Quantcast
Get breaking news alerts via email

Click here to manage your alerts
FILE - In this June 23, 2008 file photo, a US Airways jet takes off as an American Airlines jet is prepped for takeoff at Sky Harbor International Airport in Phoenix. (AP Photo/Matt York, File)
American, US Airways announce $11 billion merger

First Published Feb 14 2013 05:52 am • Last Updated Feb 14 2013 10:13 am

DALLAS • American Airlines and US Airways agreed Thursday to merge in an $11 billion deal that would create the world’s biggest airline.

The combined carrier will be called American Airlines and be based in Fort Worth. It expects to have $40 billion in annual revenue and offer more than 6,700 daily flights to 336 destinations in 56 countries.

Join the Discussion
Post a Comment

The deal is a coup for smaller US Airways Group Inc., and was driven by the persistence of its CEO, Doug Parker, who will run the combined airline. Parker sought a merger almost as soon as American parent AMR Corp. filed for bankruptcy protection in November 2011.

As Parker pushed ahead, creditors forced AMR’s management to consider the value of a merger compared with a plan for an independent American. Eventually they concluded that the best return for stakeholders, and the best chance to compete with bigger rivals United Airlines and Delta Air Lines, came from a merger.

The deal also caps turbulent half-decade of bankruptcies and consolidation for the U.S. airline industry.

Since 2008, Delta gobbled up Northwest, United absorbed Continental and Southwest bought AirTran Airways. If this latest merger goes through, American, United, Delta and Southwest will control about three-quarters of U.S. airline traffic.

The rapid consolidation has allowed the surviving airlines to offer bigger route networks that appeal to high-paying business travelers. And it has allowed them to limit the supply of seats, which helps prop up fares and airline profits.

The merger, expected to close in this year’s third quarter, will reduce the number of major U.S. airlines to four: the new American, United, Delta and Southwest. That concerns some consumer advocates, but Parker sought to assure travelers that the merger helps them too — by creating a bigger rival to United and Delta.

"While you’re right — you end up with four large airlines — the reality is there are two very large airlines right now and this creates a third," Parker said in an interview. "It provides good competition to those two."

Most airline mergers have resulted in a reduction of flights and shrinkage at some hubs, but Parker said this deal will be different because US Airways and American overlap on just 12 routes.


story continues below
story continues below

He said the new airline will keep all of American’s hubs — Dallas-Fort Worth, Chicago, Miami, New York and Los Angeles — and those of US Airways, in Phoenix, Charlotte and Philadelphia. Many airline mergers have resulted in some hubs being downgraded, as happened to Cincinnati after Delta bought Northwest.

While Parker becomes CEO of the combined company, AMR CEO Tom Horton will serve as chairman until its first shareholder meeting, likely in mid-2014. Parker becomes chairman after Horton leaves.

The boards of both companies approved the deal Wednesday. Executives said they were confident that antitrust regulators would approve the merger.

Shares of US Airways fell 31 cents, or 2.1 percent, to $14.34 in premarket trading.

AMR creditors will own 72 percent of the new company, with the remaining 28 percent will going to US Airways shareholders. The creditors’ portion includes a 23.6 percent share for American employees and unions, plus a small stake for existing shareholders of American’s parent AMR Corp.

The airlines said they expect $1 billion in combined benefits from the merger. They expect the bigger airline to lure corporate travelers away from competitors, contributing to $900 million in additional revenue. They also anticipate cost savings of roughly $150 million.

They expect to spend $1.2 billion on transition costs over the next three years.

Travelers on American and US Airways won’t notice immediate changes. It likely will be months before the frequent-flier programs are combined and years before the two airlines are fully integrated.

The companies had negotiated since August, when creditors pushed AMR to conduct merger talks so they could decide which earned them a better return: a merger or an independent American.

The deal would need approval by AMR’s bankruptcy judge and antitrust regulators.

The new American would have more than 900 planes and about 95,000 employees, not counting regional affiliates. It will be slightly bigger than United Airlines by passenger traffic, not counting regional affiliate airlines.

Next Page >


Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Top Reader Comments Read All Comments Post a Comment
Click here to read all comments   Click here to post a comment


About Reader Comments


Reader comments on sltrib.com are the opinions of the writer, not The Salt Lake Tribune. We will delete comments containing obscenities, personal attacks and inappropriate or offensive remarks. Flagrant or repeat violators will be banned. If you see an objectionable comment, please alert us by clicking the arrow on the upper right side of the comment and selecting "Flag comment as inappropriate". If you've recently registered with Disqus or aren't seeing your comments immediately, you may need to verify your email address. To do so, visit disqus.com/account.
See more about comments here.
Staying Connected
Videos
Jobs
Contests and Promotions
  • Search Obituaries
  • Place an Obituary

  • Search Cars
  • Search Homes
  • Search Jobs
  • Search Marketplace
  • Search Legal Notices

  • Other Services
  • Advertise With Us
  • Subscribe to the Newspaper
  • Access your e-Edition
  • Frequently Asked Questions
  • Contact a newsroom staff member
  • Access the Trib Archives
  • Privacy Policy
  • Missing your paper? Need to place your paper on vacation hold? For this and any other subscription related needs, click here or call 801.204.6100.