Only US Airways Group Inc. can solve bankrupt American Airlines’ network deficiencies with a merger, Chief Executive Officer Doug Parker said, and his company’s interest in a deal isn’t infinite.
“US Airways is here now and ready to get this done, and there is no guarantee that will be the case forever,” Parker said in a speech today to the National Press Club in Washington. “We believe the time for action is now.”
US Airways has pressed for a merger since January with AMR Corp. (AAMRQ:US)’s American, a combination that would surpass United Continental Holdings Inc. (UAL:US) as the world’s largest airline. The Tempe, Arizona-based carrier hasn’t made a formal offer because American still holds the exclusive right to propose a reorganization plan.
A merger needs to occur during American’s bankruptcy to avoid transaction expenses that would occur after emerging from court protection and to secure a “better environment” to work out fleet, facility and technology issues, Parker said.
US Airways, which failed in earlier bids to combine with Delta Air Lines Inc. and United Airlines, has lobbied American creditors to build support for a merger since securing tentative contract agreements with the Fort Worth, Texas-based carrier’s unions. US Airways said last week that it bought AMR debt (AAMRQ:US) to become an official creditor in the bankruptcy.
“The only opposition that seems to exist to this merger is senior management at American,” Parker said. He worked with American CEO Tom Horton earlier in his career and said the two remain friends. There is nothing personal in the takeover battle, Parker said.
US Airways fell 4.6 percent to $13.42 at the close in New York. The shares (LCC:US) have more than doubled this year for the biggest gain in the 10-company Bloomberg U.S. Airlines Index.
American said on July 11 that it’s ready to consider mergers and other restructuring options, after determining what its potential revenue and costs would be if the airline remains independent. Horton originally said his preference was to evaluate combinations after leaving court protection.
“This will be a disciplined process guided by the facts and will not be influenced by baseless rhetoric,” Mike Trevino, an American spokesman, said today in a statement. “Our increasing strength positions us well to evaluate the full range of strategic options versus our reorganization plan.”
AMR today reported second-quarter profit of $95 million, excluding $336 million in bankruptcy restructuring costs, and record quarterly revenue of $6.45 billion.
In a meeting with AMR’s bankruptcy creditors committee July 10, Horton named US Airways among five potential partners. The others are JetBlue Airways Corp., Alaska Airlines, Frontier Airlines and Virgin America Inc.
US Airways is supporting American’s request that U.S. Bankruptcy Judge Sean Lane extend to the end of the year the AMR unit’s exclusive right to file a reorganization plan.
Combining with American would save “thousands” of jobs and offer better compensation and long-term opportunities for workers of both companies, Parker said. Because their networks have little overlap, US Airways would maintain the current fleets and all existing hub cities, Parker said.
American is awaiting votes by its pilots and mechanics on contract concessions that would help cut annual labor (AAMRQ:US) costs by $1.25 billion. Baggage handlers and other airport ground workers already have approved agreements, and flight attendants have not reached a labor accord.
The unions’ agreements with US Airways, first disclosed in April, take effect only if a merger occurs.
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