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NEW YORK: AMR Corp and US Airways Group unveiled an $11bn all-stock deal yesterday that gives creditors of the bankrupt American Airlines parent control of the combined airline.
US Air’s management team, led by Chief Executive Doug Parker, will assume operational control of the airline, while AMR creditors will wind up owning 72 percent of the combined carrier and take five seats on the 12-member board.
US Airways will have four seats on the board. The remaining seats will be filled by AMR representatives.
“It has been the most successful airline restructuring in history, and we had been very focused from the outset on creating the most value for our owners,” AMR CEO Tom Horton said.
The airline, which will carry the American Airlines name, will be 2 percent larger than current No. 1 United Continental Holdings Inc in terms of traffic — the number of miles flown by paying passengers worldwide. The merger, subject to approvals from regulators and the US Bankruptcy Court, could help speed up the recovery of the US airline industry as carriers will have more room to boost fares as yet another competitor is eliminated.
The new American will be based in Dallas-Fort Worth, Texas. Parker, who has long advocated industry consolidation and began pursuing a merger in early 2012, will be the CEO. “The value of the merger is so great that we’re excited about getting the work done,” Parker said. “Integrating airlines can be difficult sometimes, but we’ve (already) done one at US Airways. We know what to do and know what mistakes to avoid.”
Parker, 51, the longest-serving CEO of a major US airline, kick-started the industry’s consolidation wave when his America West Holdings bought US Airways out of bankruptcy in 2005. Tom Horton, who became AMR’s CEO when it filed for bankruptcy, will serve as chairman of the combined airline through the first annual meeting of shareholders, after which Parker will take over.
The tie-up is the fourth major merger in the US airline industry since 2008, when Delta Air Lines bought Northwest. United and Continental merged in 2010, and Southwest Airlines bought discount rival AirTran Holdings in 2011. The new, larger American Airlines would return to the leadership position among US carriers that it ceded in recent years as high labor costs made it difficult to compete with restructured rivals.
Passengers of US Airways and American would gain access to new destinations. The standalone American is currently third in terms of traffic behind United and Delta, both of which used Chapter 11 bankruptcy protection to cut costs and find merger partners.