Tuesday, October 28, 2014

American Airlines Honors Allegheny, the Number One Merger Airline

By Ted Reed
In a consolidation-obsessed business, Allegheny Airlines may have been the biggest consolidator of them all.

It merged with Lake Central. It merged with Mohawk. It changed its named to the more universal “US Air.” It merged with Piedmont. It merged with PSA. It changed its named to the more distinctive “US Airways.” It merged with America West. And finally, it merged with American.

Now, as part of American CEO Doug Parker’s longtime effort to honor airline lineage, Allegheny is being recognized with an American heritage aircraft. The A319 was painted in Roswell, N.M. It had been flying as an Allegheny heritage aircraft in the US Airways fleet, but the paint job means it shows the American logo instead of the US Airways log.

The Allegheny aircraft joins heritage PSA and America West aircraft in the American fleet. Aircraft that honor Piedmont, as well as Air Cal, Reno Air and TWA, are coming.

Allegheny was known for being generous with its employees. “The principle culture in this company is the Allegheny culture,” US Airways CEO Stephen Wolf told employees in Charlotte in 1997, according to my new book, “American Airlines, US Airways and the Creation of the World’s Largest Airline.”

“Allegheny flew monopoly routes in the East for 2,000 years at monopoly price,” Wolf said then.  “It was wonderful and profitable every day of its life and as a result of that, we are very generous with our employees.”

At the time, Wolf was addressing the issue of “swaps,” raised by a customer service agent during a question and answer period. Swaps enabled trades of shifts with other workers.

At one time, the swaps policy allowed the airline’s 4,000 reservations agents to trade up to 50% of their shifts, but the number had been cut back to 20 swaps per quarter, irritating the agents. Many of them had drawn night shifts for years.
Wolf called the policy “goofy.”  In 1996, US Airways was still a high-cost airline, largely because every time the airline had completed a merger, the most generous components of the two previous contracts were retained.

It was a strategy that worked well when airlines were regulated, but after deregulation, it began to fray, as Southwest and other low cost airlines invaded the East Coast. A turning point came when Southwest began to serve Baltimore, then a USAir hub, in 1993.

As Frank Lorenzo, probably the most important figure in shaping the post-deregulation U.S. airline industry, has said: “They deregulated revenues, but they didn’t deregulate costs.”
Ed Colodny was the executive who presided over four mergers at Allegheny/US Air between 1975 and 1991.

When Colodny started at Allegheny in 1957, the headquarters were in Hangar 12 at Washington’s National Airport. “The corporate officers were on the second floor of what was the maintenance facility of the airline,” Colodny said, in an interview for the book.

“To describe my office as modest would be an overstatement,” he said.

At the time, Allegheny served 8 states and about 50 communities, including small Pennsylvania cities such as Altoona, Erie, Harrisburg, Lancaster and Reading. It wanted to grow, and Colodny led various efforts to convince the Civil Aeronautics Board to relax restrictions on local service airlines
Colodny changed the name to USAir in 1979, and he built the airline through mergers.  As a result, Allegheny became the only local service airline from the 1950s to remain viable into the 21st century.
Now it is largely just a memory, recalled by a heritage airplane.

Allegheny (3)


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