a year from synergies. What are they?
Why were they flying unprofitable routes to begin with, and how does the merger overcome the problem? In part, fuel and labor costs drove this, and in part low cost competition. The merger doesn’t really solve either of those. They can drop routes, but in many cases they choose not to because flying covers marginal costs but not the cost of capital. A merger doesn’t change that dynamic.
Props to Randy Petersen, though, who predicted new Hawaii service by the combined carrier.
Maybe. This one has some chance — the bet is increasing returns to scale.
Not bloody likely. Combining IT systems will probably be a hugely expensive proposition in the near and medium-term.
Randy Petersen has a new post up on his blog, imagining what an America West-USAirways tie-up would mean for integration of the two airlines’ frequent flyer programs.
He believes a merger or acquisition would be on the whole good for members
Keith Alexander speculates on what would happen to frequent flyers in an America West-USAirways tie-up.
He quotes Randy Petersen saying that USAirways members could finally relax about the future and stability of their miles.
Separately, if the combined corporate entity remains as USAirways, and its existing partnerships continue, then America West flyers will gain access to international awards like they’ve never known before through USAirways’ membership in the Star Alliance. Currently, America West’s premium international redemption options are hugely limited.
Of course, this is all speculation. If a merger were to go through, and if it were to cause the combined entity to exit the Star Alliance (after all, America West is a significant competitor to United on the West Coast of the U.S. and to the best of my knowledge America West management hasn’t commented on its position vis-a-vis Star) then USAirways frequent flyers would have their redemption options slashed dramatically.
This is all speculation — on both sides, of course — but it’ll be interesting to see how this all plays out.
A bit of a limited audience for this one, but still quite generous: Register to earn quadruple miles for your spending with USAirways (e.g. tickets, club memberships) when paying with the USAirways Visa between March 1 and March 15.
Through February 11, USAirways is offering 10,000 Dividend Miles for signing up for a lounge membership with promo code CLB10.
That’s a pretty good bonus offer, but while USAirways has some breathing room to operate I’m not sure I’d be investing in anything that last’s a full year with them. They may well be around, but I’d rather fly to Vegas and put the money on black. Better return that way.
Besides, it still offends me that USAirways charges extra for accessing partner lounges. If I just wanted access to the club on the carrier that I was flying on the day that I was flying with them, I’d probably buy an Air Canada Maple Leaf Lounge membership.
USAirways is offering double miles for purchases made through the end of the month on all flights through the end of 2005.
Business class flights to Europe earn 40,000 bonus miles (like American and British Airways) and all flights to the Carribean and Latin America earn 10,000 bonus miles.
Registration is required, and again the bonus applies only to tickets purchased by January 31.
Members of the machinists union at USAirways approved pay cuts. They were the last union to do so. Coupled with the bankruptcy court’s decision to allow USAirways to draw on the cash behind its federally back load guarantee, the airline has been given a few more months of life.
There’s currently no indication that they’ll return to profitability, especially since March is generally their lowpoint in cash for the year. But I don’t see an immediate liquidation threat. In other words, it should be fine to book February flights on the airline.
USAirways is offering up to 20,000 bonus miles that count towards elite status for booking tickets on its website. The offer requires tickets to be purchased and flown between November 16, 2004 and February 16, 2005.
The offer is ostensibly to ‘celebrate the 20th anniversary’ of the USAirways mileage program. From their email:
