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Is a merger between US Airways and American Airlines imminent?

Louisiana travelers may be interested to know that the potential merger between US Airways and American Airlines is gaining momentum. According to comments recently made by the CEO of US Airways, the benefits of a potential merger between the two groups could help both organizations achieve their business goals and make up for their individual shortcomings -- an event that would doubtless trigger much business litigation.

American Airlines is currently in bankruptcy proceedings and is attempting to restructure its organization as a stand-alone carrier, but US Airways' chief doesn't think this move will help the company regain its lost market share. American has expressed interest in potentially combining with another airline after it has exited its bankruptcy proceedings. Considering US Airways shareholders have shown support for a merger between the two organizations, the likelihood of this possibility seems to be increasing.

However, American still has the issue of their ongoing bankruptcy proceedings to contend with, which leaves many potential issues unresolved. For instance, the company is still embroiled in a conflict over its labor contracts. The company, with the goal of cutting annual labor costs by nearly $1.25 billion throughout the bankruptcy, wants to be able to void pre-existing labor agreements as part of the proceeding. The company has yet to reach agreements with the unions representing pilots, flight attendants and mechanics.

According to US Airways, though, bankruptcy proceedings cannot fix the structural weaknesses that have cost American its status as first in market share. A merger with US Airways would solve the problem, some experts say. One of the many hallmarks of a successful merger is an expanded ability to reach customers, and an expansion of the American Airlines network through a merger could do just that.

Source: Bloomberg, "US Airways Sees Progress Toward American Airlines Merger," Mary Schlangenstein, June 14, 2012

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