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Published: Friday, 2/8/2013

US Airways Talks With AMR Said to Intensify as Deadline Looms

BLOOMBERG NEWS

US Airways Group Inc.’s merger talks with bankrupt American Airlines are intensifying as the sides try to agree on control of a combined company before confidentiality accords expire next week, people familiar with the matter said.

No decisions have been made on how ownership would be split between creditors of American parent AMR Corp. and US Airways investors or who would lead the carrier, said four of the people, who asked not to be identified because the discussions are private.

A deal would create the world’s largest airline, vaulting it past the rivals that eclipsed American amid a consolidation wave during the past decade. The possible merger gained support late last month from an ad hoc group holding $1.5 billion in unsecured AMR debt, people familiar with the matter said then.

The bondholders are pushing for a deal by Feb. 15, the expiration date for non-disclosure agreements they signed with the two airlines. Talks may still falter, and there is no guarantee of a merger announcement by then, the people said.

Besides giving those investors access to proprietary information, the accords restrict them from trading in AMR or US Airways debt.

Ed Stewart, a spokesman for Tempe, Arizona-based US Airways, declined to comment about the deliberations, as did Sean Collins, a spokesman for American.

Equity Split

AMR has urged that creditors get 80 percent of the equity in a merged airline versus 20 percent for US Airways shareholders, while US Airways favors a 70 percent to 30 percent division, people familiar with the matter have said.

Still unresolved is the role American Chief Executive Officer Tom Horton would play after a merger, the people said. US Airways’ merger proposal calls for CEO Doug Parker to hold that position as well as chairman at the combined airline.

AMR’s board is pushing for Horton to have an active role to represent American’s interests and help ensure that $1.2 billion in annual savings and incremental sales promised by US Airways materializes, one of the people said. He became CEO after AMR filed for bankruptcy on Nov. 29, 2011.

If merger terms are agreed upon and approved by the bankruptcy court, the deal would be proposed as the reorganization plan to bring AMR out of Chapter 11 protection. A combination of US Airways, the fifth-biggest U.S. carrier, and No. 3 American would pass United Continental Holdings Inc. to become the world’s largest airline, based on passenger traffic.

US Airways earlier said it would keep the American name for a combined carrier and its Fort Worth, Texas, headquarters.

Parker’s Pursuit

Parker has been pursuing American since January 2012. Horton agreed to consider merger options in restructuring after saying the airline preferred to exit court protection and then weigh consolidation.

US Airways’ stock has more than tripled since the day before AMR’s Chapter 11 filing, amid speculation that Parker would succeed, compared with a 27 percent advance by the Standard & Poor’s 500 Index. The shares rose 3.3 percent yesterday to $14.56.

AMR’s $460 million of 6.25 percent convertible notes due in October 2014 have soared more than fivefold during its time in bankruptcy. They rose 0.75 percent to 97.125 cents on the dollar yesterday in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

--Editor: James Langford, Ed Dufner

To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net; Beth Jinks in New York at bjinks1@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net; Jeffrey McCracken at jmccracken3@bloomberg.net



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