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American-US Airways announce merger

Feb. 14, 2013 at 11:50 AM   |   Comments

DALLAS, Feb. 14 (UPI) -- The boards controlling American Airlines and US Airways announced an $11 billion merger Thursday that creates the world's largest airline.

Shareholders of AMR, the parent company of American Airlines, would own 72 percent of the combined company while US Airways shareholders would own the remaining 28 percent, the announcement said.

"Together, we will be even better positioned to deliver for all of our stakeholders, including our customers, people, investors, partners and the many communities we serve," AA President, Chairman and Chief Executive Officer Tom Horton said.

The merger, which faces a few hurdles before completion, would create a combined airline with 94,000 employees, 950 planes, 6,500 daily flights, eight major hubs and total sales of nearly $39 billion.

Among other advantages, the combined airline would be a major customer in the industry. The two companies currently have "firm orders for more than 600 new mainline aircraft."

The announcement said the merger would create "one of the most modern and efficient fleets in the industry."

Among other hurdles to complete the deal, it requires approval from the bankruptcy court. AMR filed for Chapter 11 in November 2011.

The combined carrier, which the announcement calls the New American Airlines, would be based in Dallas-Fort Worth where current AMR Corp. has its headquarters.

Its hub airports, used as transfer points, were expected to combine American's hubs in Dallas, Miami, Chicago, Los Angeles and New York and US Airways' in Phoenix, Philadelphia, Ronald Reagan-Washington National Airport outside the District of Columbia and Charlotte, N.C.

The morning announcement said the two airlines would realize $1 billion of annual savings in the deal, but also touted its expectation of maintaining "all [currently operating] hubs and service to all destinations."

The new American -- taking the No. 1 spot from United Airlines, which merged with Continental Airlines in 2011 -- would be the market leader on the U.S. East Coast and Southwest and in South America but would remain a lesser player in Europe than United and Delta Air Lines, The New York Times said.

The merger was not expected to significantly strengthen American's presence in Asia where it also would trail United and Delta, the Times said.

If the merger is approved, American, United, Delta and Southwest Airlines would control 87 percent of the domestic U.S. airline market, Airline Weekly analyst Seth Kaplan told USA Today.

Delta absorbed Northwest Airlines in 2008. Southwest, the world's largest low-cost carrier, bought AirTran Airways in 2011.

The American-US Airways merger still needs to pass several steps. Besides approval by American's bankruptcy judge in New York, US Airways stockholders and the U.S. Justice Department's antitrust division must also give the merger a green light.

Analysts said they expect regulators would clear the deal although they might require the combined airline to give up slots at Washington National. Slots are the right to schedule a landing or departure during specific time periods.

The AMR and US Airways Group Inc. boards approved the merger late Wednesday in separate New York meetings with their respective legal advisers, The Wall Street Journal said.

The merger has the backing of key American creditors, which is expected to smooth the way for bankruptcy-court approval.

Lawyers for American and its creditors were to appear in bankruptcy court Thursday to discuss the merger and request a time extension to propose a reorganization plan, the Journal said.

© 2013 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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