American Airlines and US Airways await approval of $11bn merger

American Airlines and US Airways await approval of $11bn merger

Combined company will create largest airline carrier in the US and is the third major airline merger in the country since 2008

· Dominic Rushe in New York

· guardian.co.uk, Thursday 14 February 2013 18.08 GM

US Airways and American Airlines are likely to win approval to create the world's biggest carrier. Photograph: Mike Theiler/Reuters

American Airlines and US Airways announced an $11bn merger on Thursday that will create the largest airline in the US.

Taking the name of American Airlines, the combined company will 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.

AA's parent company AMR is in bankruptcy and courts must approve the deal, which is also likely to attract regulatory scrutiny. But airline experts expect the deal to be approved, capping a wave of big mergers that has swept across the US airline industry.

The chief executive role will be filled by the current boss of US Airways, Doug Parker, while AA boss Tom 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. Rivals Northwest Airlines, US Airways, Delta Airlines and United Airlines, also filed for Chapter 11 protection, shielding their business from creditors while they restructured. But AA is the last to emerge from Chapter 11 and has been losing ground to its competitors. The airline has lost $12bn since 2001.

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 US Justice Department has not challenged an airline merger since a merger proposed in 2001 between United and US Airways. Since then United and Continental have merged, as have Delta and Northwest.

Parker said that the two airlines have only 12 routes overlapping out of a combined 900. In addition, he said, AA flies to 130 cities that US Airways does not cover, and US Airways flies to 62 cities not served by AA.

"I have been a long proponent of consolidation in the industry," Parker said. "And this is the last major piece needed to rationalise the industry and make it profitable."

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.

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."

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."

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.

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."

(from http://www.guardian.co.uk/business/2013/feb/14/american-airlines-us-airways-11bn-merger?INTCMP=SRCH)

Questions on the contents of the article:

1. Which two companies have merged and what proves this deal to be one of the most significant in the history of the USA?

2. Which top management changes are expected to take place as a result of the merger?

3. What strategy is American Airlines going to carry out according to Mr Doug Parker?

4. How has AA been surviving since 2011?

5. What grounds for the investigation of the merger has the American Antitrust Institute given?

6. According to the antitrust lawyer Smith, which concessions should AA and US Airways make?

Дата добавления: 2015-09-30