American, US Airways make pitches to AMR creditors

[November 15, 2012]  DALLAS (AP) -- The CEO of American Airlines parent AMR Corp. says that if his airline merges with US Airways, AMR creditors should get most of the new airline's stock, according to people familiar with the situation.

AMR CEO Thomas Horton said Wednesday that AMR creditors should get considerably more stock in a combined airline than US Airways has so far proposed, said one of the people, who spoke on condition of anonymity because the companies have signed a confidentiality agreement.

Horton made the comment during a meeting with a committee that represents creditors in AMR's bankruptcy case. US Airways Group Inc. officials spoke to the committee on Tuesday, two people familiar with the discussions said.

They said Horton also said that costs of a combined airline are hard to gauge because of labor uncertainty at US Airways, and that such uncertainty should be reason to give AMR creditors more equity as compensation for the risks related to combining the two airlines' workforces.

Horton's comments were first reported by The Wall Street Journal, also citing sources.

US Airways is pushing for a merger that would create a company roughly the size of United Airlines, the world's biggest carrier, and led by US Airways executives. AMR is working on a plan to emerge from bankruptcy protection as a stand-alone company, but Horton has not ruled out a merger.

Texas-based AMR and Arizona-based US Airways began exchanging confidential financial information two months ago, but it's not clear whether the discussions have advanced to issues such as leadership of a merged company. Because AMR is in bankruptcy protection, the big issue now is how much creditors will recover, and whether a merger would improve their payback.

US Airways executives suggested that a merged company could produce $1.2 billion or more in cost savings and new revenue, partly as a result of a bigger network that would be more attractive to travelers. CEO Doug Parker made his company's case Tuesday to the nine-member creditors committee, which includes American's three labor unions. The unions support a US Airways-led merger.

Despite this week's presentations to creditors, it could still be weeks before the fate of a potential merger is known, the people familiar with the situation said. Possible outcomes include a friendly merger, a hostile bid by US Airways, or a decision by both to walk away from the talks and go their separate ways.

While AMR has lost more than $10 billion since 2001 -- it filed for bankruptcy protection in November 2011 -- US Airways has returned to profitability despite competing against bigger rivals such as United and Delta Air Lines Inc.

AMR discounts that performance, saying that US Airways has kept labor costs artificially low by not reaching new contracts with union workers such as flight attendants and pilots. Flight attendants picketed around the country on Wednesday and are conducting a strike-authorization vote.

[Associated Press; By DAVID KOENIG]

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