AMR Corp and US Airways Group unveiled an $11 billion all-stock deal on Thursday that gives creditors of the bankrupt American Airlines parent control of the combined airline.
US Air's management team, led by Chief Executive Doug Parker, will assume operational control of the airline, while AMR creditors will wind up owning 72 percent of the combined carrier and take five seats on the 12-member board.
US Airways will have four seats on the board. The remaining seats will be filled by AMR representatives.
"It has been the most successful airline restructuring in history, and we had been very focused from the outset on creating the most value for our owners," AMR CEO Tom Horton told Reuters.
The airline, which will carry the American Airlines name, will be 2 percent larger than current No. 1 United Continental Holdings Inc in terms of traffic - the number of miles flown by paying passengers worldwide.
The merger, subject to approvals from regulators and the U.S. Bankruptcy Court, could help speed up the recovery of the U.S. airline industry as carriers will have more room to boost fares as yet another competitor is eliminated.
"Wall street has been enamored of consolidation from an industry perspective because it will help control capacity," said George Hamlin, president of Hamlin Transportation Consulting. "But I'm not sure being large for its own sake is going to guarantee success. A lot of pieces need to be put together. A lot of pieces will need to be shed."
The new American will be based in Dallas-Fort Worth, Texas. Parker, who has long advocated industry consolidation and began pursuing a merger in early 2012, will the CEO.
"The value of the merger is so great that we're excited about getting the work done," Parker told Reuters. "Integrating airlines can be difficult sometimes, but we've (already) done one at US Airways. We know what to do and know what mistakes to avoid."
Parker, 51, the longest-serving CEO of a major U.S. airline, kick-started the industry's consolidation wave when his America West Holdings bought US Airways out of bankruptcy in 2005.
Tom Horton, who became AMR's CEO when it filed for bankruptcy, will serve as chairman of the combined airline through the first annual meeting of shareholders, after which Parker will take over.
Horton's role had been one of the last sticking points for a deal, people familiar with the situation said, with AMR's board pushing for a bigger role for him.