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US Airways' Kirby On Merger Rules: Bring Labor In, Get Systems Right

Asked how the Philadelphia and New York Kennedy hubs would be integrated, Kirby said that in general the merger will create growth. Philadelphia and Kennedy "are complimentary today," he said. "Kennedy is mostly a local market, serving customers to and from New York," while Philadelphia serves both a large local market and a large connecting hub with about 500 daily flights. "They are in relative geographic proximity, but they serve very different markets," he said.

Parker said he does not anticipate regulatory hurdles. The new airline will serve 218 destinations with more than 900 routes. Only 12 routes, mostly hub-to-hub routes, are served by both airlines, he said.

The merger is expected to produce $1.1 billion in synergies in 2015. That includes $550 million in cost synergies and $900 million in network synergies as well as $400 million in "dis-synergies" or added labor costs.

Kirby said the network synergies include, primarily, flying the proper size of aircraft on each route, as well as revenue synergies derived from connecting more customers at hubs -- "between Charlotte and Chicago, we can now connect on both ends," he said, and winning back corporate customers currently served by Delta and United (UAL - Get Report) whose "networks are more comprehensive" at the moment.

On the call, Parker and AMR CEO Tom Horton exchanged pleasantries. Parker noted that he started his aviation career at American, "sitting in a cubicle, look across at a cubicle that had Tom sitting in it," and said, "We wouldn't be here today if it wasn't for Tom and his leadership."

Horton initially resisted a merger, though he noted that "American has been looking at US Airways for about 20 years now. It goes back a long way." This time, he said, that before entering into a merger "we felt very strongly that it was good to get our own house in order and get our costs competitive. Once we got that squared away, it became clear this was the right deal and the right time."

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed
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