American Airlines to explore merger options

Fri May 11, 2012 7:25pm EDT

A US airways plane takes off behind an American Airlines jet at Ronald Reagan National Airport in Washington April 23, 2012. REUTERS/Kevin Lamarque

A US airways plane takes off behind an American Airlines jet at Ronald Reagan National Airport in Washington April 23, 2012.

Credit: Reuters/Kevin Lamarque

(Reuters) - AMR Corp, parent of American Airlines, bowed to pressure on Friday from its unsecured creditors, including its largest labor unions, and said it would explore merger options while it is still in bankruptcy.

AMR, which has been in Chapter 11 since November, had long said it intended to reorganize as a stand-alone carrier, shrugging off interest expressed by rival US Airways Group Inc.

The carrier, however, has faced mounting pressure from vocal members of its creditors committee who believe a better future for AMR can be secured by merging with US Airways.

In reversing its stance, AMR said it wanted to assure stakeholders that it would pursue the best possible outcome for the airline.

"To be clear, American has committed to work in collaboration with the (creditors) committee to develop only potential consolidation scenarios and this agreement does not in any way suggest that a transaction of any kind or with any particular party will be pursued," Beverly Goulet, AMR's chief restructuring officer, said in a statement.

US Airways has been courting AMR creditors, especially disgruntled labor unions that say an AMR/US Airways tie-up would create a stronger carrier and save more jobs than AMR's stand-alone plan.

"We look forward to engaging in the AMR process to demonstrate the significant advantages of our plan to maximize value for all constituents," US Airways said in a statement.

US Airways said in April that a merger with AMR would generate at least $1.2 billion a year in new value beyond the benefit that could be passed to employees of the combined carrier. AMR has said its stand-alone plan would generate $3 billion in new revenue and savings by 2017.

AMR's chief executive, Tom Horton, had said the airline was focused solely on its bankruptcy, calling those who would attempt to acquire the company in bankruptcy "opportunists." But he never ruled out taking a merger partner after bankruptcy.

Other potential suitors also have considered a deal with AMR, including Delta Air Lines and private equity firm TPG Capital, sources have told Reuters.

Robert Mann, an airline consultant and former AMR executive, said AMR's new openness to mergers could flush out more potential partners.

"I think it was already headed there anyway," he said. "It's a recognition of the inevitable that there would be some sort of transaction."

CREDITOR REVOLT

American's three labor unions, which are part of AMR's nine-member creditor committee, have said a merger with US Airways would create a stronger airline and save more jobs than AMR's stand-alone plan. US Airways has not made a bid for AMR, which has a court-granted right to reorganize without intrusion by outsiders. That right extends to September.

Unions representing pilots and flight attendants at American Airlines on Friday again denounced the company's stand-alone business plan, calling on the managers to explore merger options with rival US Airways.

The workers staged rallies in New York and Fort Worth, Texas, where AMR is based, to declare "no confidence" in the company's ability to produce a viable business plan.

The protests came as the two sides prepared to spar in court on Monday over AMR's request to void the labor contracts it has with the unions. The airline and its unions are on a two-week hiatus from their court battle over that request.

"US Airways management's plans for merging the two carriers call for preserving and enhancing the American Airlines brand, retaining our Fort Worth home and saving thousands of jobs that will be eliminated under AMR management's stand-alone plan," David Bates, president of the Allied Pilots Association (APA), said in a statement.

The airline, which has about 74,000 full-time and part-time workers, has said it must cut 13,000 union jobs.

The carrier won steep concessions from labor in 2003 as it dodged bankruptcy at the time. AMR had been locked in fruitless labor talks with unions for years before filing for bankruptcy.

The APA, which has been negotiating with management this week, has yet to reach a deal. The Association of Professional Flight Attendants also said it has had talks with management.

Meanwhile, the Transport Workers Union, which represents 26,000 ground workers, dispatchers and other groups, is voting on AMR contract proposals for its seven work groups.

The deals do not have the endorsement of union leaders, but if they are ratified, they would cut the number of TWU-represented jobs targeted for elimination to 6,400. That compares with 9,000 jobs AMR said it would cut if it voids the worker's current deal and imposes new terms.

AMR's bankruptcy is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463.

(Reporting by Soyoung Kim and Kyle Peterson; Editing by Gary Hill, Patricia Kranz and Andre Grenon)

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Comments (3)
bill1942 wrote:
30 years ago, Bob Crandall and American Airlines drove Braniff International into bankruptcy and assumed many of their premium routes to the United Kingdom, Europe, South America, and Asia. The Splash of Color in the airline world was replaced by the drab, dull, and lifeless. It now seems only fitting that, in order to have any hope for survival, American Airlines must consider merger with US Airways, a rusty almagamation of America West, a Southwest Airlines wannabe, and US Air, a collection of broken-down east coast carriers that could not make it on their own.

May 11, 2012 9:12pm EDT  --  Report as abuse
UncleFrank wrote:
http://www.dailymail.co.uk/news/article-2143819/Charitable-frequent-fliers-250-000-unlimited-class-ticket-REVOKED-10-million-miles–took-companions-fake-names.html

May 13, 2012 8:03pm EDT  --  Report as abuse
joshua284 wrote:
American Airlines needs to Consider Delta Airlines as a merging partner not US Airways. US Airways wants to use American Airlines to get revenge on United but, they will never leave Star Alliance. Delta & American could work together to make a new alliance.. the World Skys Alliance. The largest alliance in the world!!!

May 13, 2012 12:05am EDT  --  Report as abuse
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