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American Airlines and US Airways to merge American Airlines and US Airways merge
(about 2 hours later)
American Airlines and US Airways executives are expected to announce an $11bn merger that will create the largest airline in the US. American Airlines and US Airways have announced an $11bn merger that will create the largest airline in the US.
According to reports, the boards of AMR Corporation, AA's parent, and US Airways have approved the deal and an official announcement is imminent. The boards of AMR Corporation, AA's parent, and US Airways have approved the deal and announced the terms on Thursday morning.
The combined company would have a fleet of 1,500 aircraft, $39bn in revenues and would employ 100,000 people. If approved, it will be the third major US airline merger since 2008, fuelling fears of higher ticket prices and fewer choices for consumers. Taking the name of American Airlines, the combined company would have a fleet of 1,500 aircraft, $39bn in revenues and would employ 100,000 people. It will be the third major US airline merger since 2008, fuelling fears of higher ticket prices and fewer choices for consumers.
The two sides are reportedly discussing how the company will be divided among shareholders. Also under discussion is the future role of Tom Horton, AMR's chief executive. According to US reports, the chief executive role will be filled by the current boss of US Airways, Doug Parker, while Horton will take a temporary role as non-executive chairman. The chief executive role will be filled by the current boss of US Airways, Doug Parker, while Horton will take a temporary role as non-executive chairman. Parker will also become chairman when Horton steps down.
Parker said: "Today marks an exciting new chapter for American Airlines and US Airways. American Airlines is one of the world's most iconic brands. The combined airline 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."
Horton said the deal signified the launch of a "new American Airlines", representing a new lease of life for the latest major US carrier to be threatened by the industry's perilous finances.
AA has been in bankruptcy since 2011, joining Northwest Airlines, US Airways, Delta Airlines and Unite Airlines, which since 9/11 have filed for Chapter 11 protection, shielding businesses from creditors while they restructure.AA has been in bankruptcy since 2011, joining Northwest Airlines, US Airways, Delta Airlines and Unite Airlines, which since 9/11 have filed for Chapter 11 protection, shielding businesses from creditors while they restructure.
AA's three main unions are on the creditors' committee, and last year backed the merger after AA brushed off US Airways' original offer. They said Parker's merger plan would save more jobs than AMR's plan to restructure as a standalone business.AA's three main unions are on the creditors' committee, and last year backed the merger after AA brushed off US Airways' original offer. They said Parker's merger plan would save more jobs than AMR's plan to restructure as a standalone business.
The justice department has not challenged an airline merger since 2000's proposed United-US Airways merger. Since then United and Continental have merged, as have Delta and Northwest.The justice department has not challenged an airline merger since 2000's proposed United-US Airways merger. Since then United and Continental have merged, as have Delta and Northwest.
The nonprofit group American Antitrust Institute (AAI) has called for an investigation of the merger, arguing it will substantially reduce competition on a number of routes, create regional strongholds at key airports driving traffic to their hubs and depriving smaller communities of air service.The nonprofit group American Antitrust Institute (AAI) has called for an investigation of the merger, arguing it will substantially reduce competition on a number of routes, create regional strongholds at key airports driving traffic to their hubs and depriving smaller communities of air service.
The group published a study with the Business Travel Coalition that concluded ticket prices rose 20% on some key Delta routes and 30% on several United-Continental routes after their mergers. It published a study with the Business Travel Coalition that concluded ticket prices rose 20% on some key Delta routes and 30% on several United-Continental routes after their mergers.
Diana Moss, AAI's vice-president, said: "We have had two big legacy mergers in the past 10 years. It's really time that the department of justice looked at how these mergers have affected the market."Diana Moss, AAI's vice-president, said: "We have had two big legacy mergers in the past 10 years. It's really time that the department of justice looked at how these mergers have affected the market."
Allison Smith, a former deputy assistant attorney general in the antitrust division of the department of justice, said she expected regulators to take a "close look" at the merger.Allison Smith, a former deputy assistant attorney general in the antitrust division of the department of justice, said she expected regulators to take a "close look" at the merger.
Smith, now an antitrust lawyer with McDermott Will & Emery, said: "The department of justice has allowed mergers where the networks have been complimentary and there are not too many overlapping routes."Smith, now an antitrust lawyer with McDermott Will & Emery, said: "The department of justice has allowed mergers where the networks have been complimentary and there are not too many overlapping routes."
When United merged with Continental the combined entity had to sell slots at Newark airport to satisfy regulators. Smith said AA and US Airways might have to make similar concessions.When United merged with Continental the combined entity had to sell slots at Newark airport to satisfy regulators. Smith said AA and US Airways might have to make similar concessions.
The deal has implications in the UK because International Airlines Group, the owner of British Airways and Iberia, has a joint venture with AA that allows the airlines to co-operate on transatlantic routes, schedules and fares.The deal has implications in the UK because International Airlines Group, the owner of British Airways and Iberia, has a joint venture with AA that allows the airlines to co-operate on transatlantic routes, schedules and fares.
Douglas McNeill, investment director at Charles Stanley Securities, said: "The [transatlantic] agreement will not be affected by the merger but a stronger AA is better for BA. The last thing BA and IAG want is for AA to be destabilised or to go in to long-term decline."Douglas McNeill, investment director at Charles Stanley Securities, said: "The [transatlantic] agreement will not be affected by the merger but a stronger AA is better for BA. The last thing BA and IAG want is for AA to be destabilised or to go in to long-term decline."