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Biggest airline set to be airborne

New York, Feb. 14 (Reuters): American Airlines and US Airways Group said they planned to merge to form the world’s biggest airline with a combined equity value of $11 billion.

The widely expected merger caps a wave of consolidation that has helped put the US airlines on more solid financial footing.

The merged airline will be majority owned by creditors, unions and employees of American parent, AMR Corp, which filed for Chapter 11 bankruptcy in November 2011.

The airline — to carry the American Airlines name —will be 2 per cent larger than current No. 1 United Continental Holdings Inc in traffic, as measured by the number of miles flown by paying passengers worldwide.

“By utilising American’s connecting network with penetration into smaller markets, and global alliance revenues, the new company could more effectively raise revenues and reduce costs, while addressing labour integration and capital problems,” Sterne Agee & Leach analyst Jeffrey Kauffman said before the deal was announced on Thursday.

The new American will be based in Dallas-Fort Worth and will be headed by US Airways chief executive Doug Parker, who has long advocated industry consolidation. US Airways began its pursuit of a merger in early 2012.

Tom Horton, who became AMR’s CEO when it filed for bankruptcy, will serve as chairman through its first annual meeting of shareholders, after which Parker will take over.

Horton’s role had been one of the last sticking points for a deal, people familiar with the situation have said, with AMR’s board pushing for a bigger role on his behalf.

The merger, subject to approvals from regulators and the US Bankruptcy Court, could help speed up the recovery of the US airline industry as carriers will get more room to boost fares as yet another competitor is eliminated.

Passengers of US Airways and American would gain access to new destinations.

 
 
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