American Airlines and US Airways officially announced an $11 billion merger on Thursday morning.
The new company, which will be based in Fort Worth, will have more than 6,700 daily flights to 336 destinations in 56 countries, the carriers said.
"Today we are proud to launch the new American Airlines -- a premier global carrier well equipped to compete and win against the best in the world," said Tom Horton, chief executive of American's parent company, AMR Corp.
Horton will become non-executive chairman and will step down after the carrier has its first annual meeting of shareholders and will continue in his position as chairman of the Oneworld alliance of which American is a part. US Airways chief executive Doug Parker will become chief executive of the new company and will assume the chairman title when Horton leaves the board.
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Under the terms of the deal, US Airways stockholders will receive one share of common stock in the new company for one share of US Airways stock they own which will represent 28 percent of the equity in the new airline. AMR creditors will receive 72 percent of the equity in the new company.
Existing AMR shareholders, which would usually get nothing when a company recapitalizes in bankruptcy, will receive at least 3.5 percent of the ownership in the combined carrier.
The deal will need to be approved by the bankruptcy court as well as government regulators, the companies said.
"This merger will create a stronger company, with the path to improved compensation and benefits and greater long-term opportunities for all our employees," Parker said. "With today's announcement, we start becoming one team and one new airline."
The new combined airline will have about $40 billion in revenues in 2013 and the merger expects to generate more than $1 billion in annual net cost savings by 2015. The companies said they expect one-time transition costs of about $1.2 billion spread over the next three years.
The pilots, flight attendants and ground workers unions at American and the pilots union at US Airways had previously agreed to a memorandum of understanding that outlined new contract terms once the carrier combined. The unions applauded the merger which they have publicly advocated for over the past year.
"With a strong, proven leadership team focused on partnering with frontline employees, improving reliability and customer service, and expanding our network, the new American Airlines will return to a position of industry preeminence," said Allied Pilots Association spokesman Dennis Tajer.
Last April, American's three labor unions reached conditional labor agreements with US Airways even though a formal merger proposal had not been made to American. With those agreements, American's unions were able to negotiate new contracts with American management that had fewer contract concessions than those proposed by Horton early last year.
"It's been a long, tough road but the result is well worth it," said Laura Glading, president of the Association of Professional Flight Attendants. "The new American will provide job security and fair compensation for all employees and another great option for the flying public."
The combined company also launched a joint website for customers and employees outlining details of the merger and how it may affect travelers as the two carriers integrate. The site is www.newAmericanarriving.com
Meetings have been going on for weeks as executives at both companies, along with American's unsecured creditors committee and an ad hoc bondholder group, tried to reach a deal before the Feb. 15 expiration of a nondisclosure agreement with bondholders.
AMR had asked the Bankruptcy Court to extend its deadline to submit a reorganization plan until late April, suggesting that the talks could have stretched past this week.
With the merger, American will pick up market share on the East Coast, where it has lost business in recent years to carriers such as JetBlue.
US Airways' hubs in Charlotte, N.C., and Philadelphia will also bolster American's north-south traffic on the Eastern Seaboard.
At American's largest hub, DFW, more passengers would likely connect through the airport, headed to other domestic destinations or overseas to international cities.
And since the route networks of American and US Airways have little overlap, analysts expect that the combined carrier won't have to cut much capacity, leaving airfares stable.
For US Airways, the merger provides access to more international routes and partners through the Oneworld alliance.
US Airways is a member of the Star Alliance but does not have the full benefits. United has better joint ventures with international partners.
The deal also gives Parker, who got his start in the business as a financial analyst at American in the 1980s, the airline merger he has been hoping for.
In 2007, US Airways made a failed bid for Delta Air Lines when the Atlanta-based carrier was in bankruptcy.
It also tried to merge with United Airlines in 2010 before that carrier chose Continental Airlines.
Wall Street has applauded Parker's efforts to improve profit margins at US Airways, which posted record revenue of $13.8 billion and profit of $637 million in 2012.
But investors have been concerned that the Tempe, Ariz.-based carrier would lose its competitive edge as labor costs increase and revenue on its smaller network does not.
Parker has also been unable to integrate the two pilot groups from America West and US Airways since those carriers merged in 2005.
Once government regulators and the Bankruptcy Court approve the American-US Airways deal, Horton will step down as chief executive, a role he assumed the day AMR filed for bankruptcy -- Nov. 29, 2011.
In the past year, Horton has terminated expensive leases on gas-guzzling planes that were too costly to fly and renegotiated aircraft leases and purchase agreements for new planes from Boeing and Airbus.
The carrier has increased its average fares and maintained a cash balance around $4 billion while restructuring. Just a few weeks ago, Horton unveiled a new brand logo and livery, the first time American has changed its AA with an eagle logo since 1968.
Horton also negotiated new labor contracts with all of American's unions that will save hundreds of millions of dollars annually.
But the agreements came after months of difficult contract talks and a failed pilot vote as union leaders accused Horton of overreaching with his restructuring plan and placing too many cost-cutting measures on employees.
In 2012, AMR posted a $1.87 billion loss, a bit less than its $1.98 billion loss in 2011, despite record revenue of $24.85 billion. But it's lagging behind the industry as other airlines reported millions in profits for the year.