The $11 billion merger combining US Airways and American Airlines (AMR) has the companies expecting higher revenues amid concerns about airfares.
Announced on Valentine's Day, the deal creates the largest airline in the world with a total of 6,700 daily flights to 336 destinations in 56 countries.
As a single entity operating under the American Airlines name, the companies become one of four major airlines controlling over 70 percent of the US market.
United Continental, Delta Air Lines, and Southwest Airlines fill the other top spots. And the new American expects $900 million in additional revenues to come from its competitors’ corporate clients choosing to change planes.
US Airways CEO Doug Parker will lead with AMR CEO Tom Horton as chairman until the new company’s first shareholder meeting in mid-2014. In a statement Parker said, "Our combined network will provide a significantly more attractive offering to customers."
Specifics on the new company’s offering will not be known for some time. AMR has been in bankruptcy since November 2011. The merger must be approved by the bankruptcy judge and anti-trust officials.
Approvals from both entities are expected to allow the deal to finalize in the third quarter of 2013 with the full merger process taking at least 18 months to complete. But that is not slowing speculation from all sides.
Business customers are concerned about changes to routes, connecting hubs, and frequent flyer programs. And some industry observers fear fuel prices and fierce competition could make this, the seventh airline merger since 2005, the catalyst for serious ticket price spikes.
While some change is undoubtedly inevitable, the companies being combined have few overlapping routes. Parker says both company’s hubs and destinations will probably be kept, and frequent flyer miles for either carrier will carry over to the new company.
But ticket prices in cities like New Orleans where the two companies’ current flights do overlap may decrease because of demands from the US Justice Department. Many expect the new American to be forced to release slots in airports in which its position is too dominant. The goal would be to reduce harm to customers and the result would be increased competition.
And with both airlines running New Orleans routes along with the other three airlines in what is being dubbed the Big Four, forced competition could benefit customers heading to and from the Crescent City.
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