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American Airlines, U.S. Airways get merger go ahead

Nov. 13, 2013, Washington, D.C. - The U.S. Justice Department has given its approval to the merger of American Airlines and US Airways, the last major hurdle for a deal that will create the largest airline in the world.


November 13, 2013
By CBC News

The two airlines say they hope to finalize the $11-billion deal by
the end of 2013. The two companies were quick to note on Tuesday that
customers with existing tickets are unlikely to see any noticeable
changes, but longer term, the effects could be significant.

 

Owners of frequent-flyer miles for both airlines are being told their
points will remain valid, but will likely be combined into one
consolidated program on an equal value basis.

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The two carriers are the last to link up in the latest wave of U.S. consolidation, which includes:

  • Delta and Northwest.
  • United and Continental. 
  • Southwest and AirTran.

The airline sector has been known for financial woes despite ample
demand for air travel, so it isn't surprising that so far none of those
deals have translated into cost savings for consumers.

 

The U.S. Bureau of Transportation Statistics says the average price
of a domestic U.S. flight has increased by about 15 per cent since 2009,
when consolidation began.

 

American Airlines is currently under bankruptcy restructuring, but the merger is expected to be approved.

 

A merged airline brings the carrier savings through increased
efficiency, but it also tends to help revenue as a competitor is
eliminated. The merger will give a combined American and US
Airways Group Inc. the ability to increase fares. United, Delta and
Southwest would likely follow.


The merger could also pave the way, however, for further expansion by discount airlines such as Spirit Airlines Inc. and Allegiant Travel Co.


The merged carrier will also continue to participate in the
OneWorld international airline alliance, which allows smoother
transitions for passengers in member airlines in different countries and
continents.


American founded OneWorld along with British Airways, Cathay Pacific and Qantas in 1999.


Today, it has expanded to include nine more airlines including Finnair,
Royal Jordanian and Japan Airlines. The now defunct Canadian Airlines
was also a member of OneWorld until it was bought by Air Canada more
than a decade ago and rolled into Air Canada's Star Alliance.


US Airways will leave the Star Alliance, which includes rival United Airlines, Lufthansa, Air Canada and 24 other airlines. 

 

The two airlines are seen as ideal merger partners because there is relatively little overlap in their routes. The
combined carrier will offer more than 6,700 daily flights to 336
destinations in 56 countries, making it more attractive to companies
seeking to fly employees around the globe with few connections.

 

The combined carrier will have considerable presence in
Philadelphia, Charlotte, Miami, Dallas, Atlanta and Phoenix, but the
Justice Department is requiring a scaling back of the new airline's
presence in L.A., New York, Washington and Chicago.