Employees celebrate as American, US Airways form No. 1 airline
12/09/2013 8:21 AM
11/12/2014 3:28 PM
Ringing silver bells emblazoned with the American Airlines name and logo, hundreds of employees joined top executives at the airline’s Fort Worth headquarters on Monday to cheer the closing of its merger with US Airways.
The new American Airlines Group combines the nation’s No. 3 and No. 5 carriers to form the world’s largest airline company, with more than 100,000 employees and nearly 6,700 daily flights to more than 330 destinations in more than 50 countries.
“Our goal here is to go and restore American Airlines to its position as the greatest airline in the world,” said American’s new chief executive, Doug Parker, who previously ran US Airways.
The merger ceremony also marked the end of nearly two years of operating in bankruptcy for the former AMR Corp., which is now run principally by the top executives from US Airways.
On Wall Street, investors pushed shares of the new company higher on hopes that the new airline will fare well against it major rivals, United Continental and Delta Air Lines. Shares of the company (ticker: AAL) closed at $24.60, up 2.7 percent on its first day of trading.
At 8:30 a.m., Parker rang the opening bell for the NASDAQ market remotely from a hall at American’s headquarters on Amon Carter Boulevard. He was joined by outgoing CEO Tom Horton, who will remain as non-executive chairman, and former long-time AMR CEO Robert Crandall.
During the celebration, employees were encouraged to ring their bells as a Nasdaq executive told them the louder they cheered, the higher the stock price would go up.
Later, Parker, Horton and Crandall held a town hall meeting with employees at the headquarters, taking questions on a variety of topics including the company’s brand, its presence in New York and whether the carrier will add more international flights.
“The biggest challenge is going to be the operational integration,” Parker said. “It’s not going to be easy.”
Executives said they expect it to take 18 to 24 months to fully integrate the two carriers under the American banner. Consumers should not see any impact from the merger through the busy holiday travel period, and flights are expected to continue under the US Airways name for at least a year.
Horton, who led AMR as CEO through its two-year bankruptcy and merger process, thanked employees for their hard work.
“We are putting American back on top,” Horton said, who received a standing ovation from employees.
Crandall, who was CEO from 1985 to 1998, said he wished he was young enough to come back to work at the airline.
“All of you have a chance to be part of a renaissance, to go back to the day where anything but No. 1 is not acceptable,” Crandall said.
Wall Street analysts appear bullish on American’s prospects now that the merger has closed.
“Management knows from its personal experience of integrating US Airways and America West and from observation of recent industry successes and failures how to get it right, in our view,” CRT Capital analyst Michael Derchin told investors in a research note. He placed a “buy” rating on the stock, with a price target of $31. “A focus on completion factor, on-time performance, and service metrics will be an important early indication of how the merger is working.”
With the completion of the merger, US Airways shareholders received 28 percent of the equity in the new company with a one-for-one stock transfer. AMR creditors and stakeholders received the other 72 percent of the equity. Shareholders of AMR common stock received 0.0665 shares of AAL common stock per share but could receive more equity based on the stock price during the next 120 days.
Helane Becker, an analyst with Cowen and Company, said she expects the newly formed carrier to have $42 billion in revenue in 2014.
“We expect it will take about five years to reach total completion, but obviously there will be significant improvements over the next two years,” Becker wrote in a research note.
Gimme Credit analyst Vicki Bryan was optimistic that American’s integration will be closer to the smooth transition of the Delta Air Lines-Northwest Airlines merger than the rocky integration experienced by United Airlines and Continental Airlines.
“The fact that [Parker] actually seemed to learn so much from his mistakes — and change accordingly to ensure success with consensus and collaboration — already sets him worlds apart from AMR’s former management, a very good omen that this time will actually be different for AMR’s beleaguered employees,” Bryan wrote.
Leaders from American and US Airways major unions showed their support for the deal, standing behind Parker during the bell-ringing ceremony. In April 2012, unions representing American’s pilots, flight attendants, mechanics and ground workers reached conditional labor agreements with Parker before American’s management had signed on to the merger idea.
Allied Pilots Association president Keith Wilson said the merger marks a historic moment for his union and the pilots union at US Airways. He said he is already working with the US Airline Pilots Association on contract issues that affect all the pilots.
“Hopefully we can change the culture and build a strong relationship that ensures the career stability of our pilots and also make American Airlines the preeminent carrier once more,” Wilson said.
Jessica Zavala, a reservations agent at American for seven years, came to the headquarters for the merger ceremony and said she was excited to see the deal finally done, particularly after two years of uncertainty.
“It’s Day One and it’s a new beginning for everyone,” Zavala said.
Being the greatest airline, Parker told workers, means having one that customers want to fly and where people want to work. Some changes have already occurred at the headquarters, where parking spaces are no longer assigned to management and a security guard stationed at the executive suite has been removed.
“Today’s about celebrating and working,” Parker said. “Tomorrow is all about working.”
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