American Airlines, US Airways to merge
Deal creates world’s biggest airline
DALLAS — American Airlines and US Airways will merge and create the world’s biggest airline. The boards of both companies approved the deal late Wednesday, according to people close to the situation.
The carrier will keep the American Airlines name but will be run by US Airways CEO Doug Parker. American’s CEO, Tom Horton, will serve as chairman of the new company until mid-2014, these people said. They requested anonymity because the merger negotiations were private.
The merger caps a turbulent period of bankruptcies and consolidation that will leave the U.S. airline industry dominated by four big carriers — American, United, Delta and Southwest. Together they would control almost threequarters of U.S. airline traffic.
The deal has been in the works since August, when creditors forced American to consider a merger. American has been restructuring under bankruptcy protection since late-2011. AMR creditors and possibly its shareholders will own 72 per cent of the stock, and US Airways Group Inc. shareholders will get the rest, three of the people said.
If the deal is approved by American’s bankruptcy judge and antitrust regulators, the new American will have more than 900 planes, 3,200 daily flights and about 95,000 employees, not counting regional affiliates. It will be slightly bigger than United Airlines by passenger traffic.
Travellers on American and US Airways won’t notice immediate changes. It likely will be months before the frequentflyer programs are merged, and possibly years before the airlines are fully combined.
When that happens, American’s presence will grow in key East Coast markets including New York’s La Guardia Airport and Washington’s Reagan National Airport. The merger will add US Airways hubs in Charlotte, Philadelphia and Phoenix to American’s in Dallas-Fort Worth, Chicago, Miami, New York and Los Angeles. US Airways would boost American’s service to Europe and the Latin America-Caribbean market but wouldn’t fix American’s weakness on routes to Asia.
Just five years ago, American was the world’s biggest airline. It boasted a history reaching back 80 years to the beginning of air travel. It had popularized the frequent-flyer program and developed the modern system of pricing airline tickets to match demand.
But years of heavy losses drove American and parent AMR Corp. into bankruptcy protection in late-2011.
The merger is a stunning achievement for Parker and his management team. Just a few years ago, they were running a mid-sized carrier called America West Airlines when they bought the old US Airways out of bankruptcy.
Parker’s airline is only half the size of American and less familiar around the world, but he prevailed by driving a wedge between American’s management and its union workers and by convincing American’s creditors that a merger made business sense.
US Airways has prospered in the last several years, earning a record profit of $637 million last year.