After months of negotiations, American Airlines and US Airways appeared likely to announce a merger this week, which would create the nations biggest airline and concentrate even further a once-fragmented industry.
Charlotte, currently the largest hub for US Airways, would become the second-largest hub for the new American Airlines, second to Dallas-Fort Worth. US Airways executives have said Charlotte Douglas International Airport would see the number of daily flights increase after a merger, possibly to more than 700.
The boards of both carriers are expected to meet sometime this week to approve the combination, which then needs to be approved by a bankruptcy judge in New York. A deal could be struck this week or possibly next week as talks are still ongoing.
A deal would also require the approval of federal regulators and antitrust authorities. But analysts expect regulators to approve the merger since there is little overlap between the two networks and no hubs in the same cities.
American has five major hubs in Dallas, Miami, Chicago, Los Angeles and New York. But is has been steadily losing ground to its rivals over the past decade while raking up losses that have totaled more than $12 billion in over 10 years.
Besides Charlotte, US Airways has hubs in Phoenix and Philadelphia, and a big presence at Washingtons Reagan National Airport.
A merger would expand Americans domestic network, particularly in the Northeast and the Southwest, and create a more formidable competitor internationally. The combined airline would jump ahead of United Airlines and Delta Air Lines, both of which have grown through mergers of their own in recent years.
The combination would probably bring to an end the wave of consolidation that has swept the industry in recent years. Since 2001 there have been five large mergers, reducing the number of airlines to three main carriers, a handful of low-cost carriers like Southwest Airlines and JetBlue, and regional carriers.
These mergers have led to cuts in service to many smaller cities around the country. But they have also created healthier and more profitable airlines that are able to invest in new planes and products. Faced with rising fuel costs, and losing tens of billions of dollars in the last decade, airline executives argued that the only way to survive was to consolidate capacity.
American, which has been in bankruptcy protection since November 2011, is currently the nations third-largest airline with domestic and international flights; US Airways is the fourth.
Airline mergers often rocky
Even if the deal clears all its hurdles, the merged airline still faces a range of challenges. Airline mergers are often rocky involving complex technological systems, big reservation networks as well as large labor groups with different corporate cultures that all need to be combined seamlessly. United angered passengers last year after a series of merger-related computer and reservation mistakes, and late and delayed flights.
A deal would be a major victory for Doug Parker, the chairman of US Airways, who began pursuing a merger with the bigger carrier soon after American filed for bankruptcy. His argument that American could succeed against bigger airlines only if it combined networks with US Airways swayed Americans creditors who have a critical say in the companys future.
The carriers have been discussing a deal for months. In recent days, both sides have moved much closer but were still trying to figure out how much the merged carrier would be worth and how management positions would be split.
Tom Horton, Americans chairman, who was opposed to a merger for much of the last year, was offered a position as nonexecutive chairman, said a person familiar with the matter but who asked not to be identified because the talks were still under way.
US Airways shareholders could end up with about 28 percent of the new airline, and Americans creditors would have 72 percent, this person said.
A merger could be structured to take effect as American exits bankruptcy. The airlines are pushing for a deal before Feb. 15, when some nondisclosure agreements with American bondholders are set to expire.
The timing of a possible deal, however, remains flexible.
How safe is Charlotte hub?
The merged company would be called American Airlines and based in Fort Worth, Texas. It will have a combined 94,000 employees, 950 planes, 6,500 daily flights, nine major hubs, and total sales of nearly $39 billion. It would be the market leader on the East Coast, the Southwest and South America. But it would remain a smaller player in the Pacific and Europe, where United and Delta are stronger.
Many analysts think Charlottes hub status would be safe in a merged airline, noting that the combined carrier would need a Southeast hub to counter Deltas at Atlanta. And with the lowest cost per passenger of any major hub, Charlotte is widely viewed as an efficient and profitable airport.
But not everyone is so optimistic. Adie Tomer, a researcher for the Brookings Institution whos studied aviation patterns, points to other cities that have seen drastic cuts after a merger, such as Pittsburgh (former US Airways hub), St. Louis (former TWA/American hub) and Cincinnati (former Delta hub).
The talk was consistently rosy there, too, Tomer said.
Parker deftly outmaneuvered Horton by lobbying with Americans employees. He gained an important edge last April when he won the public support of Americans three main labor groups. More recently, pilots from both airlines agreed on how they would work together if the merger succeeded.
Observer staff contributed.
The Charlotte Observer welcomes your comments on news of the day. The more voices engaged in conversation, the better for us all, but do keep it civil. Please refrain from profanity, obscenity, spam, name-calling or attacking others for their views.
Have a news tip? You can send it to a local news editor; email firstname.lastname@example.org to send us your tip - or - consider joining the Public Insight Network and become a source for The Charlotte Observer.Read moreRead less