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American Airlines and US Airways complete merger

American Airlines officially emerged from bankruptcy, closing a blockbuster deal with US Airways to become the world's largest airline.

The parent companies of the two airlines, AMR Corp. and US Airways Group Inc., formally became American Airlines Group Inc., with common shares traded on Nasdaq under the symbol AAL. The new airline will be based in Fort Worth.

Doug Parker, the former chief executive of US Airways, takes over as executive of the new American Airlines, with American's chief executive, Thomas Horton, becoming chairman of the board. The merger means that nearly 70% of the nation's domestic air traffic is carried by four airlines — American, United, Delta and Southwest.

And the stock market seems to approve.

On the first day that stock was offered for the new airline, shares opened at $23.95 and surged 65 cents, or 2.7%, to $24.60.

It is expected to take as long as two years before the employees and planes for the two carriers operate as one under a permit from the Federal Aviation Administration. At Los Angeles International Airport, US Airways is expected to eventually move from Terminal 1 to Terminal 4, where American operates, airline officials said.

For now, the two airlines will operate separate websites and reservation systems. By early January, passengers will be able to earn and redeem miles when traveling on either carrier, as well as reciprocal American Admirals Club and US Airways Club benefits.

Together, the two airlines are expected to offer nearly 6,700 daily flights to more than 330 destinations with about 950 planes and employ more than 100,000 workers.

The merger has the support of most major labor groups, including the Assn. of Professional Flight Attendants, which represents 16,000 attendants at American Airlines and faced an uncertain future after AMR Corp. filed for bankruptcy in 2011.

"Christmas has come early for the APFA," union President Laura Glading said. "It's been a long, tough slog, but today our hard work has paid off."

But US Airways workers represented by the International Assn. of Machinists and Aerospace Workers have been without a contract for more than two years and had threatened to oppose the merger until a contract is negotiated.

When the merger was announced 11 months ago, the value of the two carriers combined was estimated at $11 billion, based on their stock prices at the time. But according to the equity distribution plan announced last week, the value has soared to nearly $18 billion.

Analysts say the merger should put the new airline in a better position to compete with rivals such as Delta Air Lines and United Airlines, both of which grew through mergers of their own in the last five years.

"Prospects are excellent that newly minted American Airlines Group under now former US Airway's management will generate convincing, sustainable improvement in revenue and profits," Vicki Bryan, senior bond analyst at Gimme Credit, an independent research service on corporate bonds, said in a report Monday.

The biggest challenge facing the two airlines may be combining the reservation and frequent flier loyalty programs, industry experts say. About a year ago, computer problems grounded flights across the country as United Airlines merged its reservation system with that of Continental Airlines.

"I hope this will go more smoothly than some of the other mergers have gone," said Robert Mittelstaedt, dean emeritus of the W. P. Carey School of Business at Arizona State University.

hugo.martin@latimes.com

Copyright © 2014, Los Angeles Times
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