AMR merger would strengthen its oneworld partners: IAG chief

WASHINGTON Tue Jul 17, 2012 6:43pm EDT

A US Airways plane passes American Airlines planes at Ronald Reagan National Airport in Washington April 23, 2012. REUTERS/Kevin Lamarque

A US Airways plane passes American Airlines planes at Ronald Reagan National Airport in Washington April 23, 2012.

Credit: Reuters/Kevin Lamarque

WASHINGTON (Reuters) - A potential merger between American Airlines and US Airways would strengthen, not harm its partners British Airways and Iberia, the European airlines group's chief said Tuesday.

Willie Walsh, chief executive of the International Airlines Group (IAG) - the holding company for the two airlines and UK airline BMI - told a meeting of aviation industry representatives he supports any consolidation plan that will strengthen its oneworld alliance partner American Airlines.

With 11 participating airlines, oneworld is one of the world's three largest global airline alliances, which enables member airlines to offer customers more service across a larger global network.

American parent company AMR Corp AAMRQA.UL(AAMRQ.PK) is trying to exit Chapter 11 bankruptcy protection, which it filed last November, by the end of the year.

Meanwhile, Tempe, Arizona-based US Airways Group Inc LCC.N has expressed strong interest in a merger with American and has been courting AMR creditors.

"I've never been concerned when people have talked about this as representing a potential threat to oneworld or IAG," Walsh told reporters after a speech hosted by the Washington International Aviation Club.

"Quite the opposite - I see it, and I've always seen it, as a great opportunity for IAG and for oneworld because, without question, American will be stronger and will be better."

Walsh added that IAG would also invest directly in the third biggest U.S. airline after it emerges from bankruptcy, whether it remains a standalone or merges with a partner.

"What we've said is that we are willing to invest in American, particularly a restructured American, if they would welcome that," he said. "We would only do it if they saw it as a positive development."

Walsh said a merger with another airline will be inevitable for American.

"There will be consolidation - that's my view. Whether its US Airways and American together, I don't know," he said.

Unlike other possible partners, the US Airways network "complements" the American network, Walsh added.

While he admires US Airways chief Doug Parker's aggressive and public push to merge his airline with American in the near term, Walsh said American's desire to consider merger options after exiting from bankruptcy is "absolutely right."

He said American Chief Executive Tom Horton "will have a stronger hand to play with after he has exited (chapter 11)."

"If you look at it historically, most of the consolidation has happened after exiting from chapter 11," he told reporters.

Horton wrote in a letter to employees last week that "it makes sense to carefully evaluate a range of strategic options, including potential mergers, which could make the new American even stronger."

In addition to a potential US Airways tie-up, American is said to be weighing mergers with JetBlue Airways Corp (JBLU.O), Alaska Air Group Inc (ALK.N), Republic Airways Holdings Inc's (RJET.O) Frontier Airlines and Virgin America.

IAG's Walsh said that regardless of what American decides, the U.S. airline industry will continue to see large-scale tie-ups.

"Whatever happens with American will trigger some further consolidation within the industry. All of that will be positive," he said.

Spanish-listed IAG was formed in January 2011 as the holding company of Spanish airline Iberia and the UK's second largest airline BMI.

(Editing by Andre Grenon)

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