* Deal could allow US Air to pay some creditors in cash
* Partnership could offer third-party validation of merger
* Discussions not exclusive, one of several options-sources
By Soyoung Kim
NEW YORK, May 31 US Airways Group and
private equity firm TPG Capital may team up to bid for
American Airlines' parent, AMR Corp, according to
people familiar with the discussions.
A partnership with TPG could boost a US Airways bid for its
larger rival in several ways. It could give the carrier more
financial flexibility, including the ability to pay some AMR
creditors in cash. The addition of TPG, which has invested in
several airlines before, could also serve as third-party
validation of the proposed combination.
TPG's interest comes as US Airways, the fifth-largest U.S.
airline, has secured support for a proposed deal with AMR, the
third-largest, from some of the bankrupt airline's key
creditors, including the largest labor unions.
The sources, however, cautioned that the discussions between
US Airways and TPG are not exclusive and partnering with each
other is one of many options each party is considering.
US Airways has received expressions of interest from several
parties in financing a potential merger for AMR, while the
private equity firm is keeping its options open and may also
look at becoming AMR's financial partner under the airline's
standalone restructuring plan, the sources said.
US Airways has also yet to determine if it would need to
bring in a financial partner to fund a potential bid for AMR,
Spokespeople for US Airways and TPG declined to comment. AMR
also did not comment.
AMR'S MERGER ANALYSIS
AMR filed for bankruptcy in November, citing untenable labor
costs. The company has said it needs to shed $1.25 billion in
annual labor costs to become profitable.
AMR earlier shrugged off interest expressed by US Airways in
a deal, saying it could consider a tie-up after it exits
bankruptcy as a standalone company.
But earlier this month, under pressure from its labor unions
and other creditors to consider a merger with US Airways, AMR
agreed to work with its unsecured creditors committee on
potential merger scenarios while it is still in bankruptcy.
People familiar with the matter have said previously that
the airline wants to negotiate a merger on its own terms after
emerging from bankruptcy and could set its sights on different
targets, ranging from JetBlue Airways Corp to Alaska
Air Group Inc to US Airways.
The company aims to focus on key routes for high-value
business travelers under its business plan, including routes
connecting New York's JFK airport and London's Heathrow and the
JFK-San Francisco network.
JetBlue could be attractive to American because of its
strong presence at JFK as well as its fleet of new planes,
sources have said.
American said in a statement to Reuters on Thursday: "What's
best for our company, our people and our financial stakeholders,
will be determined by the facts in a disciplined manner and
process. And this includes whether American will choose to
pursue any combination down the road."
TPG'S FLIGHT WINGS
TPG's founders, Jim Coulter and David Bonderman, launched
their firm with an airline deal in 1993 when they bought
Continental Airlines out of bankruptcy and turned it around.
Bonderman served as the airline's chairman for 10 years.
The buyout firm went on to make lucrative investments in
America West Airlines Inc and Ryanair Holdings Plc. But
its $450 million acquisition of Midwest Air Group together with
Northwest Airlines Corp in 2008 went sour. TPG later had to sell
its stake for $31 million.
TPG has worked with AMR in the past, having partnered with
the airline on an unsuccessful $1.1 billion offer to rescue
Japan Airlines from bankruptcy in 2009. Bonderman still has the
pulse of the airline industry, having served as chairman of
Ryanair for 15 years.
TPG also has ties to US Airways. Rick Schifter, an airline
veteran and a managing partner at TPG for 18 years, sat on the
airline's board for a year before he resigned in November 2006,
on the same day US Airways made a hostile bid for Delta Air
Lines Inc. He cited "ever-increasing demands on his time
at TPG" and called consolidation in the airline industry