US Airways presses merger with American Airlines creditors
BY MARY SCHLANGENSTEIN Bloomberg News
Thursday, November 15, 2012
11/15/12 at 2:54 AM
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Original Print Headline: Airways presses creditors on merger
US Airways Group Inc., pressing to take over American Airlines in bankruptcy, has made its case for a merger to the company's unsecured creditors committee, three people familiar with the matter said.
The panel's session Tuesday with US Airways was to be followed by a meeting Wednesday with representatives of American, an AMR Corp. unit that 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 CEO Tom Horton has advocated waiting to evaluate merger options after leaving Chapter 11, while US Airways CEO Doug Parker has championed a merger since shortly after AMR's bankruptcy filing last Nov. 29. 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 charged 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 on the talks, as did Andy Backover, a spokesman for Fort Worth-based American.
U.S. Bankruptcy Judge Sean Lane in New York gave his approval 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."
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 on Nov. 9. The union's board will decide Friday whether to send that deal to members for a vote.
American won money-saving 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," Mann said of US Airways. "To get the doorman to part the velvet ropes and let them in is a bit of a victory."