Video: American Airlines and U.S. Airways are expected to announce an $11 billion merger, creating the world's largest airline.
Although the new airline would operate under the American banner, the deal is a triumph for US Airways, which forced American’s hand after the larger airline slipped into bankruptcy in November 2011. The merger needs to be approved by a New York bankruptcy judge and federal regulators.
As American dug in its heels, seeking to emerge from bankruptcy before entertaining merger talks, it was outflanked by US Airways, which won over three key union groups at American.
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With union support as leverage, US Airways convinced American’s creditors that a merger was the only way to compete with Delta and United. Those creditors pressured American’s board to make a deal, and they will end up with 72 percent of the new airline, while US Airways shareholders will get 28 percent.
“I don’t think, realistically, that either of these airlines was going to survive without merging,” Schank said. “American was in the worst position of the two, simply because they’re in bankruptcy and they’re having challenges with their unions negotiating their way out of bankruptcy.”
The final days of negotiation leading to Wednesday’s vote focused on finding a role in the new structure for American’s chairman, Tom Horton, according to someone familiar with the talks. It was finally agreed that Horton would serve a limited term as chairman of the new airline but that the task of running it would go to the architect of the merger, US Airways chief executive Doug Parker.
The new company, with 950 planes and 94,000 employees, would be based in Fort Worth. It would retain key hubs in Phoenix, Charlotte, Philadelphia, Chicago, Dallas-Fort Worth, Miami, New York and Los Angeles, with 6,500 daily flights.
Swelbar said that with just 14 percent of the market held by airlines other than the big four, this deal would be the last airline mega-merger.
Still, Schank said, thin profit margins could create stiff competition.
“If oil prices continue to go up, yes, we’re going to have to look for other ways to consolidate, reduce costs, increase fares,” he said. “I would expect that eventually we will get to the point where we’re talking about two or three carriers rather than four or five. The other big factor is the economy. If it remains where it’s been — good but not great — consolidation may be something they just have to do to survive.”
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Robert is Dr. Gridlock, the Post’s commuting columnist and an authority on all things roads and rails.
Ashley covers transportation, including roads and aviation. He is an avid cyclist and triathlete.
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