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Thu February 14, 2013
American Airlines and US Airways Announce Merger
American Airlines and US Airways are planning to merge, creating the world's largest airline. But the deal’s impact on the airline industry and its travelers is unclear.
US Airways and American Airlines announced the $11 billion merger deal Thursday morning. The combined carrier is to be called American Airlines, based in Fort Worth, Texas.
A main reason for merging is to link both airlines' networks, creating a system on par with Delta Air Lines and United. US Airways and American already have hubs in North Carolina at three of the major airports in Charlotte, Raleigh and Greensboro. The companies combined employ about 10,000 people in the Tar Heel state.
Mark Hall is a law professor at Wake Forest University. He says the merger could open more travel routes and provide more flight choices for residents in the Triad. But Hall says there’s a lot on uncertainty about the merger’s impact on the local economy.
“Any merger is seeking to reduce overhead costs, which can happen by cutting staff positions but also by consolidating functions, so if American were to consolidate some its functions with U.S. Airways in this area it might actually increase jobs, but there is also a risk that some jobs in this area will be cut,” says Hall.
Analysts also expect prices to rise in the long run. Airline mergers in the country are a continuing trend that has accelerated post 9/11 when many companies began struggling financially. Hall says if the deal is approved, only four major airlines will remain in the U.S. In 2001, there were ten domestic airlines.
“This is thought to be the most likely the last major merger in the industry. There are other merger possibilities that have been explored and abandoned for a variety of business and legal reasons, so analysts of the industry think not only will it produce the largest airline, but it also will end the wave of mergers and consolidations that we have been seeing,” says Hall.
American's parent company, AMR Corp., is still under bankruptcy protection and will need the courts to approve the deal. US Airways shareholders will also have to vote for a merger. Then the Department of Transportation and the Justice Department must sign off.