US airlines merge in $11bn deal

The merger of American Airlines and US Airways, which was announced yesterday, will create the world’s largest airline and leave 86 per cent of domestic US air travel controlled by four big airlines.

The airlines agreed a deal, valued at $11 billion (€8 billion), as American Airlines, once the country’s largest carrier, eventually approved the merger with the smaller carrier. The deal follows months of negotiations and an initial cool response from American when US Airways pushed for a merger in 2011 after American sought Chapter 11 bankruptcy protection to reorganise its business.

The marriage saves American Airlines, which has accumulated losses of more than $12 billion since 2001, and will allow US Airways to compete with the likes of Delta and United Airlines, which have grown in size through mergers, though the smaller airline will see its brand consigned to history.

Shareholders of US Airways will own 28 per cent of the enlarged airline, while the shareholders, creditors, trade unions and employees of American Airlines will own the remaining 72 per cent.

Key roles

The chairman and chief executive of US Airways, Doug Parker, will take over as chief executive of the enlarged airline, while Thomas Horton, chairman and chief executive of American’s parent company will be chairman, though his time will be limited and Mr Parker will eventually take over the role.

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

There is little overlap between the companies; there are only 12 out of 900 combined routes served by the two airlines. American flies to 130 cities not serviced by US Airways, while US Airways flies to 62 cities to which American does not fly. The enlarged carrier will be based in Fort Worth, Texas.

The new airline, along with three other companies – United, Delta and low-cost carrier Southwest Airlines – will dominate domestic air passenger travel in the United States.

US Airways operates a daily service between Dublin and Philadelphia and has also run a seasonal service to Dublin from Charlotte, North Carolina, where the airline runs its largest hub. American Airlines flies from Dublin to Chicago and will start a daily flight to New York’s JFK airport in June.

Strong presence

American has a strong presence at Heathrow airport in London while US Airways flies into key European cities American doesn’t directly serve, such as Amsterdam and Brussels.

Bill Swelbar, a researcher at the Massachusetts Institute of Technology’s International Centre for Air Transportation, said that he doesn’t expect any significant change in transatlantic routes. “In fact, a lot this merger has to do with leveraging the transatlantic services that already exist,” he said.