U.S. Air and AMR close to end merger

U.S. Air and AMR close to end merger

US Airways and AMR announced today that they are on the verge of closing a merger that is worth $11 billion and this is the most important deal in airline history. This isn’t the first deal in the airline world that is of significance. Last year, British Airways merged with Singapore Airlines and this was an extremely important deal as well. The deal comes after both companies were able to resolve differences when it comes to valuation and the structure of management. Under the deal terms, the Chief Executive of US Airways is going to be the CEO of the company after the merger. On the other hand, the Chief Executive of AMR is going to be a member of the board.

This deal comes after AMR filed for their bankruptcy during November 2011. The overall merger has a value of around $10 billion and this will give creditors of AMR 72% ownership according to the new deal. The airlines’ board of directors are planned to vote during this week on the new proposed deal. However, representatives for the company cautioned that the negotiations can get delayed or fail during the meeting. The voting meeting was supposed to take place last week but AMR delayed it because they needed more time to finalize some of their finances and other details.

A lawyer representing the committee of creditors didn’t comment until now but it is expected that there won’t be any problems related to their ownership value. Along with both airways, the committee of creditors will seriously benefit from this deal. The deal also means that US Airways is going to have to leave Star Alliance. Instead, they will have to join global alliance that already includes AMR and British Airways. With both airways merging together, it is expected that both companies are going to reap higher profits during this year as their airline traffic is going to increase as well especially that both of them already have a large amount of loyal customers.

The flights will mainly be focused inside the United States in the beginning so both airways can focus on enhancing any services and then they will extend their services to Europe and internationally. Experts are already predicting that this deal is going to be very successful especially that both airlines have a credible reputation so far and the only problem they went through was the bankruptcy filing by AMR.

About the Author

Lance Finstein financial reporter NYSE post. Authors have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. This article is for information purposes only, and is neither a solicitation or recommendation to buy nor an offer to sell securities. *NYSE Post does not set price targets on securities. Never invest into a stock discussed on this website unless you can afford to lose your entire investment.