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Economy & Business

US Airways, American Boards OK $11B Merger

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American Airlines and US Airways say they have agreed to merge in an $11 billion deal that would create the world's biggest airline. The combined carrier will be called American Airlines but run by US Airways CEO Doug Parker.

The combined network will serve 8 locations across the Pennsylvania-Delaware region—Pittsburgh, Philadelphia, Scranton, Harrisburg, State College, Allentown-Lehigh, Erie and Williamsport, with 558 daily departures.  Pittsburgh will have 60 flights to 13 destinations.

The boards of the two airlines unanimously approved the deal late Wednesday, and the companies announced the agreement early Thursday.

Industry analysts see the deal as a coup for the smaller US Airways Group Inc., which pushed for a merger almost as soon as American parent AMR Corp. filed for bankruptcy protection in November 2011.

While Parker runs the company, AMR CEO Tom Horton will serve as chairman until its first shareholder meeting, likely in mid-2014.  AMR creditors and shareholders including creditors will own 72 percent of the new company and US Airways shareholders 28 percent.

"The combined airline will have the scale, breadth and capabilities to compete more effectively and profitably in the global marketplace," US Airways’ Parker said in a statement. "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 go."

The airlines said they expect $1 billion in combined savings. The new company is expected to retain fleet and ground service in Pittsburgh, with flight operations located in Moon Township.

In a letter to its employees, US Airways noted that the “the unions representing American Airlines pilots, flight attendants and ground employees, as well as the union representing US Airways pilots, have agreed to terms for improved collective bargaining agreements effective upon the closing of the merger.  In addition, the union representing US Airways flight attendants has reached a tentative agreement, which includes support for the merger. American’s unions representing pilots and flight attendants are working with their US Airways counterparts to determine representation and single agreement protocols.”

“This merger is a result of historic labor agreements,” said Ed Bular, US Airways senior V.P. for Flight Operations.  “This new management/labor paradigm to start with is unprecedented, it’s the first of its kind.”

Bular has gone through four mergers as a pilot and in management.

The company tried to allay any fears the employees might have in the same letter by saying,  “Until the transaction is complete, American Airlines and US Airways will remain separate companies, and it will be business as usual for all of us.”

This is not the first merger involving Parker and US Airways.  He headed Tempe-based American West in 2005 when it joined with US Airways, and he became CEO of the combined airline.

American Airlines and US Airways had negotiated since August, when creditors pushed AMR to conduct merger talks so they could decide which earned them a better return: a merger or an independent American.

The deal would need approval by AMR's bankruptcy judge and antitrust regulators, who have permitted three other big airline mergers to go ahead since 2008. 

American Airlines serves 130 cities that US Airways does not; and, US Airways flies in and out of 62 cities where American Airlines has no presence.  Company officials expect the merger to close in the third quarter of 2013.