Meet US Airways' new travel buddy: American.
After months of debate, The Department of Justice (DOJ) reached a settlement with US Airways and American Airlines Tuesday that will allow the two companies to merge and become the world’s largest airline.
The merger has not been smooth for either company. The deal, first announced in February, was originally expected to be closed by the end of the third quarter but was delayed due to a DOJ antitrust lawsuit that claimed the merger would "result in passengers paying higher airfares and receiving less service.” The settlement came just two weeks before the scheduled trial.
Though the merger still needs approval from the US Bankruptcy Court, the companies don’t expect any obstacles, according to American Airlines parent company AMR’s announcement of the settlement. The merger would pull American out of two years of bankruptcy.
The combined company will operate under the American Airlines name and is being referred to as the "New" American Airlines by the companies. The $11 billion merger is now expected to be completed by December, according to AMR. However, the airlines don’t expect to complete the transition to a single carrier for the next five years.
Here's how the merger will likely affect airline passengers:
Do you fly American or US Airways and live in Washington, D.C., or New York? Expect the airlines’ presence to decrease at these airports. The centerpiece of the DOJ’s settlement was that the merged company would have to give up carrier slots, gates, and ground facilities at the nation’s key airports so as to maintain competition. The airlines must divest all 104 slots at Washington Ronald Reagan National Airport, 34 at New York’s LaGuardia Airport, and smaller divestitures at the Los Angeles, Boston, and Miami airports.
Do you fly JetBlue or Southwest or Delta? Jet Blue and Southwest may expand. Since the new American will be forced to sell carrier slots and gates, they'll be up for grabs for the other airline giants. According to the settlement, JetBlue at Reagan National and Southwest at LaGuardia will be given priority to the slots they currently lease from American. Though the airlines have not yet announced plans to buy these slots, Wall Street was enthusiastic. JetBlue stocks is up nearly 13 percent since Monday's close and Delta and Southwest shares are up 3.3 percent and 1.8 percent, respectively.
Are you a frequent flier? US Airways and American Airlines are part of separate loyalty programs. If you’re already an American Airlines loyalty member, nothing changes. If you’re part of US Airways’ Dividend Miles program, however, you’ll be transitioned to the AAdvantage loyalty program, US Airways CEO W. Douglas Parker told The New York Times. You won’t lose your miles, but they’ll be redeemable at different airlines.
Will you pay more money? A big concern of the DOJ was the impact of the merger on the cost of flying. The concessions the airlines made are intended to reduce their pricing power at certain airports. Time will tell whether those moves will be enough to keep prices down. The competition is shrinking, however. In the 1970s, 12 airlines ruled the skies. Upon completion of this merger, just four airlines will rule 85 percent of the domestic market.