American, US Airways aim for 3Q completion of merger

Courtesy, American Airlines

American Airlines and US Airways aim to complete their merger in the 2013 third quarter and see no regulatory hurdles to finalizing the deal. The two airlines entered into adefinitive merger agreement Thursday morning.

American parent AMR Corp. will emerge from Chapter 11 bankruptcy protection as the merger is finalized in the third quarter, US Airways chairman and CEO Doug Parker and American chairman, president and CEO Tom Horton told analysts and reporters in a conference call. Parker will serve as CEO of the new “American Airlines” while Horton will temporarily be chairman of the new company’s board of directors.

Of 900 combined routes the two carriers operate, “there are only 12 direct overlaps,” Horton said. Consequently, “We think this should clear regulatory approval without any carve-outs,” he said. Parker added, “We don’t expect any issues with regulatory authorities.”

The main authorities that will have to clear the deal are the US Department of Justice and the US bankruptcy court overseeing AMR’s Chapter 11 process.

The two carriers have more than 600 aircraft on order through the rest of this decade and don’t plan to change their order books. “The existing aircraft orders we have in place for the two companies we like with deliveries remaining in place,” Parker said.

There are more than 1,500 aircraft in the two carriers’ combined fleet (including regional aircraft), which would make the new American the world’s largest carrier by fleet size. Horton noted that many of these are older aircraft that can be retired as new aircraft are delivered. “We have tremendous flexibility in the new fleet to dial up or down capacity,” Horton said.

The new American plans to keep operating all of the hubs American and US Airways now operate, with American main hub Dallas/Fort Worth and US Airways main hub Phoenix playing key roles. “We’re not at a point where we can start looking at network rationalization,” Horton said. “The plan is to keep both hubs operated by both companies … There will be some changes, but it’s going to be based on the notion that we are going to maintain our own hubs.”

Executives from both airlines said labor deals already agreed to by work groups from both companies will facilitate the merger transition. “The fact that we have labor on board means we have 100,000 people working on the integration and it should go much smoother than [airline merger integrations have] historically,” US Airways president Scott Kirby said.

In terms of systems integration, Parker said he has learned from mistakes made following the 2005 America West Airlines-US Airways merger in which America West (which had been led by Parker) attempted to impose its systems on the larger US Airways. That caused a raft of operational problems. 

“It’s much easier to put the larger airline's systems in place,” Parker said he now believes. “The ingoing premise is you’ll see most of the American Airlines systems put in place at US Airways.”