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Originally published Wednesday, February 13, 2013 at 10:00 PM

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Sources: American Airlines, US Airways agree to merge

American Airlines and US Airways will merge and create the world’s biggest airline. The boards of both companies approved the merger late Wednesday, according to four people close to the situation.

The New York Times

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Ending a yearlong courtship by US Airways, American Airlines agreed Wednesday to merge with the smaller carrier, paving the way for the creation of the nation’s largest airline.

The boards of both companies met separately to approve the combination, according to two people with knowledge of the vote.

A merger would bolster American’s domestic footprint, strengthen its presence in the Northeast and give it a bigger network to attract business travelers and corporate accounts.

The merger, the details of which are being announced Thursday morning, would create a rival with the size and breadth to compete against United Airlines and Delta Air Lines, which have both grown through mergers of their own in recent years.

But while United and Delta went through bankruptcies and mergers over the past decade, American has been steadily losing ground while racking up more than $12 billion in losses since 2001. It was the last major airline to seek court protection to restructure its business when it filed for bankruptcy in November 2011.

The wave of big mergers in the industry has created healthier airlines that are better able to invest in new planes and products, including Wi-Fi, individual entertainment screens and more comfortable seats for business passengers.

But some consumer advocates worry that reducing the number of airlines would lead to higher fares over the long run and allow airlines to increase revenue by imposing new or higher fees.

The deal, finalized in recent days, could be formalized as American exits bankruptcy.

Doug Parker, the chairman and chief executive of US Airways, will take over as American’s new chief executive. Tom Horton, American’s current chairman and chief executive, will be chairman, although his tenure could be limited.

The airline would use the American name and be headquartered in Fort Worth, Texas, American’s home.

The merger still must be approved by American’s bankruptcy judge in New York. US Airways shareholders, who will also have to approve the deal, would hold 28 percent of the combined carrier.

In addition, the deal will be reviewed by the Department of Justice’s antitrust division, although analysts expect it to clear the deal.

If approved, the nation’s top four airlines — American, United, Delta and Southwest Airlines — would control nearly 70 percent of the domestic market.

The merger is a victory for Parker. Over the past year, he has convinced American’s creditors that the carrier needed to expand its network to compete.

In April, he won the critical backing of American’s three labor groups, which defied their company’s management and publicly endorsed a merger.

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