American Airlines, US Airways officially announce merger plan
BY KYLE ARNOLD World Staff Writer
Thursday, February 14, 2013
2/14/13 at 3:59 PM
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American Airlines and U.S. Airways leaders officially announced a merger this morning to create the nation’s largest carrier and give some 7,000 employees in Tulsa new leadership after more than a year of uncertainty and bankruptcy proceedings.
The boards of directors for American parent AMR Corp. and U.S. Airways approved the merger late Wednesday after hammering out a deal that gives executive control to U.S. Airways Doug Parker and gives most of the equity in the company to American Airlines’ creditors.
“The combined airline will have the scale, breadth and capabilities to compete more effectively and profitably in the global marketplace,” Parker said in a statement released Thursday morning. “Our combined network will provide a significantly more attractive offering to customers, ensuring that we are always able to take them where they want to travel, when they want to go."
American Airlines has some 7,000 employees in Tulsa at its maintenance headquarters.
The merger will create the country’s largest airline, overtaking competitors have emerged stronger than AMR through their own bankruptcy reorganizations and major mergers.
American creditors, employees and labor unions will get a 72 percent stake in the company, leaving the remaining 28 percent to U.S. Airways shareholders.
The combined carrier will be called American Airlines and headquartered in Fort Worth, Texas.
AMR CEO Tom Horton would be non-executive chairman for a little over a year before leaving the position to Parker.
The creditors would name five directors to the airline's new 12-member board, while US Airways would get the right to pick four members and AMR would choose three. AMR's creditors committee, which has a say in major decisions in bankruptcy, also endorsed the merger.
"Over the past year, the American team stood tall as we established a rock solid foundation for long-term success through an efficient and effective restructuring," AMR Corp. CEO Thomas Horton said in the statement. "As part of this process, after months of exhaustive analysis and a thorough review of all alternatives, we concluded that this merger is the best outcome for our company, delivering not only the greatest value for our financial stakeholders, but also positioning us well for sustainable success over the long term."
Parker began pursuing a merger with American in January 2012, less than two months after AMR's bankruptcy filing on Nov. 29, 2011.
The deal needs the approval of the bankruptcy court and federal officials. As for the latter, one industry observer said he sees no potential problems coming from the Justice or Transportation departments.
"The two carriers may have to make a few concessions, but there's nothing big looming that could scuttle the deal," said Seth Kaplan, editor of Airline Weekly, in a telephone interview with the Tulsa World.
The combination has the blessing of the Transport Workers Union. The TWU represents a large group of American Airlines employees, including about 5,000 mechanics and additional related workers in Tulsa, where the carrier operates its largest maintenance base and employs 7,000 people.
The TWU already has pre-negotiated key parts of what would be its contract with US Airways. The two sides agreed on a 4.3 percent raise for TWU members if a merger happened.
A group of AMR bondholders with about $1.5 billion in unsecured debt said last month it was backing a merger and pushing for an agreement by mid-February. The bondholders concluded after reviewing confidential data that a merger would provide more cost savings and other financial benefits than a stand-alone American, one person said.
American is the nation's third-biggest airline by passenger traffic, while Tempe, Ariz.-based US Airways ranks fifth. Together, they would be bigger than current world leader United Continental Holdings Inc., although United would remain slightly larger if regional operations such as United Express and American Eagle were counted.
US Airways is the product of a 2005 merger with America West, which was smaller but controlled the deal and took over the bigger company's name.
Fort Worth-based AMR sat out the last several rounds of consolidation in the airline industry and lost its perch as the world's biggest airline in 2008. Its last major acquisition was TWA, which was bankrupt at the time, in 2001.
"While the American Airlines restructuring process was difficult at times, it ultimately proved successful as thousands of high-paying jobs were saved in our community. Across the country, today’s corporations are making decisions based on economies of scale. We are confident US Airway’s decision to merge with American Airlines, a longstanding corporate partner in Tulsa, will ultimately keep thousands of high-paying aerospace and manufacturing jobs here, in our community," Mike Neal, president of the Tulsa Regional Chamber, said.
"The city of Tulsa is grateful that American Airlines and US Airways are committed to Tulsa and that our future in the aerospace/aviation industry looks very bright.
We’re thankful for the leadership of the entire community. From the beginning, 18 months ago, the Tulsa Regional Chamber, mayors and city managers from outlying communities and the Tulsa County Commissioners created a unified effort to support our various industries at the airport, on which we rely so heavily for Tulsa's economic future," Mayor Dewey Bartlett said.
Original Print Headline: Airlines agree to merge
AMR Corp. - US Airways merger
Value of deal: $11 billion
Combined revenues: $38.7 billion
Total employees: 100,000
Ownership: 72 percent by AMR creditors, 28 percent by US Airways
Board makeup: 12 directors, with five appointed by American's creditors, three appointed by American and four appointed by US Airways
Sources: AMR, US Airways, analysts.
Associated Images:
The new exterior paint job of one of 196 737-800 airlplanes that American Airlines will convert, on display during a tour stop in one of the hangers at the American Airlines Maintenance and Engineering facility in Tulsa. MICHAEL WYKE/Tulsa World
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