American Airlines and US Airways are one step closer to a potential merger. The companies said Friday they signed legal documents allowing them to confidentially exchange information.
But a deal is still far from reality.
"It does not mean we are merging -- it simply means we have agreed to work together to discuss and analyze a potential merger," US Airways CEO Doug Parker said in a letter to employees Friday.
Such a merger would put the combined airline on par with the world's largest -- United Continental Holdings Inc. -- and the slightly smaller Delta Air Lines.
Parker has been pushing for a merger since American's parent company, AMR Corp., entered Chapter 11 bankruptcy protection on November 29, 2011.
American Airlines CEO Tom Horton has said his airline is weighing several options, including remaining independent or merging with one of several airlines, including US Airways Group Inc.
In a note to all American Airlines managers Friday, the airline said it is cutting its expenses in bankruptcy court and is "also now looking at other strategic options that could make the new American even stronger."
The signing of non-disclosure agreements means the companies will not share their discussions with outside parties.
The airlines warned in a joint press release that they will not "provide any further announcements regarding the status of any such discussions unless" a merger is ready to be announced or if the talks fall apart.
US Airways' stock price rose nearly 4 percent to $10.89 shortly after the market opened Friday. The merger talk announcement came before trading began.
AMR/ US Airways Group news release:
AMR Corporation, the parent company of American Airlines, and US Airways Group, Inc. today announced that they have entered into a non-disclosure agreement, under which the companies have agreed to exchange certain confidential information and, in close collaboration with AMR's Unsecured Creditors Committee, to work in good faith to evaluate a potential combination.
The companies do not expect to provide any further announcements regarding the status of any such discussions unless and until the parties have entered into a transaction or discussions between the parties have been terminated. Furthermore, AMR and US Airways have each agreed while they are evaluating a potential combination that they and their representatives will not engage in discussions with other parties concerning a potential combination of AMR and US Airways. The companies noted that there can be no assurance that a transaction will result from these discussions.
If American Airlines and US Airways finally merge, here's what passengers can expect:
In the past decade, the airline industry has seen the combinations of Delta with Northwest, United with Continental and Southwest Airlines Co. with AirTran. Further consolidation is likely to raise airfares. The price of a domestic round-trip flight has climbed nearly 20 percent, when adjusted for inflation, over the last 10 years, according to the Bureau of Transportation Statistics.
The merger would give a combined American and US Airways Group Inc. the ability to increase fares. United, Delta and Southwest would be likely to follow.
FREQUENT FLIER MILES
Your miles would be safe. Eventually, the two airlines would merge the miles into one program. Before then, elite status from one airline would likely be honored on the other and passengers would be able to transfer miles from one program to another. That puts the occasional traveler closer to rewards.
The merged carrier would continue American's participation in the OneWorld alliance, which was founded by American, British Airways, Cathay Pacific and Qantas. Today, it has 12 airlines including Finnair, Mexicana and Japan Airlines. US Airways would leave the Star Alliance, which includes rival United Airlines, Lufthansa, Air Canada and 24 other airlines. Alliances allow passengers to earn and redeem miles on partner airlines.
A key reason for merging is to link both airlines' networks, creating a system on par with Delta Air Lines and United Airlines, part of United Continental Holdings Inc. American currently serves about 250 cities in more than 40 countries with 3,400 daily flights. US Airways has 200 destinations in 28 countries with 3,200 daily flights. There is some overlap. But by joining forces the combined airline would become more attractive to companies seeking to fly employees around the globe with few connections.
US Airways passengers would gain access to American's international destinations, particularly London and Latin America. American's passengers would be able to better connect to smaller U.S. cities that US Airways serves.
The combined carrier would have considerable presence in New York, Philadelphia, Washington, Charlotte, N.C., Miami, Chicago, Dallas, Phoenix and Los Angeles. It is unclear how many of those cities would survive the merger. In past mergers, airlines have promised not to close any hubs but have gone ahead and dramatically reduced service in once-key cities.
The merger of two airlines often means confusion and hassle for customers. Which terminal or ticket counter do they go to for check in? If there is a problem with a ticket, which company should they call? For a while, United and Continental were issuing two confirmation numbers for each ticket so either airline's staff could make changes. Problems with the integration of their frequent flier programs angered many loyal road warriors. It could be months, if not years, until all American and US Airways planes get a uniform paint job.
"These things are never as seamless as they seem," said Thomas Lawton, a professor of business administration at Dartmouth College's Tuck School of business. "There will probably be some initial teething problems."
The Associated Press contributed to this story.