American Airlines, US Airways Begin Merger Talks

American Airlines and US Airways have begun confidential merger talks, although a deal between the two major airlines is still far from becoming a reality.

The Washington Post reports that US Airways CEO Doug Parker said in a letter to employees Friday that:

“It does not mean we are merging — it simply means we have agreed to work together to discuss and analyze a potential merger.”

A merger between the two airlines would be on par with the world’s current largest (United Continental Holdings Inc) and the slightly smaller Delta Airlines, who merged with Northwest a few years ago.

Industry experts have said that the only way for American Airlines and US Airways to successfully compete with their larger rivals would be to merge their strengths. While US Airways would gain lucrative international routes, American’s larger hubs would help feed passengers from US Airways’ network for smaller cities.

A merger would have no immediate impact on passengers, although changes like frequent flier programs merging, fares rising, planes changing to American Airlines colors, and glitches in the system would be seen a year or two after the initial merger.

ABC News notes that Parker has been pushing to merge US Airways with American Airlines ever since American’s parent company, AMR Corp., entered Chapter 11 bankruptcy on November 29, 2011. Tom Horton, CEO of American Airlines, has said that the airlines is weighing many options, including either remaining independent or merging with one of several airlines, like US Airways Group.

Along with US Airways, British Airways has also signed a non-disclosure agreement with American Airlines, prompting questions that the international airline may send cash to American to either help them stay independent, or to help them have more power in a potential merger with US Airways.

The American Airlines and US Airways potential merger helped US Airways’ stock to rise almost 4 percent to $190.89 shortly after Friday’s opening bell. The two airlines also noted in a joint press release that they will not “provide any further announcements regarding the status of any such discussions unless” a merger is announced or the talks fall apart.