Airline details merger strategy

Travelers pass US Airways planes at Reagan National Airport in Washington D.C. US Airways is making its case to merge with AMR Corp.’s bankrupt American Airlines in meetings this week with American Airlines and its creditors.
Travelers pass US Airways planes at Reagan National Airport in Washington D.C. US Airways is making its case to merge with AMR Corp.’s bankrupt American Airlines in meetings this week with American Airlines and its creditors.

— US Airways Group Inc., pressing to take over AMR Corp.’s American Airlines in bankruptcy, made its case for a merger in a meeting Tuesday with the company’s unsecured-creditors committee, three people familiar with the matter said.

US Airways also met Wednesday with representatives of American, which seeks to exit court protection as a stand-alone carrier, said the people, who asked not to be identified because the talks are private. The meetings are in New York.

American Chief Executive Officer Tom Horton has advocated waiting to evaluate merger options after leaving Chapter 11, while US Airways Chief Executive Officer Doug Parker has championed a merger since shortly after AMR’s Nov. 29 bankruptcy filing. The creditors committee has a say in important decisions as AMR restructures.

“From the creditors committee perspective, whatever the two parties are proposing has to be finalized at some point, and the sooner the better,” said Bob Mann, president of aviation consultant R.W. Mann & Co. in Port Washington, N.Y.

American reached an accord with the nine-member panel in May to study strategic alternatives against which the carrier’s stand-alone plan would be vetted. The committee represents some of those owed money by AMR and is tasked with maximizing the amount of debt recovered. The members include American’s three largest unions as well as bondholder representatives.

“American is participating this week at the committee’s regularly scheduled in-person monthly meeting, at which various business matters, including the strategic alternatives process, will be discussed,” Jack Butler, an attorney for the creditors committee, said in a statement. He declined to comment on Tuesday’s meeting.

Todd Lehmacher, a spokesman for Tempe, Ariz.-based US Airways, declined to comment about the talks, as did Andy Backover, an American spokesman.

U.S. Bankruptcy Judge Sean Lane in New York gave his approval on Nov. 8 to American’s request for an extension until Jan. 28 of the airline’s exclusive right to file a reorganization plan. That has kept US Airways from making a formal merger offer in court.

“Maybe we are not going to have to wait until the end of the first quarter to find out what the plan is here,” said Fred Lowrance, an Avondale Partners LLC analyst in Nashville, Tenn. He said the discussions suggest that creditors “want to feel comfortable that they have all the information to make a comparison.”

US Airways shares fell 58 cents, or 4.6 percent, to close Wednesday at $12.01. The shares have more than doubled this year on speculation that a merger would succeed.

A combination of US Airways, the fifth-biggest U.S. airline, and No. 3 American would create the world’s largest carrier by passenger traffic, surpassing United Continental Holdings Inc. and Delta Air Lines Inc.

American has been working to reach a new contract with its pilots union, the last holdout among the carrier’s major work groups, to ensure predictable costs at a restructured airline. It secured an agreement in principle with the Allied Pilots Association last Friday. The union’s board will decide this Friday whether to send that deal to members for a vote.

The airline won moneysaving agreements with other major work groups in recent months, after US Airways reached conditional accords in April with unions for American pilots, flight attendants, mechanics and baggage handlers.

“They’ve been inviting themselves to that party for a long time,” aviation consultant Mann said of US Airways. “To get the doorman to part the velvet ropes and let them in is a bit of a victory. Ultimately it will come down to economics, but you have to get an audience before you can talk economics.”

Information for this article was contributed by David McLaughlin, Jeffrey McCracken and Beth Jinks of Bloomberg News.

Business, Pages 28 on 11/15/2012

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