American Airlines and US Airways confirm $11bn merger

Doug Parker, CEO: "Combined airline will compete more effectively and profitably in the global marketplace"

American Airlines and US Airways have announced plans to merge, in a deal that would form the world's biggest airline.

The move had been widely touted after the two boards were said to have met on Wednesday.

The merger will bring American Airlines closer in value to rival Delta Airlines, with an estimated market valuation of $11bn (£7bn).

This marks the conclusion of talks that started back in August 2012.

The lion's share of the new company will be owned by American Airlines' bankruptcy creditors, who will have 72% of the company. The carrier will be run under the American Airlines brand, but the chief executive will be the current US Airways boss, Doug Parker.

"The combined airline will have the scale, breadth and capabilities to compete more effectively and profitably in the global marketplace,'' he said in a statement.

"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 go."

The companies said they expected to make savings of more than $1bn a year.

'Fewer choices'

But the Senate Commerce Committee chairman Jay Rockefeller expressed concern about the two airlines joining forces.

The new airline

  • To offer more than 6,700 daily flights
  • Will serve 336 destinations in 56 countries
  • To have more than 900 planes
  • Will have 95,000 employees

"Industry consolidation has created stronger and more financially viable airlines, which are necessary for our country's long-term economic growth," Mr Rockefeller said.

"But it has also resulted in fewer choices for consumers, higher air fares, and reduced air service to small-and-medium sized communities.

"Any further airline merger must be carefully evaluated to make sure it is in the best interest of the travelling public by creating more competition, more options, and lower fares."

However, analysts say it should be good news for customers.

"Hopefully service will improve," said aviation expert Scott Richardson-Brown. "The route network will open up and hopefully that will be beneficial to customers.

"There's always that concern about pricing... but historically mergers don't actually lead to ticket prices going up."

Scott Richardson Brown, aviation expert: "Hopefully service will improve but... ticket prices need to rise"

But he added: "The reality is that the aviation market in the US has been losing money for years so ticket prices need to rise just because people can't be flown around the world at a loss."

Agreement

American Airlines' parent company filed for bankruptcy protection more than a year ago.

With a history stretching back 80 years, five years' ago, American had grown to be the world's biggest airline.

It was a pioneer of the loyalty programme for frequent fliers and also brought in the system of sliding prices according to demand.

But deep losses pushed the company into bankruptcy, with the company blaming labour costs and the unions blaming poor management.

US Airways, by contrast, has been profitable in recent years.

Wave of mergers

Not including affiliates, it will have around 900 aircraft and run more than 3,000 flights, employing 100,000 people.

The deal will need approval from competition regulators and a US bankruptcy court before going ahead.

After that, it could be years before passengers notice any changes.

The move follows a period of intense consolidation for the US airline sector, with Delta hooking up with Northwest and Continental with United.

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