Project Report on Merger of American airlines and US airlines

A
CONTEMPORARY REPORT
ON
MERGER OF AMERICAN AIRLINES AND US AIRWAYS
MASTER OF BUSINESS ADMINISTRATION
PACIFIC BUSINESS SCHOOL
SUBMITTED BY SUBMITTED TO
REENA SISODIYA SHIVANI KAWADIYA

Acknowledgement
“It is not possible to prepare a project report without the assistance & encouragement of
other people. This one is certainly no exception.”
On the very outset of this report, I would like to extend my sincere & heartfelt obligation
towards all the personages who have helped me in this endeavor. Without their active
guidance, help, cooperation & encouragement, I would not have made headway in the
project.
I am extremely thankful and pay my gratitude to my faculty Shivani kawadiya for her
valuable guidance and support on completion of this project in its presently.
I extend my gratitude to Pacific Business School for giving me this opportunity.
At last but not least gratitude goes to all of my friends who directly or indirectly helped
me to complete this project report.
Any omission in this brief acknowledgement does not mean lack of gratitude.
Thanking You
Reena Sisodiya

CONTENT
Sr.
No.
Particulars Page no.
1. Introduction
4
2. American Airlines
5-7
3. US Airways
8-10
4. Merger of both companies
11-13
5. Expert’s comments on the merger
14-15
6. Reasons behind the merger
16
7. Legal controversies at the time of merger
17
9. Expansion of the American Airlines Group
18-20
10. Major advantages of the merger 23
11. Benefits to the employees and stakeholders 24-25
12. How it can be good for customers 26
13. Conclusion 27
14. Bibliography 28

MERGER
The combining of two or more companies, generally by offering the stockholders of one
company securities in the acquiring company in exchange for the surrender of their
stock.
The merging of one estate or title in another.
"Merger can be applied for when the freehold and leasehold estates become vested in
the same person"
Mergers and acquisitions (abbreviated M&A) are both aspects of corporate strategy,
corporate finance and management dealing with the buying, selling, dividing and
combining of different companies and similar entities that can help an enterprise grow
rapidly in its sector or location of origin, or a new field or new location, without creating a
subsidiary, other child entity or using a joint venture.
Mergers and acquisitions activity can be defined as a type of restructuring in that they
result in some entity reorganization with the aim to provide growth or positive value.

AMERICAN AIRLINES
American Airlines, Inc. (AA) is a major U.S. airline headquartered in Worth, Texas. It
operates an extensive international and domestic network, with scheduled flights
throughout North America, the Caribbean, South America, Europe, and Asia. Its route
network centers around five "cornerstone" hubs in Dallas/Fort Worth, New York, Los
Angeles, Miami, and Chicago.
Its primary maintenance base is located at Tulsa International Airport (TUL).
American Airlines is part of the One world airline alliance, and coordinates fares,
services, and scheduling with British Airways, Finn air, and Iberia in the transatlantic
market and with Japan Airlines and Qantas in the transpacific market. Envoy Air,
SkyWest, Inc., SkyWest Airlines, and ExpressJet Airlines operate regional flights for
American Airlines under the American Eagle brand. Chautauqua Airlines fed the
American Airlines network under the American Connection brand; it will then operate
flights for the American Eagle brand due to the discontinuation of the American
Connection brand.
Founded- 1930
CEO- Doug Parker
Hubs-
 Dallas/Fort Worth International Airport
 John F. Kennedy International Airport(New York)
 Los Angeles International Airport
 Miami International Airport
 O’Hare international Airport (Chicago)
Destinations- 273

Slogan- The new American is arriving.
Commenced
operations
1934
Hubs
 Dallas/Fort Worth
International Airport
 John F. Kennedy
International Airport(New
York)
 Los Angeles International
Airport
 Miami International
Airport
 O'Hare International
Airport (Chicago)
Focus cities LaGuardia Airport (New
York)
Frequent-flyer
program
AAdvantage
Airport lounge Admirals Club
Alliance Oneworld
Fleet size 631
Destinations 273 (excluding US Airways
exclusive destinations) excl.
code-shares[1]
Company
slogan
The new American is
arriving.
Parent
company
American Airlines Group

Headquarters Fort Worth, Texas, USA
Key people  Doug Parker (CEO)
 Scott Kirby (President)
 Tom Horton (Chairman)
Website www.aa.com
American Airlines, Inc. (AA) is a major U.S. airline headquartered in Fort Worth, Texas.
It operates an extensive international and domestic network, with scheduled flights
throughout North America, the Caribbean, South America, Europe, and Asia. Its route
network centers around five "cornerstone" hubs in Dallas/Fort Worth, New York, Los
Angeles, Miami, and Chicago. Its primary maintenance base is located at Tulsa
International Airport (TUL).
American Airlines is part of the One world airline alliance, and coordinates fares,
services, and scheduling with British Airways, Finn air, and Iberia in the transatlantic
market and with Japan Airlines and Qantas in the transpacific market. Envoy Air,
SkyWest, Inc., SkyWest Airlines, and ExpressJet Airlines operate regional flights for
American Airlines under the American Eagle brand. Chautauqua Airlines fed the
American Airlines network under the American Connection brand; it will then [when?]
operate flights for the American Eagle brand due to the discontinuation of the American
Connection brand.
The former parent company of American Airlines, AMR Corporation, filed for Chapter 11
bankruptcy protection in November 2011, and in February 2013 announced plans to
merge with US Airways Group, creating the largest airline in the world. AMR and US
Airways Group completed the merger on December 9, 2013, with the new holding
company American Airlines Group, Inc. being listed on NASDAQ that day, although the
actual integration of the airlines under a single air operator's certificate will not be
completed until a much later date. The combined airline will carry the American Airlines
name and branding, and will maintain the existing US Airways hubs in
Charlotte, Philadelphia, Phoenix, and Washington D.C. for a period of at least five years
under the terms of a settlement with the US Department of Justice and several state
attorneys-general.

US AIRWAYS
US Airways is a major U.S. airline headquartered in Tempe, Arizona, USA. It operates
an extensive international and domestic network, with 193 destinations in 24 countries
in North America, South America, Europe, and the Middle East.
The airline is an affiliate member of One world and utilizes a fleet of 343 mainline jet
aircraft, as well as 278 regional jet and turbo-prop aircraft operated by contract and
subsidiary airlines under the name US Airways Express. The carrier operates the US
Airways Shuttle, a US Airways brand which provides hourly service between Boston,
New York City, and Washington, D.C. As of October 2013, US Airways employed
32,312 people worldwide and operated 3,028 daily flights (1,241 US Airways Mainline,
1,790 US Airways Express).
Founded – 1937
CEO- Robert Isom
Hubs-
 Charlotte/Douglas International Airport
 Philadelphia International Airport
 Phoenix Sky Harbor International Airport
 Ronald Reagan Washington National Airport
Subsidiaries –
• Piedmont airlines
• PSA airlines
Destinations- 193
Slogan- Fly with us

Founded 1937 (as All American
Aviation)
Hubs
 Charlotte/Douglas
 Philadelphia International
Airport
 Phoenix Sky Harbor
 Ronald Reagan
Washington National
Airport[1]
Frequent-flyer
program
Dividend Miles
Airport lounge US Airways Club
Alliance Oneworld (affiliate)[2]
Subsidiaries  Piedmont Airlines
 PSA Airlines
Fleet size 349 (Mainline), 278
(Express)[3]
Destinations 193[3]
Company
slogan
Fly with US
Parent
company
American Airlines Group
Headquarters Tempe, Arizona, USA[4]
Key people  Robert Isom (CEO)[5]
Website usairways.com

US Airways is a major U.S. airline owned by the American Airlines Group. It operates an
extensive international and domestic network, with 193 destinations in 24 countries in
North America, South America, Europe, and the Middle East.
The airline is an affiliate member of One world and utilizes a fleet of 343 main line jet
aircraft, as well as 278 regional jet and turbo-prop aircraft operated by contract and
subsidiary airlines under the name US Airways Express. The carrier operates the US
Airways Shuttle, a US Airways brand which provides hourly service between Boston,
New York City, and Washington, D.C. As of October 2013, US Airways employed
32,312 people worldwide and operated 3,028 daily flights (1,241 US Airways Mainline,
1,790 US Airways Express).
In February 2013, American Airlines and US Airways announced plans to merge,
creating the largest airline in the world. The holding companies of American an d US
Airways merged effective December 9, 2013. In preparation for their eventual
integration, the airlines began offering reciprocal frequent flyer benefits on January 7,
2014, and US Airways announced plans to leave Star Alliance to join One world as an
affiliate member of American Airlines on March 31, 2014. The combined airline will carry
the American Airlines name and branding, and will maintain the existing US Airways
hubs in Charlotte, Philadelphia, and Phoenix for a period of at least five years under the
terms of a settlement with the Department of Justice and several state attorneys-general.
US Airways management will run the combined airline from the American
headquarters in Fort Worth, Texas.

Merger of American Airlines and US Airways
In November, 2011 the former parent company of American Airlines, AMR Corporation,
filed for Chapter 11 bankruptcy protection and in February 2013 announced plans to
merge with US Airways Group, creating the largest airline in the world.
AMR and US Airways Group completed the merger on December 9, 2013, with the new
holding company American Airlines Group, Inc. being listed on NASDAQ that day,
although the actual integration of the airlines under a single air operator's certificate will
not be completed until a much later date.
The combined airline will carry the American Airlines name and branding, and will
maintain the existing US Airways hubs in Charlotte, Philadelphia, Phoenix,
and Washington D.C. for a period of at least five years under the terms of a settlement
with the US Department of Justice and several state attorneys-general.
In preparation for their eventual integration, the airlines began offering reciprocal
frequent flyer benefits on January 7, 2014 and US Airways announced plans to
leave Star Alliance to join One world as an affiliate member of American Airlines on
March 31, 2014.
US Airways management will run the combined airline from the American headquarters
in Fort Worth, Texas.
On February 14, 2013, AMR Corporation and US Airways Group officially announced
that the two companies would merge to form the largest airline (and airline holding
company) in the world, with bondholders of American Airlines parent AMR owning 72%
of the new company and US Airways shareholders owning the remaining 28%.

In January 2012, US Airways Group, the parent company of US Airways, expressed
interest in taking over AMR Corporation, the parent company of American Airlines. In
March, AMR's CEO Tom Horton said that the company was open to a merger. US
Airways (US) told some American Airlines (AA) creditors that merging the two carriers
could yield more than $1.5 billion a year in added revenue and cost savings. On April
20, American Airlines' three unions said they supported a proposed merger between the
two airlines. Under Chapter 11 bankruptcy protection, American Airlines had been
looking to merge with another airline. Earlier in July, a bankruptcy court filing stated that
US Airways was an American Airlines creditor and "prospective merger partner"; on
August 31, US Airways CEO Doug Parker announced that American Airlines and US
Airways had signed a nondisclosure agreement, in which they would discuss the
possibility of a merger.
In February 2013, American Airlines and US Airways announced plans to merge,
creating, by some measurements, the largest airline in the world. In the deal, which was
expected to close in the third quarter of 2013, stakeholders of AMR would own 72% of
the company and US Airways shareholders would own the remaining 28%. The
combined airline will carry the American Airlines name and branding; the holding
company will be renamed American Airlines Group Inc. The US Airways' management
team, including CEO Doug Parker, will retain most operational management positions.
The headquarters for the new airline will also be consolidated at American's current
headquarters in Fort Worth, Texas. US Airways will exit Star Alliance upon completion
of the merger, and American will retain its One world alliance. Judge Sean Lane
approved the merger on March 27, 2013, but declined to approve a proposed $20
million severance package to AA executive Thomas W. Horton. On July 12, US Airways
shareholders approved the proposed merger.

On August 13, 2013, the United States Department of Justice along with attorneys
general from the District of Columbia, Arizona (headquarters of US Airways), Florida,
Pennsylvania, Tennessee, Texas (headquarters of American Airlines), and Virginia filed
a lawsuit seeking to block the merger, arguing that it would mean less competition and
higher prices. American Airlines and US Airways both said that they would fight against
the lawsuit and defend their merger. In early October 2013, the District Attorney of
Texas quit the anti-trust lawsuit.
An additional requirement is that American sell two gates at O'Hare International Airport,
Los Angeles International Airport, Logan International Airport, Dallas Love Field and
Miami International Airport. Some of the slots will be sold to low-cost carriers such as
JetBlue and Southwest Airlines.
A private antitrust suit, filed by a group of 40 passengers and travel agents, also sought
to block the merger. American's bankruptcy court judge refused to enjoin the two
airlines from merging, saying that the group did not demonstrate that the merger would
irreparably harm them. The plaintiffs' lawyer appealed and was turned down at the U.S.
District Court level and was further rebuffed at the Supreme Court after Justice Ruth
Bader Ginsburg denied a stay request filed by him.

Expert’s comments on the merger
USA is still technically two separate airlines - East and West operating under the US
Airways name with separate contracts, crews and assigned aircraft. As the US Airways
management led by CEO Doug Parker gets ready to take over the "new" merged
American Airlines (Dallas/Fort Worth), the International Association of Machinists and
Aerospace Workers (IAM) has reminded US Airways management that not all is well in
the current US Airways, let alone a new larger airline. The IAM today issued this
statement:
The International Association of Machinists and Aerospace Workers (IAM) today
announced it declined management's invitation to participate in the “new” American
Airlines’ opening bell ceremony in New York City celebrating the carrier’s first day of
stock trading on the NASDAQ.
“Make no mistake, this airline has ignored and disrespected IAM members at US
Airways by its shameless refusal to settle a fair contract,” said IAM District 142
President Tom Higginbotham. “To stand there with American’s management and
pretend there are no labor problems and celebrate ‘one airline’ would be an outright lie.”
IAM members at US Airways have been in contract negotiations for almost three years.
The carrier’s management, headed by Doug Parker, who will assume the reins at the
“new” American, has refused to settle new accords with IAM members at pre-merger
US Airways. Earlier this year, the IAM requested a release from contract talks from the
National Mediation Board (NMB), a federal agency, which, if granted, could lead to a
strike.
The IAM and Transport Workers Union (TWU) formed an alliance earlier this year, the
TWU-IAM Employee Association, to jointly represent mechanic & related, fleet service
and stockroom employees at the new airline. The agreement stipulates the TWU-IAM
Association will request a single carrier determination from the NMB, a pre-requisite to
integrating unionized workforces.
This request will only occur once contracts are settled for IAM-represented workers at
pre-merger US Airways. Workforce integration will be delayed for approximately 32,000
workers at the carrier, by far the largest percentage of the combined workforce, until the
airline settles agreements with the IAM.

“This is a merger in name only,” said IAM District 141 President Rich Delaney. “As long
as this management team refuses to settle a fair contract, approximately 32,000
employees will remain separated and the merger’s synergies will not be realized.”
The IAM represents approximately 14,000 mechanic and related, fleet service,
maintenance training specialist and stockroom employees at US Airways.

Reasons behind the merger
Pursuant to the Agreement and Plan of Merger among US Airways Group, Inc. (US
Airways), AMR Corporation (AMR) and AMR Merger Sub, Inc., dated February 13,
2013, as amended, the parties have agreed to a merger (Merger) to form a new airline
group (New American). The U.S. Department of Transportation (DOT) shares the
interest of the U.S. Department of Justice (DOJ) in preserving competition (United
States v. US Airways Group, Inc. (D.D.C.)). In addition to maintaining competition, it is
imperative that any airline merger serves the broader interest of the Traveling public.
This is at the core of DOT’s mission. To protect this compelling interest, US Airways and
AMR agree to maintain service to Medium, Small and Non-hub airports from Ronald
Reagan Washington National Airport (DCA) in accordance with the terms set out in this
agreement.
Over many decades, the airlines serving DCA have developed a pattern of service to
communities of all sizes. The existing pattern of service at DCA reflects a delicate
balance of federal, state and local interests – endorsed to a significant extent by
Congress. It asserts that preserving nonstop service to a range of destinations from
DCA, including Medium, Small, and Non-hub airports, is part of DOT’s statutory mission
and the Administration’s transportation Policy. It further asserts that nonstop air service
links to DCA are essential for the continued economic vitality and growth of these
communities. Importantly, American airlines group believes the goal of preserving
nonstop service to small and medium-sized communities is wholly compatible with the
goal of preserving competition.

Legal controversies at the time of merger
The United States Department of Justice, along with attorneys general from six states
and the District of Columbia, filed a lawsuit in August 2013 seeking to block the merger,
arguing that it would mean less competition and higher prices. Both American Airlines
and US Airways said that they would fight the lawsuit and continue with their merger
after regulatory approval. On November 12, the airlines reached a settlement with the
U.S. Justice Department and several state attorneys general to settle the lawsuit and
allow the merger to be finalized.
An antitrust suit, filed by a group of 40 passengers and travel agents, also sought to
block the merger. However, American's bankruptcy court judge refused to enjoin the two
airlines from merging, saying that the group did not demonstrate that the merger would
irreparably harm them. The plaintiffs' lawyer appealed and was turned down at the U.S.
District Court level and was further rebuffed at the Supreme Court after Justice Ruth
Bader Ginsburg denied a stay request filed by him.
The Department of Justice announced that a settlement of its lawsuit was reached on
November 12, 2013. The settlement will require the merged airline to give up landing
slots or gates in 7 major airports. Under the deal, the new American is required to sell
104 slots at Ronald Reagan Washington National Airport and 34 slots at LaGuardia
Airport.
Following the Department of Justice approval, US Airways and AMR announced that
the merged company will trade on the NASDAQ stock exchange under the symbol AAL.

Expansion of American Airlines Group
According to the new airline group, "The new American has a robust global network with
nearly 6,700 daily flights to more than 330 destinations in more than 50 countries and
more than 100,000 employees worldwide. The combined airline has the scale, breadth
and capabilities to compete more effectively and profitably in the global marketplace.
Customers will soon enjoy access to more benefits and increased service across the
combined company's larger worldwide network and through an enhanced one world®
Alliance. US Airways will exit Star Alliance on March 30, 2014 and will immediately
enter one world on March 31, 2014. With an expanded global network and a strong
financial foundation, American will deliver significant benefits to consumers,
communities, employees and stakeholders."
Although American and US Airways have come together as one company, the process
to achieve a Single Operating Certificate is expected to take approximately 18 to 24
months. In the meantime, customers should continue to do business with the airline
from which travel was purchased just as they did before the merger. In short, it is
"business as usual." The airlines' separate websites, aa.com and usairways.com, as
well as the two airlines' reservations systems and loyalty programs, will continue to
operate separately until further in the integration process.
The common and preferred stock of American Airlines Group will trade on the NASDAQ
Global Select Market under the symbols "AAL" and "AALCP," respectively.

American Eagle
American Eagle is the regional marketing brand of American Airlines. Currently, four
airlines fly as American Eagle, with Chautauqua operating as American Connection.
Envoy Air, a wholly owned subsidiary of American Airlines was previously known as
American Eagle Airlines prior to the merger with US Airways. PSA Airlines, a wholly
owned subsidiary of US Airways and an operator for US Airways Express, will operate
30 new CRJ-900 aircraft in American Eagle livery starting spring 2014.
Livery
IIn addition to a new logo, American Airlines introduced a new livery for all aircraft in the
fleet. The airline calls the new livery and branding "a clean and modern update". The
current design features an abstract American flag on the tail, along with a silver-painted
fuselage, as a throw-back to the old livery. The new design was painted by Leading
Edge Aviation Services in California. Starting in January 2014, following the merger of
US Airways with American Airlines, all US Airways aircraft will be progressively painted
in American Airlines livery. The Doug Parker CEO of American Airlines Group
announced that TWA heritage aircraft will be added in the future “We will continue that
tradition at American, including introducing a TWA aircraft in the future and keeping a
US Airways livery aircraft. That also means we will keep a heritage American livery in
the fleet”.
Who’s in charge :- Parker, the US Airways CEO, was the mastermind of the merger,
and is now in charge of the new American. US Airways president Scott Kirby is now
president of the merged airline. In fact, you can expect many US Airways executives to
get key titles at the combined airline.
In one sense, that’s to be expected, because the merger also marks American’s
emergence from Chapter 11 bankruptcy protection. It’s common for corporate
executives to leave when mergers take place, and also normal that executives look for
new opportunities once a company has been reorganized.

Day to day operations: - Many things change in mergers, from the colors on airplane
tails to the types of uniforms worn by employees. In American’s case, it picked out a
new tail design in January, which will continue at least for now. (Parker isn’t saying yet
whether it will continue.) But some things will stay the same in this merger, at least for a
while.
To begin with, airports will still have American and US Airways counters and gates for a
while. It will take 18 to 24 months for the airlines to be completely merged. So, for now,
if your ticket is booked on American, show up there. If it’s booked on US Airways, go to
that gate. The airlines probably will receive their single operating certificate in 2015.
Flights and routes: - Merged airlines always say that passengers won’t notice any
difference in the places where they fly. And, there are always cutbacks and eliminations.
Just ask Pittsburgh, a major hub for US Airways, Cincinnati, a hub for Delta Air Lines,
Memphis, a hub for Northwest Airlines, and St. Louis, the home base for TWA. All of
them saw service eliminated as their companies were involved in mergers.
One place that will immediately be affected by the American-US Airways merger is
Washington’s Reagan National Airport. In order to win approval from the Justice
Department, US Airways and American agreed to sell 134 takeoff and landing slots at
Washington’s Reagan National Airport, as well as 34 slots at at New York’s LaGuardia
Airport. Those slots basically translate to the ability to operate flights from those places.
Late last week, the government gave Southwest Airlines and Virgin America permission
to buy the LaGuardia slots. It will mark the first time Virgin America has operated from
LaGuardia, where Southwest already has flights.
After the merger, the airline will operate 44 fewer daily departures at Washington
National and 12 fewer daily departures at LaGuardia. Currently, the two airlines
collectively operate about 290 daily departures from Washington and 175 daily
departures from LaGuardia.
Meanwhile, US Airways and American agreed to give up two gates — the physical
spots where planes and depart — at Boston’s Logan Airport, Chicago O’Hare, Love
Field in Dallas, Miami International Airport, and Los Angeles International Airport.
Attorneys general from across the U.S. were worried about the impact that the merger
might have, forcing the airlines to reach a deal with Justice before the consolidation
could take place.
American and US Airways have plenty of examples to look to in getting their merger off
the ground. The Delta-Northwest merger seems to be the best example of a workable
transition, although it has not been without a few bumps, while United and Continental
still are encountering problems two years after their deal took effect.

Combined fleet
American Airlines + US Airways fleet[24]
Aircraft Airline In
Service
Orders Passengers Notes
F J W Y Total
Airbus A319-
100
US
AA
93
16
—
50
— 12
8
112
102
124
110
Airbus A320-
200
US 68 — — 12 138 150
Airbus A321-
200
Transcontinental
AA 12 76[25] 10 20 36 36 102
Airbus A321-
200
US 94 TBA
Airbus A321neo AA — 130[26] TBA Ordered by
American.
Deliveries
begin 2017.
Airbus A330-
200
US 15 20 — 238 258
Airbus A330-
300
US 9 — 28 — 263 291
Airbus A350-
900
AA — 22[27] 36 — 294 330 Ordered by
US Airways.
Deliveries
begin 2017.
Boeing 737-400 US 10 — — 12 132 144 All to be
retired in
2014.
Boeing 737-800 AA 280 76 16 — — 132 148
16 — — 148 160

Boeing 737
MAX 8
AA — 100[28] TBA
Boeing 757-200
Domestic
US
AA
84 — 22 — — 166 188
Boeing 757-200
International
US
AA
33 — 16 — — 166 182
Boeing 767-
200ER
US
AA
10
6
— 18
10
0
20
— 186
128
204
268
Last Flight
AA : 7 May
2014. Last
Flight US :
Dec 2014.
Boeing 767-
300ER
AA 58 — — 30 — 195 225 Half being
retired. Other
half being
retrofitted.
Boeing 777-
200ER
AA 47 — 8 52 30 157 247
Boeing 777-
300ER
AA 11 10[29] 8 52 30 220 310
Boeing 787-8 AA — 12[28] TBA Deliveries
begin
2014.[30]
Boeing 787-9 AA — 30[28] TBA Deliveries
begin
2014.[30]
McDonnell
Douglas MD-82
AA 89 — 16 — — 124 140 To be
phased out
by 2018.
McDonnell
Douglas MD-83
AA 74 — 16 — — 124 140 To be
phased out
by 2018.
Embraer 190 US 20 — 11 — 88 99
Total 1023 506

Major advantages of the merger
 A code share agreement between American and US Airways, creating more
convenient access to the combined company's global network.
 More choices and connectivity, with nine hub airports across the U.S.
 Global access to a stronger one world alliance creating more options for travel
and benefits both domestically and internationally
 Consolidation of loyalty programs and expanded opportunities to earn and
redeem miles across the combined network
 Full integration of policies, websites, kiosks and customer-facing technology to
ensure a consistent worldwide travel experience
 The combined airline expects to share more details around these key customer
benefits early next year.
 The combination is expected to deliver enhanced value to American Airlines'
stakeholders and US Airways' investors. The transaction is expected to generate
more than $1 billion in annual net synergies by 2015.

Benefits to employees
 Employees of the new American will benefit from being part of a company with a
more competitive and stronger financial foundation, which will create greater
career opportunities over the long term.
 The completed merger also provides the path to improved compensation and
benefits for employees.
Alignment of pay, benefits, work rules and other guidelines for employees of both
airlines will be phased in over time so that all changes can be carefully
considered.
 Represented employees will continue to work under their respective Collective
Bargaining Agreements, with the modifications provided under the negotiated
Memoranda of Understanding for certain groups.
 American's non-represented Agents, Representatives and Planners will operate
under their current terms and conditions of employment with merger-related
adjustments.
 Alignment of pay, benefits, work rules and other guidelines for employees of both
airlines will be phased in over time so that all changes can be carefully
considered. Represented employees will continue to work under their respective
Collective Bargaining Agreements, with the modifications provided under the
negotiated Memoranda of Understanding for certain groups. American's non-represented
Agents, Representatives and Planners will operate under their
current terms and conditions of employment with merger-related adjustments.
The combination is expected to deliver enhanced value to American Airlines'
stakeholders and US Airways' investors. The transaction is expected to generate
more than $1 billion in annual net synergies by 2015.

Benefits To Stakeholders
American Airlines stakeholders and US Airways shareholders are expected to benefit
from the significant upside potential of the new combined airline, which is expected to
have approximately $40 billion in revenues based upon the combination of each
company’s projected 2013 performance. The combination is expected to deliver
enhanced value to American Airlines stakeholders and is projected to be significantly
accretive to EPS for US Airways shareholders in 2014.
The transaction is expected to generate more than $1 billion in annual net synergies in
2015, including $900 million in network revenue synergies, resulting predominantly from
increased passenger traffic, taking advantage of the combined carrier’s improved
schedule and connectivity, an improved mix of high-yield business, and the
redeployment of the combined fleet to better match capacity to customer demand.
Estimated cost synergies of approximately $150 million are net of the impact of the new
labor combined contracts at American Airlines and US Airways. The companies expect
one-time transition costs for the merger of approximately $1.2 billion, spread over the
next three years.
The abovementioned provisions of the support agreement relating to the treatment of
prepetition unsecured claims against the Debtors and existing equity interests in AMR
under a plan are summarized as follows:
 Holders of existing AMR equity interests will receive an aggregate initial
distribution of 3.5% of the common stock of the combined airline on the effective
date of the plan, with the potential to receive additional shares if the value of
common stock received by holders of prepetition unsecured claims would satisfy
their claims in full;
 So-called “double dip” creditors (i.e., holders of prepetition unsecured claims as
to which both AMR and American Airlines are obligors, either directly or
indirectly) will receive shares of mandatorily convertible preferred stock equal to
the full amount of their claims. These shares will convert into common stock of
the combined airline at 30 day intervals during the 120 day period following the
effective date of the plan, based on a formula tied to the market price of the
common stock of the combined airline;
 So-called “single dip” creditors (i.e., holders of prepetition unsecured claims that
are not guaranteed) will receive a combination of shares of the same class of
mandatorily convertible preferred stock as the “double dip” creditors will receive
and shares of common stock of the combined airline; and
 American Airlines’ labor unions and other employees will receive an aggregate of
23.6% of the common stock of the combined airline ultimately distributed to
holders of prepetition unsecured claims against the Debtors.
The support agreement can be terminated in certain instances, including the failure of
the Debtors to achieve certain milestones toward confirmation and consummation of the
plan.

How this merger can be good for consumers
Airlines industry expert George Hobica of is more optimist than many of his peers on the
potential impact of the American-US Airways merger. He outlines 9 “silver lining”
reasons that the merger might actually be good for consumers including:
1. There will be real savings for the airlines, which can be passed along to consumers.
2. Fares won’t increase all that much, if at all.
3. Service and flight experience should improve.
4. You’ve been paying for these bankruptcies through your taxes all along.
5. Foreign-based airlines are expanding service from the U.S., which helps keep
international fares moderate.

CONCLUSION
It is to be concluded that this merger is the best outcome for the company, delivering
not only the greatest value for their financial stakeholders, but also positioning them well
for sustainable success over the long term. The deal creates the world’s largest airline, a
position American once held until a wave of consolidation in the airline industry over the
past few years.
The American Airlines and US Airways merger, Doug Parker’s goal, became official,
with American headed back to financial markets as a publicly traded company. (It can be
found on NASDAQ under the symbol AAL.) It is very beneficial for employees of the
company as well as the customers of American Airlines. They have a long way to go to
integrate their loyalty programs, systems, operations, workforces and fleet. This will take
some time, but they are sure to keep us updated as changes occur.
They are committed to keeping us informed as they combine into one carrier and will
continue to communicate with us as they reach other important milestones.

BIBLIOGRAPHY
1. www.aa.com
2. Wikipedia
3. Times of India
4. www.google.com
5. www.usairways.com

Project Report on Merger of American airlines and US airlines

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