US Airways

US Airways closes in on deal with AMR to form largest airline

After merger failures, carrier hopes to become world's biggest in tie-up with American Airlines

PUBLISHED : Tuesday, 12 February, 2013, 12:00am
UPDATED : Tuesday, 12 February, 2013, 5:33am

US Airways chief executive officer Doug Parker, after three failed attempts at major mergers, is closing in on a deal to combine with AMR's American Airlines (AA) and form the world's biggest carrier.

Parker, 51, has applied lessons from his previous efforts, shifting tactics in pursuing the bankrupt AMR.

The two companies are working on final details and their boards may vote on the deal later this week, people familiar with the matter have said. Parker would lead the combined company, the people said.

The deal would mark a career achievement for Parker, the longest-serving CEO among large US airlines. It would also complete the industry consolidation that he began in 2005 when his America West Holdings merged with US Airways, reduce the number of full-service US carriers to just three, and bolster airlines' ability to raise fares.

"He learns from his past mistakes," Gordon Bethune, the former CEO of Continental Airlines, said. "He's done this the right way, and it's showing."

He learns from his past mistakes ... He's done this the right way, and it's showing

US Airways began its pursuit in January 2012, less than two months after Texas-based AMR sought court protection. The airlines agreed last week on post-merger leadership and the division of equity, people familiar with the matter have said.

Parker would become CEO, and American's Tom Horton would become non-executive chairman, the people said.

With US Airways now the fifth-biggest US airline, a tie-up with No3 American would push the combined carrier to the top spot by global traffic, passing United Airlines and Delta Air Lines, both of which eluded Parker in the past.

"Parker has been the No 1 backer of consolidation," said Bob Mann, a former American Airlines executive. "He doesn't mind getting his nose bloody if he thinks it's the right thing to do."

Hired in 1995 as America West's chief financial officer, Parker's tests began almost as soon as he became CEO in 2001, 10 days before the September 11 terrorist attacks.

Parker testified before Congress in support of a US$15 billion airline-aid package as travel demand shrivelled, saying America West risked bankruptcy. It secured a US$380 million federal loan guarantee.

The man known as a fierce competitor at salsa-making contests and go-cart races at US Airways' annual media day drummed up US$1.5 billion to fund the America West-US Airways deal from backers that included planemaker Airbus, former Air Canada parent ACE Aviation, and hedge funds Par Capital Management and Peninsula Investment Partners.

"He's not a distant, standoff-ish kind of guy," said Bethune, who was running Continental when Parker took the helm at America West. "He's a really bright, forward-thinking man and a great manager."

Parker, whom US Airways declined to make available for an interview, had less success with his follow-on merger efforts.