After more than a year’s worth of rumors, plenty of negotiations and three earlier attempts at merging, US Airways and the bankrupt American Airlines—which made a last-ditch effort to revamp their image earlier this month—have finally agreed to come together and be one. While they’re now moving in together and sorting through their stuff, the actual marriage and formal union won’t be completed until the third quarter of this year.
In an $11 billion all-stock deal, the two big brands are joining to create the world’s largest airline—but investors and consumers alike are pondering if bigger is indeed better. The new company, which will fly under American’s name and revamped logo but be run by US Airways CEO Doug Parker, is predicting that it “will produce annual savings and new revenue totaling more than $1 billion by 2015,” Bloomberg reports.
“American Airlines is one of the world’s most iconic brands,” Parker stated in the merger announcement press release. “The combined airline will have the scale, breadth and capabilities to compete more effectively and profitably in the global marketplace. 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 travel, when they want to go.”[more]
Before then, plenty of things need to happen, but luckily for the more than 93,000 employees of the new company, there are only a dozen routes that overlap of the more than 900 that the airlines fly. After all, the more overlap, the more staff reductions. However, “there will be about $150 million in savings excluding initial expenses to put all employees onto the same pay scale,” Bloomberg notes.
Parker has been trying to merge his company with another since an unsuccessful bid to combine with Delta back in 2007. “This is really terrific for both companies,” Helene Becker, a Dahlman Rose & Co. analyst told Bloomberg. “When American went into Chapter 11, Doug saw his chance to grow US Airways and to finish the consolidation that really started several years ago.”
US Airways shareholders will end up with an extra share of the company for every two shares they currently hold. Sounds like a win-win for those financially vested in the deal, but what about passengers? “You cannot find an airline merger in recent times that went well,” said Joe Brancatelli, editor of JoeSentMe, a business travel website in an interview with CNN Money.
From lost luggage to jacked up fares, history tells us that a win for the airline is often a loss for the customer. Your thoughts? Weigh in below.