US Airways offers merger proposal to American Airlines
Published: Friday, Dec. 7, 2012, 6:04 p.m.
US Airways Group Inc. has made a formal merger proposal to American Airlines parent AMR Corp. and its creditors that could value the combined airline at about $8.5 billion, two people familiar with the matter said on Friday.
Details of the merger proposal emerged as American Airlines pilots voted to ratify a union contract on Friday, ending a years-long labor dispute and stabilizing the carrier as it tries to emerge from bankruptcy.
Under an all-stock merger US Airways proposed in mid-November at a meeting with AMR's unsecured creditors committee, AMR creditors would own 70 percent of the merged company and US Airways shareholders 30 percent, the people said.
US Airways and AMR are currently negotiating toward a potential merger agreement that the smaller rival hopes could be sealed as soon as January, one of the people added, asking not to be named because the matter is not public.
The combined AMR and US Airways could have a value similar to Delta Air Lines Inc, which has a market capitalization of about $8.6 billion, the person said.
At the same time, AMR is still pursuing a plan to emerge from bankruptcy as an independent airline, which will be compared against the merits of a merger with US Airways, the people said.
The companies have yet to narrow differences on a number of significant issues before any deal could be agreed, including how much of the combined carrier each side should own, the people said.
AMR creditors think they should get an equity stake of closer to 80 percent in a merged entity, rather than the 70 percent proposed by US Airways, the people said. AMR and US Airways also disagree on potential cost and revenue benefits from a merger as well as labor integration challenges, they added.
Representatives of AMR, US Airways and the creditors committee declined to comment. The Wall Street Journal reported details of US Airways' proposal on Friday.
The new labor contract, approved by nearly three-quarters of the AMR pilots who voted, gives the Allied Pilots' Association a 13.5 percent equity stake in AMR and offers what the union sees as a path to “industry-standard” pay, union spokesman Dennis Tajer told Reuters.
AMR filed for bankruptcy in November 2011, primarily because of high labor costs. It said it needed to cut those costs by $1 billion a year. It achieved concessions from its ground workers and flight attendants but remained at odds with pilots in bitter labor talks that date to 2006.
AMR creditors had deemed labor peace a major priority, saying labor uncertainty could make it difficult for creditors and potential investors to assess the company's post-bankruptcy viability.
Friday's vote could be seen as addressing that concern and providing AMR a clearer path toward exiting Chapter 11.
The pilots had been working under strict labor terms imposed unilaterally by AMR as part of its bankruptcy process while negotiations dragged on. The pilots struck down a previous contract offer in August, which at the time AMR had framed as its “last, best” offer.
How the company will look when it exits bankruptcy is still unclear. The pilots' union says it has lost faith in AMR management, led by Chief Executive Tom Horton, and strongly supports a US Airways takeover.
“This ratified agreement should not in any way be viewed as support for the American standalone plan or for this current management team,” Tajer said. “This contract represents a bridge to a merger with US Airways.”
At least one large group of bondholders, including JPMorgan Chase & Co, Pentwater Capital Management and York Capital Management, has expressed interest in providing an equity infusion to fund AMR as a standalone entity.
The group was strengthened recently when other significant stakeholders, including Marathon Asset Management, joined forces with it, according to court papers filed by the group on Thursday.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Investors put squeeze on prospective homeowners’ American dreams
- How can I delete my search history on Facebook?
- Employers say friends can ease work stress
- Big oil pushes limits
- Airline merger reshapes industry’s landscape
- Workplaces reach out to vets
- PNC to pay $81M to Freddie Mac to resolve problem mortgages
- Unemployment rate falls as employers add 203,000 jobs nationwide
- American Eagle Outfitters’ quarterly profit down 68 percent
- Market rebounds on strong jobs news
- Mercedes offers luxury for the rest of us