5 Things to Know About the American Airlines, US Airways Merger
Image credit MyFoxPhoenix
Step aside Delta, United and Southwest Airlines: those three carriers, respectively, may be the current largest airlines in the country by passenger volume and the number of destinations, but each is soon to be moved down a peg as a new company ascends to the number one spot. The long awaited and hotly debated merger deal between American Airlines and US Airways has finally been given the go-ahead by the Justice Department. After the merge is complete, the companies plan to operate under the American Airlines name, and, by some metrics, will do so as the largest airline on earth.
5 Last Year American and US Air Carried More Than 190 Million Passengers
American Airlines alone reported “enplaning” more than 107 million passengers in 2012, domestically and internationally. US Airways handled more than 82 million travelers. That would suggest the merged airline will see upward of 200 million enplaned passengers next year, if the trends of increased air travel we have seen over the past several years continue.
4 New Company Will Be Valued at More Than $16 Billion
The estimated value of the new American Airlines, as the company formed by the American Airlines/US Airways merger will be called, will be worth more than $16 billion according to expert estimates based off current stock prices and potential value in the future. The merger will take many months and potentially even years to complete, but it will ultimately result in a massive and valuable corporation.
3 Stock Prices of Many Airlines Lifted on News of the Merger Approval
The stock price of US Airways only rose a few cents after word that the D.O.J. had given the OK for the proposed merger and would drop its looming lawsuit. Shares of American Airlines leaped all the way from $2.43 a share up to nearly $12 each. Of greater note, though, were the rising stock prices of other airlines. Several lower cost carriers, the regular competition of these merging “legacy” airlines, might benefit from the deal, and are certainly doing so in the short-term: Southwest and JetBlue both saw increased share value after the announcement of the deal.
2 The New Mega Airline Will Actually Have a Smaller Presence in Some Locations
In order to secure the approval of the Department of Justice, American and US Air had to agree to shrink their footprint(s) at plural airports. The key locations that had regulators concerned were Washington D.C.’s Regan National Airport and New York’s LaGuardia, two of the country’s busiest air travel hubs, and both locations with limited slots and no room to grow. The merged airline will relinquish a portion of its takeoff and landing “rights” at these locations and will allow other airlines more access, thus avoiding monopolizing the prime real estate. The new company will also relinquish space in Chicago, Los Angeles, Dallas, Miami and several other key spots.
1 American Airlines Is Currently Bankrupt
The merger between American Airlines and US Airways is unprecedented not only in that it will create the world’s biggest airline, but also for being one of the largest deals in which one entity is currently bankrupt. This merger is in fact partially a strategy American Airlines is using to exit Chapter 11 bankruptcy, a state in which it has existed since filing in late November of 2011. The merger plan was announced in February of 2013, the DOJ filed suit in August, and now, with a deal in place between the Justice Department and the corporations, the new American Airlines looks set to soar out of bankruptcy and into dominance.