AIRLINES

American Airlines, US Airways announce merger

 

hsampson@MiamiHerald.com

After a nearly yearlong courtship, the union became official Thursday: American Airlines and US Airways have formally announced plans to merge.

An early morning announcement by the airlines confirmed reports widely circulated after boards of both companies approved the merger late Wednesday.

The move brings stability to one of Miami-Dade County’s largest private employers more than a year after the airline and its parent company filed for bankruptcy protection, leaving the fate of thousands of employees — and the largest carrier at Miami International Airport — in question.

According to the Thursday announcement, the deal was approved unanimously by the boards of both companies, creating the world’s biggest airline with implied market value of nearly $11 billion, based on the Wednesday closing price of US Airways stock. The airline will have close to 100,000 employees, 1,500 aircraft, $38.7 billion in combined revenue.

The deal must be approved by American’s bankruptcy judge and antitrust regulators, but no major hurdles are expected. The process is expected to take about six months, according to a letter sent to employees Thursday by American CEO Tom Horton.

Travelers won’t notice immediate changes. The new airline will be called American Airlines. It likely will be months before the frequent-flier programs are merged, and possibly years before the two airlines are fully combined. The new airline will be a member of the oneWorld airlines frequent flier alliance.

And for Miami travelers, it’s unlikely that much will change at any point. American and regional carrier American Eagle handled 68 percent of traffic at the airport last year, while US Airways accounted for just 2 percent. American boasts 328 flights to 114 destinations from Miami.

“We don’t expect any substantial changes at MIA if the merger occurs because our traffic is largely driven by the strength of the Miami market and not the airlines serving it,” said airport spokesman Greg Chin.

American has said for more than a year that its long-term plan calls for increasing departures at key hubs, including Miami, by 20 percent. That pledge has already started to materialize; in recent months, the airline has added new service to Asuncion, Paraguay and Roatán, Honduras.

During its bankruptcy restructuring, about 400 American employees lost jobs, leaving American and its regional carrier, American Eagle, with 9,894 employees in Miami-Dade County and 43 in Fort Lauderdale. US Airways has few employees in the area.

“It really isn’t going to affect Miami in a very major way anytime soon,” said Michael Boyd, an aviation consultant in Evergreen, Colo. “Only because US Airways isn’t a big player in South Florida.”

At Fort Lauderdale-Hollywood International Airport, American and US Airways combined would still only be the fifth-largest airline after Southwest, Spirit, JetBlue and Delta, a spokesman said. The two airlines have little overlap in routes from Fort Lauderdale.

Despite the lack of major changes, Boyd said the merger would be a good development for Miami.

“It should be positive for the employees and it should be positive for the communities that the airlines serve,” he said.

Robert Herbst, an independent airline analyst and consultant, said US Airways will add a “significant amount” of destinations in the Northeast, including Philadelphia and Washington, D.C.

“You’ll see some additional service, I believe, from Miami to Europe because of the merger, and better connections to Asian markets,” he said. “It’ll be good for the Miami area.”

Herbst, founder of AirlineFinancials.com, said the deal solidifies employment for American Airlines employees in Miami. He said he was confident that the leadership of the merged airline “will do everything they can to make sure Miami stays as one of the major hub airports of the system.”

Still, analysts say some negatives for travelers may emerge. Combining two competitors could drive up fares, said Rick Seaney, CEO and co-founder of Dallas-based FareCompare.

“The only good news is that if airlines get too frisky with higher prices, consumers will let them know quickly by cutting back on air travel,” he said.

The priciest fares will occur at hubs where the merged airline will have little competition, including Houston and Charlotte, analysts said. And consumers can expect to see fare jumps on routes where American and US Airways have overlapping nonstop service, such as Philadelphia to DFW or Miami, Charlotte to Miami and DFW, and Phoenix to Miami.

But Brett Snyder, who runs the CrankyFlier.com blog, believes that higher-than-average fares would be limited to few cities.

“There are very few markets where they (American and US Airways) today have overlapping services,’’ he said. “They operate pretty independently from each other.”

The carrier will be run by US Airways CEO Doug Parker. American’s CEO, Tom Horton, will become chairman of the new company through the first shareholders meeting, when Parker will take over a chairman. AMR stakeholders will own 72 percent of the new company’s common stock; US Airways shareholder will own 28 percent, the company said.

The merger is a stunning achievement for Parker. His airline is only half the size of American and is less familiar around the world, but he prevailed by driving a wedge between American’s management and its union workers and by convincing American’s creditors that a merger made business sense. Unions already have voted to support a merger, and a group of unsecured creditors has agreed to the arrangement, according to Thursday’s company statement.

Just five years ago, American was the world’s biggest airline. It boasted a history reaching back 80 years to the beginning of air travel. It had popularized the frequent-flier program and developed the modern system of pricing airline tickets to match demand. It was unseated as the world’s largest airline after United Airlines merged with Continental and Delta Air Lines merged with Northwest.

But years of heavy losses drove American and parent AMR Corp. into bankruptcy protection in late 2011. The company blamed bloated labor costs; its unions accused executives of mismanagement.

Miami Herald staff writer Douglas Hanks and Business Editor Jane Wooldridge contributed to this report, which was supplemented with information from the Associated Press and the Fort Worth Star-Telegram.

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