It's a done deal -- almost.
The boards of American Airlines parent AMR and US Airways have given their blessing to a merger that they say will create “a premier global carrier.” The value of the deal, which must jump through a variety of federal regulatory hoops, is put at approximately $11 billion based on the price of US Airways' stock as of February 13.
Initially, the newly-created carrier will operate under the American Airlines and will -- according to a joint press release -- give customers “access to more choices and increased service across the combined company's larger worldwide network.”
"Today, we are proud to launch the new American Airlines -- a premier global carrier well equipped to compete and win against the best in the world," said Tom Horton, chairman, president, and CEO of American Airlines. "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.”
US Airways Chairman and Chief Executive Officer Doug Parker, calls it “an exciting new chapter” for both carriers. “The combined airline,” he said, “will have the scale, breadth and capabilities to compete more effectively and profitably in the global marketplace. Our combined network will provide a significantly more attractive offering to customers, ensuring that we are always able to take them where they want to travel, when they want to go."
What about consumers?
The Association for Airline Passenger Rights worries that fewer airlines means less competition and higher fares…and fees. The group says if the merger is allowed to proceed, passengers stand to lose because they will have fewer choices, less competitive fares, and service to smaller airports will likely dwindle.
“You don’t have to be an economics professor to understand that less competition in the market is going to result in consumers paying more, and airfares are certainly not immune from this simple fact,” said Brandon M. Macsata, the group's executive director. “In fact, since a couple of the legacy airlines were lost to mergers we’ve not only seen an increase in airfares over the last seven years, they have been accompanied by ballooning fees for everything ranging from baggage, change-of-flight to seat selection.”
Here to there
The combined airline will offer more than 6,700 daily flights to 336 destinations in 56 countries and is expected to maintain all hubs currently served by American and US Airways, which the companies say will result in more travel options for customers.
Both airlines expect that the regional carriers they own -- AMR Corporation's American Eagle and US Airways' Piedmont and PSA -- will continue to operate as distinct entities, providing seamless service to the combined airline.
Completing the deal
The merger is conditioned on the approval by the U.S. Bankruptcy Court for the Southern District of New York, regulatory approvals, approval by US Airways shareholders, other customary closing conditions, and confirmation and consummation of the Plan. The combination is expected to be completed in the third quarter of this year.
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