Finance:Legacy carrier

Short description: American airline with interstate routes established before 1978

A legacy carrier, in the United States , is an airline that had established interstate routes before the beginning of the route liberalization permitted by the Airline Deregulation Act of 1978, and was therefore directly affected by it. Legacy carriers are distinct from low-cost carriers, which, in the United States, are generally new airlines that entered the market after 1978 to compete in the newly deregulated industry.

Background

A typical characteristic of legacy carriers is that they usually provide higher quality services than a low-cost carrier; for example, a legacy carrier typically offers first class and business class seating, a frequent-flyer program, and exclusive airport lounges. Many legacy carriers are also members of an airline alliance, through which they agree to provide reciprocal services to the passengers of other airlines in the same alliance.

The term 'legacy carrier' has generally not been used outside the United States. Many other countries have long-established flag carriers that are or were historically owned by or often given preferential treatment by their national governments. The national airlines occupy a position roughly equivalent to the American legacy carriers on quality of service and membership in international alliances compared to newer low-cost carriers. No American legacy carriers are official flag carriers in the United States.

Since the Deregulation Act, many legacy carriers have folded or merged with other carriers. Those that survived now benefit from the fact that low-cost carriers no longer hold large cost advantages over the major legacy carriers.

A trend among legacy carriers is to outsource short-haul and medium-haul flights to regional airlines. In 2011, 61% of all advertised flights by American, United, and Delta were operated by a regional airline, an increase from 40% in 2000. Another trend is for legacy carriers to enter into "fare wars", where the legacy airline will lower their fares until they force new low cost carriers out of the market.

The term does not apply to current-day major carriers that, while having existed before the Airline Deregulation Act, did not operate interstate and were solely intrastate regional airlines until after the passage of the Act: prominent examples include Southwest Airlines which opened its first non-Texas route in 1979, and Hawaiian Airlines did not fly outside of Hawaii until 1985.

Active legacy carriers

As of 2020, the list of legacy carriers remaining is as follows:

• Alaska Airlines
• American Airlines
• Delta Air Lines
• United Airlines

Defunct legacy carriers

Through the mid-20th century, the "Big Four" domestic airlines were American, Eastern, TWA, and United. Additionally, Pan Am focused exclusively on international service and was the unofficial U.S. flag carrier. Many smaller airlines operated concurrently, and some grew into national airlines in the years surrounding the 1979 deregulation.

• Southern Airways, merged with North Central to become Republic in 1979.
• North Central Airlines, merged with Southern to become Republic in 1979.
• National Airlines, acquired by Pan Am in 1980.
• Hughes Airwest, acquired by Republic in 1980.
• Braniff International Airways, defunct in 1982.
• Texas International Airlines, merged with Continental in 1982.
• Frontier Airlines, acquired by PEOPLExpress in 1985, then merged with Continental in 1986.
• Ozark Air Lines, acquired by TWA in 1986.
• Republic Airlines, merged with Northwest in 1986.
• Western Airlines, merged with Delta in 1987.
• Piedmont Airlines, merged with USAir in 1989.
• Eastern Air Lines, defunct in 1991.
• Pan American World Airways (Pan Am), defunct in 1991.

By the end of 1991, there were seven remaining transcontinental legacy carriers: American, Continental, Delta, Northwest, TWA, United, and US Airways. These seven stood for a decade until TWA was incorporated into American in 2001.

The remaining six subsequently stood for nearly another decade, but with mounting financial losses, four (Delta, Northwest, US Airways and United Airlines) were under Chapter 11 bankruptcy protection by 2005, setting off several years of mergers and acquisitions.

US Airways was purchased by America West Airlines in a 2005 reverse merger, acquiring the assets and branding of the larger US Airways while putting the America West leadership team largely in charge of the merged airline.

United emerged from bankruptcy in 2006 and almost immediately began discussions to merge with Continental Airlines. Those talks fell through in 2008, leading United to turn to US Airways for combination talks, which also failed. Ultimately in 2010, Continental agreed to merge with United, with the combined airline taking the United name.

Delta and Northwest emerged from bankruptcy in 2007. During the bankruptcy process, Delta was the target of a hostile takeover attempt by US Airways. Delta and Northwest agreed to merge in 2008, citing substantial efficiencies.

American Airlines entered bankruptcy protection in 2011 and would be purchased by US Airways in 2013 under a similar arrangement to the America West reverse merger. The branding of the larger American Airlines would remain, while putting the US Airways leadership team (many of them originally from America West) largely in charge of the merged airline.

See also

• List of airline mergers and acquisitions
• Low-cost carrier
• List of defunct airlines of the United States
• Major airlines of the United States