American Airlines To Merge With US Airways

American Airlines and US Airways have confirmed an $11bn (£7.1bn) merger to create the world's biggest airline.

The deal, which is aimed at securing loss-making American's exit from 15 months of bankruptcy protection, is predicted to save the carriers a combined $1bn (£644m) annually.

The new carrier will keep the American Airlines name but be run by US Airways chief executive Doug Parker.

American's CEO, Tom Horton, will serve as chairman and American's current creditors will own 72% of the new company, with US Airways' shareholders holding 28% of the business.

Sources said the deal had been under discussion since August last year when creditors pushed for merger talks so they could decide which earned them a better return: a merger or Mr Horton's plan for an independent airline.

American has been restructuring under the bankruptcy protection and the agreement would apparently mean that its creditors and possibly its shareholders will own 72% of the stock, with US Airways Group securing the rest.

If the deal is approved by American's bankruptcy judge and competition regulators, the new American will have more than 900 planes, 3,200 daily flights and about 95,000 employees, not counting regional affiliates.

It would also mean that American, United, Delta and Southwest would control about three-quarters of US airline traffic - a situation that worries passenger groups and may concern competition regulators.

Charles Leocha of the Consumer Travel Alliance said that with just four big airlines instead of five, it would be easier to raise fares.

"The benefits of this deal will go only to the corporations, not to consumers," he said.

Just five years ago, American was the world's biggest airline but years of heavy losses - totalling almost $15bn (£9.6bn) since 2001 - drove it into bankruptcy protection.

The company blamed bloated labour costs but its unions accused executives of mismanagement.