American Airlines, US Airways poised to vote on merger
BY Staff and Wire reports
Saturday, February 09, 2013
2/09/13 at 7:05 AM
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The boards of American Airlines parent AMR Corp. and US Airways Group Inc. are prepared to vote on a merger Monday as executives and advisers work on final terms this weekend, people familiar with the matter said.
American CEO Tom Horton:
Bloomberg News reported that the sides have agreed that AMR's bankruptcy creditors would get 72 percent of the equity in the new carrier, with 28 percent for US Airways shareholders, said two of the people, who asked not to be identified because the talks are private.
He could become non-executive chairman, while US Airways CEO Doug Parker would run the merged airline.
The new entity would be valued at about $13 billion, analysts said.
US Airways CEO Doug Parker would run the airline as AMR Corp. CEO Tom Horton becomes non-executive chairman, the person said.
Horton's tenure in that post is still being negotiated and would be limited to one or two years, one of the people said.
AMR's bankruptcy creditors committee is poised for a vote early next week on any merger accord, with an announcement as soon as Tuesday, two people said.
The deal also would need the approval of the bankruptcy court and federal officials. As for the latter, one industry observer said he sees no potential problems coming from the Justice or Transportation departments.
"The two carriers may have to make a few concessions, but there's nothing big looming that could scuttle the deal," said Seth Kaplan, editor of Airline Weekly, in a telephone interview with the Tulsa World.
The deal also has the blessing of the Transport Workers Union. The TWU represents a large group of American Airlines employees, including about 6,000 mechanics and related workers in Tulsa, where the carrier operates its largest maintenance base.
The TWU already has pre-negotiated key parts of what would be its contract with US Airways. The two sides have agreed on a 4.3 percent raise for TWU members if a merger happens.
At the executive level, leadership and the division of the equity had been the final major issues in the merger discussions, people familiar with the talks have said.
Fort Worth-based American declined to comment on the deliberations.
Besides the split of equity between AMR creditors and US Airways investors, the proposed merger calls for existing AMR stockholders to get shares in the combined company, sources said. Details of that plan are still being negotiated, they said.
A group of AMR bondholders with about $1.5 billion in unsecured debt said last month it was backing a merger and pushing for an agreement by mid-February. The bondholders concluded after reviewing confidential data that a merger would provide more cost savings and other financial benefits than a stand-alone American, one person said.
US Airways, based in Tempe, Ariz., began pursuing a merger in January 2012, less than two months after AMR's bankruptcy filing on Nov. 29, 2011.
American is the nation's third-biggest airline and US Airways ranks fifth by passenger traffic. Together, they would be bigger than current world leader United Continental Holdings Inc., although United would remain slightly larger if regional operations such as United Express and American Eagle were counted.
US Airways is the product of a 2005 merger between USAir and America West.
AMR sat out the last several rounds of consolidation in the airline industry and lost its perch as the world's biggest airline in 2008. Its last major acquisition was TWA, which was bankrupt at the time, in 2001.
Tulsa World Business Editor John Stancavage and The Associated Press contributed to this story by Bloomberg News.
Original Print Headline: Merger vote may be held Monday
Merger in the making?
Who: American Airlines and US Airways.
What: Combination that would produce the largest U.S. airline by passenger traffic, valued at about $13 billion.
Why: American Airlines is struggling to get out of bankruptcy. US Airways would enjoy the size benefits of joining with American.
When: Boards of both airlines could announce a deal early next week.
Sources: Bloomberg News, AMR Corp., US Airways.
The new exterior design and logo of an American Airlines jet is displayed at the carrier's maintenance and engineering facility in Tulsa on Jan. 22. The plane was on a tour to publicized the new look. MICHAEL WYKE/Tulsa World