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With Creditor Vote, American Closes in on US Air Merger

With Creditor Vote, American Closes in on US Air Merger

American today announced preliminary results of the up or down vote by the airline’s creditors on the pending merger with US Airways.

According to American’s news release, the vote was overwhelmingly in favor of the merger, with at least 88 percent of each of the eight classes of creditors giving the plan a thumbs-up.

The merger and American’s exit from bankruptcy, which are linked, must still receive approval from the bankruptcy court, from the U.S. Justice Department, and from European regulatory authorities.

With the creditor vote behind it and widespread expectations that the remaining approvals will be granted, albeit with conditions, American is on track emerge from bankruptcy and merge with US Airways during the third quarter of 2013.

Merger Cheat Sheet

  • The new company will retain the “American Airlines” name and be based at American’s Ft. Worth headquarters.
  • US Airways chief Doug Parker will be the new CEO. American chief Tom Horton will be named chairman of the new board and remain in that position until the spring of 2014 when the company’s first annual shareholder meeting will be held. When Horton departs the board, Parker will assume his position as chairman.
  • American’s creditors would own around 72 percent of the new company; US Airways shareholders would get the rest.
  • Based on 2012 results, the new company would have generated $38.7 billion in revenue.
  • The merger is expected to generate around $1 billion in combined extra revenue and cost savings for the new company.
  • The new company will be valued at around $11 billion.
  • Combining the third- and fifth-largest U.S. carriers will create the world’s largest airline, in terms of passenger traffic.
  • Prior to any post-merger rationalization, the two airlines will have around 94,000 employees, 950 planes, 6,500 daily flights, and nine major hubs (American: Dallas, Miami, Chicago, Los Angeles, New York; US Airways: Phoenix, Philadelphia, Charlotte). Although the carriers promise to maintain all current hubs, Phoenix and Philadelphia are likely to be downsized in the post-merger “rationalization.”
  • The new American will be a member of the oneworld alliance, not the Star Alliance.
  • The merger is subject to review and approval by U.S. regulators. That shouldn’t be a problem since there is relatively little overlap between the two airlines’ networks.
  • The actual merger won’t happen overnight. United and Delta required five and seven months respectively to secure the necessary approvals for their mergers.
  • It was 22 months after their merger closed before United and Continental finally merged their frequent flyer programs. Expect a similar post-close interval before American and US Airways consolidate their programs.
  • Comparisons between American and US Airways’ current mileage programs are probably moot since there’s a high likelihood that an entirely new revenue-based program (like Southwest’s) will be introduced to replace both programs.
  • After the merger, 83% of U.S. domestic air traffic will be in the hands of just four airlines (American 26%, United 19.3%, Delta 19.2%, Southwest 17.3%).

Reader Reality Check

Are you looking forward to the merger with optimism, or with dread?

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  • Michelle Stewart

    What is the basis for the following claim? The Aadvantage program is one (if not THE) largest, profitable, successful award programs out there, the current AA staff are expected to keep their positions. Why mess with success?

    “…Comparisons between American and US Airways’ current mileage programs are probably moot since there’s a high likelihood that an entirely new revenue-based program (like Southwest’s) will be introduced to replace both programs…”

  • http://www.weflyfree.com/ Justin

    Agreed … where is the evidence for that assertion?

  • YanquiBob

    “..the two airlines will have …><… nine major hubs (American: (1)Dallas, (2)Miami, (3)Chicago, (4)Los Angeles, (5)New York; US Airways: (6)Phoenix, (7)Philadelphia, (8)Charlotte).."

    I count eight. So where's the ninth hub?

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