American Air CEO says not focused on merger for now

BEIJING Mon Jun 11, 2012 12:47am EDT

American Airlines aircraft stand on the tarmac at Los Angeles International Airport in Los Angeles April 20, 2012. REUTERS/Lucas Jackson

American Airlines aircraft stand on the tarmac at Los Angeles International Airport in Los Angeles April 20, 2012.

Credit: Reuters/Lucas Jackson

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BEIJING (Reuters) - American Airlines still plans to exit bankruptcy at the end of this year but is not concentrating on a merger currently despite pressure from unions to forge a combination with US Airways, American's chief executive said on Monday.

"We are not focused on a merger. Right now we are focused on a successful restructuring," CEO Tom Horton said on the sidelines of an industry meeting.

Global No. 3 American has the exclusive right until September to propose restructuring plans in bankruptcy. It has reluctantly said that it would explore the possibility of merging but has stressed it prefers to remain independent.

American would review "all the alternatives to create the best outcome," Horton said, adding its plan remains to step out of court protection as a standalone entity.

He told reporters that management's approach is off to a good start.

"We are very focused on restructuring our company independently. That has to be our focus. Anything else, I think, for the time being has to be a distraction. That is our focus and I am pleased to say the results so far are very encouraging," Horton said.

Horton said the year-end timetable for exiting Chapter 11, however, could slip if unions do not agree to contracts in a timely manner.

American sought bankruptcy protection from creditors in November and wants $1.25 billion in annual cost savings from labor. It has threatened to cancel collective bargaining agreements covering thousands of workers, including pilots and flight attendants, if new agreements are not struck soon.

A New York bankruptcy judge could rule as early as this month on American's motion to void contracts. Talks with flight attendants broke off last week.

INDUSTRY TRANSFORMATION

American's restructuring will complete a U.S. airline industry transformation that was triggered by the sector's worst-ever downturn last decade. Four prominent rivals have already merged to form two mega-carriers at United Airlines and Delta Air Lines and are reshaping U.S. air travel in major markets, like New York.

American's decision to merge or go it alone will further alter the competitive landscape as well as influence where airlines will fly and how much consumers will pay to travel. Planes are full and fares are up this year.

Horton's comments at the International Air Transport Association (IATA) meeting will no doubt resonate with key unions and other creditors who are pushing the company hard to merge.

Labor believes concessions alone will not suffice and that American cannot survive on its own. Unions are convinced that a deal with US Airways is the only way for American to compete with United and Delta.

Most Wall Street analysts, industry executives and bankers agree the company would find it difficult to convince creditors that going it alone would trump the benefits of consolidation.

Separately, Horton added that American would uphold a record order for 460 Airbus and Boeing jets.

(Reporting by Tim Hepher, Anurag Kotoky; Writing by John Crawley; Editing by Joseph Radford and Muralikumar Anantharaman)

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