Goliath Airline Created

The new airline, with the new American livery

The new airline, with the new American livery

The merger between American Airlines and US Airways which was finalized yesterday created a goliath airline with 1,500 aircrafts serving 330 destinations via 6,700 daily flights in 50 countries.

BBC story:

9 December 2013 Last updated at 16:21 GMT

American Airlines and US Airways merger finalised

American airline planesThe merger between the two companies createsthe world’s largest airline

American Airlines and US Airways have completed their long awaited merger to create the world’s biggest airline.

It follows AMR Corporation, the parent company of American Airlines, emerging from its 2011 bankruptcy filing.

Shares in the new company soared after making their debut on the Nasdaq exchange under the stock symbol AAL.

The merger had previously been blocked by the US Justice Department (DOJ) over concerns about competition in the sector.

“Our people, our customers and the communities we serve around the world have been anticipating the arrival of the new American,” said new boss Doug Parker. Mr Parker had previously been the head of US Airways.

“We are taking the best of both US Airways and American Airlines to create a formidable competitor, better positioned to deliver for all of our stakeholders. We look forward to integrating our companies quickly and efficiently so the significant benefits of the merger can be realised.”

The two companies say they expect to save more than $1bn in synergies with the merger.

New goliath

The new airline, which will be known as American Airlines, will provide nearly 6,700 daily flights to more than 330 destinations in more than 50 countries.

It will have a combined workforce of over 100,000 employees.

As part of the merger settlement with the DOJ announced in November, both US Airways and American Airlines agreed to give up several hundred slots at airports across the US.

Those slots were intended for low-cost carriers such as JetBlue and Southwest Airlines, in order to keep prices low for consumers who might be hurt by the increasing consolidation in the US airline industry.

Analysts cheered the news, noting that this was the final merger in a long series. Now, there are three main US carriers: United, Delta, and American.

“With the merger of American Airlines and US Airways the long cycle of US industry reconstruction began in 1979 with deregulation is now complete,” Nexa Capital’s Ray Neidl told the BBC.

“The public, as well as investors, will benefit from a financially strong industry which can now invest to keep its product updated and in international markets competitive with foreign carriers.”

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Naturally, after the merger is completed all the assets, borrowings and commitments, operations, destinations and frequencies and workforce between the two airlines would be combined and rationalised. Just for size, the largest airlines before this is Dubaii based Emirates serving almost daily to 150 destinations in 74 countries.

The USD 17 billion dollar company is expected to be traded as NASDAQ on Tuesday. The new airlne would be known as American and based in Dallas-Fort Worth.

USA Today story:

US Airways begins its fade into history

Celebrations at Sky Harbor International Airport in Phoenix, US Airways headquarters in Tempe, Ariz. KPNX-TV, Phoenix

Dawn Gilbertson and Ryan Randazzo, The Arizona Republic2:13 p.m. EST December 9, 2013

The merger may be official but combining computer systems, other operations will take time.

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TEMPE, Ariz. — The sign atop the nine-story office building downtown still will say US Airways, and so will the white planes with the blue tail that take off every few minutes from Phoenix’s Sky Harbor International Airport.

But after Doug Parker rang the Nasdaq bell Monday from Fort Worth, Texas, signaling the completion of the $17 billion US Airways-American Airlines merger, US Airways started its gradual fade into the history books.

PHOTOS: The new look of American Airlines
STORY: High court rejects attempt to block merger
STORY: Airlines to close merger Monday

The combined airline is the largest in the world by number of passengers and is called American — employee celebrations around the world are heralding the debut of the “new” American. Texas is its home. The title on Parker’s business cards changes from chief executive of US Airways to chief executive of American; his permanent home address from Paradise Valley, Ariz., to Dallas.

For the first time since upstart America West Airlines bounded onto the scene in the 1980s, This area no longer boasts a major airline in its backyard.

The Phoenix metropolitan area also loses one of its few Fortune 500 headquarters — an indicator of corporate vitality — and many of the 750 well-paying jobs that go with it.

A longtime Phoenix lawyer and community leader, Richard Mallery, played a role in the high-profile public-private restructuring of bankrupt America West in the early 1990s and watched the airline go on to acquire US Airways, then make the run for American. He wishes the headquarters of the combined airline were here but isn’t wistful.

“It just depends upon how you look at this moment,” said Mallery, a partner at Snell & Wilmer. “I prefer to see it as something that is good for Phoenix. For us to become a major hub for the largest airline in the world, that’s great.”

Parker and other top US Airways executives, who began pursuing the merger with larger American more than two years ago and today started running the combined airline, have acknowledged the sting of losing the headquarters but have promised a strong corporate presence in Arizona and more flight options as US Airways and American join their route networks.

“The customer that lives in Phoenix now has far more options to go to destinations that they don’t have on US Airways today,” Scott Kirby, the longtime US Airways president who assumes the same title at American, said before the merger was official. “Asia and South America are the two easiest examples.”

The benefits and inevitable fallout from the third industry megamerger in five years will unfold as the airlines combine their operations during the next two years.

Very little will change overnight. US Airways’ stock ceased trading Friday, and beginning Monday, investors hold shares of the new American. Unlike US Airways and the old American, whose shares were listed on the New York Stock Exchange, the new American’s stock is being traded on Nasdaq. The symbol is AAL.

Travelers still will book US Airways flights on US Airways’ website and American flights on American’s website. US Airways travelers will check in at US Airways ticket counters, American passengers at American’s ticket counters, even if they are in different terminals.

The first wave of changes for travelers will start after the holiday travel crush. On Jan. 7, some reciprocal benefits will kick in for members of the airlines’ frequent-flier programs.

The first change most travelers will notice, in Phoenix at least, happens in mid-February, when the airlines will combine their operations at Sky Harbor International Airport. American Airlines, which has fewer than two dozen daily flights out of Phoenix compared with more than 250 for US Airways, will move to Terminal 4, US Airways’ longtime home.

It will be one of the first airports to have joint US Airways-American operations.

Also in February, travelers will be able to book US Airways and American Airlines flights on American’s website, aa.com.

“That will be significant from a customer’s perspective,” Kirby said. “That’s the first time we’ll be able to start connecting customers.”

Sometime early next year, the airlines plan to sync their fee policies, in-flight meal and drink service, seating layout and more, so that they appear more like one airline to passengers despite different names on the planes.

“There literally are hundreds of issues, down to things like what kind of coffee you’re going to have and Coke or Pepsi,” Kirby said. “There are those kinds of things we’ll do pretty quickly.”

The airlines have been working on such merger minutiae since the deal was announced in February. They got a couple of unexpected extra months when the federal government filed a lawsuit to block the merger in August. The companies had been hoping to close the deal at the end of September.

What will take longer: fully combining the airline’s frequent-flier programs, switching to a single reservations system and website and painting US Airways planes with American’s paint scheme. American’s planes will need repainting, too, if the new executives running the airline decide on a fresh start. American introduced a new paint scheme and logo in January that drew mixed reactions, and Parker has not committed to keeping it.

“That’s still to be determined,” Kirby said in an interview last week.

US Airways last week sent a letter to charities in Phoenix about the pending merger and said it means “great things for all of our non-profit partners.”

Kelly Balthazor, director of community relations, told the groups that the company plans to keep 2014 charitable contributions and programs at the same level as 2013. She said airline officials will meet with each non-profit partner beginning this month to talk about future programs under the combined airline.

“As we work through our transition, we promise to be open and communicative about any potential changes,” Balthazor said.

David Rousseau, chairman of the Super Bowl Host Committee, said Arizona stands to benefit from the close ties the executive team has to the state. Parker and Kirby have each lived in Arizona since 1995, when they joined America West Airlines here and raised families.

“The personal and professional contacts that reside here, the family contacts that reside here,” he said. “I like our chances in the long run with those types of organic ties or links … Had it been the other way, had American’s senior staff took over, Doug and his group exited stage right, that would have been the worst of all scenarios.”

US Airways executives said moving to Texas won’t cause them to forget Arizona and the mega-airline they developed here. They have pledged to keep a strong corporate presence here though such promises in other mergers have fallen short of expectations. Executives also note that they extended the lease on the corporate headquarters building for five years last fall and have a five-year renewal option.

“I will miss Phoenix,” Kirby said. “I love the mountains. I love being able to go up to Flagstaff. … It’s a great place to live. But this is a fantastic opportunity.”

Despite all of the merger work in the past two years, much of it done this year at American’s headquarters in Fort Worth, Kirby concedes it might take time to get used to saying American Airlines instead of US Airways.

“I haven’t been practicing, but I still occasionally say America West, so I’m sure I’ll screw up plenty,” Kirby said.

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39 airlines in the US got together and went to the Supreme Court to block the merger, citing unhealthy competetion. However, it was turned down by Supreme Court Judge Ruth Ginsburg.

Supreme Court rejects attempt to block AA-US Airways merger

Bart Jansen, USA TODAY9:58 a.m. EST December 8, 2013

Supreme Court Justice Ginsberg rejects appeal to block the merger that is set to close on Monday.

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The Supreme Court has rejected a request to block the merger of American Airlines and US Airways, which is scheduled to close Monday.

Justice Ruth Bader Ginsburg rejected the request late Saturday from a group of 39 airline passengers who argued that the merger would hurt consumers by reducing competition.

The 28-page filing by New Jersey lawyer Gil Messina cited a Government Accountability Office report in June that 53 million passengers would be affected by the merger eliminating competition in 1,660 pairs of cities.

“It is, plaintiffs respectfully submit, clear that the proposed merger, if not stayed, will result in irreparable harm due to the lessening of competition and the elimination of a competitor,” the request said.

The request came the same day the 2nd U.S. Circuit Court of Appeals rejected the request to halt the merger of what would become the world’s largest airline.

A U.S. Bankruptcy Court judge had approved the merger after the Justice Department settled its lawsuit that attempted to block the merger, under an agreement with the airlines to give up limited slots for landings and takeoffs at Washington’s Reagan National airport, New York’s LaGuardia airport and a handful of other airports.

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The merger and creation of this goliath airlines is part of US carriers rationalising the huge air travelers  market for the country with the largest economy. In 2012, the US air travelers market saw 1,129 million passenger-miles flown, comprises of 570 million for domestic and 559 million international generating an operating income of USD196 billion.

In all, the US air travelers market record 672 million passengers for domestic and 92 million passengers for international sectors through 8.44 million domestic flights and 822,500 international flights. Interestingly, the load factor for domestic flights stand at 83.38% where as for the international flights at 81.52%.

What is interesting is that US carriers made USD2 billion in net income for the domestic routes but lost money in Latin, Trans-Atlantic, Trans-Pacific and international sectors. The worst in Trans-Atlantic, where an aggregated net loss of USD 1.13 billion is recorded.

Even expansion is in agenda post merger, it is expected that the resources before this accorded to the two separate airlines like gates in the airports served would have to be rationalised and some be assigned for other carriers.

Published in: on December 10, 2013 at 02:54  Comments (5)  

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5 CommentsLeave a comment

  1. A quick one – a question or two: any effect on Tony Fernandez’s airlines (plural innit?) They operating low cost, too, and in same sectors of operation?

    I note they say, “Those slots were intended for low-cost carriers such as JetBlue and Southwest Airlines, in order to keep prices low for consumers who might be hurt by the increasing consolidation in the US airline industry.

    Will be back when free.

  2. I Googled the Bloomberg report on this subject. What is noteworthy are the following:

    – the new American Airlines CEO, Doug Parker, is seeking US$1 billion in new revenue and savings.

    – he has agreements with the AAL unions to ensure labour peace and predictable costs.

    – quote from Scott Kirkby, AAL president: “What investors care about is our financial performance. I feel pretty confident we can deliver again.”

    – quote from Savanthi Syth, an analyst at Raymond James Financial Inc: “They (AAL) are in a good position….they have their own merger experience and they’ve watched what’s worked for others. They will be a formidable competitor.”

    Closer to home, what can MAS learn from this? It’s about tight cost controls, cost savings, new revenue and financial performance.

    Does MAS have what it takes to be able to compete effectively and profitably in the ultra-competitive global airline industry?

    Even SIA is feeling the heat from the Gulf carriers in the premium full-service market and from low-cost carriers in the bread-and-butter market.

  3. Govertment have issue 3 more licence for Airline to operate in Malaysia.One to Syed Mokhtar to be operated from Sinai and another two for Halim Mazmin and Tahira air,a shareholder link to top UMNO leader.
    The govertment had issue AOC to Malindo air because they were vary upset with Air asia and Tony.

    The customers will benefit but MAS will incurred more loses.

  4. Malaysia Airlines Fleet Details and History

    http://www.planespotters.net/Airline/Malaysia-Airlines

    AirAsia Fleet Details and History

    http://www.planespotters.net/Airline/AirAsia

    • Very good.

      Now what about SIA’s fleet details and history?

      Ditto for Emirates?

      Do you think that MAS’s many times postponed fleet expansion plans is going to pose a threat to the likes of SIA and Emirates, or even Cathay Pacific?

      MAS makes a big deal of ordering B737-800 aircraft.

      Emirates and SIA are ordering multiple units of B777s, B787s, A350s and A380s.

      Let’s acknowledge a fact – MAS doesn’t have the firepower and management skills to play in the big leagues of the airline industry.

      The MAS unions, and their supporters in the political arena and the blogosphere, are whistling in the dark and hoping, let’s face it, for another government bailout.

      In the mean time, they have conveniently gone into finger-pointing and targeted AirAsia as MAS’s bête noire and enemy.

      What has MAS contributed to making KLIA a major regional air hub that is able to compete toe-to-toe against Changi Airport, Hong Kong International Airport, Incheon International Airport and Narita Airport?

      If anything, MAS is dropping unprofitable routes and focussing more on the region.

      And, by default, Malaysians will transit in Changi Airport to catch their international flights.

      Do the MAS unions even realise this?


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