American Airlines
and US Airways have confirmed they will merge, an $11 billion deal that will
produce the world's largest airline.
The announcement was made just as American Airlines filed
the papers in federal bankruptcy court in New York to notify creditors of a
plan to settle its obligations by giving them 72 percent ownership of the new
company.
Because only 13 routes are served nonstop by both
American and US Airways, no substantive objections are expected to be raised by
the antitrust division of the Justice Department, though the two carriers
together will have 60 percent of flights at Reagan National Airport.
The announcement confirmed all the key details leaked by
sources in recent days. US Airways CEO will be CEO of the resulting company,
and although the deal is structured as a US Airways acquisition of American,
the resulting company will take the American name and will still be
headquartered in Ft. Worth, Tex., where the current AMR Corp. is based. But the
official announcement adds that a "significant operational presence"
will be maintained in Phoenix, where US Airways is based.
American's current CEO Tom Horton, who initially opposed
even considering merger before an independent emergence from bankruptcy, will
be a non-executive chairman, holding the post only through the new company's
first board meeting. Horton was outmaneuvered when Parker secured conditional
agreements with American's three major labor unions, and he also negotiated
directly with the AMR creditors' committee.
The board of directors will consist of four US Airways
representatives including Parker, three American representatives including
Horton, and five representatives from the AMR creditors' committee.
The new American will have 94,000 employees, 6,500 daily
flights, and 950 aircraft operating mostly out of eight hubs. While United is
strong to Asia and Delta is strong to Europe, American is strong to Latin
America.
American's alliance partners, including Qantas Airways,
Japan Airlines and British Airways, endorsed the merger because they wanted to
be able to sell code share tickets on US Airways routes to many U.S. cities
that the current American does not serve.
American has daily service to Hawaii from its DFW
headquarters hub, but most of its Hawaii service, to Honolulu, Kahului, Kona
and Lihue, starts from LAX.
US Airways serves the same four airports from its own hub
in Phoenix.
American used to have a popular route to Honolulu from
San Francisco but canceled it last year as the company focused more intently on
its hubs, which did not include SFO. US Airways briefly tried nonstops to
Honolulu from its hub at Charlotte but bookings disappointed and the service
was stopped.
The merger will make American Airlines and United
Airlines virtually tied for largest airline in the world - United will be
slightly bigger or smaller depending on whether one counts its outsourced
regional service - with Delta so close in size that it will amount to a
three-way tie. These three carriers, plus discount carrier Southwest Airlines,
will together control about 70 percent of U.S. passenger air capacity. Each
will continue to anchor one of the world's three major international airline
alliances.
The announcement did not include any information on the
future merger of the two carriers' frequent flier programs.
