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American Air’s Merger with US Airways Was the Biggest Aviation Story of 2013

Dec 23, 2013 8:00 am

Skift Take

Not only was the world’s biggest airline created, but American Airlines managed to emerge from bankruptcy in the best possible situation and change the landscape of the American aviation industry.

— Samantha Shankman

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Mike Theiler  / Reuters

A view of two US Airways Express planes next to an American Airlines plane (background) at the Ronald Reagan Washington National Airport in Arlington County, Virginia, February 10, 2013. Mike Theiler / Reuters

Twelve months ago, it was unclear what American Airlines would look like at the end of 2013. A year earlier, it was unclear if there even would be an American Airlines.

But the whirlwind ride from bankruptcy to merger deal to federal lawsuit has ended in a new company and new hope for 6,300 employees in Tulsa, even if the trip to get there was painful and the price high.

On Dec. 9 American Airlines finally merged with US Airways to become the world’s largest airline, handing the reins of the company to new CEO Doug Parker.

The company is now valued at more than $19 billion, and the price of the company’s stock has been growing since it was first offered, indicating investors have confidence in American Airlines Group Inc. and the changes it took to get to a merged company.

With that, American officially ended more than two years of bankruptcy, creditors were fully repaid and stockholders even got a small share of the new company.

But there was plenty that happened along the way to make some doubt that the merger would ever happen.

“There was a lot of unknown,” said Dennis Altendorf, the director of aerospace development and strategy for the Tulsa Regional Chamber. “They had to come out of bankruptcy, and they had to get clearance from the government.”

The year started with former AMR Corp. CEO Tom Horton adamant that American Airlines could emerge from bankruptcy as a standalone company, ready to compete with airlines that had already consolidated and staked a dominant position in the industry.

Horton said that lower labor costs, through a smaller workforce and frozen pensions, could help the company, along with a new fleet of more efficient and more luxurious planes.

Horton and American struck a deal with US Airways on Feb. 14, pending approval from the bankruptcy court.

The deal gave American and creditors everything they could ask for and even promised raises and equity shares for employees.

But along the way there were challenges to Horton’s severance. Then in August the Department of Justice sued to block the merger, claiming then that the industry was too consolidated and that customers would suffer.

Days before the lawsuit was set to go to trial, the two sides struck a deal to give up key slots in New York and Washington, D.C., and the deal was allowed to go forward.

Now 100,000 workers at the company are looking forward to a happier coming year, yet it’s one still full of uncertainty. Parker and American’s other new leaders must decide how Tulsa and American’s primary maintenance and overhaul base fits into the future for the world’s new largest airline.

One of Tulsa’s largest private employers, American Airlines and 6,300 local employees went from bankrupt to an entirely new company. With a new boss, workers at American’s largest maintenance base are still looking for security.

(c)2013 Tulsa World (Tulsa, Okla.) Distributed by MCT Information Services.

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