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American Airlines/US Airways Merger Edges Forward

16 may 2013 - News - Editor

The American Airlines/US Airways merger moved a step closer to completion, when US Judge Sean Lane signed off on the proposed agreement to merge the two airlines, thereby creating the largest airline in the world, one that will have more than 100,000 workers in its employ. The signing off of the agreement came more than six weeks after Judge Lane heard the motion in a hearing during which he rejected the proposal to hand AMR Corporation CEO Thomas Horton a severance package of $20 million.

The agreement would see Horton step down as CEO of the new company, making way for US Airways CEO Doug Parker to take the reins. An objection to the hefty payout was raised by US Trustee Tracy Hope Davis on the grounds that it violates bankruptcy law limiting severance packages to executive management of bankrupt companies. Judge Lane agreed, noting that another agreement could be reached between Horton and the new post-merger company at a later stage. It’s been reported, however, that American Airlines is continuing to push for the severance to be included in the bankruptcy reorganization plan. A hearing for American Airlines to present its reorganization plan has been scheduled for June 4, after which time the airline will have sixty days to obtain approval of the deal from creditors. Despite what may seem to be a setback, American Airlines officials are confident of officially merging with US Airways by the end of September 2013.

Meanwhile a study released by the Consumer Travel Alliance is calling on antitrust regulators to investigate what effect the merger will have on competition for both connecting and nonstop flights. The study notes that up to 30 percent of US Airways’ connecting routes and 40 percent of American Airlines' connecting routes have overlap, so whereas in the past passengers would have had a choice of two airlines and competitive pricing, now there would be no choice but to use the new merged airline and pay the asking price for fares. US Airways spokesman Todd Lehmacher asserts that the new airline plans to maintain existing hubs of both airlines, with an expansion of service resulting in more choices and better service for customers.

 


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