U.S. Airways, American Airlines Deal on Tap

Airplane, dusk
Airplane, dusk

An $11 billion merger between bankrupt AMR Corp., parent of American Airlines, and U.S. Airways Group Inc. (NYSE: LCC) could be concluded as early as this week, according to sources cited at Reuters.

The deal would make the merged company the world's largest airline, and it would be the last of the major consolidations among U.S. air carriers. Delta Air Lines Co. (NYSE: DAL) merged with Northwest Airlines in 2008 and United and Continental merged in 2010 to form United Continental Holdings Inc. (NYSE: UAL), currently the world's largest airline.

The U.S. Airways-American talks have reportedly been focused on valuation and management. According to Reuters, U.S. Airways' CEO would become the CEO of the merged company, and the current American Airlines CEO would become nonexecutive chairman until the new company holds its first annual meeting, sometime in 2014.

Will this merger be any smoother than the ones that formed Delta and United Continental? Not likely. After two years, United and Continental only recently managed to get the reservations systems united, and merger costs have been much higher than expected. The Delta-Northwest deal was not significantly smoother.

So, when the American-U.S. Airways deal is done, expect at least a couple of years of turbulence before the company finds smoother air.

Filed under: 24/7 Wall St. Wire, Airlines Tagged: DAL, LCC, UAL