US Airways Shareholders Give Go Sign to Merger with American Airlines

Andrew Klips |

The merger between US Airways Group, Inc. (LCC) and American Airlines parent AMR Corporation (AAMRQ) that would create the world’s biggest airline got a step closer to realization on Friday as US Air reported shareholder approval of the deal.  US Airways made the announcement from what could be its last shareholder meeting, being held in New York City.

The $12.8-billion stock deal was first announced in February, with expectations that the transaction would be completed by the end of September.

US Air said that of 132,788,060 votes received, representing over 99 percent of LCC stock, 132,273,780 voted in favor of the merger.  257,757 voted against and 256,523 abstained.

"By bringing together two highly complementary networks and generating significant revenue synergies, the new American Airlines will deliver enhanced value for its shareholders,” said Doug Parker, chairman and chief executive of US Airways.  Upon completion of the merger, Parker will be seated as CEO of the combined company.  AMR’s current CEO, Tom Horton, will assume the role of nonexecutive chairman of the merged company, at least for a short period.  The merged company will be headquartered in Dallas-Forth Worth and keep the American Airlines name.

It’s estimated that the large carrier will operate 950 aircraft, employ more than 100,000 employees and offer in excess of 6,700 flights daily to 336 destinations in 56 countries.

The deal still has to win approval of several other antitrust authorities, including the U.S. Department of Justice, the European Union and the bankruptcy court overseeing AMR Corp.’s restructuring.  Overrun by debt and unable to secure a cost-cutting labor agreement, AMR filed for Chapter 11 bankruptcy protection in November 2011.  A federal judge has scheduled a hearing for August 15 to finalize the AMR plan to emerge from bankruptcy.

The merger will give AMR creditors 72 percent of the new company, leaving current US Airway shareholders with 28 percent.

The Justice Department has in the recent past approved the mergers of Delta Air Lines Inc. (DAL) and Northwest, Southwest Airlines Co. (LUV) and Air Tran and United Airlines (UAL) and Continental.  To that end, most expect the American/US Airways deal to go through.

There has been speculation that the US DOJ may want the new American Airlines to give up some of its takeoff and landing slots at Reagan National Airport outside Washington, D.C.  Parker has said he doesn’t think that will be a requirement.  In 2010, the DOJ made Continental sell slots at its Newark, New Jersey hub to Southwest as a contingency to approval in the merger deal with United.

Protestors, including members of the Service Employees International Union wanting higher pay for airport workers, gathered outside building where the US Airways meeting was being held.

Shares of AAMRQ have put together a strong climb in 2013, appreciating more than 500 percent.  At 2013 highs of $7.15, shares were up a whopping 800 percent in May.  With today’s news, shares have inched up 2 percent to $4.96 halfway through the trading day.  Shares of LCC are up by 2 percent as well at $17.76, putting shares ahead about 40 percent so far in 2013.





DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
BMCBF BMO Short Corporate Bond Index ETF Unit 11.30 0.00 0.00 0
DAL Delta Air Lines Inc. (DE) 43.50 -0.13 -0.30 7,601,129
LUV Southwest Airlines Co 42.53 -0.27 -0.63 4,441,164
UAL United Continental Holdings 45.13 0.14 0.31 3,650,347

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