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American and US Airways Merger Create World's Largest Airline

Andrew Harrer | Bloomberg | Getty Images

The Boards of American Airlines and US Airways have voted to merge the two airlines creating the world's largest carrier. The CEO's of the two airlines will formally announce the new airline tomorrow at events in Dallas and Tempe, Arizona.

The merged carrier will take the name American Airlines since it has broader appeal around the U.S. and internationally. Doug Parker, the current CEO of U.S. Airways will become CEO of the new American.

(Read More: American-US Air Deal Could Be End of Airline Stock Run)

Tom Horton, who steered American Airlines through bankruptcy will take the position of non-executive chairman through 2014.

New American Expands its Reach

The merged airline will catapult American from third largest airline in the world behind United and Delta into the position of world's biggest airline.

The new American will have:

* Headquarters in Dallas, Texas

* More than 900 airplanes

* Hubs in 6 U.S. Cities

* Membership in the One World Alliance for frequent flyers

(Read More: American-US Airways: What It Means For Frequent-Flyers)

Most importantly for the new American is its expanded reach in lucrative markets on the east coast of the U.S. In recent years, as Delta/Northwest and United/Continental merged, they increased their presence in the Eastern U.S. That left the old American in a weaker position to leverage east coast markets as a base to expand with lucrative routes to Europe.

Parker, U.S. Airways Prevail

Ownership of the new American will be split with 72% going to AMR Creditors and 28% to US Airways shareholders. It will have a market cap of $10.5-11 Billion dollars. The day to day operation of the American will be headed by Doug Parker.

(Read More: United's Note to US Airways: Mergers Can Be Ugly)

For Parker, long an advocate of consolidation in the airline industry, the merger ends a 8 year run where he's engineered two successful mergers. He was CEO of America West when it merged with U.S. Airways in 2005. Since then U.S. Airways stock is up 34%.

When Parker first proposed a merger between U.S. Airways and American, the suggestion was initially dismissed by AMR executives.

(Read More: US Airways CEO: Merger with American Makes Sense)

Parker persisted, and succeeded in part by striking a deal with American's labor unions and locking in a framework for new contracts if the two airlines were to merge.

Sources say the merger is expected to win anti-trust approval.

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