* CEO says will be reaching out to interested parties
* US Air, JetBlue, Alaska to be included -source
* Frontier, Virgin also included-source
* American sees itself as an acquirer -source
* Private equity, other carriers may be interested -source
By Soyoung Kim
NEW YORK, July 10 The bankrupt parent of
American Airlines said on Tuesday it will press ahead with
evaluating potential mergers and will reach out to interested
parties, a move set to satisfy some creditors less than
impressed with its stand-alone restructuring plan.
A source familiar with the situation said AMR sees itself as
an acquirer in potential mergers and at least five airlines --
US Airways Group Inc, JetBlue Airways Corp,
Alaska Air Group, Republic Airways' Frontier
Airlines, and Virgin America -- will be considered.
Any merger proposals would be weighed against the standalone
restructuring plan being developed, the source added.
American has faced mounting pressure from vocal members of
its creditors committee, led by its largest labor unions, who
have argued that a merger with US Airways would give the
combined carrier a strong network to compete with rivals beefed
up by their own mergers. US Airways has expressed interest in a
merger and has been courting AMR's creditors.
Executives at American, the No.3 U.S. airline, mentioned the
five carriers as potential merger candidates at a meeting with
its unsecured creditors committee on Tuesday and discussed the
merits and challenges of each combination, said the source, who
asked not to be identified because the matter is not public.
Chief Executive Tom Horton said in a letter to employees
that greater clarity on revenue and the company's cost structure
was allowing a review of potential mergers.
"It now makes sense to carefully evaluate a range of
strategic options, including potential mergers, which could make
the new American even stronger," he wrote.
The letter comes two months after American said it would
explore merger options while still in bankruptcy.
US Airways said in a statement it was pleased with the
"All we have asked for is a fair and balanced opportunity to
present our plan versus others, and we are hopeful this is the
beginning of such a process," US Airways said. "We remain
confident that our plan will maximize value for all
The source also said private equity firms, other legacy U.S.
carriers and even foreign airlines may show interest in a
potential deal or investment once American starts the evaluation
PROGRESS IN LABOR TALKS
American, which sought bankruptcy protection in November,
citing high labor costs, is also taking new steps to stabilize
its court restructuring with progress on labor negotiations
aimed at achieving more than $1 billion in annual cost
reductions, mainly from unions.
The carrier has struck a tentative deal with pilots for cost
savings and on Tuesday reached a similar agreement with the
final two groups of unionized mechanics and other ground
workers. Talks continue with flight attendants.
Horton said American, working together with the creditors
committee, would analyse synergies, costs and tax and capital
structure implications when looking at potential mergers.
The source said American plans to send out non-disclosure
agreements to interested parties in the coming weeks after
sharing the documents first with its creditors committee.
He added that the process could continue through the fall.
Horton said he has been a proponent of industry
consolidation for many years and the company has assessed many
possible combinations in the past, including an acquisition of
US Airways. He added that he had also approached his
counterparts at other airlines last year to discuss the merits
of possible combinations.
But since American's slide into Chapter 11, Horton's view
has been that American should first straighten out its own
business before considering a "complex and challenging airline
acquisition," he said.
"That is just common sense. But it is also a prudent merger
strategy, should we take that path, to assure that we begin from
a position of greatest strength and stability."
Delta Air Lines Inc and Northwest Airlines both
emerged from bankruptcies several years ago as stand-alone
companies before striking a merger deal with each other. United
Airlines also stepped out of Chapter 11 on its own before tying
up with Continental Airlines.
American has sought court permission to extend until the end
of the year the time it can take to develop a business plan
without interference from outside parties. The current
exclusivity period expires at the end of September.
AMR's bankruptcy is in re AMR Corp et al, U.S. Bankruptcy
Court, Southern District of New York, No. 11-15463.