American Airlines and US Airways Group, Inc. (NYSE:LCC) are in final talks on a merger that is likely to come out in the coming week, surpassing government objections on acquisitions in the industry.
As a result of this merger, the nation’s biggest airline would step into the market in the form of a gigantic international competitor in the domestic network.
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According to the terms of the deal, that is still being finalized, US Airways Group, Inc. (NYSE:LCC) Chief Executive Doug Parker would become CEO, while AMR’s Tom Horton would serve as non-executive chairman of the board until spring of 2014, when the combined company holds its first annual meeting, the sources said.
The deal would employ 94,000 people, fly 950 planes, operate 6,500 daily flights in nine major hubs, and generate total sales of about $39 billion.
Despite of its healthier and profitable results, a merger of this kind generally results into a cut in service to many smaller cities around the county and less competition and therefore higher ticket prices, as well as possible job losses
“The best outcome is preserving as many of those 7,000 jobs as we can,” said Jim Farm, VP of Tulsa Chamber.
Reuters wrote that the all-stock merger is anticipated to value the consolidated stock between $10.5 billion and $11 billion, and would give AMR creditors 72 percent of the ownership in the new company.
US Airways, based in Phoenix, Philadelphia and Charlotte, has lost a total of $1.3 billion since 2008. However, comparing its previous profit margin of 4.6% to its 2012 profit, a total of $637 million looks like an improvement over 2011’s $71 million profit and 2010’s $502 million net.
This deal is also expected to put a stop on the consolidation spree that every other industry player had been following lately. The New York Times wrote that a total of 5 mergers have been announced since 2001, cutting airlines to three main carriers only.
AMR and US Airways Group, Inc. (NYSE:LCC) declined to comment.