American will emerge from bankruptcy and complete its merger with US Airways on December 9, according to a joint news release from the two airlines.
The announcement follows a ruling this morning by the U.S. Bankruptcy Court for the Southern District of New York, which approved the settlement of the Justice Department’s antitrust suit to block the merger and deemed that a pending civil suit contesting the merger wasn’t sufficient grounds to delay the tie-up.
Consumer advocates, including this writer, have argued that this merger will result in over-consolidation in the industry, leading to higher prices and less service. The Justice Department’s suit was predicated on the same arguments, but in the end, the DOJ succumbed to pressure from political and business interests and settled the complaint with only token concessions on the airlines’ part.
So even as Wall Street was applauding the news—shares of Delta, United, JetBlue, and Alaska Airlines were up sharply—travelers were venting their dismay and disappointment on online forums such as FlyerTalk. As a poster using the optimistic handle “Seat 1F” commented: “Not unexpected… but still sad to see the merger will now happen. What a shame.”
Merger Cheat Sheet
- The new company would 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 120,000 employees, 950 planes, 6,500 daily flights, and eight 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 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 percent, United 19.3 percent, Delta 19.2 percent, Southwest 17.3 percent).
Reader Reality Check
How do you expect the merger to affect air travel in the coming months and years?
This article originally appeared on FrequentFlier.com.
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