The past week saw important developments at two U.S. airlines under our coverage. During the week, Delta (NYSE:DAL) equipped its 19,000 flight attendants with Windows handheld devices to process on board credit card payments and thus ease the process of in-flight purchases by passengers. This latest technical investment follows many such investments from Delta in the recent past that aim to raise its customer service standards.
Meanwhile, US Airways (NYSE:LCC) and American Airlines filed a motion seeking November 12, 2013, as the start date to their trial brought on by the Department of Justice (DoJ), which blocked their merger earlier in August on competition concerns. The department on the other hand wants the trial to start not before February 10, 2014. A delayed start to the trial will mean increased financial strain on American and uncertainty for its debt-holders and unions, as the merger agreement between US Airways and American expires on December 13, 2013.
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Last Thursday, Delta announced that it distributed more than 19,000 Windows Phone 8 Nokia Lumia 820s to its flight attendants for streamlining and easing in-flight customer service.  These devices will be used by Delta flight attendants to process credit card payments of passengers in real-time for in-flight shopping. Passengers will be able to utilize this gateway to make payments for seat upgrades as well. The devices will connect to the Internet using AT&T’s 4G LTE network and WiFi on board the Delta aircraft. In future, Delta intends to expand the usage of these devices to providing its attendants with customer-specific information for a more personalized service experience. The carrier is also looking at using these devices for reading coupons off the mobile phone screens of its customers to further improve its delivery services. This solution for Delta has been developed by Microsoft, Avanade and AT&T, after extensive feedback from flight attendants.
This novel solution will help Delta provide its customers especially corporate travelers a point of differentiation from its competitors. It can thus help attract additional passenger traffic to the carrier. However, like in the case of on board WiFi, if this solution were to become a success then other carriers would adopt it soon.
Nonetheless, through this latest solution, Delta has followed through on its commitment of raising its service standards by use of technology. In the recent past, the carrier has made a number of investments in technology. In early 2013, it launched a Fly Delta app for iPad that allows customers to book/cancel tickets, check flight status, track frequent flier miles and access a lot of other information. Prior to that in December 2012, it launched a new delta.com website with many upgrades and in September 2012, it refurbished self-service kiosks.
During the week, US Airways and American Airlines filed a motion proposing November 12, 2013, as the start date for their trial against the Justice Department.  On August 13, the department had moved surprisingly to block the merger between these airlines after allowing many airline mergers in recent years, including four big ones. The Justice Department on the other hand wants a longer preparation period for the trial and accordingly has proposed a trial start date of February 10, 2014, to the court. The department believes this period of around 180 days before the case goes to trial is typical taking in to the account the size of the merger and the number of customers it affects.
US Airways and American Airlines want the trial to begin sooner rather than later as a delayed merger approval, if the carriers were to win the case against the DoJ, will impact the synergies anticipated from their merger. Additionally, the merger agreement between US Airways and American Airlines allows either party to terminate the deal in case the merger gets delayed beyond December 13, 2013. Though this termination date can be extended by the carriers on mutual consent, in the meanwhile, this date is working to increase uncertainty among the carriers’ employees and debt-holders. A delay in the start of the trial will also raise American Airlines and US Airways’ merger-related expenses as they are paying significant fees to professionals per day for restructuring, legal and other advice.
To resolve the current impasse, the federal judge who has been appointed to hear this case has scheduled a meeting between US Airways-American Airlines and the Justice Department on August 30, to rule on the trial start date. If the department were to prevail at this meeting then the US Airways-American Airlines merger synergies will likely get reduced slightly and merger-related costs for both the carriers will rise marginally, even before it gets decided whether the merger will take place or not.Notes:
- Delta continues push for technical innovation with handheld devices, August 22 2013, www.delta.com [↩]
- American Airlines And US Airways File Motion To Set Trial For Nov. 12, 2013, August 22 2013, www.usairways.com [↩]