US Airways Shareholders Approve $11 Billion Merger With AMR
The all-stock tie-up, which will create the world’s largest airline, was backed by more than 99 percent of shares voted at the company’s annual meeting in New York, US Airways said in a statement. Its stockholders will own 28 percent of the combined carrier, with the rest going to creditors in AMR’s bankruptcy.
The new American will have the heft to compete with United Continental Holdings Inc. and Delta Air Lines Inc., which also were created in a wave of consolidation that began in 2005 and swept up five of the 10 biggest U.S. carriers. American and US Airways expect to complete their merger this quarter, in conjunction with AMR’s exit from bankruptcy protection.
Previous mergers “created three airlines that are larger than US Airways and make it very difficult for airlines like US Airways and American Airlines to compete with our relatively smaller networks,” Chief Executive Officer Doug Parker said at the meeting. “The merger of US Airways and American eliminates this competitive disadvantage.”
An exchange ratio for shares of Tempe, Arizona-based US Airways in the merger hasn’t been set. US Airways gained 1.1 percent to $17.56 at the close in New York. The stock has risen 30 percent this year, as the Bloomberg U.S. Airlines Index advanced 42 percent.
The combination must be approved by the court overseeing AMR’s bankruptcy and by the U.S. Justice Department, which is assessing whether it will create a monopoly in any markets. Federal regulators won’t issue a decision before an Aug. 15 hearing at which Fort Worth, Texas-based AMR will seek court approval for its reorganization plan, people familiar with the matter said last month.
US Airways still expects to receive antitrust approval this quarter, Parker said. The combined airline’s position at Reagan National Airport in Washington, where the number of flights is limited, has been the focus of objections from competitors such as JetBlue Airways Corp. and Southwest Airlines Co.
While the merged American will control 67 percent of daily departures from Reagan, that amounts to only 50 percent of seats flown at the airport and 25 percent of seats in the larger Washington market that also includes Baltimore-Washington and Dulles airports, Parker said.
“Our competitors are using all the force they can to force us to divest” flight slots at Reagan, he said in response to a shareholder question. “It may be that someone decides, as a matter of policy, that it’s something they think makes sense. We would argue that’s terrible policy.”
The merger will produce annual savings and new revenue totaling more than $1 billion by 2015, the airlines have said. The combined airline will displace United Continental as the largest carrier, based on passenger traffic, and will operate more than 6,700 daily flights.
The US Airways shareholder vote represents “continued progress on our path toward building the world’s leading airline,” said Mike Trevino, a spokesman for American.
The new airline will keep American’s name and its Fort Worth headquarters. US Airways executives will hold the top leadership positions. AMR CEO Tom Horton will serve as chairman until the combined airline’s first annual meeting.
US Airways began pursuing a merger with American within months of the larger carrier’s Nov. 29, 2011, bankruptcy filing. After building support for the combination among American’s unions and creditors, the two airlines announced a merger agreement on Feb. 14 this year.
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