AMR, US Airways merging to make world's largest airline 

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By NBC News staff and wire reports
A US Airways plane (foreground) taxis past an American Airlines plane at the Ronald Reagan Washington National Airport in Arlington County, Virginia, in this file photo taken February 10, 2013.MIKE THEILER / Reuters

After a long and often painful courtship, American Airlines and US Airways are headed for the altar in a merger deal that would create the world's largest airline and change the face of the domestic airline industry.

The airlines' boards officially announced the deal early Thursday, after news of the merger leaked widely Wednesday night. The new airline will be named American Airlines in homage to a brand that has fallen on harder times recently but is still widely recognized around the nation and the world.

But it will be run by US Airways CEO Doug Parker, who relentlessly pursued the merger even as AMR Corp., the parent company of American Airlines, was reorganizing in bankruptcy. The two carriers valued the deal at $11 billion.

The merger, if approved by American's bankruptcy judge and by federal regulators, reduces the number of major airlines in the United States to four: The new American Airlines (the largest); United Airlines; Delta Air Lines; and Southwest Airlines. Combined, the four control about 70 percent of the domestic air travel market.

The merged airline will offer more than 6,700 daily flights to 336 destinations in 56 countries.

While passengers are unlikely to notice any changes at first, eventually the merger likely will mean higher fares, especially for business travelers under certain conditions.

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Related story: 5 things the American Airlines-US Airways merger means for you

American has been in bankruptcy since November 2011. The boards of the two aviation giants approved the deal Wednesday night, people familiar with the matter said.

The all-stock merger would finalize the consolidation of legacy U.S. air carriers that helped put the industry on a more solid financial footing.

AMR's bankruptcy creditors will own 72 percent of the combined airline, which will be based in Fort Worth, Texas. US Airways shareholders will own the rest.

The board approval came after AMR's unsecured creditors committee, which includes all three of AMR's major unions, met earlier on Wednesday to approve the proposed merger agreement, according to people familiar with the deal. The merger came after AMR initially rebuffed US Airways' overtures months ago. But US Airways persisted, winning over creditors and unions to finally land its larger rival.

The merged company will have a board of 12 members: four from US Airways including its chief executive Doug Parker, three from AMR including chief executive Tom Horton and five to be designated by the AMR creditors, two of the people said.


That will shrink to 11 members in 2014 after Horton steps down following the combined company's first annual meeting, the person added. Parker becomes chief executive of the new airline.

AMR's unsecured creditors are expected to be made whole on their claims in the form of stock in the merged company and also get accrued interest, the people said. AMR's shareholders will get a small equity stake as well, they added.

The deal comes more than 14 months after the bankrupt parent of American Airlines filed for bankruptcy, and would mark the last combination of legacy U.S. carriers, following the Delta-Northwest and United-Continental mergers.

A tie-up with US Airways would create the world's top airline by passenger traffic and help American and US Air better compete with United Continental Holdings and Delta Air Lines .

The $11 billion valuation of the combined American-US Airways compares to the roughly $12.4 billion market capitalization for Delta, and $8.7 billion for United Continental.

Customers can continue to book travel as well as track and manage flights and frequent flyer activity through AA.com or USAirways.com. At this time, there are no changes in the frequent flyer programs of either airline. All miles on either airline will continue to be honored.

The Associated Press, CNBC and Reuters contributed to this report.