Why Are US Airways And American Airlines Merging? Behind The Creation Of World's Largest Airline

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By Connor Adams Sheets | February 14, 2013 1:40 PM EST

US Airways and American Airlines are reportedly set to merge Thursday in a mega-merger that will create the world's largest airline. 

News of the deal, which "four people close to the situation" tell the Associated Press was approved Wednesday evening by the Boards of Directors of both airlines, does not come as a major surprise as the Washington Post reports that US Airways has been actively pursuing such a merger for much of the past year.

If the two companies do in fact merge -- which would require the approval of both the Department of Justice's anti-trust division and the judge handling American Airlines' bankruptcy, which the merger is expected to receive -- ABC News reports that the new company would most likely be called American Airlines.

But the CEO of the company would be current US Airways CEO Doug Parker, while current American Airlines CEO, Tom Horton, would be named chairman of the new company, AP's sources said.

As for the question of why the merger is taking place, that's a little more complicated. Back in August, creditors demanded that American Airlines, which has been under bankruptcy protection since 2011, seek a merger rather than continue to restructure as an independent company.

As such, American, which had already been in conversations with US Airways, began to work out a deal with the company. The two carriers have already worked out agreements with pilots, flight attendants and mechanics, according to ABC News. This groundwork suggests that the merger is better-orchestrated and will proceed more smoothly than many other mega-mergers, which often see major issues when employees of two or more entities are brought under one umbrella.

Also, ABC News reports that the frequent flyer mile programs of both airlines will merge within months of the companies being brought together, eliminating yet another possible point of stress for the deal.

The creation of the new airline will mark the third major airline merger since 2008. Delta and Northwest merged that year, retaining the name Delta, and United and Continental joined in 2010, forming the current largest airline, United Airlines, which is slightly smaller than the company that will be created by the American Airlines-US Airways merger, according to ABC News.

There are a number of concerns, however, because if the merger is approved, 86 percent of domestic air travel will be handled by just four carriers: Delta, United, Southwest and the new, bigger version of American Airlines. Together, American Airlines and US Airways will be slightly bigger than United Airlines.

And fares could go up for domestic flights. Though American and US Airways are not competitors on many of their main routes, ABC News Travel and Lifestyle Editor Genevieve Shaw Brown says that less competition between carriers often means higher ticket prices for travelers.

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