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On Monday US Airways Group Inc. and American Airlines parent AMR Corp. have officially announced their merger. This will create the world’s largest airline and likely be marking the end to a wave of major-carrier consolidation that has helped put the U.S. airlines on more sound financial footing.
The two merging airlines will take the American Airlines name and will be the biggest U.S.-based airline, bigger than the Chicago-based United Airlines. The global network will have almost 6,700 daily flights to more than 330 destinations in more than 50 countries and employ more than 100,000 employees worldwide.
Next will be the tricky process of combining the two large airlines. There have been problems with other mergers, notably United with Continental Airlines, a combination announced in 2010. The merged airlines have separate websites, usairways.com and aa.com, and so the two airlines’ reservations systems and loyalty programs will remain operating separately until examination into the process continues.
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The newly merged airlines will join the American’s Oneworld Alliance. US Airways will leave it’s current membership with Star Alliance on March 30 and join Oneworld Alliance the very next day, the airline said.
“Our people, our customers and the communities we serve around the world have been anticipating the arrival of the new American, Doug Parker, CEO of American Airlines, said in a statement. “We are taking the best of both US Airways and American Airlines to create a formidable competitor, better positioned to deliver for all of our companies quickly and efficiently so the significant benefits of the merger can be realized.”
The merger comes as AMR Corp. emerges from two years of bankruptcy protection under the deal, and CEO Tom Horton will step aside to become chairman until the first annual meeting.
The process will take 18 to 24 months to receive a single operating certificate, which will allow the airlines to combine operations, the airlines said. In the short term, it will be business as usual, as the airlines continue to operate mostly separately.
The first signs of a combined airline will come in early January, when the airlines begin to offer some mutual frequent-flier benefits. The new airline formally known as American Airlines Groups’ shares will begin trading the on Nasdaq under the ticker AAL.
US Airways holders, which closed last week at $22.55, will get shares of the new company in a one-for-one exchange. The stock may reach $39 by 2015, estimated Hunter Keay, a Wolfe Research Inc. analyst, while Jamie Baker of JPMorgan Chase & Co, sees Fort Worth, Texas-based American rising to $37.
Image Credit: MGN Online
