American Airlines (Dallas/Fort Worth) new incoming CEO, Doug Parker of US Airways (Phoenix), is facing his biggest professional challenges of his airline career as the merger of American Airlines and US Airways moves to the final stages. For Doug, he is actually returning to AA. Doug was at the old American Airlines from 1986 to 1991 where he served under former CEO Robert Crandall.
This article by the Star-Telegram outlines the challenges Doug is now facing at the new AA as he prepares to take the leadership role in the day-to-day operations. The new world’s largest airline is facing many challenges as it integrates again two airlines. Critics will argue that Doug has failed to fully integrate America West Airlines (Phoenix) with the old US Airways (Washington). Today the current US Airways still operates as two airlines with East and West divisions with separate contracts, crews and aircraft. Now Doug will have to integrate three airlines into one.
The good news is Parker has already negotiated conditional labor agreements with AA’s three largest unions.
Read the full article: CLICK HERE
Copyright Photo: Michael B. Ing/AirlinersGallery.com. Doug is probably going to have to accept the new American look due to the already large number of repainted AA aircraft and the on-going “new look” advertising campaign. This effort by the current AA management has probably already settled the decision on what AA will look like going forward even though this livery is not Doug’s design. It will always be known as out-going CEO Tom Horton’s livery. American’s Boeing 737-823 WL N973AN (msn 29548) climbs away from the runway at Los Angeles International Airport in the new look.
AMR Corporation (American Airlines) (Dallas/Fort Worth) today issued this statement:
Today, the U.S. Bankruptcy Court for the Southern District of New York approved the settlement of the lawsuit reached with the U.S. Department of Justice (DOJ) and certain states relating to the merger of AMR Corporation and US Airways Group, Inc. (US Airways). The court also ruled that the merger may be consummated despite the pendency of a private antitrust lawsuit. As a result of the Court’s rulings, AMR Corporation, the parent company of American Airlines, Inc., today filed with the U.S. Bankruptcy Court for the Southern District of New York a notice that the proposed effective date of the Plan of Reorganization will be December 9, 2013.
Consummation of AMR’s Plan of Reorganization and the merger of US Airways Group, Inc. with and into a subsidiary of AMR Corporation is planned to be completed prior to the securities markets opening on December 9, 2013. Assuming this expected schedule, the last day of trading of all outstanding securities of AMR, including the common stock trading under the symbol “AAMRQ,” and the common stock of US Airways Group, Inc. (Phoenix) will be December 6, 2013.
Upon the anticipated closing of the merger on December 9, 2013, AMR Corporation will be renamed American Airlines Group Inc., with its common stock to be listed and traded on the NASDAQ Global Select Market under the symbol “AAL” and its preferred stock to be listed and traded on the NASDAQ Global Select Market under the symbol “AALCP.”
At the time the Plan of Reorganization becomes effective and the merger closes, each outstanding share of US Airways Group, Inc. common stock will be converted into one share of American Airlines Group Inc. common stock and substantially all pre-Chapter 11 unsecured claims against and outstanding equity securities of AMR Corporation will be satisfied by American Airlines Group Inc. common stock or preferred stock in accordance with the Plan of Reorganization.
This merger will create the world’s largest airline. It will be the end of US Airways as a stand alone company (operating initially under the American Airlines Group until the merger is finally implemented). The top management of US Airways will essentially take over the new American Airlines.
Copyright Photo: Michael B. Ing/AirlinersGallery.com. American’s Boeing 737-823 N922NN (msn 29523) soars away from Los Angeles International Airport.
AMR asks the bankruptcy court to approve the DOJ agreement leading to a merger with US Airways Group
AMR Corporation (American Airlines) (Dallas/Fort Worth) has asked the bankruptcy court to approve the settlement agreement with the Department of Justice (DOJ) permitting it to merge with the US Airways Group (US Airways) (Phoenix) according to this report by Reuters. One group of consumers opposed the merger, otherwise no one is objecting to DOJ settlement according to the AMR lawyers.
Bankruptcy Court Judge Sean Lane said he would offer a ruling in 24 to 36 hours.
If approved, the new merged group would become the American Airlines Group.
Read the full report: CLICK HERE
Copyright Photo: Michael B. Ing/AirlinersGallery.com. The rapid repainting of the American fleet in the new 2013 look has likely hit the “tipping point” that incoming CEO Parker is now unlikely to change due to the delay in getting the merger approval. This livery will probably remain as the color scheme of the “new American” once the merger is completed. The new American is really America West Airlines (due to the ongoing management) doing business soon as American Airlines (formerly US Airways). Boeing 777-223 ER N770AN (msn 29578) climbs away from Los Angeles.
Growing Pains: Will the Merger Result in Higher Fares and Reduced Service?
By Aaron Newman
As I wrote in my previous article, The Department of Justice (DOJ) filed suit in August to stop the proposed merger of American and U.S. Airways on antitrust grounds. The DOJ said the merger, which will create the world’s largest airline, would lead to higher fares for customers and less competition – reducing service to small and medium sized cities. In their suit against the merging airlines, The DOJ claimed the following; “the merger between US Airways and American would likely substantially lessen competition, and tend to create a monopoly, in violation of Section 7 of the Clayton Act.” Will this merger actually create a monopoly or oligopoly resulting in higher fares? Will the travelling public be left to cope with a reduction in service?
With last week’s merger announcement (see this report by Reuters) the US Airways and American Airlines merger has resulted in four airlines; the new American Airlines, United, Delta and Southwest to control nearly 90 percent of the domestic airline market according to this report by NBC News. Some argue that because of supply and demand, together with rising fuel prices the average cost of fares will potentially rise once the merger is fully implemented. The DOJ initially claimed that rising fares will not be alleviated by new carriers or low-cost carriers. “Low-cost carriers are not likely to replace the flights that would be cut after a merger between American and US Airway, and the ones that are left will cost more.”
US Airways effectively competes for travelers today by offering discounts of up to 40 percent for connecting flights on other airlines’ nonstop routes with Advantage Fares. Some industry analysts claim once this merger is completed, the combined airline’s pricing structure will look more like the existing American, Delta and United. As a result, the popular Advantage Fares program will likely be eliminated, resulting in higher prices and less services for consumers.
Most analysts, myself included, praise this marriage as the potential end of major financial turbulence for the largest U.S. airlines. The American-US Airways merger is the latest wave of consolidation that will help return the industry to continued profitability. This report by Reuters explains that with a new, merged airline the public may lose some service, but in the long run we’ll benefit by a stronger, more profitable airline. It shouldn’t surprise if fares went up slightly based on a variety of pricing influences including demand, capacity, and competition. However, the public will benefit more from a stronger merged airline, than the slight fare difference from two stand-alone airlines. Unions at AMR (American’s parent company) and US Airways share this view. The unions have expressed confidence that this deal could reverse years of decline at once-great American, and lift US Airways workers from their below average compensation. “We have the opportunity to transform American into an industry powerhouse.”
Bill Baer, head of the Justice Department Antitrust Division, said in a statement prior to the agreement of this merger that with the end of competition between US Airways and American, the industry will be deprived of a healthy competitive environment. “Both airlines have stated they can succeed on a standalone basis, and consumers deserve the benefit of that continuing competitive dynamic,” Baer said.
“The new American will fly all the routes to all the markets we currently serve,” US Airways Chief Executive Doug Parker told Congress in June. “Where appropriate, we expect to increase such service.” Doug Parker may be a little optimistic with this statement; I project that some cities will lose some routes as the new American will experience growing pains combining nine domestic hubs. Major restructuring will not occur until 2016-2017as part of the DOJ agreement was to maintain all hubs for three years. I do not foresee a situation like Pittsburgh or Memphis, but there will be restructuring in order to grow appropriately. The two hubs that will see the majority of change will be New York JFK and Los Angeles. With the proximity to Philadelphia, slot restrictions, and tough international competition, New York JFK’s potential is limited. I foresee Philadelphia and Charlotte as the primary east coast domestic hubs. Same scenario applies to LAX; tough competition and limited growth opportunities make Phoenix the smartest choice for a west coast domestic hub. These two cities will obviously not be hurt by a reduction in service from American Airlines.
This merger will benefit the new airline, customers, and the industry as a whole. The airline industry is currently on a path to sustained profits, and a stronger merged American Airlines will produce similar results. Profitable airlines benefit customers, employees, shareholders and the cities the airlines serve. Delta Airlines is producing record profits, and United Airlines is near completion of the largest merger to date, American Airlines needed this merger to be a viable competitor to its two larger competitors.
Consumers have benefited from intense price competition in the past; such pricing is not sustainable as past bankruptcies have shown. Going forward, the airlines will likely shift the focus of their competition to service and product offering instead of intense price wars (i.e. industry’s onboard improvements). The combination of American Airlines and US Airways creates a better network than either airline could build on its own. American’s extensive operations throughout the central U.S. from its Chicago and Dallas hubs provide critical coverage where US Airways is undersized. US Airways’ operation in the Northeast does the same for American. New entrants will find their way into any markets that become underserved by this merger. Spirit Airlines has recently found ways to succeed in fortress hubs (i.e. Dallas and Detroit), and JetBlue has an expansive network that will compete in the northeastern US. These ultra-low cost carriers will find opportunities to fill any void that a merger leaves behind. If legacy airlines let fares climb, then smaller competitors (Spirit, Allegiant, Frontier, and JetBlue) will come in and thrive.
Top Copyright Photo: Eddie Maloney/AirlinersGallery.com.
Bottom Copyright Photo: Brian McDonough/AirlinersGallery.com.
US Airways (Phoenix) will offer new nonstop daily service from the airline’s international gateway at Philadelphia International Airport (PHL) to Scotland’s capital city of Edinburgh. For the first time, the airline will operate flights to and from Edinburgh Airport (EDI) on 176-seat dual-class Boeing 757-200 aircraft between May 23, 2014 and October 1, 2014.
The flight schedule is as follows:
|Flight #||Origin||Destination||Dep. Time||
|Start Date||End Date|
|May 23, 2014||Sept. 30, 2014|
|May 24, 2014||Oct. 1, 2014|
*Flight arrives the following day.
With the new service, US Airways will operate 472 weekday departures and serve 118 destinations in the U.S., Canada, Latin America, Mexico, Europe and the Caribbean from Philadelphia International Airport.
Copyright Photo: Bruce Drum/AirlinersGallery.com. Boeing 757-2B7 N200UU (msn 27809) taxies to the runway at the Charlotte hub.
AMR Corporation (Dallas/Fort Worth), whose principal operating subsidiary is American Airlines, Inc. (Dallas/Fort Worth), and US Airways Group, Inc. (Phoenix) today announced that they have applied to list the common stock of the combined company on the NASDAQ Global Select Market. Upon closing of the merger and AMR’s emergence from Chapter 11, the combined company will be renamed American Airlines Group Inc. and will use the ticker symbol “AAL.” Additionally, the common stock of both US Airways Group, Inc. and AMR Corporation will be cancelled and shareholders will receive equity interests in American Airlines Group Inc. per the terms of the Merger Agreement and Plan of Reorganization.
Copyright Photo: Ken Petersen/AirlinersGallery.com. American Airlines’ Boeing 777-323 ER N721AN (msn 31546) prepares to touch down in New York (JFK).
The president of the Allied Pilots Association (APA), certified collective bargaining agent for the 10,000 pilots of American Airlines, issued the following statement in response to news that the Justice Department has settled its lawsuit with American Airlines and US Airways regarding the airlines’ pending merger.
“The Allied Pilots Association leadership is pleased the DOJ and the two airlines have found a mutually acceptable way to address concerns about the merger. As we have said since the lawsuit was filed, this merger is pro-competition,” said APA President Capt. Keith Wilson. “Merging with US Airways will remedy American Airlines’ longstanding network shortfalls and put American on equal footing with Delta and United. With the merger, American will offer travelers a viable alternative to Delta and United.
“Today marks the culmination of an aggressive and unconventional strategy APA began pursuing early last year. Our primary goals were to help ensure American would survive and thrive, thereby ensuring long-term career stability for our pilots. This merger will accomplish both goals.
“With the DOJ settlement, American now has the opportunity to return to a position of industry preeminence. We look forward to working with our colleagues at the US Airline Pilots Association as we shift our focus to negotiating a joint collective bargaining agreement.”
American and US Airways settle with the Department of Justice giving up 52 DCA slot pairs and 17 LGA slot pairs, paving the way towards a merger
AMR Corporation (Dallas/Fort Worth), the parent company of American Airlines, Inc., (Dallas/Fort Worth) and US Airways Group, Inc. (US Airways) (Phoenix) today announced that the airlines have settled the litigation brought by the U.S. Department of Justice (DOJ), the States of Arizona, Florida, Michigan and Tennessee, the Commonwealths of Pennsylvania and Virginia, and the District of Columbia challenging the merger of AMR and US Airways. The companies also announced an agreement with the U.S. Department of Transportation (DOT) related to small community service from Washington Reagan National Airport (DCA).
Tom Horton, chairman, president and CEO of AMR, and incoming chairman of the board of the combined company, said, “This is an important day for our customers, our people and our financial stakeholders. This agreement allows us to take the final steps in creating the new American Airlines. With a renewed spirit, we are about to create the world’s leading airline that will offer, along with our oneworld® partners, a comprehensive global network and service by the best people in the business. There is much more work ahead of us but we’re energized by the challenge and look forward to competing vigorously in the ever-changing global marketplace.”
Doug Parker, chairman and CEO of US Airways, and incoming CEO of the combined airline, said, “This is very good news and we are grateful to all who have made it happen. In particular, we are thankful to our employees, who throughout this process continued to believe in a better future as one airline and who voiced their support passionately and consistently. We also want to thank the elected officials in the states and communities we serve, the business leaders in our hub cities, and the thousands of customers who endorsed and supported this effort. Thank you as well to the U.S. Department of Justice, the state attorneys general and the U.S. Department of Transportation. We are pleased to have this lawsuit behind us and look forward to building the new American Airlines together.”
Under the terms of the settlement, the airlines will divest 52 slot pairs at Washington Reagan National Airport (DCA) and 17 slot pairs at New York LaGuardia Airport (LGA), as well as certain gates and related facilities to support service at those airports. The airlines also will divest two gates and related support facilities at each of Boston Logan International Airport, Chicago O’Hare International Airport, Dallas Love Field, Los Angeles International Airport, and Miami International Airport. The divestitures will occur through a DOJ approved process following the completion of the merger. Despite the divestitures, the new American is still expected to generate more than $1 billion in annual net synergies beginning in 2015, as was estimated when the merger was announced in February.
After completion of the required divestitures, the combined company expects to operate 44 fewer daily departures at DCA and 12 fewer daily departures at LGA than the approximately 290 daily DCA departures and 175 daily LGA departures that American and US Airways operate today. The divestitures required by the settlement are not expected to impact total employment at the new American.
To ensure much of the service currently operated by the carriers to small- and medium-sized markets from DCA is maintained, the new American has agreed with the DOT to use all of its DCA commuter slot pairs for service to these communities. The new American intends to announce the service changes that will result from the divestitures in advance of the sale of the DCA and LGA slots, so that the airlines acquiring those slots have the opportunity to maintain service to those impacted communities.
In the settlement agreement with the state Attorneys General, the new American has agreed to maintain its hubs in Charlotte, New York (Kennedy), Los Angeles, Miami, Chicago (O’Hare), Philadelphia, and Phoenix consistent with historical operations for a period of three years. In addition, with limited exceptions, for a period of five years, the new American will continue to provide daily scheduled service from one or more of its hubs to each plaintiff state airport that has scheduled daily service from either American or US Airways. A previous settlement agreement with the state of Texas will be amended to make it consistent with today’s settlement.
Completion of the merger remains subject to the approval of the settlements by the U.S. Bankruptcy Court, and certain other conditions. The companies now expect to complete the merger in December 2013.
Copyright Photo: Andi Hiltl/AirlinersGallery.com. American Airlines’ Boeing 767-323 ER N376AN (msn 25445) touches down in Zurich.
Reuters: DOJ asking American and US Airways to give up some DCA slots and routes for a merger agreement
American Airlines (Dallas/Fort Worth) and US Airways (Phoenix) reportedly are considering a pre-trial offer by the Department of Justice (DOJ) to give up slots at Ronald Reagan National Airport (the combined airline would control 69 percent of the DCA slots) in Washington and some other routes around the country according to this report by Reuters citing sources and the Wall Street Journal. The DOJ is focusing on over 1,000 city pairings where the combined airline would dominate. However in a deregulated marketplace where any U.S. airline can enter a market, how would the “new American” if approved, be prevented from reentering a market again in the future? DCA is slot controlled but most of the airports on the DOJ list are “free entry” airports.
Read the full report: CLICK HERE
Copyright Photo: Brian McDonough/AirlinersGallery.com. American’s Boeing 737-823 N968AN (msn 30095) completes its approach from the south into Washington’s slot-controlled Reagan National Airport.
Have you seen the “new look” AirlinersGallery.com photo library website?
American Airlines (Dallas/Fort Worth) and US Airways (Phoenix) are now considering a settlement agreement with the Department of Justice (DOJ) according to this report by Reuters. The reported deal would involve giving up an unspecified number of Washington Reagan National Airport slots. The trial to block the proposed merger is due to start on November 25.
Read the full report: CLICK HERE
Copyright Photo: Brian McDonough/AirlinersGallery.com. The battle and approval of the merger has always been about the “fortress” number of Reagan National slots. American’s Boeing 737-823 N924NN (man 33486) banks on the river approach into Washington’s downtown Reagan National Airport.
US Airways Group, Inc. (US Airways) (Phoenix) today reported its third quarter 2013 financial results. For the third quarter 2013, pretax profit excluding net special items was a record $367 million, a $174 million, or 90%, year-over-year improvement.
On a GAAP basis, the Company reported a third quarter pretax profit of $336 million, up from $246 million in 2012. The GAAP net profit for the third quarter 2013 was $216 million, or $1.04 per diluted share versus a GAAP net profit of $245 million, or $1.24 per diluted share, for the same period in 2012. The Company’s 2013 third quarter results include a provision for income tax of $120 million, comprised principally of non-cash federal income tax expense, while the 2012 provision for income tax was only $1 million.
US Airways’ Chairman and CEO Doug Parker said, “We are extremely pleased to report a record pretax profit in the third quarter. These tremendous results are a testament to our 32,000 team members and their dedication to our millions of customers.
Revenue and Cost Comparisons
Total revenues in the third quarter were a record $3.9 billion, up 9.1 percent versus the third quarter 2012 on a 4.1 percent increase in total available seat miles (ASMs). Total revenue per ASM was a record 15.97 cents, up 4.9 percent versus the same period last year driven by a 4.4 percent increase in passenger yield and a record load factor of 85.5 percent.
Total operating expenses in the third quarter were $3.4 billion, up 5.0 percent over the same period last year on a 4.1 percent increase in ASMs. Mainline cost per available seat mile (CASM) was 12.94 cents, up 1.9 percent. Excluding special items, fuel and profit sharing, mainline CASM was 8.08 cents, up 1.7 percent versus the same period last year. Express CASM excluding special items and fuel was 14.36 cents, up 2.8 percent on a 0.4 percent decrease in ASMs.
During the third quarter, the Company repaid in full the prepaid miles loan issued in connection with its Barclays affinity credit card program at its face amount of $200 million. As of September 30, 2013, the Company had $3.9 billion in total cash and investments, of which $350 million was restricted. This is up $1.1 billion from the Company’s third quarter 2012 total cash and investments balance of $2.8 billion, of which $347 million was restricted.
The Company recognized approximately $31 million of net special items before taxes in the third quarter. Mainline operating special items totaled $40 million and consisted primarily of merger related costs. Express operating special items consisted of a $14 million credit resulting from a favorable arbitration ruling related to a vendor contract. The Company also recognized approximately $5 million in nonoperating special items primarily related to non-cash write offs of debt discount associated with conversions of our 7.25% convertible senior notes. The net tax effect of these special items was approximately $6 million.
- As part of the Company’s fleet renewal program, the Company took delivery of five new A321 aircraft and one new A330-200 aircraft. These aircraft replaced 737-400 aircraft.
- Standard & Poor’s (S&P) raised the Company’s credit rating by one notch from “B-” to “B.” S&P cited the Company’s improved financial results and strong cash position as part of its upgrade.
- As part of the Company’s operational incentive program, employees have earned approximately $10 million in year-to-date operational incentive payouts.
- Pilots at PSA Airlines, a wholly-owned subsidiary of US Airways, represented by the Air Line Pilots Association (ALPA), ratified a Letter of Agreement that amends their existing collective bargaining agreement originally reached with the airline on March 27, 2013.
- Introduced US Airways’ Track Your Bag, a free service allowing customers with a smartphone, tablet or laptop connected to the internet access to real-time information on the status of their checked luggage. Customers can check when their luggage is loaded and offloaded on their flight.
- Announced agreement with Bags VIP delivery service that allows customers to schedule luggage delivery directly to their home, hotel or business. Travelers can schedule and pay for Bags VIP delivery up to one hour prior to their scheduled departure by visiting maketraveleasier.com/usairways.
- US Airways’ Education Foundation awarded $270,000 in educational grants to 21 nonprofit organizations in the airline’s hub cities of Charlotte, N.C., Philadelphia, Phoenix and Washington, D.C. as part of its 2013 Community Education Grant Program.
- In partnership with the American Cancer Society’s Making Strides Against Breast Cancer (MSABC), the Company has launched its second annual “BE PINK” campaign. As part of the campaign, thousands of employees have purchased and are wearing pink uniform items in October, which is National Breast Cancer Awareness Month. Proceeds from the sale of uniform items are donated to the American Cancer Society. In addition, employees will show their support of breast cancer programs through the sponsorship of MSABC walks in the airline’s hub cities of Charlotte, N.C., Philadelphia, Phoenix and Washington, D.C.
- As part of the Company’s “Hope Takes Flight” campaign, which benefits United Way, US Airways’ employees raised more than $1.4 million. Money raised will go to support the communities in which US Airways’ employees live and work.
Copyright Photo: Bruce Drum/AirlinersGallery.com. The new Airbus A321s are gradually replacing the older Boeing 737-400s which should be gone by the end of 2014. This phase out will end the company’s long relationship with the Boeing 737. Boeing 737-4B7 N434US (msn 24556) climbs away from runway 27R at Fort Lauderdale-Hollywood International Airport.
US Airways (Phoenix) will launch new nonstop service between its largest hub at Charlotte, North Carolina and Barcelona, Spain; Brussels, Belgium; Lisbon, Portugal and Manchester, England this spring. The four flights from Charlotte supplement the airline’s current service to these destinations from its international gateway at Philadelphia International Airport. Service to Barcelona, Lisbon and Manchester will begin on May 22, 2014. Service to Brussels will launch on June 5, 2014. The new flights bring the number of international destinations US Airways serves from Charlotte to 38 – ten cities in Europe and 28 in Canada, Mexico, Latin America, South America and the Caribbean. US Airways now serves 145 airports in 28 countries from Charlotte.
The flight schedules are as follows:
|From Charlotte (CLT) to:||Departure||Arrival||Aircraft Type||First Day of Service||Last day of service|
|Barcelona (BCN)||6:35 p.m.||9:10 a.m.||Airbus A330-200 with Envoy Suite||May 22, 2014||Oct. 24, 2014|
|Lisbon (LIS)||8:25 p.m.||9:20 a.m.||Boeing 757||May 22, 2014||Sept. 28, 2014|
|Manchester(MAN)||8:35 p.m.||9:30 a.m.||Boeing 757||May 22, 2014||Sept. 28, 2014|
|Brussels (BRU)||4:30 p.m.||7:00 a.m.||Boeing 767||June 5, 2014||Sept. 1, 2014|
|To Charlotte(CLT) from:||Departure||Arrival||Aircraft Type||First Day of Service||Last day of service|
|Barcelona (BCN)||2:30 p.m.||6:15 p.m.||Airbus A330-200 with Envoy Suite||May 23, 2014||Oct. 25, 2014|
|Lisbon (LIS)||11:20 a.m.||3:15 p.m.||Boeing 757||May 23, 2014||Sept. 29, 2014|
|Manchester (MAN)||2:25 p.m.||6:20 p.m.||Boeing 757||May 23, 2014||Sept. 29, 2014|
|Brussels (BRU)||10:15 a.m.||1:45 p.m.||Boeing 767||June 6, 2014||Sept. 2, 2014|
Customers traveling between Charlotte and Barcelona in Envoy, US Airways international business class, will experience the Envoy Suite, which is featured on all of the airline’s Airbus A330 aircraft. The Envoy Suite features an adjustable seat that reclines into a fully flat bed, personal in-flight entertainment and a standard 110-volt universal power outlet so customers can work, play or relax.
Copyright Photo: Bruce Drum/AirlinersGallery.com. Airbus A330-243 N279AY (msn 1011) climbs away from the runway at the Charlotte-Douglas International Airport (CLT) hub.
Have you seen the “new look” AirlinersGallery.com photo library?
All Slotted Up: The new American Airlines and DCA
By Aaron Newman
By now we’ve all heard of the Justice Departments lawsuit filed on Aug. 13 to stop the $11 billion deal between US Airways Group (US Airways) and AMR Corporation (American Airlines). The DOJ argues the merger would violate antitrust laws because it will lead to higher airfares, less competition on high profile routes and therefore higher costs to the traveling public. In November, a judge will hear the case without a jury and decide whether the merger should go forward. With just under two months before the November 25th antitrust case involving American Airlines and U.S. Airways, I will be spending the next 2-3 months dissecting three topics in depth likely to be crucial topics in the courtroom.
A hot topic in talks between the Justice Department and the corporations is whether the airlines will agree to sell slots; takeoff and landing rights, to reduce their dominance at Reagan National Airport outside Washington, D.C. Airlines must possess slots which give them rights to one takeoff or landing per day. Three miles south of downtown Washington D.C., DCA is the preferred airport in the D.C. beltway. The airport provides easy transit points for politicians and professionals looking to be downtown within minutes. The only problem…the airport is slot restricted in an effort to direct passengers to the suburban and more distant Dulles International Airport (IAD).
DCA is one of a few airports in the nation where regulations limit the number of flights. Slots at DCA are particularly valuable for airlines, since many people will pay a premium to fly from convenient DCA instead of more distant Dulles or BWI. For example, JetBlue recently leased 8 daily round trips from US Airways at a cost of $40 million, used for increased frequencies to Boston. U.S. Airways currently claims DCA as its fourth largest hub and provides nonstop service to 71 airports from Reagan National, and faces no nonstop competitors on 55 of those routes (as of July 2013). Doug Parker, CEO of U.S. Airways and post-merger American, says DCA will remain a critical east coast hub for the new airline. Post-merger, US Airways will lessen capacity to existing American Airlines destinations. This will allow US Airways to expand its hub operations at Reagan, adding new small city destinations in the eastern half of the United States, a strong argument in the airlines attempt to retain all 68% of its slots.
Source: U.S. Department of Transportation
With U.S. Airways already claiming 56% of slots at DCA, the new airline will claim 68% post-merger, it’s anticipated by industry insiders that the new American will be forced to concede slots in order to satisfy the courts and complete a merger. United and Continental had to lease slots at Newark Liberty to Southwest in order to complete their 2010 merger, according to this report by Business Travel News. One argument against divesting slots at DCA is that many are used for small regional cities throughout the East Coast. US Airways surprisingly only carries 35% of all passengers at DCA despite holding 56% slots. This is due to the fact that many of the flights are used for smaller cities on turboprops and regional jets. CEO of U.S. Airways, Doug Parker has been arguing that if his airline has to divest slots, other airlines will simply use them to fly to large hub cities. Some members of Congress have even sent a letter asking for US Airways/American to keep its slots so their own constituencies can keep their flights.
In this report by Reuters, it gives detail of a recent attempt by JetBlue management and CEO, David Berger to persuade lawmakers to take away a portion of DCA slots in the name of anti-competitiveness. Berger suggests that the new American should not exceed the current 55% threshold at DCA. “JetBlue believes that the merger, absent meaningful action by the Department of Justice, will make an unbalanced competitive situation at Ronald Reagan Washington National Airport (DCA) even worse,” Robert Land, JetBlue’s senior vice president stated in a recent letter to Senator Charles Schumer (D-New York).
It’s unlikely that the new American will escape the trial without conceding slots at DCA. I suspect the new American will retain between 55 and 59 percent of slots at DCA. This will result in some regional cities losing service, cities like Huntsville AL, Bangor ME, and White Plains, NY. It’s probably important to note that the combined American will hold roughly a 49% market share at Reagan National, US Airways today only holds a 35% market share despite holding 56% of the slots. Regional flights are made possible because US Airways has such a large slot allotment at Reagan. The US Airways operation at DCA is a secondary connecting airport because of the frequency enabled by the slot holdings. If the new airline were forced to divest a larger percentage of slots the hub operation would begin to look different than it does today – the economics of regional flights make it unworkable.
The bigger question is how the remaining 8-12 percent of slots be divided among other airlines? This will be an interesting development going forward. I agree with Parker that large hub cities will be the winners in this case. Cities like Newark NJ, Atlanta GA, Chicago IL Midway, etc. In conclusion, there are currently four major slot restricted airports in the U.S.; New York JFK, La Guardia (LGA), Newark (EWR), and Washington Reagan (DCA). Two different airlines have a market share that is greater than the important 49% number; Delta at La Guardia and United at Newark. Both of those market conditions were granted approval by the DOJ without going to trial. So, why is this merger and DCA suddenly being treated differently?
Top Copyright Photo: Marcelo F. De Biasi/AirlinersGallery.com.
Bottom Copyright Photo: Marcelo F. De Biasi/AirlinersGallery.com.
American Airlines‘ (Dallas/Fort Worth) flight attendants, represented by the APFA, are putting political pressure on those states which are joining with the U.S. Department of Justice (DOJ) to oppose the American-US Airways (Phoenix) merger. APFA is particularly focusing on Attorney General Pam Bondi from the State of Florida. American has a large international hub at Miami International Airport. The union issued this statement:
In the wake of Tuesday’s announcement by Texas Attorney General Greg Abbott that he would withdraw from the lawsuit to block the merger of American Airlines and US Airways, the flight attendants at American are calling on Pam Bondi and attorneys general from five other states to do the same.
“Florida, particularly South Florida, is home to about 2,500 American flight attendants that are in need of good wages and long term job security, but General Bondi is standing in the way of that,” said APFA President Laura Glading. “Pam Bondi’s participation in the Justice Department’s antitrust lawsuit demonstrates a lack of understanding of what the merger means for her constituents. Everyone – business travelers, tourists, and airline employees – stand to benefit from the new American. We were able to explain that to General Abbott in Texas and we’d like to do the same in Florida.”
Unable to compete with United and Delta, which had recently merged with Continental and Northwest, respectively, American Airlines was forced into Chapter 11 bankruptcy in November of 2011. It is clear that in order for American to be competitive, it needs to merge with US Airways. The merger plan has had the strong support of employees at both companies since its inception. Unfortunately, the US Department of Justice and attorneys general from seven states and the District of Columbia filed an eleventh-hour lawsuit to block the merger in August of this year.
The new American Airlines will offer consumers more destinations and a better product. It will also give flyers a third choice – in addition to Delta and United – for their travel needs. Finally, the merger will provide much-needed job security for approximately 100,000 employees nationwide, 11,650 of whom live in Florida.
Last week, members of Florida’s congressional delegation sent a letter to General Bondi urging her to support the merger. The letter was authored by Rep. Alcee Hastings and signed by Reps. Debbie Wasserman Schultz, Ted Deutch, Lois Frankle, Frederica Wilson, Joe Garcia, and Patrick E. Murphy.
Copyright Photo: Brian McDonough/AirlinersGallery.com. Boeing 737-823 N965AN (msn 29544) of American arrives in deadlocked Washington (Reagan National).
American Airlines (Dallas/Fort Worth) and US Airways (Phoenix) received good news in its efforts to merge. The State of Texas has dropped out of the group opposing the merger along with the U.S. Department of Justice (DOJ). Texas now supports the merger and issued this statement:
Texas Attorney General Greg Abbott, AMR Corporation (Dallas/Fort Worth), the parent company of American Airlines, Inc., and US Airways Group, Inc. (Phoenix) have announced they have reached an agreement for the Texas Attorney General to support the proposed merger of American and US Airways.
Under the terms of the agreement, the new American Airlines will maintain scheduled daily service to more than twenty airports in Texas. In addition, the agreement provides that Dallas/Fort Worth International Airport be maintained as a large hub airport for the combined airline and that the new American will maintain its headquarters in the Dallas/Fort Worth area.
The State of Texas had previously joined the U.S. Department of Justice (“DOJ”) as co-plaintiff in its pending suit to block the merger of American Airlines and US Airways. With today’s agreement, the Texas Attorney General has agreed to withdraw his participation in the DOJ’s lawsuit.
“I’m pleased we were able to find common ground and gain the carefully considered support of the Attorney General in our home state,” said Tom Horton, chairman, president and CEO of AMR. “This is an important step forward for American Airlines, for Texas, and for our customers and people of both American and US Airways. Texas has long played a lead role in our company’s history, and this agreement is assurance of our commitment to maintain and enhance the outstanding levels of service and connectivity that the new American will provide to the citizens of Texas. This merger will enhance job security and career opportunities for our combined Texas based employee base of nearly 25,000. The combined airline will fly more people and more goods to more places while providing more competition to benefit customers in the U.S. and abroad. We thank Attorney General Abbott for his partnership in finding a solution and also thank the people of American and US Airways for their continued support of the merger.”
Doug Parker, chairman and CEO of US Airways, said the following: “We are grateful to have the support of Attorney General Abbott. In addition, the support for the merger from the employees of American Airlines and US Airways has been overwhelming. This combination makes sense for our customers, employees and the communities we serve. We are dedicated to completing this merger on behalf of all of them.”
Texas airports included in the agreement include:
- Abilene Regional Airport
- Austin-Bergstrom International Airport
- Brownsville/South Padre Island International Airport
- Corpus Christi International Airport
- Dallas/Fort Worth International Airport
- East Texas Regional Airport
- Easterwood Airport
- El Paso International Airport
- Houston William P. Hobby Airport
- Houston George Bush Intercontinental Airport
- Jack Brooks Regional Airport
- Killeen-Fort Hood Regional Airport
- Laredo International Airport
- Lubbock Preston Smith International Airport
- McAllen-Miller International Airport
- Midland International Airport
- Rick Husband Amarillo International Airport
- San Angelo Regional Airport
- San Antonio International Airport
- Tyler Pounds Regional Airport
- Waco Regional Airport
- Wichita Falls Regional Airport
In other news, the DOJ lost its bid to delay the trial in its lawsuit to stop the merger. Many of the DOJ’s attorneys and staff were put on furlough due the government shutdown.
The “airline trial of the century” will proceed as scheduled in late November.
Copyright Photo: Eddie Maloney/AirlinersGallery.com. American’s Boeing 737-823 WL N938NN (msn 33490) lands in Las Vegas.
PSA Airlines’ (2nd) (US Airways Express) (Dayton) pilots, represented by the Air Line Pilots Association, Int’l (ALPA), have ratified tentative agreements reached with the managements of PSA Airlines and its parent company, US Airways Group Inc. (Phoenix), that guarantee the placement of 30 large regional jets at PSA. With 85.99 percent of eligible pilots casting their ballots, 61 percent voted in favor of the agreements.
The agreements are contingent on the merger of US Airways Group and AMR Corporation by December 31, 2015.
The agreements include a commitment by US Airways Group to place a minimum of 30 large regional jets on the PSA operating certificate. PSA pilots will also be granted seniority-based interviews and guaranteed additional job offers at US Airways. In exchange, PSA pilots agreed to pay adjustments, changes to medical premiums, and an extension of their contract to 2023. Coming six months to the day after the pilots ratified a new contract, the agreements also provide PSA pilots with greater job security at PSA, furlough protections, and opportunities for first officers to upgrade to captain positions more quickly.
Copyright Photo: Jay Selman/Airlinersgallery.com. PSA currently operates 35 smaller Bombardier CRJ200s and 14 of the pictured CRJ700 (CL-600-2C10). N702PS (msn 10135) departs from the Charlotte hub.
The U.S. Department of Justice (DOJ) (Washington) has asked the special master handling discovery disputes to limit the number of documents it must turn over to American Airlines (Dallas/Fort Worth) and US Airways (Phoenix). The DOJ is suing both carriers to block their effort to merge. All parties are currently in the discovery phase. According to this report by Reuters, the DOJ objects to the airlines’ request to turn over all confidential internal documents relating to all previous airline merger requests in the past 10 years.
Read the full report: CLICK HERE
Copyright Photo: Marcelo F. De Biasi/Airlinersgallery.com. Boeing 737-823 N804NN (msn 29567) lands at Washington’s Reagan National Airport, across the Potomac River from the contentious and gridlocked District of Columbia.
AMR Corporation (Dallas/Fort Worth), the parent company of American Airlines, Inc., (Dallas/Fort Worth) and US Airways Group, Inc. (Phoenix), the parent of US Airways (Phoenix), have each agreed to extend the outside date at which either party may terminate the previously announced Agreement and Plan of Merger (the Merger Agreement), in light of the trial schedule surrounding litigation with U.S. Department of Justice (DOJ).
In a joint statement, Tom Horton, chairman, president and CEO of AMR, and Doug Parker, chairman and CEO of US Airways, said, “The Boards and management teams of AMR and US Airways remain committed to completing this combination to create the new American, and the extension of this outside date is a reflection of this commitment. Our focus is on mounting a vigorous defense and winning our court case so the new American can enhance competition, provide better service to our customers and create more opportunities for our employees.”
The amended Merger Agreement extends the date on which either AMR or US Airways may terminate the Merger Agreement from December 17, 2013 to the later of January 18, 2014, or, if the Court enters an order on or before January 17, 2014 in favor of American and US Airways, on the 15th day following the entry of such order. In the event of an unfavorable ruling by the Court, AMR or US Airways may terminate the merger agreement five days after the Court enters a final, but appealable, order permanently enjoining the merger.
Top Copyright Photo: Brian McDonough/AirlinersGallery.com. American’s Boeing 737-823 N925NN (msn 31169) prepares to touch down at Washington’s Reagan National Airport.
Bottom Copyright Photo: Jay Selman/AirlinersGallery.com. US Airways’ Embraer ERJ 190-100 IGW N961UW (msn 19000183) taxies to the runway at the Charlotte hub.
American and US Airways file a motion for all DOJ documents relating to all previous mergers for the last 10 years
American Airlines (Dallas/Fort Worth) and US Airways (Phoenix) have filed a motion in court requesting all analyses, studies, forecasts and all other documents relating to the Department of Justice’s (DOJ) approval of the four previous mergers completed over the past decade (Delta-Northwest, United-Continental, Southwest-AirTran and US Airways-America West).
The DOJ is opposing the American-US Airways merger but approved these four mergers in the past.
The DOJ stated it would reply formally to the motion next week according to this report by Reuters.
Read the full report: CLICK HERE
Copyright Photo: Jay Selman/AirlinersGallery.com. Airbus A319-115 N93003 (msn 5704) is now in service with American Airlines and prepares to land at Charlotte-Douglas International Airport.
AMR Corporation (American Airlines) (Dallas/Fort Worth) has secured an approval from U.S. bankruptcy judge Sean Lane yesterday for its merger with US Airways. However the merger requires a resolution with the Department of Justice which is going to court to block the proposed merger with the US Airways Group.
The judge also denied a clause that would pay outgoing CEO Tom Horton $19.9 million in severance pay.
Read the full story from Reuters: CLICK HERE
Copyright Photo: Brian McDonough/AirlinersGallery.com. Boeing 737-823 N970AN (msn 30096) completes its final approach into Washington’s Reagan National Airport.
American Airlines (Dallas/Fort Worth) and US Airways (Phoenix) will go to trial on November 25 against the Department of Justice, six states and the District of Columbia. U.S. District Court Judge Colleen Kollar-Kotelly set the trial date. The date was sooner than the DOJ wanted which means they will have to do their research much faster.
The DOJ, the six states and DC entered the lawsuit in the court on August 13 to block the proposed merger. This trial will probably serve as one of the final hearings in the merger request since the DOJ is critical in any approval. In other words, a judge could determine the fate of the two airlines.
The airlines are likely to argue that Southwest Airlines (which was not counted in the original DOJ data) is a formidable competitor and a merger is necessary to stay competitive against WN and other fast-growing ultra low fares carriers like Spirit Airlines and Allegiant Air (they have a good point). They are also likely to argue that air fares have gone up not as a result of the recent mergers but continuously rising fuel costs.
The DOJ meanwhile would prefer to compare the AA-US merger against the previous mergers of United Airlines-Continental Airlines and Delta Air Lines-Northwest Airlines and their international routes.
The other critical point bound to be discussed in detail at the trial is the slots the proposed merged carrier will have at Washington’s super high yield Reagan National Airport. The new AA would be a super carrier at DCA if the merger is now approved. AA-US will likely have to give up more concerning DCA.
Lawyers for both sides are likely to exchange millions of documents according to this report by Reuters. If you are an airline route analysis junkie, this is the “trial of the century”.
As many as 50 people could testify at the trial. Will other airline CEOs testify at the trial?
Read the full report: CLICK HERE
Top Copyright Photo: Brian McDonough/AirlinersGallery.com. American’s Boeing 737-823 N989AN (msn 33205) prepares to land at Dulles International Airport in Virginia near Washington, DC.
Have you seen the “new look” AirlinersGallery.com?
Bottom Copyright Photo: Michael B. Ing/AirlinersGallery.com. US Airways’ Airbus A321-231 N535UW (msn 3993) climbs away from Seattle-Tacoma International Airport.
The Department of Justice (DOJ) (Washington) has rejected the request of American Airlines (Dallas/Fort Worth) and US Airways (Phoenix) for a speedier trial on November 12 on its merger request. The DOJ and six states and the District of Columbia (DC) have filed a lawsuit to block the merger. The DOJ and this group still want a March 2014 trial because of the research required.
Read the full story from USA Today: CLICK HERE
Copyright Photo: Brian McDonough/AirlinersGallery.com. American Airlines’ Boeing 737-823 N968AN (msn 30095) arrives at the number one hot spot in the merger fight, Washington’s slot-controlled Reagan National Airport.
AMR Corporation (Dallas/Fort Worth), the parent company of American Airlines, Inc. (Dallas/Fort Worth), and US Airways Group, Inc. (US Airways) (Phoenix) have announced that they filed a motion to set a trial date and a supporting brief in the United States District Court for the District Of Columbia in connection with the lawsuit filed by the U.S. Department of Justice (DOJ) regarding the merger of the two airlines. In the motion, American Airlines and US Airways have requested a November 12, 2013 trial date.
In their filing, the Companies explain that their proposed trial date is very reasonable by recent historical standards. The DOJ request for 180 days, especially with one of the parties in bankruptcy, however, would be unprecedented and unreasonable in the circumstances. Based on the DOJ merger cases litigated to a decision since 2001, the average time from the DOJ’s complaint to trial is 70 days.
Top Copyright Photo: Ole Simon/AirlinersGallery.com. American Airlines’ Boeing 777-223 ER N781AN (msn 29586) approaches Madrid for landing.
Bottom Copyright Photo: Michael B. Ing/AirlinersGallery.com. Airbus A319-132 N814AW (msn 1281) lands at Long Beach near Los Angeles.
Reuters Analysis: American Airlines-US Airways merger would offer more service probably with higher ticket prices, but both carriers need the merger
The analysis concludes American Airlines and US Airways need a merger to stay competitive with both Delta Air Lines and United Airlines for the corporate customer.
This analysis takes a look at what would happen if the merger was approved: CLICK HERE
Copyright Photo: James Helbock/AirlinersGallery.com. Brand new Boeing 737-823 N935NN (msn 33231) was handed over to American Airlines on August 12, 2013.
AMR Corporation (American Airlines) (Dallas/Fort Worth) and US Airways (Phoenix) in a show of unity, vowed yesterday to fight the Department of Justice’s (DOJ) lawsuit in court (along with six states and the District of Colombia). Three high-powered attorneys have been hired to fight the lawsuit. The two airlines will try to argue in court that their merger will promote competition, especially against Delta Air Lines, United Airlines and Southwest Airlines.
However the real measure being used by the DOJ and will probably be the central theme in the court, will another merger lead to lower ticket prices? With the recent Delta-Northwest, United-Continental and Southwest-AirTran mergers, ticket prices have been raised steadily (probably due more to fuel costs) along with an increasing long list of add-on charges. Airline profits are at its highest. The DOJ is using American’s and US Airways’ own pre-airline merger reports when they were arguing for a merger which states an AA-US merger would lead to higher yields permitting the lower ticket prices to be dropped on many routes where they compete adding to the bottom line for the merged company. AA-US also have a large share of the routes and traffic from slot-controlled Washington Reagan National Airport. Very few of those routes have any meaningful competition. DCA routes have some of the highest yields in the country.
At any rate the lawsuit will delay the merger decision, probably now to 2014.
Read the full report from Reuters: CLICK HERE
However for bankrupt AMR Corporation and American Airlines and its shareholders, the rejection could send its bankruptcy reorganization back to where it all started with a key question:
Can the deal be restructured again to meet the DOJ’s antitrust objections (especially concerning Washington’s Reagan National Airport) and keep some value for the creditors and shareholders? Without US Airways in the equation, a new reorganization would probably shift the company’s equity to the current creditors. The existing shareholders could get nothing in any new reorganization making it harder to “sell”.
In addition what happens to CEO Tom Horton and his nearly $20 million severance package?
Nick Brown examines the options for AMR in this article as it tries to adjust to a newer reality: CLICK HERE
Copyright Photo: TMK Photography/AirlinersGallery.com. The new 2013 livery of American is now likely to become the livery of a new American with or without US Airways as more aircraft are repainted. There is a tipping point (probably already achieved) where it becomes unfeasible to go to another look. US Airways’ CEO Doug Parker, if he becomes the CEO of the new American, may be stuck with current CEO Tom Horton’s design going forward. The controversial livery is the least of Doug’s problems right now. Boeing 737-823 N965AN (msn 29544) poses for the camera under perfect light at Toronto (Pearson).
The Allied Pilots Association (APA), representing the 10,000 pilots of American Airlines (Dallas/Fort Worth) has also backed management and issued this statement:
The president of the Allied Pilots Association (APA), certified collective bargaining agent for the 10,000 pilots of American Airlines, reiterated the union’s commitment to seeing the proposed merger of American Airlines and US Airways through to its fruition.
“Approving the merger is in the best interests of all concerned,” APA President Capt. Keith Wilson said. “We are disappointed that the U.S. Department of Justice has challenged the merger and look forward to the opportunity to highlight the merger’s many benefits.”
The Justice Department, six state attorneys general and the District of Columbia filed a civil antitrust lawsuit today challenging the proposed merger of the two carriers.
“The pilots of American Airlines remain fully committed to merging with US Airways, which will provide for a more secure future for the 100,000 men and women who work for the two airlines,” Wilson said. “As for the notion that the merger would be anti-competitive, the two airlines’ route structures are highly complementary with very little overlap. Combining the two carriers would significantly expand the choice of travel destinations available to consumers.
“Also, the combination of American Airlines and US Airways would create a network carrier comparable to Delta and United in terms of revenue and reach, establishing an important competitive counter balance to those two airlines.
“Consolidation has enabled our industry to stabilize after a round of Chapter 11 bankruptcies that were the result of various exogenous shocks, including terrorist attacks, fuel price spikes and pandemics. It makes no sense for the Justice Department to conclude now that airline industry consolidation is somehow undesirable.”
US Airways’ CEO Doug Parker vows to fight the decision by the DOJ. Now the real negotiations will begin on what AA-US are willing to give up, especially at Washington Reagan National. Read the interview in Forbes: CLICK HERE
The Association of Professional Flight Attendants (APFA) has issued this statement, backing up management’s response to the Department of Justice (DOJ) announcement of a lawsuit against the proposed American Airlines-US Airways merger:
The Association of Professional Flight Attendants, representing more than 16,000 Flight Attendants at American Airlines, pushed back hard against today’s announcement that the Department of Justice would file suit to block the merger of American and US Airways.
“The fact that Attorney General Holder and the Justice Department have decided to stand in the way of this merger is outrageous and the height of hypocrisy,” said APFA President Laura Glading. “Their actions are only serving to prop up the duopoly they created and they’re doing it at the expense of consumers, the industry, and the employees of American and US Airways.”
Following major mergers of their own, Delta and United have emerged as the dominant carriers in the aviation industry and their vast networks have attracted the high-value business travelers airlines need in order to be profitable. Frequent flyers have left American in droves in favor of carriers with more routes and destinations. The American/US Airways merger will give these travelers a viable third option.
“The reason American is in bankruptcy is because it couldn’t compete in the environment created by the airline mergers of the past few years, which occurred with DOJ’s blessing. Now the game is in the third quarter and they want to change the rules,” Glading said. “It’s ludicrous.”
After decades of uncertainty, including bankruptcies, liquidations, and job losses, the mergers of Delta/Northwest and United/Continental helped move the aviation industry towards a stable and healthy competitive environment. The American/US Airways merger is the final piece of the deregulation puzzle that will provide long-term stability after 30 years of tumult. Without the merger, consumers and workers should expect more uncertainty and more failed airlines.
The DOJ suit claims that American can thrive on its own which is puzzling considering that each and every interested party that has examined this deal has arrived at the opposite conclusion. In reality, the merger has the strong support of airline executives, investors, and workers because everyone knows that neither carrier can compete as a standalone. Any recent success American has enjoyed can be credited to the employees whose wages and benefits were slashed in bankruptcy and to the consumer confidence the merger plan has generated.
For Flight Attendants, the merger will provide job security for thousands of middle class wage earners. The new American is the light at the end of a long tunnel for APFA members that have lost billions of dollars during the industry’s downturn.
“We’re going to continue to fight for this merger and we’re prepared to bring the fight to federal court, the halls of Congress, and the White House, if necessary,” Glading said. “Everyone needs this merger – airline investors, workers, and the flying public especially.”
The Department of Justice (DOJ) (Washington) filed an antitrust lawsuit today affectively blocking the AMR Corporation (American Airlines) (Dallas/Fort Worth) and US Airways Group (US Airways) (Phoenix) merger. The DOJ seeks to block the merger ”because it would eliminate competition between US Airways and American and put consumers at risk of higher prices and reduced service”.
The DOJ just issued this statement:
The Department of Justice, six state attorneys general and the District of Columbia filed a civil antitrust lawsuit today challenging the proposed $11 billion merger between US Airways Group Inc. and American Airlines’ parent corporation, AMR Corp. The department said that the merger, which would result in the creation of the world’s largest airline, would substantially lessen competition for commercial air travel in local markets throughout the United States and result in passengers paying higher airfares and receiving less service.
The Department of Justice’s Antitrust Division, along with the attorneys general, filed a lawsuit in the U.S. District Court for the District of Columbia, which seeks to prevent the companies from merging and to preserve the existing head-to-head competition between the firms that the transaction would eliminate. The participating attorneys general are: Texas, where American Airlines is headquartered; Arizona, where US Airways is headquartered; Florida; the District of Columbia; Pennsylvania; Tennessee; and Virginia.
“Airline travel is vital to millions of American consumers who fly regularly for either business or pleasure,” said Attorney General Eric Holder. “By challenging this merger, the Department of Justice is saying that the American people deserve better. This transaction would result in consumers paying the price – in higher airfares, higher fees and fewer choices. Today’s action proves our determination to fight for the best interests of consumers by ensuring robust competition in the marketplace.”
Last year, business and leisure airline travelers spent more than $70 billion on airfare for travel throughout the United States. In recent years, major airlines have, in tandem, raised fares, imposed new and higher fees and reduced service, the department said.
“The department sued to block this merger because it would eliminate competition between US Airways and American and put consumers at risk of higher prices and reduced service,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “If this merger goes forward, even a small increase in the price of airline tickets, checked bags or flight change fees would result in hundreds of millions of dollars of harm to American consumers. Both airlines have stated they can succeed on a standalone basis and consumers deserve the benefit of that continuing competitive dynamic.”
American and US Airways compete directly on more than a thousand routes where one or both offer connecting service, representing tens of billions of dollars in annual revenues. They engage in head-to-head competition with nonstop service on routes worth about $2 billion in annual route-wide revenues. Eliminating this head-to-head competition would give the merged airline the incentive and ability to raise airfares, the department said in its complaint.
According to the department’s complaint, the vast majority of domestic airline routes are already highly concentrated. The merger would create the largest airline in the world and result in four airlines controlling more than 80 percent of the United States commercial air travel market.
The merger would also entrench the merged airline as the dominant carrier at Washington Reagan National Airport, with control of 69 percent of the take-off and landing slots. The merged airline would have a monopoly on 63 percent of the nonstop routes served out of Reagan National airport. As a result, Washington, D.C., area passengers would likely see higher prices and fewer choices if the merger is allowed, the department said in its complaint. Blocking the merger will preserve current competition and service, including flights that US Airways currently offers from Washington’s Reagan National Airport.
The complaint also describes how, in recent years, the major airlines have succeeded in raising prices, imposing new fees and reducing service. The complaint quotes several public statements by senior US Airways executives directly attributing this trend to a reduction in the number of competitors in the U.S. market:
- President Scott Kirby said, “Three successful fare increases – [we are] able to pass along to customers because of consolidation.”
- At an industry conference in 2012, Kirby said, “Consolidation has also…allowed the industry to do things like ancillary revenues…. That is a structural permanent change to the industry and one that’s impossible to overstate the benefit from it.”
- As US Airways CEO Parker stated in February 2013, combining US Airways and American would be “ the last major piece needed to fully rationalize the industry.”
- A US Airways document said that capacity reductions have “enabled” fare increases.
“The merger of these two important competitors will just make things worse –exacerbating current airline industry trends toward reduced service, increasing fares and increasing passenger fees,” added Baer.
As the complaint describes, absent the merger, US Airways and American will continue to provide important competitive constraints on each other and on other airlines. Today, US Airways competes vigorously for price-conscious travelers by offering discounts of up to 40 percent for connecting flights on other airlines’ nonstop routes under its Advantage Fares program. The other legacy airlines – American, Delta and United – routinely match the nonstop fares where they offer connecting service in order to avoid inciting costly fare wars. The Advantage Fares strategy has been successful for US Airways because its network is different from the networks of the larger carriers. If the proposed merger is completed, the combined airline’s network will look more like the existing American, Delta and United networks, and as a result, the Advantage Fares program will likely be eliminated, resulting in higher prices and less services for consumers. An internal analysis at American in October 2012, concluded, “The [Advantage Fares] program would have to be eliminated in a merger with American, as American’s large, nonstop markets would now be susceptible to reactionary pricing from Delta and United.” And, another American executive said that same month, “The industry will force alignment to a single approach–one that aligns with the large legacy carriers as it is revenue maximizing.” By ending the Advantage Fares program, the merger would eliminate lower fares for millions of consumers, the department said.
The complaint also alleges that the merger is likely to result in higher ancillary fees, such as fees charged for checked bags and flight changes. In recent years, the airlines have introduced fees for those services, which were previously included in the price of a ticket. These fees have become huge profit centers for the airlines. In 2012, domestic airlines generated more than $6 billion in fees from checked bags and flight changes alone. The legacy carriers often match each other when one introduces or increases a fee, and if others do not match the initiating carrier tends to withdraw the change. By reducing the number of airlines, the merger will likely make it easier for the remaining carriers to coordinate fee increases, resulting in higher fees for consumers.
The department also said that the merger will make coordination easier among the legacy carriers. Although low-cost carriers such as Southwest and JetBlue offer consumers many benefits, they fly to fewer locations and are unlikely to be able to constrain the coordinated behavior among those carriers.
American Airlines is currently operating in bankruptcy. Absent the merger, American is likely to exit bankruptcy as a vigorous competitor, with strong incentives to grow to better compete with Delta and United, the department said. American recently made the largest aircraft order in industry history, and its post-bankruptcy standalone plan called for increasing both the number of flights and the number of destinations served by those flights at each of its hubs.
The department’s complaint describes US Airways executives’ fear of American’s standalone growth plan as “industry destabilizing.” The complaint states that US Airways worries that American’s growth plan would cause “others” to react “with their own enhanced growth plans…,” and that the resulting effect would increase competitive pressures throughout the industry. The department said the merger will allow US Airways’ management to abandon these aggressive growth plans and continue the industry’s current trend toward higher prices and less service.
The department’s complaint states that executives of both airlines have repeatedly said that they do not need the merger to succeed. The complaint states that US Airways’ CEO observed in December 2011, that “A[merican] is not going away, they will be stronger post-bankruptcy because they will have less debt and reduced labor costs.” US Airways’ executive vice president wrote in July 2012, that, “There isNO question about AMR’s ability to survive on a standalone basis.” And, as recently as January 2013, American’s management presented plans that would increase the destinations it serves in the United States and the frequency of its flights, and would position American to compete independently as a profitable airline with aggressive plans for growth.
AMR is a Delaware corporation with its principal place of business in Fort Worth, Texas. AMR is the parent company of American Airlines. Last year American flew more than 80 million passengers to more than 250 destinations worldwide and took in more than $24 billion in revenue. In November 2011, American filed for bankruptcy reorganization.
US Airways is a Delaware corporation with its principal place of business in Tempe, Ariz. Last year US Airways flew more than 50 million passengers to more than 200 destinations worldwide and took in more than $13 billion in revenue.
Analysis: How American Airlines and US Airways executives wrecked their own merger proposal by Rick Newman: CLICK HERE
Meanwhile AMR and the US Airways Group responded with this statement:
AMR Corporation, the parent company of American Airlines, Inc., and US Airways Group, Inc. today announced that they intend to mount a vigorous and strong defense to the U.S. Department of Justice’s (DOJ) effort to block their proposed merger.
“We believe that the DOJ is wrong in its assessment of our merger. Integrating the complementary networks of American and US Airways to benefit passengers is the motivation for bringing these airlines together. Blocking this procompetitive merger will deny customers access to a broader airline network that gives them more choices.
“Further, this merger provides the best outcome for AMR’s restructuring. The widespread support from the employees and financial stakeholders of both airlines underscores the fact that this is the best path forward for both airlines and the customers and communities we serve.
“We will mount a vigorous defense and pursue all legal options in order to achieve this merger and deliver the benefits of the new American to our customers and communities as soon as possible.”
Benefits of the New American:
With more than 6,700 daily flights to 336 destinations in 56 countries around the world, the new American Airlines will strengthen communities nationwide through better service and travel to more destinations both domestically and internationally. Importantly, the combined airline expects to maintain current hubs of both airlines and expand service from those hubs, resulting in more choices for customers. The result for consumers is that the new American will be a highly competitive alternative to other domestic and global carriers.
Greater Long-Term Opportunities for Employees
Employees of the combined airline will benefit from being part of a company with a more competitive and strong financial foundation, which will create greater opportunities over the long term. The merger will also provide the path to improved compensation and benefits for employees.
More Choices, Increased Service, and an Enhanced Travel Experience for Customers
Customers will benefit from new flying options, more choices, increased service and an enhanced travel experience. We expect our complementary flight networks to increase efficiency and provide more options for customers. Greater connectivity with oneworld® alliance partners will give customers more options for travel and benefits both domestically and internationally.
The merger provides the best outcome for American’s restructuring with creditors and equity holders receiving nearly unprecedented recoveries and having approved the Plan of Reorganization overwhelmingly.
As previously announced, the boards of directors of both AMR and US Airways approved a plan to combine to create the new American Airlines, a premier global carrier.
The International Association of Machinists and Aerospace Workers (IAM) (Washington) has issued this statement:
In a contest overseen by the Nation Mediation Board (NMB), the International Association of Machinists and Aerospace Workers (IAM) today soundly defeated the International Brotherhood of Teamsters (IBT) in an election to represent nearly 4,600 Mechanic and Related employees at US Airways (Phoenix). The IAM received 1,903 votes, or 58 percent of all votes cast in the five-week election, while the IBT received 1,418 votes, less than 42 percent.
“This victory marks an important milestone for the Mechanic and Related group at US Airways,” said IAM Transportation Vice President Sito Pantoja. “By voting for the Machinists Union our members safeguarded their pensions and seniority heading into the merger with American Airlines while rejecting the empty promises of an organization with a history of corruption.”
In addition to creating uncertainty regarding future representation, the year-long raid by IBT effectively suspended contract negotiations between US Airways and IAM, which has represented Mechanic and Related employees at US Airways since 1949.
“The election results will allow contract negotiations between the IAM and US Airways to resume without any further delay,” said IAM District 142 President Tom Higginbotham. “We remain convinced that the IBT never had support among mechanics at US Airways to get this election in the first place. We fully expect the NMB to thoroughly investigate the matter.”
In a separate IBT raid on more than 11,000 Mechanic and Related workers at American Airlines, the Transport Workers Union (TWU) presented testimony from former Teamster organizers who claimed that IBT organizing staff forged hundreds of election authorization cards. The NMB is currently investigating to determine if the IBT submitted enough valid cards to warrant an election at American Airlines.
The IAM is the world’s largest airline union and is the largest union at US Airways, representing over 14,000 Mechanic and Related, Fleet Service, Stockroom and Maintenance Training Specialists.
Copyright Photo: Bruce Drum/AirlinersGallery.com. Airbus A319-132 N826AW (msn 1534) in the special Arizona livery prepares to arrives at Minneapolis-St. Paul International Airport.
Want to see more logojets?: CLICK HERE
AMR Corporation, the parent company of American Airlines, Inc., and US Airways Group, Inc. have announced that they have received clearance from the European Commission under the EC Merger Regulation for their proposed merger.
Tom Horton, chairman, president and CEO of AMR, and incoming Chairman of the Board of the combined company, said, “We are very pleased that the EU has approved the merger between American Airlines and US Airways. This represents one of the final milestones on our path to becoming the new American Airlines.”
Doug Parker, chairman and CEO of US Airways, and incoming CEO of the combined company, said, “The clearance by the European Commission is an important step toward closing this merger. The new American will benefit customers in the United States, Europe and across the world by enhancing connectivity within the oneworld alliance and creating more options for travel both domestically and internationally. We look forward to providing access to the best destinations in the world as the new American Airlines.”
As previously announced, AMR and US Airways agreed to combine to create the new American Airlines, a premier global carrier. Headquartered in Dallas/Fort Worth, the new American Airlines will become a highly competitive alternative for consumers to other global carriers and is expected to offer more than 6,700 daily flights to 336 destinations in 56 countries. The combined airline will offer customers more choices and increased service across a larger worldwide network and through an enhanced oneworld alliance. Together, American Airlines and US Airways are expected to operate a mainline fleet of almost 950 aircraft and employ more than 100,000 team members worldwide.
The merger is subject to regulatory approvals, other customary closing conditions and confirmation of AMR’s Plan of Reorganization by the U.S. Bankruptcy Court for the Southern District of New York. The companies continue to expect to complete the combination in the third quarter of 2013.
Top Copyright Photo: Tony Storck/AirlinersGallery.com. Boeing 737-823 N967AN (msn 29545) prepares to land at Washington’s Reagan National Airport.
Bottom Copyright Photo: Brian McDonough/AirlinersGallery.com. The final (U.S.) merger approvals will come down to the issue of DCA Slots. American-US Airways are fighting to preserve their dominating number of arrival and departure slots at Washington’s Reagan national Airport. US Airways’ Airbus A321-231 N556UW (msn 5244) banks after completing the “River Approach” into DCA.
US Airways Group, Inc. (US Airways) (Phoenix) today reported its second quarter 2013 financial results. For the second quarter 2013, pretax profit excluding net special items was $409 million, the highest in Company history. Net profit excluding net special items was a record $324 million, or $1.58 per diluted share. Net profit excluding net special items for the second quarter 2012 was $321 million, or $1.61 per diluted share. The Company’s 2013 second quarter net profit excluding net special items was negatively impacted by a non-cash provision for income tax of $85 million. There was no provision for income tax recorded in 2012.
On a GAAP basis, the Company reported a net profit of $287 million for its second quarter 2013, or $1.40 per diluted share. This compares to a net profit of $306 million, or $1.54 per diluted share, for the same period in 2012. The Company’s 2013 second quarter net profit was negatively impacted by a non-cash provision for income tax of $67 million.
See the accompanying notes in the Financial Tables section of this press release for a reconciliation of GAAP financial information to non-GAAP financial information.
Revenue and Cost Comparisons
Total revenues in the second quarter were a record $3.9 billion, up 2.9 percent versus the second quarter 2012 on a 3.4 percent increase in total available seat miles (ASMs). Total revenue per ASM was 16.22 cents, down 0.5 percent versus the same period last year driven by a 2.8 percent decrease in passenger yield, offset by a record quarterly load factor of 85.1 percent.
Total operating expenses in the second quarter were $3.4 billion, up 1.0 percent over the same period last year. Mainline cost per available seat mile (CASM) was 12.88 cents, down 2.0 percent on a 4.2 percent increase in mainline ASMs. Excluding special items, fuel and profit sharing, mainline CASM was 8.21 cents, down 0.4 percent versus the same period last year. Express CASM excluding special items and fuel was 14.34 cents, up 1.1 percent on a 0.3 percent decrease in ASMs.
As of June 30, 2013, the Company had a record $4.0 billion in total cash and investments, of which $350 million was restricted. This is up approximately $1.1 billion from the Company’s first quarter 2013 total cash and investments balance of $2.9 billion, of which $352 million was restricted.
During the second quarter, the Company raised approximately $870 million in net incremental cash through a series of financing transactions. These transactions included the refinancing of the Company’s term loan (resulting in approximately $270 million in incremental cash); the issuance of high yield bonds in an aggregate principal amount of $500 million; and a $100 million C-tranche to its 2012-2 EETC.
The Company recognized approximately $55 million of net special items before taxes in the second quarter. Operating special items totaled $24 million and were primarily related to merger costs. The Company also recognized approximately $31 million in nonoperating special items primarily related to debt extinguishment charges due to non-cash write offs of debt discount and debt issuance costs in connection with conversions of the Company’s 7.25% convertible senior notes and repayment of the Citicorp North America term loan. The net tax effect of these special items was approximately $18 million.
The Company and its representatives continue to work closely with their counterparts at American in merger integration planning. The Company continues to expect the transaction to close in the third quarter. Recent accomplishments include:
- June 10: US Airways and American announced the new Board of Directors and the senior leadership team for the new American Airlines Group Inc.
- June 10: The Securities Exchange Commission (SEC) Form S-4 Registration Statement was declared effective by the SEC.
- June 19: US Airways’ Chairman and CEO Doug Parker and American Airlines’ Senior Vice President, General Counsel & Chief Compliance Officer Gary Kennedy, jointly testified before the Senate Subcommittee on Aviation, Operations, Safety and Security about the benefits of the new American Airlines to customers, employees, financial stakeholders and communities.
- July 12: US Airways’ shareholders approved the proposed merger with 99.8 percent in favor and 0.2 percent against.
- To date, leadership teams have been announced for operations, finance, revenue management, marketing, human resources, corporate communications, and legal and labor relations.
Copyright Photo: Bruce Drum/AirlinersGallery.com. Airbus A319-112 N733UW (msn 1205) in the Pittsburgh Steelers motif taxies to the active runway at the Charlotte hub.
US Airways (Phoenix) in anticipation of the merger with American Airlines (Dallas/Fort Worth), will re-launch the Phoenix-Miami route on October 27. The route will be operated daily with Airbus A320s according to Airline Route. This is an old America West route.
Copyright Photo: Ton Jochems/AirlinersGallery.com. Airbus A320-214 N119US (msn 1268) approaches Los Angeles International Airport for landing.
US Airways Group, Inc. (Phoenix), the parent of US Airways (Phoenix), today announced that its shareholders approved the merger agreement with AMR Corporation (Dallas/Fort Worth), the parent company of American Airlines, Inc. (Dallas/Fort Worth).
The merger agreement was approved by the affirmative vote of the holders of a majority of the outstanding shares of US Airways stock, which represented over 99% of the votes cast by US Airways shareholders on the proposal. Of the 132,788,060 shares voted, 132,273,780 shares voted in favor of the proposal; 257,757 shares voted against; and 256,523 abstained. Shareholders also approved other proposals related to the merger.
Doug Parker, chairman and CEO of US Airways, and incoming CEO of the combined company, said, “We are pleased that our shareholders overwhelmingly supported our merger with American Airlines. This approval is a major milestone on our path to completing the merger, and we continue to make excellent progress overall thanks to the focused efforts of the dedicated representatives from both companies. By bringing together two highly complementary networks and generating significant revenue synergies, the new American Airlines will deliver enhanced value for its shareholders. I want to thank our shareholders, our customers and our more than 100,000 dedicated employees for their support throughout this process and look forward to moving forward as an even stronger airline.”
As previously announced, AMR and US Airways agreed to combine to create the new American Airlines, a premier global carrier. Headquartered in Dallas-Fort Worth, the new American Airlines will become a highly competitive alternative for consumers to other global carriers and is expected to offer more than 6,700 daily flights to 336 destinations in 56 countries. The combined airline will offer customers more choices and increased service across a larger worldwide network and through an enhanced oneworld® Alliance. Together, American Airlines and US Airways are expected to operate a mainline fleet of almost 950 aircraft and employ more than 100,000 team members worldwide.
The merger is subject to regulatory approvals, other customary closing conditions and confirmation of AMR’s Plan of Reorganization by the U.S. Bankruptcy Court for the Southern District of New York. The companies continue to expect to complete the combination in the third quarter of 2013.
Top Copyright Photo: Michael B. Ing/AirlinersGallery.com. Airbus A330-323X N275AY (msn 370) departs from London (Heathrow).
Bottom Copyright Photo: Andi Hiltl/AirlinersGallery.com. Boeing 767-323 ER N336AA (msn 25193) lands at Zurich.
US Airways (Phoenix) now offers customers the ability to skip the line at baggage claimwith Bags VIP delivery service; which delivers their bag to their home, hotel or office. The airline also offers customers the Track Your Bag tool on usairways.com. Track Your Bag allows travelers to follow their bags from check-in to landing from their smart phone, tablet or laptop.
Bags VIP Delivery Service
Customers can now opt to have their bags delivered directly to their home, hotel or business withBags VIP delivery. Travelers can schedule and pay for Bags VIP delivery up to one hour prior to their scheduled departure by visiting maketraveleasier.com/usairways. Once scheduled, customers need only to drop the bags off at the airport, pay any applicable baggage fees and they will be delivered within four to six hours of arrival. Bags VIP delivery service starts at $29.95 and is offered in all domestic locations the airline serves.
Track Your Bag
Any passenger connected to the Internet can now view real-time information on the bag’s status, including when the bag is checked in, on a plane, and off a plane, with US Airways’ Track Your Bag tool. Track Your Bag tool can easily be accessed at usairways.com/baggage; all that is needed is a last name and baggage tag number or confirmation code. Track Your Bag is also available free on Gogo® internet equipped flights.
Copyright Photo: Brian McDonough/AirlinersGallery.com. Boeing 757-2G7 N909AW (msn 24522) prepares to land at Washington (Reagan National).
The United States Department of Justice (Washington) is taking sworn depositions as part of a legal probe into the proposed American Airlines (Dallas/Fort Worth) and US Airways (Phoenix) merger according to this exclusive report by Reuters. The DOJ is concerned that if the merger is approved as it stands, it would create antitrust concerns because the new American Airlines would control 68 percent of the slots at downtown Washington Reagan National Airport. Proposed CEO Doug Parker has told Congress in hearings that if the new airline is required to surrender DCA slots it could mean a loss of service to the medium and smaller cities serving the capitol. Many of the representatives are from those districts that could lose air service to their place of work. Over 100 members of Congress have asked those Federal agencies approving the merger to allow the new American to keep the DCA slots. Other airlines would probably like additional lucrative DCA slots. A fight is brewing.
Read the full report: CLICK HERE
Copyright Photo: Marcelo F. De Biasi/AirlinersGallery.com. “Gridlock and Motion”. In many ways DCA is the “airport of Congress” as the favorite airport for those members of Congress who live nearby, as well as all of the concerned parties always flying in on any proposed legislation and the growing legions of lobbyists ready to apply rapid pressure on Congress on any given issue. As a result DCA has some of highest yield routes in the country. Symbolically, fast-moving American’s Boeing 737-823 N804NN (msn 29567) lands at DCA across the river from slow-moving downtown Washington.
AMR Corporation (Dallas), the parent company of American Airlines, Inc. (Dallas/Fort Worth), and US Airways Group, Inc. (US Airways) (Phoenix) today announced the senior leadership team responsible for guiding the new American Airlines after the closing of the companies’ expected merger.
As previously announced, Tom Horton, 52, will serve as Chairman of the Board of the new American Airlines. Doug Parker, 51, will serve as Chief Executive Officer and a member of the Board of Directors. The senior leadership team announced today includes:
- Scott Kirby, 45, President: responsibilities include planning, marketing, sales, alliances, pricing/yield management and operations
- Elise Eberwein, 48, Executive Vice President, People and Communications: responsible for human resources, media relations, internal communications, social media and public affairs
- Beverly Goulet, 58, Chief Integration Officer: will lead the complex integration process of merging American Airlines and US Airways into one airline
- Robert Isom, 49, Chief Operating Officer and Chief Executive Officer of US Airways, Inc. post-close: responsible for all aspects of airline operations, including customer service, flight operations, maintenance, regional carrier management, cargo, safety and security
- Stephen Johnson, 56, Executive Vice President, Corporate Affairs: responsibilities include corporate and legal affairs, government and regulatory affairs, labor relations, and real estate
- Derek Kerr, 48, Chief Financial Officer: responsible for oversight of all financial areas, including financial planning and analysis, corporate finance and treasury functions, purchasing, controller and audit functions and investor relations
- Maya Leibman, 47, Chief Information Officer: responsible for all information technology systems, including systems development, infrastructure, and planning
- William Ris, 65, Senior Vice President, Government Affairs: responsible for all federal and international government and regulatory affairs and public policy
Kirby, Eberwein, Isom, Johnson and Kerr will join the new American from US Airways; Goulet, Leibman and Ris will join from American.
American Airlines and US Airways also noted that Dan Garton will step down as President and Chief Executive Officer of American Eagle Airlines later this year. A successor will be named prior to Mr. Garton’s departure.
AMR and US Airways also announced today the members of the Board of Directors of the combined company after the closing of the companies’ expected merger. The new Board will be comprised of the following individuals, who the companies believe have the experience, breadth and perspective to guide the new American Airlines to create value for all of the company’s stakeholders:
- John T. Cahill, Lead Independent Director
- James F. Albaugh
- Jeffrey D. Benjamin
- Michael J. Embler
- Matthew J. Hart
- Alberto Ibarguen
- Richard C. Kraemer
- Denise M. O’Leary
- Ray M. Robinson
- Richard P. Schifter
As previously announced, AMR and US Airways agreed to combine to create the new American Airlines, a premier global carrier. Headquartered in Dallas-Fort Worth, the new American Airlines will become a highly competitive alternative for consumers to other global carriers and will provide greater flight opportunities, with more than 6,700 daily flights to 336 destinations in 56 countries. The combined airline will offer customers more choices and increased service across a larger worldwide network and through an enhanced oneworld® Alliance. Together, American Airlines andUS Airways are expected to operate a mainline fleet of almost 950 aircraft and employ more than 100,000 people worldwide. The merger is subject to regulatory approvals, approval by US Airways shareholders, other customary closing conditions and confirmation of American Airlines’ Plan of Reorganization by the U.S. Bankruptcy Court for the Southern District of New York.
Bottom Line: The new American with be CEO Doug Parker’s airline managed by mostly his former US Airways managers. Although the American name is retained (as it was with US Airways), it is really America West Airlines now operating as the new American Airlines when the merger is approved.
Copyright Photo: Marcelo F. De Biasi/AirlinersGallery.com. Old and new AA tails meet at Washington (Reagan National), a key strategic airport for the new American.
Video: The two companies salute their rich heritage:
US Airways (Phoenix) tomorrow (June 8) will launch daily nonstop service to Sao Paulo, Brazil from its largest hub at Charlotte, North Carolina. The new flight is US Airways’ second destination in South America and complements the airline’s existing nonstop service to Rio de Janeiro from Charlotte. US Airways will operate service to Brazil’s largest city on Boeing 767-200 aircraft with seating for 18 in Envoy, US Airways’ international business class, and 186 in the main cabin.
The flight schedule is as follows:
|Charlotte Douglas International Airport (CLT) – Guarulhos-Sao Paulo Airport (GRU)||Guarulhos-Sao Paulo Airport (GRU) – Charlotte Douglas International Airport (CLT)**|
|802||5:50 p.m.||4:30 a.m.*||803||8:25 a.m.||5:25 p.m.|
|*Flight arrives next day.**First day of operation for Sao Paulo-bound flight is June 9, 2013.|
On March 4, US Airways filed an application with the U.S. Department of Transportation (DOT) for the rights to operate daily, year-round service between Sao Paulo and the airline’s international gateway at Philadelphia. The proposed service would be the airline’s third daily flight to South America and would provide customers in 75 communities with easy one-stop access to Sao Paulo.
Copyright Photo: Jay Selman/AirlinersGallery.com. Boeing 767-2B7 ER N256AY (msn 26847) climbs away from the runway at Charlotte Douglas International Airport.
In the current US Airways onboard magazine the airline pays tribute to its past with an article on its heritage logojets (Click on the Slide Show above to see all of the logojets):
Department of Justice opposes American’s $19.9 million severance package for departing CEO Tom Horton
American Airlines (Dallas/Fort Worth) is facing resistance from the Department of Justice according to this report by Reuters. The DOJ is opposing American Airlines’ Chapter 11 reorganization plan to pay outgoing CEO Tom Horton $19.9 million in severance pay (the CEO that got AA into bankruptcy). The unions have opposed this large payout after being asked to give back on salaries and benefits.
Read the full article: CLICK HERE
In other news by Reuters, American Airlines is warning regulators that any requirement to give up certain airport slots could lead to a reduction in service to smaller markets from slot-controlled airports. American Airlines and US Airways (Phoenix) are seeking a merger approval to build the world’s largest airline.
Read the full article: CLICK HERE
Copyright Photo: Marcelo F. De Biasi. American Eagle Airlines‘ (2nd) Bombardier CRJ700 (CL-600-2C10) N508AE (msn 10072) climbs away from Washington’s Reagan National Airport, one airport that could see a reduction in slots for the merged carrier.
US Airways (Phoenix) today begins daily, nonstop, summer service from its international gateway at Philadelphia following a four-year hiatus to Shannon, Ireland. The airline will operate flights to SNN on 176-seat dual-class Boeing 757-200 aircraft until September 6, 2013. The seasonal service complements US Airways’ existing flights to Dublin, which the airline serves year-round from Philadelphia and during the summer from its largest hub in Charlotte, North Carolina.
The flight schedule is as follows:
|Philadelphia International Airport (PHL) –||Shannon Airport (SNN) – Philadelphia|
|Shannon Airport (SNN)||International Airport (PHL)|
|776||9:05 p.m.||8:40 a.m.*||777||11:35 a.m.||2:05 p.m.|
*Flight arrives next day. First day of service from Shannon is May 23, 2013.
Copyright Photo: Marcelo F. De Biasi. Ex-America West Boeing 757-2G7 N909AW (msn 24522) climbs away from Washington (Reagan National).
American Airlines (Dallas/Fort Worth) and US Airways (Phoenix) have circled August 31 as a target date for its possible merger approval pending any anti-trust concerns of the government. In the meantime, according to this Wall Street Journal update, 29 employee teams are currently analyzing differences between the two carriers and ways to integrate the merger process. This research will lead to a sequence of events once the approval is granted. CEO Parker and CEO Horton co-lead the transition team. The new American livery still remains an resolved issue for the possible new American.
Read the full story: CLICK HERE
Copyright Photo: Brian Peters/AirlinersGallery.com. Boeing 777-323 ER N722AN (msn 31547) arrives at the DFW hub.
Video: What is it like to take delivery of a brand new Boeing 737-800:
US Airways (Phoenix) is upgrading its international product while making international travel more comfortable and convenient with several in-flight enhancements starting this spring and summer.
Beginning May 1, passengers traveling in the Economy cabin will receive complimentary headsets and complimentary wine with their main meal on flights to and from Europe, the Middle East and South America. Earlier this month, the airline also expanded DineFresh, its premium chilled meal option paired with wine that has been available on trans-Atlantic flights departing its hubs at Philadelphia and Charlotte, N.C. since last August, to select trans-Atlantic flights headed to Philadelphia and Charlotte. DineFresh meals are priced at $21.99 and must be pre-ordered at least 24 hours prior to departure.
In July, US Airways will introduce new amenity kits in Envoy, its international business class. The airline has teamed up with Red Flower, a New York-based, eco-friendly beauty and lifestyle brand, to offer passengers traveling in Envoy a soft classic jute-lined bag filled with delicately scented botanical products including Ocean moisturizing body lotion, Italian Blood Orange lip balm and an Italian Blood Orange facial towelette with whole essential oils of pink grapefruit and blood orange which provide an instant boost and a sense of invigoration.
“As a world traveler, it brings me great joy and excitement to see Red Flower partnered with US Airways,” says Red Flower founder Yael Alkalay. “Red Flower is a trendsetter in beauty and wellness, drawing inspiration from curative global traditions and the potent force of nature. We share our mission of creating extraordinary experiences with US Airways. Through this partnership, we hope to enhance and bring a sense of comfort, well-being and a lift of energy and spirit while traveling the skies.”
In addition to the new Red Flower offerings, the amenity kit will contain socks, eyeshades, earplugs, tissues, a pen, toothbrush, toothpaste and mouthwash to ensure that customers traveling in Envoy arrive at their destination relaxed, refreshed and ready to do business.
“We’ve invested in improvements that will make international travel for business and leisure customers more comfortable and convenient,” said Andrew Nocella, US Airways’ senior vice president, Marketing and Planning “The enhancements were based on customer and employee feedback and are launching as we resume seasonal summer service to ten European cities and begin new service to Sao Paulo, Brazil.”
In May, US Airways resumes daily seasonal service to Athens, Greece; Barcelona, Spain; Glasgow, Scotland; Lisbon, Portugal; Shannon, Ireland and Venice, Italy from Philadelphia. Daily, seasonal service will also operate from Charlotte hub to Dublin, Ireland; Madrid, Spain; Paris and Rome. Additional seasonal frequencies are also being added to Frankfurt, Germany from both Philadelphia and Charlotte, giving customers a choice of four daily non-stop flights from the East Coast. The seasonal flights supplement existing year-round service to 12 destinations in Europe and the Middle East. On June 8, US Airways will launch daily, non-stop year-round service to Sao Paulo, Brazil from Charlotte.
The enhancements in Envoy and economy follow a multi-million dollar investment in upgrades to US Airways’ domestic First Class service and the addition of Gogo inflight internet on more than 90 percent of the US Airways fleet. On April 1, the airline began offering customers in First Class a choice of snacks in addition to their meal on long-haul flights and a continental-style breakfast on the go that includes a yogurt smoothie, croissant, almond butter, jam and a mint on overnight long-haul flights.
Top Copyright Photos: US Airways.
US Airways Group, Inc. (US Airways) (Phoenix) today reported its first quarter 2013 financial results. For the first quarter 2013, net profit excluding net special items was a record $55 million, or $0.31 per diluted share. Net loss excluding net special items for the first quarter 2012 was $22 million, or ($0.13) per share.
On a GAAP basis, the Company reported a net profit of $44 million for its first quarter 2013, or $0.26 per diluted share, compared to a net profit of $48 million, or $0.28 per diluted share, for the same period in 2012. See the accompanying notes in the Financial Tables section of this press release for a reconciliation of GAAP financial information to non-GAAP financial information.
US Airways Group, Inc. Chairman and CEO Doug Parker stated, “We are extremely pleased to produce these record first quarter results. Our 32,000 hard-working team members continue to run a safe and reliable airline for our customers. These outstanding results are the product of their efforts and provide a solid foundation as we plan for combining with American Airlines.
“Looking forward, our integration planning work with American is going well and we continue to expect that the merger will close in the third quarter of this year. The entire US Airways team is looking forward to working with our colleagues at American to build the premier global airline.”
Revenue and Cost Comparisons
A strong demand environment and record passenger load factors led to record revenue performance. Total revenues in the first quarter were $3.4 billion, up 3.5 percent versus the first quarter 2012 on a 1.3 percent increase in total available seat miles (ASMs). Total revenue per ASM was a record 15.78 cents, up 2.2 percent versus the same period last year, driven by a 2.4 point increase in passenger load factor.
Total operating expenses in the first quarter were $3.3 billion, up 2.2 percent over the same period last year. Mainline cost per available seat mile (CASM) was 13.82 cents, up 1.8 percent on a 1.4 percent increase in mainline ASMs. Excluding special items, fuel and profit sharing, mainline CASM was 8.77 cents, up 0.7 percent versus the same period last year. Express CASM excluding special items and fuel was 15.12 cents, down 1.3 percent on a 0.8 percent increase in ASMs.
As of March 31, 2013, the Company had $2.9 billion in total cash and investments, of which $352 million was restricted, up from $2.7 billion, of which $336 million was restricted on December 31, 2012.
On April 10, the Company launched and priced an offering of 2013-1 Class A and Class B enhanced equipment trust certificates (EETCs) in the aggregate face amount of approximately $820 million. The proceeds from the offering will be used to finance its purchase of 18 Airbus aircraft scheduled to be delivered from September 2013 to June 2014. The transaction is expected to close on April 24, 2013.
As a result of the above mentioned EETC transaction, the Company has secured financing commitments for all of its aircraft deliveries to June 2014.
US Airways’ Chief Financial Officer Derek Kerr stated, “We are extremely pleased with the results of our recent EETC financing transaction. Thanks to our strong financial and operational performance, along with our strategic positioning, we were able to obtain the lowest fixed rate financing on an EETC issued by a major airline since 2003.”
The Company recognized approximately $11 million of net special charges in the first quarter. Operating special charges totaled $41 million and primarily included costs related to the merger and the ratification of the US Airways flight attendant collective bargaining agreement. In addition, the Company recognized a $30 million non operating special credit in connection with an award received in an arbitration related to previous investments in auction rate securities.
Merger with American
On February 14, US Airways announced that it had reached a definitive merger agreement with AMR Corporation to create the new American Airlines. The new American will have a robust global network, a strong financial foundation, and is expected to generate more than $1 billion in annual synergies by 2015. The Companies presently expect the transaction to close in the third quarter.
Marketing and Customer Enhancements
- Began new daily, non-stop service between its largest hub in Charlotte, N.C. and London’s preferred business airport, Heathrow. The daily flight will supplement the airline’s existing daily service between its international gateway in Philadelphia and Heathrow, and replaces its service between Charlotte and London’s Gatwick airport.
- Introduced two new choices to DineFresh, its premium meal option for customers flying in Economy to Europe, the Middle East and South America. Since the program’s inception in August 2012, US Airways remains the only U.S.-based carrier to deliver a premium meal option for customers traveling internationally to or from the United States in Economy.
- Announced new non-stop, daily year-round service from its international gateway in Philadelphia to Salt Lake City on June 8. The new service will give customers in Salt Lake City one-stop access to destinations throughout the East Coast, Europe, the Middle East and the Caribbean.
- The airline’s employees earned approximately $6 million in profit sharing for the first quarter results and an additional $4 million in operational incentive payouts through February.
- Honored 64 employees for their more than 45 years of service with US Airways (pilots were honored for 40 years) at the airline’s service anniversary dinner.
- Selected 51 employees to receive the fourth quarter Chairman’s Award, US Airways’ most prestigious honor.
- Awarded ten employees $10,000 each for providing exceptional service to customers through the airline’s “Above & Beyond” program. The “Above & Beyond” program recognizes employees who provide exceptional service to the airline’s customers and fellow employees. Since launching the program in 2006, the airline has received more than 300,000 A&B coupons and has awarded nearly $7.3 million to more than 9,000 employees.
- Announced that its 6,800 flight attendants, represented by the Association of Flight Attendants – CWA (AFA), ratified a new contract that provides immediate pay increases and includes support for the merger of US Airways and American Airlines.
- Announced that its pilots represented by the Air Line Pilots Association (ALPA), at both wholly owned Express carriers, PSA Airlines and Piedmont Airlines, have voted to ratify new five-year collective bargaining agreements.
Other Notable Accomplishments
- Announced that the Company has received FAA certification on its wide-body Airbus A330 aircraft for SafeRoute®, a cornerstone navigation computer software system for the FAA’s NextGen airspace redesign program.
- Announced that the US Airways Education Foundation will award $270,000 in grants this year to nonprofit organizations in the airline’s hub cities of Charlotte, N.C., Philadelphia, Phoenix and Washington, D.C. Grants will be awarded to children’s educational programs aimed to increase academic achievement for those they serve. Since 1992, the US Airways Education Foundation has awarded nearly $4.9 million in scholarships and grants.
- Announced that its Community Foundation awarded a total of $125,000 in grants to Arizona Opera and Ballet Arizona to assist in facilities renovation.
Copyright Photo: Jan Petzold/AirlinersGallery.com. Airbus A319-112 N742PS (msn 1275) in the PSA retrojet scheme climbs away from Charlotte.
AMR Corporation (Dallas/Fort Worth), the parent of American Airlines (Dallas/Fort Worth) and American Eagle Airlines (Dallas/Fort Worth), yesterday filed its reorganization plan to exit its Chapter 11 reorganization with the bankruptcy court in New York. This is a necessary step towards a merger with US Airways (Phoenix). Under the plan, outgoing CEO Tom Horton would receive a $19.9 million severance plan. This amount was previously rejected by the bankruptcy judge Sean Lane.
The merger is expected to be closed in the third quarter. However there are many merger issues that are still unresolved.
Read the full report from Reuters: CLICK HERE
Copyright Photo: Tony Storck. Boeing 737-823 WL N803NN (msn 29566) of the “new American” arrives at Baltimore/Washington (Thurgood Marshall).
US Airways (Phoenix) today (March 30) will begin daily, nonstop service between its largest hub in Charlotte, North Carolina and London’s preferred business airport, Heathrow. The daily flight will supplement the airline’s existing daily service between its international gateway in Philadelphia and Heathrow, and replaces its current service between Charlotte and London’s Gatwick airport, which ended yesterday.
US Airways will operate the service between Charlotte and London Heathrow with Airbus A330 aircraft that features Envoy, the airline’s international business class. Customers traveling in Envoy will experience the remarkably comfortable and private Envoy Suite equipped with an adjustable seat that reclines into a fully flat bed. The Envoy Suite also features personal in-flight entertainment and a 110-volt universal power outlet.
The flight schedule is as follows:
|Charlotte Douglas International Airport (CLT) – London Heathrow Airport (LHR)||London Heathrow Airport (LHR) – Charlotte Douglas International Airport (CLT)|
|730*||7:05 p.m.||8:05 a.m.||731**||10:05 a.m.||2:10 p.m.|
* Flight arrives next day.
** First day of Charlotte-bound flight is March 31, 2013.
The flight will originate in Miami offering customers in South Florida convenient one-stop service to London via the airline’s Charlotte hub.
Copyright Photo: Bruce Drum. Airbus A330-323X N275AY (msn 370) arrives at the Charlotte-Douglas International Airport hub.
American Airlines‘ (Dallas/Fort Worth) new 2013 livery was approved by the current AA management team headed by CEO Tom Horton who is leaving soon. This new look was apparently not approved by the current US Airways CEO (and the upcoming new American CEO) Doug Parker. Parker has called the new American livery a merger “integration issue” according to this article and interview by Skift Travel IQ. In other words, this new livery (above) could be short-term as it will soon be associated with the old (outgoing) AA management team. What changes (if any) to this new design created by Futurebrands will be now determined by the new American-US Airways integration team.
Read the full article: CLICK HERE
Copyright Photo: Tony Storck. Boeing 737-823 WL N803NN (msn 29566) touches down at Baltimore/Washington International Thurgood Marshall Airport in the new (temporary?) look.
American Airlines (Dallas/Fort Worth) has received bankruptcy court approval to merge with US Airways (Phoenix). Details of the merger, including the final restructuring plan, still need to be finalized. The merger still needs to obtain government approvals.
Read the full report from Reuters: CLICK HERE
Copyright Photo: Luimer Cordero. American Airlines’ Boeing 737-823 WL N980AN (msn 33203) arrives at the Miami International Airport hub.
American Airlines (AMR Corporation) (Dallas/Fort Worth), which is merging with US Airways (Phoenix), has asked the bankruptcy court to extend its deadline for submitting its Chapter 11 reorganization plan from April 15 to May 29.
Read the full report from Reuters: CLICK HERE
Copyright Photo: Mark Durbin. The first Boeing 767-300 to wear the new look is the pictured 767-323 ER N368AA (msn 25195) at San Francisco.
US Airways (Phoenix) has filed an application with the U.S. Department of Transportation (DOT) for the rights to operate daily, year-round service between the airline’s hubs in Charlotte, N.C., and Philadelphia, and Sao Paulo, Brazil. US Airways will begin service between Charlotte and Sao Paulo on June 8 using frequencies leased from another carrier. An award of rights for Charlotte – Sao Paulo flights will ensure US Airways avoids a service interruption due to the frequency lease terminating prior to Open Skies between the United States and Brazil commencing in 2015.
US Airways’ proposed service between Philadelphia and Sao Paulo would be the airline’s third daily flight to South America and would complement its existing service to Sao Paulo and Rio de Janeiro from its Charlotte hub.
Copyright Photo: Bruce Drum. Boeing 767-2B7 ER N252AU (msn 24765) taxies to the runway at the Charlotte hub.
American Airlines and US Airways receive a DOJ request for additional information for its proposed merger
AMR Corporation (Dallas/Fort Worth), the parent company of American Airlines, Inc. (Dallas/Fort Worth), and US Airways Group, Inc. (the parent of US Airways) (Phoenix) announced that, on March 4, 2013, each company received a request for additional information (Second Request) from the U.S. Department of Justice (DOJ) in connection with the proposed merger of the two airlines.
A DOJ Second Request is a standard part of the regulatory process. A Second Request extends the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, during which the parties may not close the transaction, until 30 days after American Airlines and US Airways have substantially complied with the Second Request (or the waiting period is otherwise terminated by the DOJ). American Airlines and US Airways expect to respond promptly to the Second Request and to continue working cooperatively with the DOJ as it conducts its review of the proposed combination. American Airlines and US Airways continue to expect the combination to be completed in the third quarter of 2013.
The merger is conditioned on the approval by the U.S. Bankruptcy Court for the Southern District of New York, regulatory approvals, approval by US Airways shareholders, other customary closing conditions, and confirmation and consummation of the Plan of Reorganization.
Copyright Photo: Wingnut. American Airlines’ Boeing 777-323 ER N717AN (msn 31543) in the new look made its first appearance at London (Heathrow) yesterday.
US Airways‘ (Phoenix) flight attendants, represented by the Association of Flight Attendants – CWA (AFA), ratified a new contract today that provides immediate pay increases and includes support for the merger of US Airways and American Airlines. The new contract opens four-party negotiations with American’s flight attendant union and airline representatives, an initial step in reaching a combined collective bargaining agreement. Eighty percent of flight attendants voting approved the agreement, which covers the airline’s 6,800 flight attendants who are based in US Airways’ four hub cities of Phoenix, Philadelphia, Charlotte, N.C., and Washington, D.C.
Following ratification today, the new contract specifies negotiations to begin within thirty days between airline officials at US Airways and American Airlines, AFA and the union representing American Airlines flight attendants, the Association of Professional Flight Attendants (APFA). The talks would establish protocols for reaching a combined collective bargaining agreement once the merger of US Airways and American Airlines, announced on February 14, is closed. The merger is expected to close by the third quarter of this year following regulatory agency and bankruptcy court approvals.
Copyright Photo: Jay Selman. Will the US Airways logojets survive the merger with American? Probably yes since US Airways’ CEO Doug Parker will be running the new American. Doug has always honored and celebrated the legacies of the previous airlines and wisely promoted local sports teams at his hubs. There may be more logojets coming at the new AA especially those celebrating the local AA hub cities and their sports teams. Airbus A319-112 N717UW (msn 1069) in the Carolina Panthers special sports livery taxies to the runway at the Charlotte hub.