American, US Airways Boards to Meet, May Announce Merger This Week

By Paul Riegler on 11 February 2013
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AMR CEO Tom Horton last week in São Paulo

AMR CEO Tom Horton last week in São Paulo

Following months of negotiations, the boards of AMR, the parent of American Airlines, and US Airways are set to meet on Wednesday to consider a merger that would result in the world’s largest airline.

Depending on the outcome of the meetings and the resolution of some points that are still being negotiated, the merger could be announced as early as Thursday.  The merger itself would serve as the reorganization plan for taking American out of bankruptcy protection if the bankruptcy court judge and federal regulators approve it.

The merged entity, which would retain the American Airlines name, would be an airline with a market capitalization of over $10 billion.  Sources at the two airlines have said that the merger will create more than $1 billion in cost savings and additional revenue.

The new airline would be a far more formidable competitor both domestically, and internationally thanks to a much more comprehensive route network.   Unlike the two previous mergers of legacy carriers, Delta Air Lines with Northwest and United Airlines with Continental, the combined American-US Airways would not look to trim routes or reduce flying because there is very little overlap in the two airlines route networks, something that should bode well for the deal when reviewed by federal anti-trust regulators.  It would be the fifth large airline merger since 2001 and further reduce the number of full-service carriers to three.

American has been in bankruptcy protection since November 2011 and is currently the nation’s third-largest airline; US Airways is the fourth.

The deal is said to give AMR creditors 72% of the merged airline while US Airways stockholders would receive 28%.  US Airways CEO Doug Parker would become the new CEO and AMR CEO Tom Horton would become nonexecutive chairman.

Numerous issues are still on the table including Mr. Horton’s tenure as chairman, the makeup of the new board of directors and who controls appointments, and compensation issues.

In addition to the meetings of the two airlines’ boards, the AMR unsecured creditors committee is scheduled to meet Monday to discuss the merger.  The UCC’s approval is necessary for the merger to go through.

(Photo: Accura Media Group)

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