Reporting Jack Fink
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FORT WORTH (CBSDFW.COM) - After months of courtship, Fort Worth-based American Airlines and Phoenix-based US Airways are officially tying the knot. In the aviation industry’s newest marriage, the two airlines are joining forces to create the world’s largest airline. As CBS 11 News had reported, the new airline will continue to be called American Airlines and will be based in Fort Worth.
To symbolize the new matchup, a US Airways Boeing 737 was parked next to an American Airlines Boeing 777, freshly painted with the carrier’s new logo and paint scheme, at DFW International Airport’s international terminal, Terminal D.
The boards of directors at both airlines unanimously approved the $11 billion deal late Wednesday.
The new company said that it will be a part of the Oneworld Alliance, and improve loyalty benefits by expanding opportunities for members to earn and redeem miles. Executives said that they will maintain all hubs of each airline and will offer more than 6,700 daily flights to 336 destinations in 56 countries. “Together, we’re building a leading global airline, second to none,” said American Airlines CEO Tom Horton.
CBS 11 News at 4 – Merger Details:
CBS 11 News at 5 – Passenger Impact:
CBS 11 News at 6 – What’s Next?:
CBS 11 News at 10 – Looking Forward:
Under the agreement, US Airways CEO Doug Parker will become Chief Executive Officer of the new airline and will serve on the board. Meanwhile, Horton will become chairman of the merged airline’s board of directors through the first annual shareholders meeting. Parker will become board chairman once Horton leaves the airline.
The new company will dissolve the AMR Corporation. The new combined company will be named American Airlines Group Incorporated.
A bankruptcy judge is expected to approve the deal. Executives said that the combination is expected to be completed in the third quarter of 2013.
“We are proud to launch the new American Airlines — a premier global carrier well equipped to compete and win against the best in the world,” said Horton on Thursday morning.
“Today marks an exciting new chapter for American Airlines and US Airways,” Parker said. “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.”
The 12-member board will be comprised of three American Airlines representatives, four representatives from US Airways and five representatives from AMR’s creditors. AMR’s stakeholders will own 72 percent of the new airline and US Airways stakeholders will own 28 percent.
SMU economics professor Bernard Weinstein said, “That would give us some bragging rights. We would be home to the world’s largest airline.” The new, larger airline will offer more flights out of DFW. Weinstein added, “For businesses and people located here, you’ll really be able to fly anywhere in the world on American.”
Because of the American Airlines bankruptcy, Weinstein said, the airline has been able to cut costs which, in the end, will help it compete. According to executives, the merged carrier will produce a savings of $1 billion by 2015.
While the combined company will likely bring more flights to DFW, it will also result in higher airfares because of less competition. “American will virtually have a monopoly on every route that they fly,” Weinstein said. “The only hope is that there will be some competition from other airlines.”
Federal regulators must also sign off on the merger, which is expected after the government approved the United-Continental and Delta-Northwest mergers years ago.
The deal has been in negotiations for months. Merger talk began heating up last April, when Parker announced that he favored US Airways joining forces with American Airlines. Sources familiar with the deal said that Parker proposed a near 50-50 split between the two airlines, but that Horton rejected the offer because he believed American Airlines was making a strong comeback in operational and financial performance. Horton wanted American Airlines creditors to receive an 80 percent stake in the new airline, according to reports.
After a decade of losses, American Airlines filed for bankruptcy in November 2011. Horton favored emerging from bankruptcy as an independent airline that would consider mergers at a later date. Last summer, American Airlines creditors wanted to consider a merger between the two airlines and, as a result, American Airlines said that it would consider all options while still in bankruptcy.
Leaders at the three main American Airlines unions also pushed hard for a merger and for Parker to become CEO of a combined airline. They do not like Horton or the American Airlines management team. Parker struck tentative deals with each of the American Airlines unions in the event that a merger took place. Experts said that having a competing airline’s CEO get involved in another carrier’s bankruptcy is unprecedented.
The unions then used the tentative deals with US Airways to negotiate better contracts than the steep cuts that American Airlines had proposed to the unions back in February of last year. Under a memo of understanding agreed to last month, American Airlines pilots negotiated $522 million in improvements to their compensation over the six-year period of their contract. US Airways pilots just signed a similar deal.
Allied Pilots Association president Keith Wilson issued a statement on Thursday in support of the merger. “We can now look forward to having a new leadership team that has a strong operational track record and a proven desire to focus on rebuilding our great airline,” he said.
The Association of Professional Flight Attendants also welcomed the merger news. “It’s been a long, tough road but the result is well worth it,” said union president Laura Glading. “The new American will provide job security and fair compensation for all employees and another great option for the flying public.”
But rank and file members of the pilots and flight attendants unions said that they are concerned about the merger. Chris Manno has been a pilot with American Airlines for nearly 28 years. He worries about pilot seniority — fearful that US Airways pilots would jump over them in the company’s pecking order. “It remains to be worked out or its turned over to arbitration which, as a union member, I’m not happy about,” Manno said.
Passengers won’t see immediate changes at DFW Airport until after the merger is completed in about six months.
American will continue to fly out of Terminals A, B, C, and D. While US Airways will stay in Terminal E.
For more information on the merger, check out the website NewAmericanArriving.com.
A list of questions posed about the merger was filed by American today to the Securities and Exchange Commission. To read the full list – CLICK HERE
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