AMR Sees US Airways Merger Review Concluded Within Weeks
By Mary Jane Credeur - Jan 3, 2013

American Airlines parent AMR Corp. (AAMRQ), now reorganizing in bankruptcy, expects to reach a decision within weeks on whether to merge with US Airways Group Inc. or remain independent, Chief Executive Officer Tom Horton said.

The company’s board and unsecured creditors committee asked unions at Fort Worth, Texas-based American and at US Airways to help evaluate the benefits, costs and risks of a deal, Horton said today in a memo to employees.

“I can assure you we are conducting a collaborative, fact- based analysis to determine the best path forward for American,” Horton wrote. “While I cannot give you a precise date, I can tell you that we expect to bring this to conclusion within a matter of weeks.”

AMR has a board meeting set for Jan. 9 at which it hoped to be ready to decide whether to go ahead on a tie-up, people familiar with the matter said in mid-December. US Airways (LCC) has been pursuing a merger with American, which filed for bankruptcy in November 2011, to form the world’s largest carrier.

Progress toward a possible tie-up continues.

The board of the Allied Pilots Association, which represents 8,000 American pilots, approved an interim labor agreement last weekend that removes one more hurdle to a merger.
Union Review

The deal is now being considered by the US Airline Pilots Association, which represents 5,200 US Airways pilots, and management at both carriers, the APA said on Dec. 29. Approval would blunt the risk of labor objections to a merger by easing the two unions toward a joint contract aligning pay and work rules.

American is assessing that agreement as part of the merger evaluation, Horton said in his message to employees.

“I have been personally involved in all deliberations regarding the overall strategic review and focused intently on creating a framework with the unions and for all our employee groups that keeps American competitive and allows us to build a successful future,” Horton said.

A combination of American, the third-biggest U.S. carrier, and No. 5 US Airways would surpass United Continental Holdings Inc. as the world’s largest airline, based on passenger traffic.

AMR filed for Chapter 11 bankruptcy ahead of a fourth straight annual loss. Tempe, Arizona-based US Airways began pursuing a takeover in early 2012.

The case is in re AMR Corp., 11-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Mary Jane Credeur in Atlanta at [email protected]

To contact the editor responsible for this story: Ed Dufner at [email protected]
®2013 BLOOMBERG

January 3, 2013

Dear American Team:

As we start a new year, I’d like to thank you all for capping a year of extraordinary work by delivering for our customers during our busiest season. This dedication underscores why I have so much confidence in the future of the new American.

As you know, we continue the process we embarked upon months ago to carefully assess how we can deliver the greatest value for our stakeholders and the best outcome for our people and customers. Together with our Board, and the Creditors’ Committee, we asked our unions and those of US Airways to join the discussions underway in order to better evaluate the potential benefits, costs and risks of a potential merger. All parties are operating under a confidentiality agreement, and while I cannot provide any details, I can assure you we are conducting a collaborative, fact-based analysis to determine the best plan forward for American.

As part of these joint efforts, last week APA announced that its Board voted to approve a proposed Memorandum of Understanding (MOU), which is now subject to review and approval by American, US Airways and the US Airline Pilots Association (USAPA), the union representing US Airways’ pilots. Discussions with our other unions and those of US Airways are also in progress. I have been personally involved in all deliberations regarding the overall strategic review and focused intently on creating a framework with the unions and for all our employee groups that keeps American competitive and allows us to build a successful future.

The proposed MOU will be reviewed alongside other factors under evaluation, as part of making an informed decision about whether a merger should be pursued.

I know many of you have questions about what happens next and how long this evaluation will be underway. While I cannot give you a precise date, I can tell you that we expect to bring this to conclusion within a matter of weeks. As we do, our objective is unchanged – to create the most value for our owners and the strongest possible American going forward. All of our efforts have been aimed at building on the extraordinary progress we have already made.

In just over a year, we have moved faster and performed better through our restructuring than any airline in history. Our collective efforts have created a strong foundation for the future of the new American, which is on course to become a premier global airline, equipped to compete against the best in the world. Staying laser-focused on serving our customers and running a great airline must remain our highest priority.

Thank you again for your commitment, and I look forward to sharing more information as soon as possible.

Sincerely,

Tom

By Terry Maxon
[email protected]
10:21 pm on January 3, 2013 | Permalink
The Association of Professional Flight Attendants issued this statement just after 9:30 p.m. Thursday:

“APFA has agreed to a Memorandum of Understanding (MOU), clarifying several points contained within the Bridge Agreement the union signed with US Airways last Spring. This MOU further illuminates the financial benefits of a merger to AMR’s creditors. APFA is currently operating under a judicially-enforceable non-disclosure agreement (NDA) with regards to merger discussions, which means that as long as this restriction is in place, we are not able to divulge specific details of the MOU.”

We don’t know if other parties have also agreed to this MOU. It likely is along the lines of the Allied Pilots Association MOU in which that union announced a proposed MOU by itself, with the other parties — US Airline Pilots Association, unsecured creditors committee, American Airlines and US Airways — not yet signing on.

We’re seeking clarification. APFA’s counterpart at US Airways is the Association of Flight Attendants-CWA.