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Thursday, February 14, 2013

American, US Airways Merge to Create World’s Largest Airline

American Airlines and US Airways officially announced their $11 billion merger Thursday to create the world’s largest airline, and perhaps the last major network merger for the domestic airline industry.

The merger comes as American continues to undergo Chapter 11 bankruptcy proceedings, which it filed for in 2011. US Airways CEO Doug Parker pursued the merger throughout 2012, and the two airlines’ board of directors were finally able to reach an agreement.

"We've been reinvesting and renewing the company," said Tom Horton CEO of American Airlines on CBS News Thursday. "We've been doing a lot of things to bring the company back and indeed have returned it to profitability. This is really the logical next step to return American back to industry leadership — we’ll be the number one airline in the world and create really a truly world-class global carrier with our partners at US Airways."

The new airline will keep the name American Airlines, as the two companies decided to scrap the US Airways name because American is more “iconic,” according to Parker. Creditors of AMR, the parent company of American Airlines, will retain a 72 percent ownership stake in the company with US Airways shareholders to own 28 percent of the combined company stock. Parker will serve as the CEO of the new American and Horton will be the company chairman.

The merger still needs approval from the bankruptcy court overseeing American’s reorganization, and the two carriers are still awaiting approval from federal regulators and US Airways shareholders.

If approved, it will become the seventh major airline merger in the United States since 2005 as carriers have adjusted to the recent economic downturn and the skyrocketing price of jet fuel. The merger would create an airline industry where the top four carriers –– American, United, Delta and Southwest –– are reportedly controlling about 70 percent of the domestic market. The new American Airlines would offer more than 6,700 flights to 336 destinations in 56 counties.

“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,” said Parker.

Both carriers expect their regional subsidiaries (AMR’s American Eagle and US Airways’ Piedmont and PSA) to continue to operate distinctly, providing regional service for the new combined airline.  More

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