Boards Pull Trigger on American, US Air Merger

 - February 14, 2013, 9:41 AM
The merger of American Airlines and US Airways would create the world's largest airline. (Image: American Airlines)

The boards of AMR Corporation and US Airways Group have unanimously agreed to move forward with the long-anticipated merger of their American Airlines and US Airways subsidiaries, the companies announced Thursday morning. Once cleared by anti-trust regulators, the U.S. Bankruptcy Court for the Southern District of New York and US Airways shareholders, the transaction would create the world’s largest airline, valued at some $11 billion based on the price of US Airways stock as of February 13. The companies expect to complete the merger during this year’s third quarter.

Plans call for the combined carrier to operate under the American Airlines name and base its operations in Fort Worth, Texas. Current American Airlines chairman, president and CEO Thomas Horton would serve as chairman of the combined airline’s board of directors through its first annual shareholders’ meeting and current US Airways chief executive Doug Parker would become CEO of the merged airline. Parker would then assume the chairmanship once Horton steps down. The 12-member board would consist of Horton, Parker, five AMR creditor representatives and four US Airways representatives.

Based on the two companies’ financial performance projected for this year, they would generate roughly $40 billion in combined revenues. In a joint statement released Thursday, the companies said the deal would produce annual net “synergies” of more than $1 billion in 2015, including some $900 million from increased passenger traffic, an improved schedule and connectivity, a more profitable mix of high-yield business and the redeployment of the combined fleet to better match capacity to customer demand. The companies expect to incur a transition cost of about $1.2 billion, spread over the next three years.

“This merger provides enhanced potential for full recovery for our creditors,” said Horton. “In addition, I am pleased that we were able to obtain the support of a sizable portion of our unsecured creditors for a plan that provides a recovery of at least a 3.5 percent aggregate ownership stake in the combined airline for our shareholders.  It is unusual in Chapter 11 case—and unprecedented in recent airline restructurings—for shareholders to receive meaningful recoveries.  I look forward to working closely with Doug Parker, whom I have known as a friend for more than 25 years, and with the leadership teams of both companies to assure a smooth integration and the creation of a new industry leader.”