Twenty-five years ago, US Airways Chief Executive Doug Parker and AMR Chief Executive Tom Horton had side-by-side cubicles in the finance department at American Airlines' headquarters on Amon Carter Boulevard.On Thursday, they were side by side once again, this time in American's Admirals Club at Dallas/Fort Worth Airport, smiling and making jokes as they formally announced an $11 billion merger of their airlines. The deal requires the approval of the U.S. Bankruptcy Court, where American has been operating under Chapter 11 protection for more than a year."We are creating a premier global carrier and by combining the strengths of both companies, we will be delivering the most value to our owners and the greatest benefits to our customers and our people," Horton said.The new company, to be based in Fort Worth, will be the world's largest airline, with more than 6,700 daily flights to 336 destinations in 56 countries. Combined, the company will have about 100,000 employees. Currently, American has 22,500 workers in North Texas."Our two networks are extremely complimentary and the result is a competitive alternative for consumers to other global carriers," Parker said, adding that the combined carrier will maintain all of its hubs including DFW. Of the 900 routes that the airlines currently operate, only 12 overlap, he said, adding that he does not expect significant opposition to the merger from federal antitrust regulators."The new American is going to be a powerhouse," said Horton.Parker, 51, who first proposed the merger about a year ago and won over creditors and union leaders with his vision, will become chief executive officer of the new American Airlines Group. Horton, also 51, will become nonexecutive chairman and will step down after the carrier has its first annual meeting of shareholders of American Airlines Group. He will continue in his position as chairman of the Oneworld alliance, of which American is a partner, and will depart with a severance package worth nearly $20 million."Tom was nice enough to agree to hang on and help me with that transition but then also cared enough about American to know that once that transition happens it's time for someone else to lead," Parker said at the news conference. "He's confident enough in me to let me do that which I'm elated with.""So don't mess it up," Horton interjected, and the room broke out in laughter.Financial detailsThe 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.Under the terms of the deal, US Airways stockholders will receive one share of common stock in the new company for each US Airways share they own, representing 28 percent of the equity in the new airline. AMR creditors will receive 72 percent of the equity in the new company.That includes 23.6 percent of the common stock for American's labor unions, which negotiated equity stakes as part of cost-saving contract agreements; 44.9 percent for creditors who hold pre-petition unsecured claims for both American and AMR; and at least 3.5 percent for existing AMR shareholders. They could receive more if the claims of AMR's creditors are satisfied in full, the carriers said.Creditors will receive shares of convertible preferred stock with a value that will be determined by a formula tied to the market price of the stock once the new carrier emerges from bankruptcy.The future of American Eagle, AMR's regional carrier, is unclear. Parker said the regional feed being provided by American Eagle will still be needed by the new carrier but it's too early to decide whether Eagle will be spun off or kept as part of the merged carrier.Officials expect the deal to close in the third quarter of 2013.JP Morgan analyst Jamie Baker told investors that he expects the integration of the two carriers to face few challenges compared with the problems United Continental has had with its merger combination."[US Airways-American] has spent the past year courting labor, and the two airlines share similar IT infrastructure [notably, Sabre]," Baker wrote in a note to investors on Thursday. "Given that labor and IT are typically the most problematic areas of integration, we expect a reasonably smooth process from here."Union reactionThe pilots, flight attendants and ground workers unions at American and the pilots union at US Airways have agreed to a memorandum of understanding that outlines new contract terms once the carriers combine. The unions applauded the merger, which they have publicly advocated over the past year.Keith Wilson, president of the Allied Pilots Association which represents American pilots, said he is looking forward to working with the new management to rebuild American, although he cautioned about short-term challenges."We need to keep people focused on doing the best job they can while we work through finishing up bankruptcy and then immediately upon exiting bankruptcy to work with the management team to maximize the benefits we're going to get out of this merger," Wilson said.In some respects, the pilots union and other labor groups at American have already been working with Parker and his team at US Airways. 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.Laura Glading, president of the Association of Professional Flight Attendants, said her members are excited and look forward to Parker's leadership."We're going to get a change of culture so that means our culture too," Glading said. "We're all going to have figure out how to work very hard together and we're going to do that because the success of American Airlines is going to be the success of all of us."Andrea Ahles, 817-390-7631Twitter: @Sky_Talk
New company will be called American Airlines Group, based in Fort Worth.
Doug Parker will become chief executive officer; Tom Horton will become non-executive chairman for about a year.
AMR creditors will own 72 percent of new company; US Airways owners will get 28 percent.
AMR unions will have 23.6 percent equity stake.
Approval required from regulators and Bankruptcy Court.