Agents' Choice 2020

The New American, now a reality

Seems a bit poetic that the long-rumoured merger of American Airlines and US Airways would see the two companies officially tie the knot on Valentines Day. Well that’s the way it has worked out as American and US Airways officially announced that both of their boards have unanimously approved a definitive merger agreement under which the companies will combine “to create a premier global carrier” that will have an implied combined equity value of approximately $11 billion based on the price of US Airways’ stock as of Feb. 13, 2013. The new airline will operated under the American Airlines name and will offer benefits to both airlines’ customers, communities, employees, investors, and creditors. Customers will have access to more choices and increased service across the combined company’s larger worldwide network and through an enhanced oneworld Alliance, of which American Airlines is a founding member. With firm orders for more than 600 new mainline aircraft, the combined airline will have one of the most modern and efficient fleets in the industry, and a solid foundation for continued investment in technology, products, and services. Thomas Horton, chairman, president and CEO of American Airlines, will serve as chairman of the combined airline’s board of directors through its first annual meeting of shareholders, and will also serve as the combined airline’s representative to the oneworld Alliance, of which he is currently chairman, and International Air Transport Association for the same duration. Doug Parker, chairman and CEO of US Airways, will serve as CEO and a member of the board of directors. Parker will assume the additional position of chairman of the Board following the conclusion of Horton’s service. Under the terms of the merger agreement, US Airways stockholders will receive one share of common stock of the combined airline for each share of US Airways common stock then held. The aggregate number of shares of common stock of the combined airline issuable to holders of US Airways equity instruments (including stockholders, holders of convertible notes, optionees and holders of restricted stock units) will represent 28% of the diluted equity of the combined airline. The remaining 72% diluted equity ownership of the combined airline will be issuable to stakeholders of AMR and its debtor subsidiaries that filed for relief under Chapter 11 (the “Debtors”), American’s labour unions, and current AMR employees. The merger is to be effected pursuant to a plan of reorganization (the “Plan”) for the Debtors in their currently pending cases under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. The Plan is subject to confirmation and consummation in accordance with the requirements of the Bankruptcy Code. In connection with the merger agreement, AMR has entered into a support agreement with certain unsecured creditors holding approximately $1.2 billion of prepetition unsecured claims against the Debtors. Pursuant to the support agreement, the creditors party thereto have agreed, subject to certain conditions, to support a plan of reorganization implementing the merger and incorporating a compromise and settlement of certain intercreditor and intercompany claims issues. Provisions of the support agreement relating to the treatment of prepetition unsecured claims against the Debtors and the treatment of existing equity interests in AMR are summarized further below. The combined airline will offer more than 6,700 daily flights to 336 destinations in 56 countries. The combined airline is expected to maintain all hubs currently served by American Airlines and US Airways, resulting in more travel options for customers. Both airlines expect that the regional carriers they own — AMR Corporation’s American Eagle and US Airways’ Piedmont and PSA — will continue to operate as distinct entities, providing seamless service to the combined airline. The company will be headquartered in Dallas-Fort Worth and will maintain a significant corporate and operational presence in Phoenix.

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