American Airlines, US Airways Announce Merger

American Airlines parent company AMR Corp and US Airways announced Thursday that their boards have approved a merger agreement to create the largest US airline.

Published

3 months ago

Categories

Finance

Topics

Finance, United States

People

Doug Parker, Tom Horton

Places

United States of America

Companies

Us Airways Group, Inc., American Airlines

Transcript

SHOTLIST: DALLAS, TEXAS, FEBRUARY 14, 2013, SOURCE: CBS **RESTRICTIONS: NO RESALE for non-editorial purposes No Japan No Free over the air broadcasters in Australia No US cable news outlets, free over the air networks or stations, their websites and their mobile phone services SOUNDBITE 1 Doug Parker (man), CEO, US Airways (English, 15 sec): "It makes sense now. It made for a while, we think, but sometimes all the planets need to align and it's taken a while for us to get here but fortunately we've come to an agreement that this makes sense for all of our customers, for all of our employees, our investors and we couldn't be happier." SOUNDBITE 2 Tom Horton (man), CEO, American Airlines (English, 13 sec): "This was 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." UNDATED FILE IMAGES, SOURCE: CBS **RESTRICTIONS: NO RESALE for non-editorial purposes No Japan No Free over the air broadcasters in Australia No US cable news outlets, free over the air networks or stations, their websites and their mobile phone services - VAR file images of a US Airways fleet on the runway, landing and taking off HANDOUT RELEASED JANUARY 17, 2013, SOURCE: AMERICAN AIRLINES **NO RESALE for non-editorial purposes** - excerpts of a promotional video unveiling the new American Airlines look, which includes a new logo and exterior for its planes UNDATED FILE IMAGES, SOURCE: CBS **RESTRICTIONS: NO RESALE for non-editorial purposes No Japan No Free over the air broadcasters in Australia No US cable news outlets, free over the air networks or stations, their websites and their mobile phone services - VAR of American Airlines planes on the runway ------------------- AFP TEXT STORY US-transport-aviation-company-AmericanAirlines-USAirways,2ndlead American Airlines, US Airways announce merger by John Biers NEW YORK, Feb 14, 2013 (AFP) - American Airlines parent company AMR Corp and US Airways announced Thursday that their boards have approved a merger agreement to create the largest US airline. The combined company, which will have an implied equity value of approximately $11 billion, will become a fully operating entity following American's pending bankruptcy proceeding, according to a news release. The companies expect the deal to result in combined synergies of more than $1 billion. Following American's emergence from bankruptcy and the execution of the deal, US Airways will hold approximately 28 percent of the company, with American interests holding the rest, the news release said. The deal follows a spate of earlier US airline mergers that have reshaped the sector and improved profitability. The added heft gives American a better chance of competing with fellow airline giants United and Delta in terms of offering more destinations in an efficient manner. "The combined airline will have the scale, breadth and capabilities to compete more effectively and profitably in the global marketplace," said US Airways chief executive Doug Parker. "Our combined network will provide a significantly more attractive offering to customers." The combined airline will offer more than 6,700 daily flights to 336 destinations in 56 countries, the news release said. The new airline will be the largest US airline in terms of revenue. The companies touted the deal for strengthening the combined company's competitive presence in the US Northeast, the western part of the US and Latin America. Some observers have said the deal still leaves American with a relatively weak position in Europe and Asia compared with some competitors. Within the $1 billion in synergies, about $900 million comes from network efficiencies resulting from the combined carriers improved schedule and connectivity. The companies expect one-time transaction costs related to the merger of approximately $1.2 billion. Antitrust regulators and a US bankruptcy court must first give their approval before the merger can go forward, as American has been under bankruptcy protection since November 2011. The idea of an American-US Airways tie-up has been floated since American went into bankruptcy protection. Under the transaction, US Airways chief executive Parker will become chief executive of the newly formed company, while American chief executive Tom Horton will serve as chairman of the board through the middle of 2014 before stepping down, sources familiar with the matter said. Horton said the deal "provides enhanced potential for full recovery for our creditors." Holders of existing shares of American parent AMR will receive an aggregate initial distribution of 3.5 percent of the common stock of combined airline, the news release said. "This looks like the end of a surprisingly successful round of US industry restructuring," said Richard Aboulafia, an analyst with the Teal Group Corp. Projections for 2013 show that the US airline industry in terms of absolute profit would be the healthiest worldwide, said John Thomas, airlines specialist at LEK Consulting. American has continued to operate under court supervision even as it sought to slash costs by renegotiating wage and benefit deals with its unions. Prospects of a merger strengthened when union leaders publicly endorsed it in April, and talks moved ahead when the two firms signed a non-disclosure agreement to exchange confidential information in August. The news release noted that the merger enjoys the support of several leading unions from the two companies, including pilots associations and representatives of flight attendants. jmb/dw