American-US Air Merger Clears Europe Hurdle

As expected, European Union regulators approved the American-US Airways merger, with conditions.

An email statement from the European Commission quoted in Bloomberg, put the matter thusly: "The decision is conditional upon the release of one daily slot pair at London Heathrow and of other commitments in order to induce entry on the London-Philadelphia route. In light of these comprehensive commitments, the commission concluded that the transaction would not raise competition concerns." It's not clear what the carriers would or could do to increase competition on the London-Philadelphia route.

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American's emergence from bankruptcy protection, which hinges on the merger plan, must still be approved by a bankruptcy judge. And the merger itself must still pass antitrust muster with the U.S. Justice Department.

The merger remains on track to secure the necessary approvals and be in effect by the end of September.

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 percent 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%).

This article originally appeared on FrequentFlier.com.

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