Bloomberg News

AMR Says ‘Very Focused’ on Restructuring as Independent Company

June 10, 2012

AMR Corp. (AAMRQ:US), the parent of American Airlines, said it plans to emerge from bankruptcy protection as an independent company even as US Airways Group Inc. seeks support for a combination.

“We’re very focused on restructuring independently,” Chief Executive Officer Tom Horton said today in Beijing at a briefing. “That has to be our focus now and anything else for the time being is a distraction.”

AMR is trying to fend off US Airways (LCC:US) after the smaller carrier won union backing for a takeover and began approaching bondholders. Fort Worth, Texas-based AMR is working to reduce labor costs, add more small jets and boost international service after seeking protection from creditors in November.

The company is now in the midst of restructuring labor contracts, which Horton called the “most challenging” part of the process. It is also the element most likely to cause the carrier to miss its year-end target for leaving court protection, Horton said.

“It’s a very aggressive objective,” he said, while reiterating that it was achievable. “That would be 13 months front to back.”

Horton, who became chief executive when the carrier sought court protection, is in Beijing for the annual meeting of the International Air Transport Association.

Labor Costs

AMR is seeking to pare labor costs, which were the highest in the industry, according to the carrier. The company’s request to throw out existing contracts to help cut annual labor spending by $1.25 billion will be ruled on by June 22 by U.S. Bankruptcy Court Judge Sean Lane.

The Allied Pilots Association said June 7 that some progress was being made in late talks with the airline urged by Lane, and that negotiations would resume June 13. The Association of Professional Flight Attendants and American failed to reach an agreement in meetings that ended June 1.

Two groups represented by the Transport Workers Union are set for talks June 11 and 12, after five others accepted American’s last contract offer in May.

AMR’s unsecured creditors committee last month began pressing Horton to consider strategic options including combinations. Merging American, the third-biggest U.S. carrier, with fifth-ranked US Airways would create the world’s largest airline. US Airways hasn’t yet made a formal bid.

US Airways has proposed cutting $800 million a year from labor costs to bring spending in line with industry standards. Since signing contracts with American’s unions that are contingent on a merger, Tempe, Arizona-based US Airways has worked to build support among AMR bondholders, saying a combined carrier would produce a greater return.

--Andrea Rothman and Mary Schlangenstein. Editors: Neil Denslow, Garry Smith

To contact Bloomberg News staff for this story: Andrea Rothman in Beijing at aerothman@bloomberg.net Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net; Neil Denslow at ndenslow@bloomberg.net


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