American Airlines has agreed to merge with US Airways, which will create the largest airline in the country, according to The New York Times. The deal was unanimously approved by the boards of both companies and it worth $11 billion. Shareholders of US Airways will own 28 percent of the combined airline as part of the deal. Shareholders, labor unions, creditors, and employees of American Airlines will own 72 percent.
The deal might be finalized as American exits bankruptcy. The new chief executive of American will be W. Douglas Parker, the chairman and chief executive of US Airways. The chairman and chief executive of AMR Corporation, the parent of American, Thomas W. Horton, will be the chairman for the combined company.
“I have been a long proponent of consolidation in the industry,” Parker said on a conference call. “And this is the last major piece needed to rationalize the industry and make it profitable.”
Parker noted that the airlines have just 12 routes that overlap out of the 900 they service. Parker said that more cities will be receiving service with the new company operating. American currently flies to 130 cities that US Airways does not fly to and US Airways flies to 62 cities American does not fly to.
“This is an extremely complementary merger,” Parker said.
The announcement said that the new company is expected to keep all of its hubs and that it will have 6,700 flights per day to 336 destinations in 56 countries. The merger has to be approved by the bankruptcy judge for American in New York. The shareholders at US Airways would also have to approve it. The deal will also need to be reviewed by the antitrust division of the Justice Department.
The new combined company will be called American Airlines and its biggest hurdle will be to integrate the operations over the coming years. Parker has worked on mergers in the past. He was in charge at America West when it merged in 2005 with US Airways.
The new company will still have its headquarters in Fort Worth and it will feature 94,000 employees, 950 planes, 6,500 daily flights, eight major hubs and total revenue of nearly $39 billion. The merged company will be the market leader in the Southwest, South America, and the East Coast. There are hubs in Miami, Dallas, Los Angeles, Chicago and New York for American. The hubs for US Airways are in Philadelphia, Phoenix, and Charlotte, North Carolina. The airline also has a large presence at Ronald Reagan National Airport in Washington, DC.