The U.S. Justice Department has given its approval to the merger of American Airlines and US Airways, the last major hurdle for a deal that will create the largest airline in the world.
The two airlines say they hope to finalize the $11-billion deal by the end of 2013. The two companies were quick to note on Tuesday that customers with existing tickets are unlikely to see any noticeable changes, but longer term, the effects could be significant.
Owners of frequent-flyer miles for both airlines are being told their points will remain valid, but will likely be combined into one consolidated program on an equal value basis.
The two carriers are the last to link up in the latest wave of U.S. consolidation, which includes:
- Delta and Northwest.
- United and Continental.
- Southwest and AirTran.
The airline sector has been known for financial woes despite ample demand for air travel, so it isn't surprising that so far none of those deals have translated into cost savings for consumers.
The U.S. Bureau of Transportation Statistics says the average price of a domestic U.S. flight has increased by about 15 per cent since 2009, when consolidation began.
American Airlines is currently under bankruptcy restructuring, but the merger is expected to be approved.
A merged airline brings the carrier savings through increased efficiency, but it also tends to help revenue as a competitor is eliminated. The merger will give a combined American and US Airways Group Inc. the ability to increase fares. United, Delta and Southwest would likely follow.
The merger could also pave the way, however, for further expansion by discount airlines such as Spirit Airlines Inc. and Allegiant Travel Co.
The merged carrier will also continue to participate in the OneWorld international airline alliance, which allows smoother transitions for passengers in member airlines in different countries and continents.
American founded OneWorld along with British Airways, Cathay Pacific and Qantas in 1999. Today, it has expanded to include nine more airlines including Finnair, Royal Jordanian and Japan Airlines. The now defunct Canadian Airlines was also a member of OneWorld until it was bought by Air Canada more than a decade ago and rolled into Air Canada's Star Alliance.
US Airways will leave the Star Alliance, which includes rival United Airlines, Lufthansa, Air Canada and 24 other airlines.
The two airlines are seen as ideal merger partners because there is relatively little overlap in their routes. The combined carrier will offer more than 6,700 daily flights to 336 destinations in 56 countries, making it more attractive to companies seeking to fly employees around the globe with few connections.
The combined carrier will have considerable presence in Philadelphia, Charlotte, Miami, Dallas, Atlanta and Phoenix, but the Justice Department is requiring a scaling back of the new airline's presence in L.A., New York, Washington and Chicago.