American agrees now to explore a merger with US Airways

American Airlines (AMR Corporation) (Dallas/Fort Worth) coming under extreme pressure from its unsecured creditor’s committee and its unions, has changed its position and is now willing to explore a possible merger with US Airways (Phoenix). Previously AA management has preferred to go it alone in the Chapter 11 bankruptcy reorganization process.

American’s management has issued the following statement:

“AMR Corporation, the parent company of American Airlines, Inc. and AMR Eagle Holding Corporation, said yesterday (May 11) that it has a joint protocol agreement under which the Company and the Official Committee of Unsecured Creditors agree to jointly complete certain actions. The actions contemplated by the agreement include developing potential consolidation scenarios (i.e. mergers), but the agreement is not an indication that the company intends to pursue a transaction of any kind.

Beverly K. Goulet, AMR’s Chief Restructuring Officer, Vice President – Corporate Development and Treasurer, said, “The purpose of this collaborative joint agreement with the Committee is to reinforce and assure what we have stated before: what’s best for our company, our people and our financial stakeholders will be determined by the facts in a disciplined manner and process. And this includes whether American will choose to pursue any combination down the road. This is the charge of the board of directors and the leadership team to be done in close collaboration with the creditors committee. It is best for all that this process be very clear so that we are not distracted or diverted by anything that does not serve the best interests of all our company’s financial and other stakeholders. To be clear, American has committed to work in collaboration with the Committee to develop only potential consolidation scenarios and this agreement does not in any way suggest that a transaction of any kind or with any particular party will be pursued.”

Meanwhile the pilots, represented by the Allied Pilots Association, held “no confidence” rallies yesterday (May 11) and issued the following statement:

“The Allied Pilots Association (APA), certified collective bargaining agent for the 10,000 pilots of American Airlines (AMR), staged rallies in New York and Fort Worth this morning (May 11) to highlight a sentiment of “no confidence” in the current management team’s stand-alone business plan and ability to successfully restructure the airline.

“It’s time for a meaningful change of direction at American Airlines,” said APA President Captain Dave Bates. “Our message is clear: we do not support AMR management’s stand-alone business plan. Likewise, we do not believe that the executives who steered American Airlines into bankruptcy are the ones who are best qualified to lead us out.”

The rallies took place at APA’s Fort Worth, TX headquarters and in front of the bankruptcy court where the AMR case is being heard at One Bowling Green in lower Manhattan.

“Almost 7,500 American Airlines pilots have added their names to a petition of no confidence in AMR management,” Bates said. “By an overwhelming majority, our pilots have indicated their preference for a new plan and new management.”

Bates noted that all three unions at American Airlines have reached conditional labor and plan of reorganization agreements with US Airways management that, if implemented, would boost productivity and reduce costs.

“US Airways management’s plans for merging the two carriers call for preserving and enhancing theAmerican Airlines brand, retaining our Fort Worth home and saving thousands of jobs that will be eliminated under AMR management’s stand-alone plan,” he said. “We are firmly convinced that their alternative plan of reorganization provides a more promising path for our airline’s future and reiterate our call for the AMR Board of Directors to engage in immediate discussions with US Airways management.”

Meanwhile US Airways Group issued the following statement:

“We are very pleased that the AMR management team and Board of Directors have committed to a process to explore consolidation scenarios that will enhance value for its stakeholders. The Unsecured Creditors Committee should be recognized for its efforts and we look forward to working with the Committee in the process going forward. As previously stated, US Airways has concluded that a combination is in the best interests of employees, customers and the communities of both companies, as well as AMR’s creditors and US Airways’ investors.  We look forward to engaging in the AMR process to demonstrate the significant advantages of our plan to maximize value for all constituents.”

The stage is now set: A waiting suitor in the form of US Airways, already signing agreements with AMR’s unions, pressurizing unsecured creditors and unions calling for a change of management at AMR and a reluctant AMR management group trying to hold onto the status quo (i.e. their jobs) as they reorganize under Chapter 11. In the end, the bankruptcy judge will have to try to find a middle ground approach to solve this very complex and acrimonious reorganization. Good luck to all parties.

A possible merger between AMR and US Airways Group would not be easy. The two groups operate a diverse fleet and US Airways still has unresolved issues with its pilots concerning the lack of a single contract between East (the old US Airways) and West (the old America West). The two fleets along with the personnel are still not interchangeable. Can America West (now “US Airways”) management make it work under the American Airlines name and DFW headquarters while it still hasn’t clean-up its previous marriage?

Copyright Photos: Bruce Drum.

American Slide Show: CLICK HERE

US Airways Slide Show: CLICK HERE