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American-US Airways merger talks reportedly close to completion

A union of the two airlines would create the nation's largest carrier, with as many of 120,000 employees and a fleet of nearly 1,000 planes.

February 12, 2013|By Hugo Martín, Los Angeles Times
  • American Airlines unveils a new company logo and exterior paint design on a Boeing 737-800 in Dallas. The exterior changes were announced as American's parent company, AMR Corp., was in merger talks with US Airways.
American Airlines unveils a new company logo and exterior paint design… (Tom Pennington, Getty Images )

A long-anticipated merger of American Airlines and US Airways that would create the nation's largest carrier may be announced as early as this week, sources say.

The union of Fort Worth-based American and Tempe, Ariz.-based US Airways would create a carrier with as many as 120,000 employees and a fleet of nearly 1,000 planes.

The boards of the two airlines are expected to meet in the next few days to vote on the proposed merger, sources have told Los Angeles Times and other news outlets. A meeting to vote on the merger was scheduled for Monday, according to some reports, but was postponed to give those involved more time to work out final details.

A merger would highlight the efforts that airlines have made to overcome the financial turmoil in the industry since the Sept. 11, 2001, terrorist attacks, the Great Recession and the volatility of fuel prices in the last few years.

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In 2011, American Airlines became the latest of several major carriers to file for Bankruptcy Court protection over the last decade. US Airways, a smaller but more profitable carrier, has publicly advocated a merger with American to better compete against larger carriers such as Delta and United airlines. It is a move that many industry analysts have supported.

But a merger has been delayed, sources say, because of ongoing negotiations to appoint a new board and management for the airline as well as a decision on how to split the value of the new carrier among creditors and shareholders of the existing airlines.

According to sources, a decision has now been reached to name US Airways Group Inc. Chief Executive Doug Parker as CEO of the new carrier, while Tom Horton, CEO of American Airlines' parent, AMR Corp., would serve as nonexecutive chairman of the board until next year.

Analysts have estimated that the two companies could generate as much as $1 billion in savings and added revenue by combining forces.

"In our view, we have held that an eventual merger between American and US Airways was in the best long-term interest of both carriers," Jeff Kauffman, an analyst at Birmingham, Ala.-based Sterne Agee, said in an analysis Monday.

Sources have said that the new carrier would retain the name American Airlines and would operate out of American's headquarters in Fort Worth.

One of the toughest parts about pushing through an airline merger — the integration of unions — has been largely ironed out because flight attendants, ground crews and pilots from both airlines have already signed tentative consolidation agreements over the last few weeks.

Analysts say the anticipated merger, after the merger of United and Continental airlines in 2012 and Delta and Northwest airlines in 2010, as well as Southwest Airlines acquiring AirTran Airways in 2010, reduces competition and could lead to higher fares. Domestic fares in the U.S. rose about 4% in 2012, according to industry reports.

"Modestly less competition will, on average, mean modestly higher fares," said Seth Kaplan, a managing partner at Airlines Weekly, a trade publication. "But as for nonstop fares on the biggest corporate travel routes, American and US Airways only compete head to head on about a half-dozen routes."

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