A new chapter was added to the merger story of
US Airways Group Inc.
) and American Airlines Inc, a subsidiary of AMR Corporation, as
U.S. Bankruptcy Judge Sean Lane gave his green signal for the $11
billion unification. The judge in the Manhattan courtroom turned
down the application of a planned $19.9 million severance for Tom
Horton, the outgoing CEO of AMR.
DELTA AIR LINES (DAL): Free Stock Analysis
US AIRWAYS GRP (LCC): Free Stock Analysis
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Horton's severance package - that was to be paid in cash and
stock on an equal share basis - was opposed by the U.S. Trustee
on grounds of violating bankruptcy laws.
However, the merger of the two aforesaid airlines - which will
create the largest global carrier - will take around six months
for completion as it is pending approvals from antitrust
regulators of the Department of Justice and US Airways
Fort Worth, Texas based AMR Corporation filed for bankruptcy in
Nov 2011, citing unmanageable labor issues that drastically
increased the company's expenses. Repetitive attempts on part of
the airline to solve the problem by negotiating with the
unionized workforce proved futile.
In mid Feb, the board of directors of US Airways Group and AMR
Corporation gave a nod to the pending merger agreement. Following
the completion of the deal, AMR stakeholders will control 72%
interest of the new entity, while the remaining 28% will be owned
by US Airways shareholders.
The newly formed airline - American Airlines Group Inc. - is
expected to have nearly 6,700 flights daily and generate annual
revenue of roughly $40 billion. Headed by US Airways chief
executive Doug Parker, the combined company will also dethrone
United Continental Holdings Inc.
) from its current status of being the carrier of the highest
number of passengers.
Mergers have played an important role in shaping the present
scenario of the airline industry in U.S. This is evident from the
past three-mega mergers - Northwest Airlines and
Delta Air Lines Inc.
) in 2008, United Airlines and Continental Airlines in 2010, and
AirTran Holdings and
Southwest Airlines Co.
) in 2011. All the three companies - Delta, United and Southwest
- hold commanding positions within the industry and are the
long-term beneficiaries on both capacity and cost fronts.
Currently, Delta, United and Southwest carry a Zacks Rank #3
(Hold), while US Airways has a Zacks Rank #4 (Sell).