US Airways CEO Says Mergers Herald Returns to Investors
Doug Parker, poised to run the world’s biggest carrier after the pending merger of US Airways Group Inc. (LCC) and American Airlines (AAMRQ), said consolidation will create a stronger industry able to provide returns to investors.
The airline formed in the American-US Airways combination will have a broad enough network to compete with larger rivals United Continental Holdings Inc. (UAL) and Delta Air Lines Inc. (DAL), Parker, now US Airways’ chief executive officer, said today in an interview set to air on Bloomberg Television’s “Street Smart” with Adam Johnson.
Putting American and US Airways together will leave just three major U.S. carriers with domestic and international routes, down from seven in 2000. The merger, announced on Feb. 14, will close as American exits bankruptcy protection in this year’s third quarter.
“This isn’t an industry that’s ever been able to meet its return on capital,” said Parker, 51. “Investors are demanding that and we need to go do it. We have the structure we need to go do that and have a very competitive industry that could also provide returns to investors. We are committed to doing that.”
While the Bloomberg U.S. Airlines Index (BUSAIRL) surged 40 percent in the 12 months that ended March 1, investors also have been battered in recent years by airline losses and bankruptcies. The index tumbled 53 percent from the end of 2006 through 2009, more than twice the 21 percent drop for the Standard & Poor’s 500 Index.
United and Delta were among the carriers restructuring in court last decade, setting the stage for mergers that vaulted them past American into the top spots in the global industry by passenger traffic.
American, the third-biggest U.S. carrier, and No. 5 US Airways are assembling a transition team from both companies that will focus on how to integrate operations, Parker said.
The combination still must win approval from AMR’s bankruptcy judge, shareholders of Tempe, Arizona-based US Airways and federal regulators. The merged airline will keep American’s name and its Fort Worth, Texas, headquarters and retain all seven hubs.
“They fit together perfectly,” Parker said. “We have a very strong East Coast presence where American had a hole, and we fill that hole very capably.”
Annual savings and new revenue from the merger should total more than $1 billion by 2015, the airlines said. US Airways also will spend about $400 million to bring its employees up to American’s pay rates.
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