NEW YORK (Bloomberg) – US Airways Group Inc. shareholders have moved the carrier a step closer to an US$11 billion merger with AMR Corp.’s American Airlines by approving the combination in a vote.
The all-stock tie-up, which will create the world’s largest airline, was backed Friday by more than 99 per cent of shares voted at the company’s annual meeting in New York, US Airways said in a statement. Its stockholders will own 28 per cent of the combined carrier, with the rest going to creditors in AMR’s bankruptcy.
The new American will have the heft to compete with United Continental Holdings and Delta Air Lines, which also were created in a wave of consolidation that began in 2005 and swept up five of the 10 biggest US carriers. American and US Airways expect to complete their merger this quarter, in conjunction with AMR’s exit from bankruptcy protection.
Previous mergers “created three airlines that are larger than US Airways and make it very difficult for airlines like US Airways and American Airlines to compete with our relatively smaller networks,” Chief Executive Officer Doug Parker said at the meeting. “The merger of US Airways and American eliminates this competitive disadvantage.”
An exchange ratio for shares of Tempe, Arizona-based US Airways in the merger hasn’t been set.
The combination must be approved by the court overseeing AMR’s bankruptcy and by the Justice Department, which is assessing whether it will create a monopoly in any markets. Federal regulators won’t issue a decision before a 15 August hearing at which Fort Worth, Texas-based AMR will seek court approval for its reorganisation plan, people familiar with the matter said last month.
US Airways still expects to receive antitrust approval this quarter, Mr. Parker said. The combined airline’s position at Reagan National Airport in Washington, where the number of flights is limited, has been the focus of objections from competitors such as JetBlue Airways Corp. and Southwest Airlines Co.
While the merged American will control 67 per cent of daily departures from Reagan, that amounts to only 50 per cent of seats flown at the airport and 25 per cent of seats in the larger Washington market that also includes Baltimore-Washington and Dulles airports, Mr. Parker said.
“Our competitors are using all the force they can to force us to divest” flight slots at Reagan, he said in response to a shareholder question. “It may be that someone decides, as a matter of policy, that it’s something they think makes sense. We would argue that’s terrible policy.”
Attorneys general from 18 states have joined the Justice review, and a group of consumers has sued to block the combination in federal court in San Francisco.
The merger will produce annual savings and new revenue totalling more than $1 billion by 2015, the airlines have said. The combined airline will displace United Continental as the largest carrier, based on passenger traffic, and will operate more than 6,700 daily flights.
The US Airways shareholder vote represents “continued progress on our path toward building the world’s leading airline,” said Mike Trevino, a spokesman for American.
The new airline will keep American’s name and its Fort Worth headquarters. US Airways executives will hold the top leadership positions. AMR CEO Tom Horton will serve as chairman until the combined airline’s first annual meeting.