DALLAS – American Airlines and US Airways agreed Thursday to merge in an $11 billion deal that would create the world's biggest airline. The combined carrier will be called American Airlines and be based in Fort Worth. It expects to have $40 billion in annual revenue and offer more than 6,700 daily flights to 336 destinations in 56 countries. The deal is a coup for smaller US Airways Group Inc., and was driven by the persistence of its CEO, Doug Parker, who will run the combined airline. Parker sought a merger almost as soon as American parent AMR Corp. filed for bankruptcy protection in November 2011. As Parker pushed ahead, creditors forced AMR's management to consider the value of a merger compared with a plan for an independent American. Eventually they concluded that the best return for stakeholders, and the best chance to compete with bigger rivals United Airlines and Delta Air Lines, came from a merger. The deal also caps turbulent half-decade of bankruptcies and consolidation for the US airline industry. Since 2008, Delta gobbled up Northwest, United absorbed Continental and Southwest bought AirTran Airways. If this latest merger goes through, American, United, Delta and Southwest will control about three-quarters of US airline traffic. The rapid consolidation has allowed the surviving airlines to offer bigger route networks that appeal to high-paying business travelers. And it has allowed them to limit the supply of seats, which helps prop up fares and airline profits. The merger, expected to close in this year's third quarter, will reduce the number of major U.S. airlines to four: the new American, United, Delta and Southwest. That concerns some consumer advocates, but Parker sought to assure travelers that the merger helps them too — by creating a bigger rival to United and Delta. “While you're right — you end up with four large airlines — the reality is there are two very large airlines right now and this creates a third,” Parker said in an interview. “It provides good competition to those two.” Most airline mergers have resulted in a reduction of flights and shrinkage at some hubs, but Parker said this deal will be different because US Airways and American overlap on just 12 routes. He said the new airline will keep all of American's hubs — Dallas-Fort Worth, Chicago, Miami, New York and Los Angeles — and those of US Airways, in Phoenix, Charlotte and Philadelphia. Many airline mergers have resulted in some hubs being downgraded, as happened to Cincinnati after Delta bought Northwest. While Parker becomes CEO of the combined company, AMR CEO Tom Horton will serve as chairman until its first shareholder meeting, likely in mid-2014. Parker becomes chairman after Horton leaves. The boards of both companies approved the deal Wednesday. Executives said they were confident that antitrust regulators would approve the merger. Shares of US Airways fell 31 cents, or 2.1 percent, to $14.34 in premarket trading. AMR creditors will own 72 percent of the new company, with the remaining 28 percent will going to US Airways shareholders. The creditors' portion includes a 23.6 percent share for American employees and unions, plus a small stake for existing shareholders of American's parent AMR Corp. The airlines said they expect $1 billion in combined benefits from the merger. – Agencies
