AMR, U.S. Airways in $11B Merger Pact

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Published February 14, 2013

| FOXBusiness

American Airlines parent AMR and U.S. Airways (LCC) revealed plans to merge Thursday in a deal that would create the world’s biggest carrier with a value of roughly $11 billion.

AMR has been in Chapter 11 bankruptcy since November 2011, and the tie-up has been in the works since last year. The board of directors of both companies unanimously approved the deal. However, it will still be subject to regulatory, bankruptcy court and creditor approval.

The new airline, which will fly under the name American Airlines, is expected to edge out United Continental (UAL) to be the biggest U.S. carrier by passenger miles. It will offer 6,700 flights a day to 56 countries, the airlines said in a release.

U.S. Airways CEO Doug Parker will serve as the new chief executive for the combined entity. Meanwhile, AMR CEO Thomas Horton will serve as chairman of the board of directors.

“We are proud to launch the new American Airlines – a premier global carrier well equipped to compete and win against the best in the world,” Horton said in a statement. “Together, we will be even better positioned to deliver for all of our stakeholders, including our customers, people, investors, partners, and the many communities we serve.”

Under the agreement, U.S. Air shareholder will own 28% of the new company, and AMR stakeholders will hold 72%. The companies expect to take a $1.2 billion one-time transaction charge spread over three years.

Rothschild served as AMR’s financial advisor, with Weil, Gotshal & Manges, Jones Day, Paul Hastings, Debevoise & Plimpton and K&L Gates providing legal advice. Barclays (BCS) and Millstein & Co. gave U.S. Air financial advice, with Latham & Watkins, O’Melveny & Myers, Cadwalader, Wickersham & Taft, and Dechert providing legal counsel.

Shares of U.S. Air jumped 1.6% in pre-market trading.

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