US-American merger long in the making, but far from done

February 14, 2013

After more than a year of speculation and negotiation, the merger between US Airways and American Airlines is official. The new airline will keep American’s name and be worth about $11 billion. As KJZZ’s Nick Blumberg reports, the merger creates the largest carrier in the world. 

Doug Parker US Airways CEO Doug Parker addresses the media at Sky Harbor International Airport after returning from Dallas-Fort Worth. (Photo by Nick Blumberg - KJZZ)

US Airways CEO Doug Parker will lead the new company. He spoke to reporters Thursday shortly after landing at Sky Harbor airport and said the megacarrier will provide a few things to a few different groups: “to our customers, more service to more places; to our employees, the ability to have an airline that provides more job security as well higher compensation in wages; and to all of our owners and shareholders, the opportunity to share in about a billion dollars of synergies we create by putting these two companies together.”

Parker likes a good merger. As CEO of America West airlines, he joined forces with then-bankrupt US Airways, and has also looked at two other mergers in recent years. He said putting two airlines together is tricky.

“The challenge, of course, is making sure we integrate as efficiently as possible, as seamlessly as possible. We learned a lot through our America West-US Airways integration. A lot of things to do right, some things not to do the same way we did before.”

Disagreements over pilot contracts in the US Airways-America West merger have dragged on for years. Before entering into official negotiations with American Airlines, Parker approached the unions representing American’s employees. Jamie Horwitz is a spokesman for the Transport Workers Union, which represents employees in both US and American.

“We were able to reach agreements with US Airways for workers at American, even prior to this merger, which is pretty unusual -- even unprecedented, I would say.”

Horwitz said that sent a clear message to company leaders and Wall Street that employees were amenable to a merger. American Airlines is in chapter 11, so the plan still has to be approved in bankruptcy court -- and by federal antitrust regulators. Dan Goldfine is an attorney with Phoenix law firm Snell and Wilmer who specializes in antitrust issues.

“The ultimate question is whether prices to consumers or output to consumers -- in this case, number of flights and choices -- whether prices will go up or output will go down post-merger,” Goldfine said. But Goldfine based on recent airline mergers, he doesn't expect the feds to block the deal.

The airlines say there will be some cuts, but mostly in management. With about 900 nonstop routes between the two carriers, they say only a dozen overlap. And they stress while the new company will be headquartered in Dallas-Fort Worth, Phoenix will remain a hub.

John McDonald with US Airways said Sky Harbor is an asset that comes to the table, not a cost to be cut.

"And I think most people don’t get that. They just don’t understand from an operational level how airlines work," McDondald said. "So if you look at United, you look at Delta, you look at our operations on the East Coast, you realize the value of Phoenix Sky Harbor Airport.”

As for the impact on consumers, consolidation can always mean ticket price hikes. But officials say the new airline, which will keep American's name, will offer new options for travelers -- and they promise to honor frequent flier miles and benefits. The deal is set to close in the third quarter of 2013, but fully integrating the two airlines is still quite a ways away.

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