American Airlines and US Airways merger

Mergers and Acquisitions: American Airlines and US Airways merger
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Mergers and Acquisitions: American Airlines and US Airways merger
Circumstances of the merger
American Airlines and US Airways merged to form the largest airline in the world, with the shares of the formed company trading under the name American Airlines Group Inc. (AAL) (Martin, 2013). US Airways is owned by US Airways Group while American Airlines is owned by AMR Corporation. Interests of merging with AMR Corporation were first expressed by US Airways Group in January 2012 and the CEO of AMR Tom Horton agreed to the merger negotiations. There are a number of circumstances which can be cited as the main reasons that contributed to this merger. First, American Airlines had filed for bankruptcy protection in 2011 and the management had announced that it was looking for a merger partner.
Second, Mr. Doug Parker, the CEO of US Airways had campaigned vigorously for the merger. He tried to convince the creditors, labor unions and the management of AMR about the necessity of establishing a huge airline that has the capacity of competing with the other two U.S. airline giants (United and Delta) that had expanded through mergers (Carey & Nicas, 2013). He gave an example of United Continental Holdings Inc., Southwest Airlines Co. and Delta Air Lines Inc. which all had merged with different airlines and currently manages over 80 percent of domestic capacity in the U.S. Another important reason of merging the two airlines is increasing revenues and cutting on operational costs. According the Parker, merging the two companies would yield over $1.5 billion per annum and this made the U.S. Airways and American Airlines to sign a nondisclosure agreement on August 31, enabling them to discuss the possibility of merger.
Effects of merger
The American Airlines-US Airways merger created the largest airline in the world, a position once held by American Airlines (AA) before a wave of consolidation that occurred over the past in the airline industry. The merger will also make AAL to operate close to 6,700 flights daily to over 330 destinations spread across more than 50 nations (Maynard, 2013). Currently, the two airlines has employed more than 100,000 workers spread across the world. Melendez (2013) says that the merger would be a bad deal for customers, especially the frequent fliers. This is because airfares are projected to increase due to reduced competition, customer choice will be reduced, overcrowding on aircrafts will increase and some employees may lose their jobs. The ability of low-cost airlines to discipline the amount of fares will be compromised. Moreover, it is expected that some hubs such as Phoenix will either be downgraded abandoned all together.
Moreover, 70% of the air travel market in the U.S. will be controlled by only four firms, including Southwest, Delta, United-Continental and AAL. It is ...