Belfast Telegraph

Tuesday 30 September 2014

Merger sees world's biggest airline

A merger deal between American Airlines and US Airways has been in the works since August (AP)

American Airlines and US Airways will merge and create the world's biggest airline after the boards of both companies approved the deal, sources close to the situation said.

The carrier will keep the American Airlines name but will be run by US Airways chief executive Doug Parker. American's CEO, Tom Horton, will serve as chairman of the new company until mid-2014, four sources, who requested anonymity because the merger negotiations were private, said.

The merger caps a turbulent period of bankruptcies and consolidation that will leave the US airline industry dominated by four big carriers - American, United, Delta and Southwest. Together they would control almost three-quarters of US airline traffic.

The deal has been in the works since August, when creditors forced American to consider a merger rather than remain independent. American has been restructuring under bankruptcy protection since late 2011. AMR creditors and possibly its shareholders will own 72% of the stock, and US Airways Group shareholders will get the rest, three of the sources said.

A formal announcement is expected on Thursday.If the deal is approved by American's bankruptcy judge and anti-trust 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 will not notice immediate changes. It will probably be months before the frequent-flyer programmes are merged, and possibly years before the two airlines are fully combined.

When that happens, American's presence will grow in key US east coast markets including New York's LaGuardia 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 would not 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 popularised the frequent-flyer programme and developed the modern system of pricing airline tickets to match demand. But years of heavy losses drove American and parent AMR into bankruptcy protection in late 2011. The company blamed bloated labour costs; its unions accused executives of mismanagement.

The merger is a stunning achievement for Mr Parker and his management team at US Airways, based in Tempe, Arizona. 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.

Mr Parker's airline is only half the size of American and is 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.

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