AMR and US Airways to merge

AMR's American Airlines and US Airways have confirmed an $11 billion merger that will create the world's largest airline.

Doug Parker, chief executive of the smaller US Airways, will be chief executive at the new airline, and AMR chief Tom Horton will be non-executive chairman, sources said.

AMR's bankruptcy creditors will own 72 per cent of the new company, and US Airways stockholders will get 28 per cent.

Mr Parker (51) has said the combined carrier would retain the American name and Texas headquarters.

The merger will return American to the top spot in global passenger traffic, a ranking secured with the 2001 purchase of Trans World Airlines. American lost that size advantage and lucrative corporate contracts during the past decade as rivals combined, and AMR posted losses totalling more than $6 billion in the four years through 2011, when it filed for Chapter 11 protection.

"One of the really nice things is how complementary the route networks are," Mr Parker (51) said in an interview. "Of over 900 routes, only 12 have any overlap, which is phenomenal. We are going to need to keep all the hubs in place, the cities we fly to we will need to continue to fly to."

Along with United Continental Holdings and Delta Air Lines, American will be one of just three US full-service carriers with trans-oceanic routes, down from seven at the start of the last decade. American is the third-largest US carrier, and US Airways is number five.

Most of the projected yearly benefits from combining American with US Airways will be in new revenue, at about $900 million, the companies said. There will be about $150 million in savings excluding initial expenses to put all employees onto the same pay scale.

One-time transaction costs will be $1.2 billion spread over the next three years, the companies said. 

Bloomberg