American Airlines and US Airways reportedly close in on deal
02/07/2013 4:37 PM
05/16/2014 9:04 PM
US Airways Group’s merger talks with bankrupt American Airlines reportedly are intensifying as the sides try to agree on control of a combined company before confidentiality accords expire next week.
No decisions have been made on how ownership would be split between creditors of American parent AMR and US Airways investors or who would lead the carrier, said four people familiar with the matter. They 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 during a consolidation wave. A combined carrier would be valued at almost $13.1 billion, according to Dan McKenzie, a Buckingham Research Group analyst in New York.
The possible merger gained support late last month from an ad hoc group holding $1.5 billion in unsecured AMR debt.
The bondholders are pushing for a deal by Feb. 15, the expiration date for nondisclosure agreements they signed with the two airlines. Talks may still falter, and there is no guarantee of a merger announcement by then.
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 US Airways, declined to comment about the deliberations, as did Sean Collins, a spokesman for American.
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 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. 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 materialize, 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 will 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 and 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 has been pursuing American since January 2012. Horton agreed to consider merger options 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.
AMR’s $460 million of 6.25 percent convertible notes due in October 2014 have soared more than fivefold during its time in bankruptcy.