Quantcast
Latest Stories

American Airlines, US Air to form largest US carrier

By

A US Airways jet passes an American Airlines jet, Thursday, Feb. 14, 2013, at Sky Harbor International Airport in Phoenix. The merger of the two airlines has given birth to a meg- airline with more passengers than any other in the world. AP PHOTO/MATT YORK

NEW YORK—American Airlines and US Airways announced a long-expected merger Thursday that would create the largest US airline, giving them more weight in an industry that has steadily consolidated in recent years.

The marriage would establish a huge carrier with more than 1,500 aircraft, able to compete head to head with powerful rivals United Airlines and Delta Air Lines.

It would also help lift American parent AMR Corp from bankruptcy reorganization, where it has been since November 2011.

Following American’s emergence from bankruptcy and the execution of the deal, US Airways will hold approximately 28 percent of the company, with American interests holding the rest, and the fleet will fly under the name American Airlines.

In a statement the companies valued the deal at $11 billion in “implied equity value” and predicted it would result in combined synergies of more than $1 billion.

Company officials characterized the deal as a winner for consumers by establishing a third US airline giant to compete with Delta and United. They expect to complete the merger in the third quarter.

But Standard & Poor’s raised doubts about how much greater competitiveness the combined company will have, and meanwhile a leading Washington think tank quickly condemned the merger as a bad deal for consumers.

“The combined airline will have the scale, breadth and capabilities to compete more effectively and profitably in the global marketplace,” said US Airways chief executive Doug Parker.

“Our combined network will provide a significantly more attractive offering to customers.”

The combined airline will offer more than 6,700 daily flights to 336 destinations in 56 countries, according to the companies.

It would assemble a powerful fleet of 1,511 mainline and regional aircraft. Combined revenues of $38.7 billion in 2012 would put them slightly ahead of United and Delta.

Company executives told AFP that “they’ll be some opportunities for rationalization” of management and headquarters staff.

But executives said the biggest savings came from combining routes and organizing planes efficiently so that the largest planes go to the busiest routes.

They also touted the combined company’s capacity to win back valuable corporate riders who were lured away by other airlines.

The companies also said the deal would strengthen the combined company’s competitive presence in the US Northeast, the western part of the US and Latin America.

Some observers have said the deal still leaves American with a relatively weak position in Europe and Asia compared with competitors.

The deal follows a spate of earlier US airline mergers that have reshaped the sector and improved profitability.

S&P cited “potential revenue synergies” from the deal, but said it believes the route network created by the merger is “not as strong” as those created by recent mergers executed by United and Delta.

Also, S&P warned there will “be likely higher labor costs from signing new contracts with unions to facilitate merging the airlines.”

The New American Foundation, a Washington think tank, said airline mergers frequently ill-serve medium-sized cities like St. Louis and Pittsburgh as airlines orient around major domestic and international routes.

“Previous big mergers resulted in higher fares and less service, and unfairly affected some regions of the nation more than others. It is troubling that an essential national service is now governed only by a handful of airline executives, who see themselves as accountable only to shareholders,” the foundation said.

Antitrust regulators and a US bankruptcy court must first give their approval before the merger can go forward, as American has been under bankruptcy protection since November 2011.

The idea of an American-US Airways tie-up has been floated since American’s bankruptcy filing.

Under the transaction, US Airways chief executive Parker will become CEO of the newly formed company, while American chief executive Tom Horton will serve as chairman of the board through the middle of 2014 before stepping down, sources familiar with the matter said.

“This looks like the end of a surprisingly successful round of US industry restructuring,” said Richard Aboulafia, an analyst with the Teal Group Corp.

Projections for 2013 show that the US airline industry in terms of absolute profit would be the healthiest worldwide, said John Thomas, airlines specialist at LEK Consulting.

Parker told CNBC that after the recent wave of mergers, “we’re pretty much done” with consolidation.

American has continued to operate under court supervision even as it sought to slash costs by renegotiating wage and benefit deals with its unions.

The two carriers said the merger enjoys the support of several leading unions from the two companies, including pilots associations and representatives of flight attendants.


Follow Us


Follow us on Facebook Follow on Twitter Follow on Twitter


Recent Stories:

Complete stories on our Digital Edition newsstand for tablets, netbooks and mobile phones; 14-issue free trial. About to step out? Get breaking alerts on your mobile.phone. Text ON INQ BREAKING to 4467, for Globe, Smart and Sun subscribers in the Philippines.

Tags: Air Transport , American Airlines , aviation , US , US Airways

  • i_am_filipino

    Let us merge us and ph aviation to compete to stop using chinese aircraft. Avoid buying spareparts made in china to avoid plane crash

  • INQ_reader

    I hope these americans can navigate properly, unlike their sea navigators who got lost at Tubbataha reef.



Copyright © 2014, .
To subscribe to the Philippine Daily Inquirer newspaper in the Philippines, call +63 2 896-6000 for Metro Manila and Metro Cebu or email your subscription request here.
Factual errors? Contact the Philippine Daily Inquirer's day desk. Believe this article violates journalistic ethics? Contact the Inquirer's Reader's Advocate. Or write The Readers' Advocate:
c/o Philippine Daily Inquirer Chino Roces Avenue corner Yague and Mascardo Streets, Makati City, Metro Manila, Philippines Or fax nos. +63 2 8974793 to 94
Advertisement
Advertisement

News

  • Camilla’s brother dies of NYC head injury
  • Nepal officials go to Everest to try to end crisis
  • Escudero ready to defend self should name appear in Napoles’ list
  • Obama calls for peaceful end to island dispute
  • Russia not abiding by agreement on Ukraine—Obama
  • Sports

  • Promoters Dela Hoya, Arum in talks for Pacquiao-Alvarez—report
  • Benzema guides Madrid to 1-0 win over Bayern
  • Suns’ Goran Dragic win NBA’s Most Improved Player award
  • Heat go up 2-0, hold off Bobcats 101-97
  • Ronaldo shakes off injury fears to play Bayern
  • Lifestyle

  • Photos explore dynamics of youths’ sexual identity
  • 12th Philippine Food Expo set at the World Trade Center
  • No tourist draw, Malang the croc will remain wild
  • The best flavors of summer in one bite, and more
  • Homemade yogurt, bread blended with pizza, even ramen
  • Entertainment

  • Has Ai Ai fallen deeply with ‘sireno?’
  • Sony developing live-action Barbie comedy
  • California court won’t review Jackson doctor case
  • Return of ‘Ibong Adarna’
  • Practical Phytos plans his future
  • Business

  • Facebook profits triple as mobile soars
  • Insular Honors Sales Performers at Testimonial Rites
  • Apple increases stock buyback, will split stock
  • Cost-recovery provisions for affected gencos urged
  • This time, BIR goes after florists
  • Technology

  • Enrile in Masters of the Universe, Lord of the Rings?
  • Top Traits of Digital Marketers
  • No truth to viral no-visa ‘chronicles’
  • ‘Unlimited’ Internet promos not really limitless; lawmakers call for probe
  • Viber releases new design for iPhone, comes to Blackberry 10 for the first time
  • Opinion

  • Editorial cartoon, April 24, 2014
  • Talking to Janet
  • Respite
  • Bucket list
  • JPII in 1981: walking a tightrope
  • Global Nation

  • PH-HK relations repaired, but families of victims still being courted
  • Filipinos in Middle East urged to get clearance before returning
  • PH seeks ‘clearer assurance’ from US
  • China and rivals sign naval pact to ease maritime tensions
  • What Went Before: Manila bus hostage crisis
  • Marketplace