Category Archives: AMR Corporation

November 25 set as the trial date in the American – US Airways merger request

American Airlines (Dallas/Fort Worth) and US Airways (Phoenix) will go to trial on November 25 against the Department of Justice, six states and the District of Columbia. U.S. District Court Judge Colleen Kollar-Kotelly set the trial date. The date was sooner than the DOJ wanted which means they will have to do their research much faster.

The DOJ, the six states and DC entered the lawsuit in the court on August 13 to block the proposed merger. This trial will probably serve as one of the final hearings in the merger request since the DOJ is critical in any approval. In other words, a judge could determine the fate of the two airlines.

The airlines are likely to argue that Southwest Airlines (which was not counted in the original DOJ data) is a formidable competitor and a merger is necessary to stay competitive against WN and other fast-growing ultra low fares carriers like Spirit Airlines and Allegiant Air (they have a good point). They are also likely to argue that air fares have gone up not as a result of the recent mergers but continuously rising fuel costs.

The DOJ meanwhile would prefer to compare the AA-US merger against the previous mergers of United Airlines-Continental Airlines and Delta Air Lines-Northwest Airlines and their international routes.

The other critical point bound to be discussed in detail at the trial is the slots the proposed merged carrier will have at Washington’s super high yield Reagan National Airport. The new AA would be a super carrier at DCA if the merger is now approved. AA-US will likely have to give up more concerning DCA.

Lawyers for both sides are likely to exchange millions of documents according to this report by Reuters. If you are an airline route analysis junkie, this is the “trial of the century”.

As many as 50 people could testify at the trial. Will other airline CEOs testify at the trial?

Read the full report: CLICK HERE

Top Copyright Photo: Brian McDonough/AirlinersGallery.com. American’s Boeing 737-823 N989AN (msn 33205) prepares to land at Dulles International Airport in Virginia near Washington, DC.

American Airlines:

Have you seen the “new look” AirlinersGallery.com?

US Airways:

Bottom Copyright Photo: Michael B. Ing/AirlinersGallery.com. US Airways’ Airbus A321-231 N535UW (msn 3993) climbs away from Seattle-Tacoma International Airport.

AMR Corporation and US Airways file a motion to set merger trial for November 12, 2013

AMR Corporation (Dallas/Fort Worth), the parent company of American Airlines, Inc. (Dallas/Fort Worth), and US Airways Group, Inc. (US Airways) (Phoenix) have announced that they filed a motion to set a trial date and a supporting brief in the United States District Court for the District Of Columbia in connection with the lawsuit filed by the U.S. Department of Justice (DOJ) regarding the merger of the two airlines. In the motion, American Airlines and US Airways have requested a November 12, 2013 trial date.

In their filing, the Companies explain that their proposed trial date is very reasonable by recent historical standards. The DOJ request for 180 days, especially with one of the parties in bankruptcy, however, would be unprecedented and unreasonable in the circumstances. Based on the DOJ merger cases litigated to a decision since 2001, the average time from the DOJ’s complaint to trial is 70 days.

Top Copyright Photo: Ole Simon/AirlinersGallery.com. American Airlines’ Boeing 777-223 ER N781AN (msn 29586) approaches Madrid for landing.

American Airlines:

US Airways:

Bottom Copyright Photo: Michael B. Ing/AirlinersGallery.com. Airbus A319-132 N814AW (msn 1281) lands at Long Beach near Los Angeles.

The next move for AMR and American Airlines

AMR Corporation (American Airlines) (Dallas/Fort Worth) and US Airways (Phoenix) in a show of unity, vowed yesterday to fight the Department of Justice’s (DOJ) lawsuit in court (along with six states and the District of Colombia). Three high-powered attorneys have been hired to fight the lawsuit. The two airlines will try to argue in court that their merger will promote competition, especially against Delta Air Lines, United Airlines and Southwest Airlines.

However the real measure being used by the DOJ and will probably be the central theme in the court, will another merger lead to lower ticket prices? With the recent Delta-Northwest, United-Continental and Southwest-AirTran mergers, ticket prices have been raised steadily (probably due more to fuel costs) along with an increasing long list of add-on charges. Airline profits are at its highest. The DOJ is using American’s and US Airways’ own pre-airline merger reports when they were arguing for a merger which states an AA-US merger would lead to higher yields permitting the lower ticket prices to be dropped on many routes where they compete adding to the bottom line for the merged company. AA-US also have a large share of the routes and traffic from slot-controlled Washington Reagan National Airport. Very few of those routes have any meaningful competition. DCA routes have some of the highest yields in the country.

At any rate the lawsuit will delay the merger decision, probably now to 2014.

Read the full report from Reuters: CLICK HERE

However for bankrupt AMR Corporation and American Airlines and its shareholders, the rejection could send its bankruptcy reorganization back to where it all started with a key question:

Can the deal be restructured again to meet the DOJ’s antitrust objections (especially concerning Washington’s Reagan National Airport) and keep some value for the creditors and shareholders? Without US Airways in the equation, a new reorganization would probably shift the company’s equity to the current creditors. The existing shareholders could get nothing in any new reorganization making it harder to “sell”.

In addition what happens to CEO Tom Horton and his nearly $20 million severance package?

Nick Brown examines the options for AMR in this article as it tries to adjust to a newer reality: CLICK HERE

Copyright Photo: TMK Photography/AirlinersGallery.com. The new 2013 livery of American is now likely to become the livery of a new American with or without US Airways as more aircraft are repainted. There is a tipping point (probably already achieved) where it becomes unfeasible to go to another look. US Airways’ CEO Doug Parker, if he becomes the CEO of the new American, may be stuck with current CEO Tom Horton’s design going forward. The controversial livery is the least of Doug’s problems right now. Boeing 737-823 N965AN (msn 29544) poses for the camera under perfect light at Toronto (Pearson).

American Airlines:

US Airways:

The Justice Department to block the AMR Corporate-US Airways Group merger

BREAKING NEWS

The Department of Justice (DOJ) (Washington) filed an antitrust lawsuit today affectively blocking the AMR Corporation (American Airlines) (Dallas/Fort Worth) and US Airways Group (US Airways) (Phoenix) merger. The DOJ seeks to block the merger “because it would eliminate competition between US Airways and American and put consumers at risk of higher prices and reduced service”.

The DOJ just issued this statement:

Justice Department Files Antitrust Lawsuit Challenging Proposed Merger Between US Airways and American Airlines. Merger Would Result in U.S. Consumers Paying Higher Airfares and Receiving Less Service; Lawsuit Seeks to Maintain Competition in the Airline Industry.

The Department of Justice, six state attorneys general and the District of Columbia filed a civil antitrust lawsuit today challenging the proposed $11 billion merger between US Airways Group Inc. and American Airlines’ parent corporation, AMR Corp. The department said that the merger, which would result in the creation of the world’s largest airline, would substantially lessen competition for commercial air travel in local markets throughout the United States and result in passengers paying higher airfares and receiving less service.

The Department of Justice’s Antitrust Division, along with the attorneys general, filed a lawsuit in the U.S. District Court for the District of Columbia, which seeks to prevent the companies from merging and to preserve the existing head-to-head competition between the firms that the transaction would eliminate. The participating attorneys general are: Texas, where American Airlines is headquartered; Arizona, where US Airways is headquartered; Florida; the District of Columbia; Pennsylvania; Tennessee; and Virginia.

“Airline travel is vital to millions of American consumers who fly regularly for either business or pleasure,” said Attorney General Eric Holder. “By challenging this merger, the Department of Justice is saying that the American people deserve better. This transaction would result in consumers paying the price – in higher airfares, higher fees and fewer choices. Today’s action proves our determination to fight for the best interests of consumers by ensuring robust competition in the marketplace.”

Last year, business and leisure airline travelers spent more than $70 billion on airfare for travel throughout the United States. In recent years, major airlines have, in tandem, raised fares, imposed new and higher fees and reduced service, the department said.

“The department sued to block this merger because it would eliminate competition between US Airways and American and put consumers at risk of higher prices and reduced service,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “If this merger goes forward, even a small increase in the price of airline tickets, checked bags or flight change fees would result in hundreds of millions of dollars of harm to American consumers. Both airlines have stated they can succeed on a standalone basis and consumers deserve the benefit of that continuing competitive dynamic.”

American and US Airways compete directly on more than a thousand routes where one or both offer connecting service, representing tens of billions of dollars in annual revenues. They engage in head-to-head competition with nonstop service on routes worth about $2 billion in annual route-wide revenues. Eliminating this head-to-head competition would give the merged airline the incentive and ability to raise airfares, the department said in its complaint.

According to the department’s complaint, the vast majority of domestic airline routes are already highly concentrated. The merger would create the largest airline in the world and result in four airlines controlling more than 80 percent of the United States commercial air travel market.

The merger would also entrench the merged airline as the dominant carrier at Washington Reagan National Airport, with control of 69 percent of the take-off and landing slots. The merged airline would have a monopoly on 63 percent of the nonstop routes served out of Reagan National airport. As a result, Washington, D.C., area passengers would likely see higher prices and fewer choices if the merger is allowed, the department said in its complaint. Blocking the merger will preserve current competition and service, including flights that US Airways currently offers from Washington’s Reagan National Airport.

The complaint also describes how, in recent years, the major airlines have succeeded in raising prices, imposing new fees and reducing service. The complaint quotes several public statements by senior US Airways executives directly attributing this trend to a reduction in the number of competitors in the U.S. market:

President Scott Kirby said, “Three successful fare increases – [we are] able to pass along to customers because of consolidation.”
At an industry conference in 2012, Kirby said, “Consolidation has also…allowed the industry to do things like ancillary revenues…. That is a structural permanent change to the industry and one that’s impossible to overstate the benefit from it.”
As US Airways CEO Parker stated in February 2013, combining US Airways and American would be “ the last major piece needed to fully rationalize the industry.”
A US Airways document said that capacity reductions have “enabled” fare increases.

“The merger of these two important competitors will just make things worse –exacerbating current airline industry trends toward reduced service, increasing fares and increasing passenger fees,” added Baer.

As the complaint describes, absent the merger, US Airways and American will continue to provide important competitive constraints on each other and on other airlines. Today, US Airways competes vigorously for price-conscious travelers by offering discounts of up to 40 percent for connecting flights on other airlines’ nonstop routes under its Advantage Fares program. The other legacy airlines – American, Delta and United – routinely match the nonstop fares where they offer connecting service in order to avoid inciting costly fare wars. The Advantage Fares strategy has been successful for US Airways because its network is different from the networks of the larger carriers. If the proposed merger is completed, the combined airline’s network will look more like the existing American, Delta and United networks, and as a result, the Advantage Fares program will likely be eliminated, resulting in higher prices and less services for consumers. An internal analysis at American in October 2012, concluded, “The [Advantage Fares] program would have to be eliminated in a merger with American, as American’s large, nonstop markets would now be susceptible to reactionary pricing from Delta and United.” And, another American executive said that same month, “The industry will force alignment to a single approach–one that aligns with the large legacy carriers as it is revenue maximizing.” By ending the Advantage Fares program, the merger would eliminate lower fares for millions of consumers, the department said.

The complaint also alleges that the merger is likely to result in higher ancillary fees, such as fees charged for checked bags and flight changes. In recent years, the airlines have introduced fees for those services, which were previously included in the price of a ticket. These fees have become huge profit centers for the airlines. In 2012, domestic airlines generated more than $6 billion in fees from checked bags and flight changes alone. The legacy carriers often match each other when one introduces or increases a fee, and if others do not match the initiating carrier tends to withdraw the change. By reducing the number of airlines, the merger will likely make it easier for the remaining carriers to coordinate fee increases, resulting in higher fees for consumers.

The department also said that the merger will make coordination easier among the legacy carriers. Although low-cost carriers such as Southwest and JetBlue offer consumers many benefits, they fly to fewer locations and are unlikely to be able to constrain the coordinated behavior among those carriers.

American Airlines is currently operating in bankruptcy. Absent the merger, American is likely to exit bankruptcy as a vigorous competitor, with strong incentives to grow to better compete with Delta and United, the department said. American recently made the largest aircraft order in industry history, and its post-bankruptcy standalone plan called for increasing both the number of flights and the number of destinations served by those flights at each of its hubs.

The department’s complaint describes US Airways executives’ fear of American’s standalone growth plan as “industry destabilizing.” The complaint states that US Airways worries that American’s growth plan would cause “others” to react “with their own enhanced growth plans…,” and that the resulting effect would increase competitive pressures throughout the industry. The department said the merger will allow US Airways’ management to abandon these aggressive growth plans and continue the industry’s current trend toward higher prices and less service.

The department’s complaint states that executives of both airlines have repeatedly said that they do not need the merger to succeed. The complaint states that US Airways’ CEO observed in December 2011, that “A[merican] is not going away, they will be stronger post-bankruptcy because they will have less debt and reduced labor costs.” US Airways’ executive vice president wrote in July 2012, that, “There isNO question about AMR’s ability to survive on a standalone basis.” And, as recently as January 2013, American’s management presented plans that would increase the destinations it serves in the United States and the frequency of its flights, and would position American to compete independently as a profitable airline with aggressive plans for growth.

AMR is a Delaware corporation with its principal place of business in Fort Worth, Texas. AMR is the parent company of American Airlines. Last year American flew more than 80 million passengers to more than 250 destinations worldwide and took in more than $24 billion in revenue. In November 2011, American filed for bankruptcy reorganization.

US Airways is a Delaware corporation with its principal place of business in Tempe, Ariz. Last year US Airways flew more than 50 million passengers to more than 200 destinations worldwide and took in more than $13 billion in revenue.

Analysis: How American Airlines and US Airways executives wrecked their own merger proposal by Rick Newman: CLICK HERE

Meanwhile AMR and the US Airways Group responded with this statement:

AMR Corporation, the parent company of American Airlines, Inc., and US Airways Group, Inc. today announced that they intend to mount a vigorous and strong defense to the U.S. Department of Justice’s (DOJ) effort to block their proposed merger.

“We believe that the DOJ is wrong in its assessment of our merger. Integrating the complementary networks of American and US Airways to benefit passengers is the motivation for bringing these airlines together. Blocking this procompetitive merger will deny customers access to a broader airline network that gives them more choices.

“Further, this merger provides the best outcome for AMR’s restructuring. The widespread support from the employees and financial stakeholders of both airlines underscores the fact that this is the best path forward for both airlines and the customers and communities we serve.

“We will mount a vigorous defense and pursue all legal options in order to achieve this merger and deliver the benefits of the new American to our customers and communities as soon as possible.”

Benefits of the New American:

Promotes Competitiveness

With more than 6,700 daily flights to 336 destinations in 56 countries around the world, the new American Airlines will strengthen communities nationwide through better service and travel to more destinations both domestically and internationally. Importantly, the combined airline expects to maintain current hubs of both airlines and expand service from those hubs, resulting in more choices for customers. The result for consumers is that the new American will be a highly competitive alternative to other domestic and global carriers.

Greater Long-Term Opportunities for Employees

Employees of the combined airline will benefit from being part of a company with a more competitive and strong financial foundation, which will create greater opportunities over the long term. The merger will also provide the path to improved compensation and benefits for employees.

More Choices, Increased Service, and an Enhanced Travel Experience for Customers

Customers will benefit from new flying options, more choices, increased service and an enhanced travel experience. We expect our complementary flight networks to increase efficiency and provide more options for customers. Greater connectivity with oneworld^® alliance partners will give customers more options for travel and benefits both domestically and internationally.

The merger provides the best outcome for American’s restructuring with creditors and equity holders receiving nearly unprecedented recoveries and having approved the Plan of Reorganization overwhelmingly.

As previously announced, the boards of directors of both AMR and US Airways approved a plan to combine to create the new American Airlines, a premier global carrier.

American Airlines:

US AIrways:

American Airlines and US Airways receive European Commission approval to merge

The European Commission has cleared American Airlines (Dallas/Fort Worth) and US Airways (Phoenix) to merge. AMR Corporation issued this statement:

AMR Corporation, the parent company of American Airlines, Inc., and US Airways Group, Inc. have announced that they have received clearance from the European Commission under the EC Merger Regulation for their proposed merger.

Tom Horton, chairman, president and CEO of AMR, and incoming Chairman of the Board of the combined company, said, “We are very pleased that the EU has approved the merger between American Airlines and US Airways. This represents one of the final milestones on our path to becoming the new American Airlines.”

Doug Parker, chairman and CEO of US Airways, and incoming CEO of the combined company, said, “The clearance by the European Commission is an important step toward closing this merger. The new American will benefit customers in the United States, Europe and across the world by enhancing connectivity within the oneworld alliance and creating more options for travel both domestically and internationally. We look forward to providing access to the best destinations in the world as the new American Airlines.”

As previously announced, AMR and US Airways agreed to combine to create the new American Airlines, a premier global carrier. Headquartered in Dallas/Fort Worth, the new American Airlines will become a highly competitive alternative for consumers to other global carriers and is expected to offer more than 6,700 daily flights to 336 destinations in 56 countries. The combined airline will offer customers more choices and increased service across a larger worldwide network and through an enhanced oneworld alliance. Together, American Airlines and US Airways are expected to operate a mainline fleet of almost 950 aircraft and employ more than 100,000 team members worldwide.

The merger is subject to regulatory approvals, other customary closing conditions and confirmation of AMR’s Plan of Reorganization by the U.S. Bankruptcy Court for the Southern District of New York. The companies continue to expect to complete the combination in the third quarter of 2013.

Top Copyright Photo: Tony Storck/AirlinersGallery.com. Boeing 737-823 N967AN (msn 29545) prepares to land at Washington’s Reagan National Airport.

American Airlines:

US Airways:

Bottom Copyright Photo: Brian McDonough/AirlinersGallery.com. The final (U.S.) merger approvals will come down to the issue of DCA Slots. American-US Airways are fighting to preserve their dominating number of arrival and departure slots at Washington’s Reagan national Airport. US Airways’ Airbus A321-231 N556UW (msn 5244) banks after completing the “River Approach” into DCA.

AMR Corporation reports a net profit of $357 million in the second quarter

AMR Corporation (American Airlines and American Eagle Airlines) (Dallas/Fort Worth) today issued this financial report:

AMR Corporation, the parent company of American Airlines, Inc., today reported results for the second quarter ended June 30, 2013. Key highlights include:

Consolidated and mainline passenger revenue of $5.6 billion and $4.9 billion, respectively – highest passenger revenue for the second quarter in company history
Net profit of $357 million, excluding reorganization and special items, a $262 million improvement year-over-year
Operating profit of $502 million, excluding special items, a $254 million improvement over second quarter 2012. GAAP operating profit of $489 million, a $347 million improvement year-over-year
Consolidated unit costs, excluding fuel and special items, improved 5.8 percent year-over-year, marking the third consecutive quarter of unit cost reduction on that basis
American continued its fleet renewal and took delivery of nine fuel-efficient Boeing 737-800s and three 777-300ERs in the quarter. For the year, the company has taken delivery of 24 new aircraft, including six 777-300ERs
American and US Airways continue to anticipate closing their merger in the third quarter of 2013

In the second quarter of 2013, GAAP net profit was $220 million, a $461 million improvement compared to the prior-year period. Excluding reorganization and special items, second quarter 2013 net profit was $357 million, a $262 million improvement compared to the prior-year period. This record setting quarterly result was bolstered by a June during which the company recorded its best monthly profit, excluding reorganization and special items, in its history. In the quarter, AMR had $137 million of reorganization and special items, which are detailed below.

Financial Progress

AMR continues to execute on its objectives as it nears the completion of its restructuring efforts and prepares for its merger with US Airways. With many financial and operating changes from its restructuring already in place, it expects to realize additional improvements as the company continues to implement new terms negotiated with certain vendors and suppliers. It also plans to compete more effectively in the future when American expects to introduce larger regional jets into the operation, which will enable it to better match aircraft size with demand in certain markets.

In the second quarter of 2013, AMR strengthened its liquidity and reduced interest rates through several key transactions. It closed on a $1.05 billion term loan and a $1 billion revolving credit facility. The revolving credit facility will be available upon emergence from its restructuring. AMR also completed a private offering of approximately $120 million of enhanced equipment trust certificates and received gross proceeds of approximately $216 million from the re-marketing of tax-exempt bonds related to its Tulsa maintenance base.

AMR realized year-over-year cost improvements across its business, excluding fuel. Furthermore, to position the company for the future, American is in the midst of a significant renewal and transformation of its fleet and has taken delivery of 42 new fuel efficient Boeing 737-800 and 777-300 ER aircraft over the past 12 months. During the full year of 2013, American expects to take delivery of 59 new mainline aircraft.

In one of the most effective major corporate restructurings ever, AMR’s proposed Plan of Reorganization provides the potential for full recovery for American’s unsecured creditors and a recovery of at least 3.5 percent of the aggregate diluted common stock of the combined airline for the company’s existing shareholders.

Revenue Performance

For the second quarter of 2013, AMR reported consolidated revenue of approximately $6.4 billion, comparable with AMR’s record-setting consolidated revenue results in the same period last year. Consolidated and mainline passenger revenue in the second quarter of 2013 was the highest second quarter passenger revenue result in company history. Respectively, they increased 0.2 percent to $5.6 billion and 1.1 percent to $4.9 billion, compared to the second quarter of 2012.

Second quarter 2013 consolidated and mainline capacity were both up approximately 1.1 percent year-over-over, while consolidated and mainline passenger revenue per available seat mile (PRASM) were lower by 0.9 percent and 0.1 percent, respectively.

While a decrease in close-in demand was observed beginning in March, actions taken in the second quarter to maintain load factor resulted in sequential PRASM improvement throughout the quarter.

American’s mainline load factor, or the percentage of total seats filled, was 84.8 percent during the second quarter, compared to 85.1 percent in the second quarter of 2012. Mainline passenger yield, which represents the average fares paid, increased 0.2 percent year-over-year.

Despite revenue headwinds and against the backdrop of a sluggish economy, AMR was able to drive profitability and significant margin expansion in the second quarter.

Operating Expense

For the second quarter, AMR’s consolidated operating expenses decreased $350 million, or 5.5 percent, versus the same period in 2012. AMR’s mainline and consolidated cost per available seat mile (unit cost) in the second quarter decreased 7.5 percent and 6.6 percent, respectively. Excludingspecial items, AMR’s consolidated operating expenses decreased $257 million, or 4.1 percent, year-over-year.

Taking into account the impact of fuel hedging, AMR paid $3.02 per gallon for jet fuel in the second quarter of 2013 versus $3.24 per gallon in the second quarter of 2012, a 6.8 percent decrease. The company paid $70 million less for fuel in the second quarter of 2013 than it did in the prior-year period.

Excluding fuel and special items, mainline and consolidated unit costs in the second quarter of 2013 decreased 6.5 percent and 5.8 percent year-over-year, respectively, primarily driven by the company’s restructuring efforts. This was the third consecutive quarter of non-fuel unit cost reduction.

In addition, AMR achieved an operating profit of $502 million and an operating margin of approximately 7.8 percent, an improvement of approximately $254 million and 3.9 points, respectively, over the prior-year period, excluding special items in both periods. On a GAAP basis, AMR realized an operating profit of $489 million and an operating margin of approximately 7.6 percent, an improvement of approximately $347 million and 5.4 points, respectively, over the prior-year period.

An unaudited summary of second quarter 2013 results, including reconciliations of non-GAAP to GAAP financial measures, is available in the tables at the back of this press release.

Cash Position

The company ended the second quarter with approximately $7.1 billion in cash and short-term investments, including a restricted cash balance of $863 million, compared to a balance of approximately $5.8 billion in cash and short-term investments, including a restricted balance of approximately $772 million, at the end of the second quarter of 2012.

Total cash and short-term investments increased approximately $2.0 billion from the first quarter ended 2013. Approximately $1.2 billion of the increase in cash and short-term investments was generated from operating activities, while the balance was significantly bolstered by the financing activities described above.

Pending Merger with US Airways

American and US Airways made significant progress toward planning for the closing of the merger and integrating the two airlines. Led by the Integration Management Office (IMO), integration planning teams and cross-functional task forces are defining the manner in which the two companies will combine their commercial, customer service, operations and corporate functions after the merger closes. During the quarter, the IMO held two Merger Planning Summits.

The following merger milestones were achieved in the second quarter:

April 2-3: Integration Planning Kickoff — 29 planning teams comprised of leaders from both airlines to plan the integration
May 6: IMO Planning Summit – IMO team met to conduct planning activities required for merger close and beyond
May 10: The bankruptcy court presiding over American’s restructuring entered an order approving the merger with US Airways, subject to confirmation and consummation of American’s Plan of Reorganization (the Plan)
June 10: American and US Airways announced the Board of Directors and senior leadership team responsible for guiding the combined company, American Airlines Group Inc., effective upon the closing of the merger
June 10: The Securities and Exchange Commission (SEC) Form S-4 Registration Statement was declared effective by the SEC, which gave US Airways shareholders the opportunity to review the proxy statement included in the Form S-4 and vote on the proposed merger at the US Airways annual shareholder meeting on July 12, 2013
June 19: American and US Airways jointly testified before the Senate Subcommittee on Aviation, Operations, Safety, and Security that the new American Airlines will be a stronger, more competitive airline that will provide significant benefits to customers, employees, financial stakeholders and communities of both airlines
June 27- 28: IMO Master Planning Summit — Individual teams met to review planning progress and establish the master plan for the overall integration
July 12: US Airways shareholders, at their annual shareholders meeting, overwhelmingly approved the merger agreement with AMR

The merger is conditioned on approval by regulatory authorities, expiration of statutory waiting periods, other customary closing conditions, and confirmation and consummation of the Plan in accordance with the provisions of the Bankruptcy Code. The combination is expected to be completed in the third quarter of 2013.

Recent Business Highlights

American continued to generate positive momentum throughout its business, while preparing for emergence from restructuring and its pending merger with US Airways. Recent highlights include:

American strengthened its expanding global network by launching or announcing new service from its hubs to international destinations, including Miami-Milan; New York (JFK)-Dublin; Dallas/Fort Worth-Seoul, South Korea; Chicago O’Hare-Düsseldorf, Germany; DFW-Lima, Peru; and Miami and the Caribbean (Martinique and Guadeloupe).
- Additionally, American significantly enhanced its service from Los Angeles International Airport (LAX) by launching or announcing nine new destinations, including new daily non-stop service from LAX to Sao Paulo beginning on Nov. 21.
- On July 1, American, British Airways and Iberia welcomed Finnair to the Atlantic Joint Business.
The American Airlines AAdvantage Program was named Airline Program of the Year at the 2013 Freddie Awards.
The new American Airlines identity received a 2013 bronze CLIO award for best corporate identity design.
American Airlines Cargo was named the Best Cargo Airline of the Americas for the sixth consecutive year by readers of Air Cargo News, the world’s leading air cargo industry publication.
American opened its Flagship Check-In for premium customers at JFK. This is American’s third airport offering the expedited and personalized check-in experience. Chicago’s O’Hare airport will open its Flagship Check-In today, making it American’s fourth airport to offer this enhanced customer experience.
In June, American completed the successful rollout of its industry-leading Electronic Flight Bag program with the discontinuation of paper revisions to terminal charts, making it the first major commercial airline to fully utilize tablets in all cockpits during all phases of flight.

Restructuring Progress

On June 7, 2013, the Court presiding over the Company’s Chapter 11 cases entered an order approving American’s Disclosure Statement and authorized the company to begin soliciting approval of the Plan from AMR’s creditors and stockholders. The Plan voting deadline is July 29, 2013.

The hearing before the Court to consider confirmation of the Plan is scheduled for Aug. 15, 2013. The effective date of the Plan and American’s emergence from restructuring are expected to occur simultaneously with the closing of the merger with US Airways. American and US Airways continue to expect to close their merger in the third quarter of 2013.

Reorganization and Special Items

AMR’s second quarter 2013 results include the impact of $137 million in reorganization and special items.

Of that amount, AMR recognized a $124 million loss in reorganization items resulting from certain of its direct and indirect U.S. subsidiaries’ voluntary petitions for reorganization under Chapter 11 on Nov. 29, 2011. These items primarily consist of estimated allowed claim amounts for certain special facility revenue bonds as well as for professional fees.
The company’s operating expenses for the second quarter also include special charges and merger-related expenses of $13 million.

Capacity Guidance

AMR estimates consolidated capacity in the third quarter of 2013 to be up approximately 2.7 percent versus the third quarter of 2012, driven by the combination of a longer average stage length per operation flown, and by new or increased capacity into South Korea, Mexico, Central and South America. For the full year 2013, consolidated capacity is estimated to increase approximately 1.5 percent versus the prior year. This guidance is for independent AMR Corporation and does not include US Airways.

American continues to make progress in implementing Main Cabin Extra, providing customers with more leg room in the Main Cabin. To date, American has completed the retrofit of its MD-80, Boeing 757, 767 fleets and 95 percent of its 737 fleet.

American Airlines:

American Eagle:

US Airways stockholders approve the merger with American Airlines

US Airways Group, Inc. (Phoenix), the parent of US Airways (Phoenix), today announced that its shareholders approved the merger agreement with AMR Corporation (Dallas/Fort Worth), the parent company of American Airlines, Inc. (Dallas/Fort Worth).

The merger agreement was approved by the affirmative vote of the holders of a majority of the outstanding shares of US Airways stock, which represented over 99% of the votes cast by US Airways shareholders on the proposal. Of the 132,788,060 shares voted, 132,273,780 shares voted in favor of the proposal; 257,757 shares voted against; and 256,523 abstained. Shareholders also approved other proposals related to the merger.

Doug Parker, chairman and CEO of US Airways, and incoming CEO of the combined company, said, “We are pleased that our shareholders overwhelmingly supported our merger with American Airlines. This approval is a major milestone on our path to completing the merger, and we continue to make excellent progress overall thanks to the focused efforts of the dedicated representatives from both companies. By bringing together two highly complementary networks and generating significant revenue synergies, the new American Airlines will deliver enhanced value for its shareholders. I want to thank our shareholders, our customers and our more than 100,000 dedicated employees for their support throughout this process and look forward to moving forward as an even stronger airline.”

As previously announced, AMR and US Airways agreed to combine to create the new American Airlines, a premier global carrier. Headquartered in Dallas-Fort Worth, the new American Airlines will become a highly competitive alternative for consumers to other global carriers and is expected to offer more than 6,700 daily flights to 336 destinations in 56 countries. The combined airline will offer customers more choices and increased service across a larger worldwide network and through an enhanced oneworld® Alliance. Together, American Airlines and US Airways are expected to operate a mainline fleet of almost 950 aircraft and employ more than 100,000 team members worldwide.

Top Copyright Photo: Michael B. Ing/AirlinersGallery.com. Airbus A330-323X N275AY (msn 370) departs from London (Heathrow).

US Airways:

American Airlines:

Bottom Copyright Photo: Andi Hiltl/AirlinersGallery.com. Boeing 767-323 ER N336AA (msn 25193) lands at Zurich.

American and US Airways announce the senior management team for the merged company

AMR Corporation (Dallas), the parent company of American Airlines, Inc. (Dallas/Fort Worth), and US Airways Group, Inc. (US Airways) (Phoenix) today announced the senior leadership team responsible for guiding the new American Airlines after the closing of the companies’ expected merger.

As previously announced, Tom Horton, 52, will serve as Chairman of the Board of the new American Airlines. Doug Parker, 51, will serve as Chief Executive Officer and a member of the Board of Directors. The senior leadership team announced today includes:

Scott Kirby, 45, President: responsibilities include planning, marketing, sales, alliances, pricing/yield management and operations
Elise Eberwein, 48, Executive Vice President, People and Communications: responsible for human resources, media relations, internal communications, social media and public affairs
Beverly Goulet, 58, Chief Integration Officer: will lead the complex integration process of merging American Airlines and US Airways into one airline
Robert Isom, 49, Chief Operating Officer and Chief Executive Officer of US Airways, Inc. post-close: responsible for all aspects of airline operations, including customer service, flight operations, maintenance, regional carrier management, cargo, safety and security
Stephen Johnson, 56, Executive Vice President, Corporate Affairs: responsibilities include corporate and legal affairs, government and regulatory affairs, labor relations, and real estate
Derek Kerr, 48, Chief Financial Officer: responsible for oversight of all financial areas, including financial planning and analysis, corporate finance and treasury functions, purchasing, controller and audit functions and investor relations
Maya Leibman, 47, Chief Information Officer: responsible for all information technology systems, including systems development, infrastructure, and planning
William Ris, 65, Senior Vice President, Government Affairs: responsible for all federal and international government and regulatory affairs and public policy

Kirby, Eberwein, Isom, Johnson and Kerr will join the new American from US Airways; Goulet, Leibman and Ris will join from American.

American Airlines and US Airways also noted that Dan Garton will step down as President and Chief Executive Officer of American Eagle Airlines later this year. A successor will be named prior to Mr. Garton’s departure.

AMR and US Airways also announced today the members of the Board of Directors of the combined company after the closing of the companies’ expected merger. The new Board will be comprised of the following individuals, who the companies believe have the experience, breadth and perspective to guide the new American Airlines to create value for all of the company’s stakeholders:

John T. Cahill, Lead Independent Director
James F. Albaugh
Jeffrey D. Benjamin
Michael J. Embler
Matthew J. Hart
Alberto Ibarguen
Richard C. Kraemer
Denise M. O’Leary
Ray M. Robinson
Richard P. Schifter

As previously announced, AMR and US Airways agreed to combine to create the new American Airlines, a premier global carrier. Headquartered in Dallas-Fort Worth, the new American Airlines will become a highly competitive alternative for consumers to other global carriers and will provide greater flight opportunities, with more than 6,700 daily flights to 336 destinations in 56 countries. The combined airline will offer customers more choices and increased service across a larger worldwide network and through an enhanced oneworld® Alliance. Together, American Airlines andUS Airways are expected to operate a mainline fleet of almost 950 aircraft and employ more than 100,000 people worldwide. The merger is subject to regulatory approvals, approval by US Airways shareholders, other customary closing conditions and confirmation of American Airlines’ Plan of Reorganization by the U.S. Bankruptcy Court for the Southern District of New York.

Bottom Line: The new American with be CEO Doug Parker’s airline managed by mostly his former US Airways managers. Although the American name is retained (as it was with US Airways), it is really America West Airlines now operating as the new American Airlines when the merger is approved.

Copyright Photo: Marcelo F. De Biasi/AirlinersGallery.com. Old and new AA tails meet at Washington (Reagan National), a key strategic airport for the new American.

American Airlines:

US Airways:

Video: The two companies salute their rich heritage:

Bankruptcy judge approves AMR to send its restructuring and merger plan to its unsecured creditors

AMR Corporation (American Airlines) (Dallas/Fort Worth) has received an approval from the bankruptcy court judge, Sean Lane, to send its reorganization and merger plan to the unsecured creditors according to this report by Reuters. This reorganization is unique in that the creditors will receive a 3.5 percent share in the new company under the proposal. Usually creditors do not receive any value after a Chapter 11 reorganization. Secured creditors will be paid in full.

On June 7, 2013 AMR issued this statement:

AMR Corporation, the parent company of American Airlines, Inc., announced that the U.S. Bankruptcy Court for the Southern District of New York entered the order approving the Disclosure Statement filed in connection with the company’s proposed Plan of Reorganization (the Plan). The Court also authorized American to begin soliciting votes on the Plan of Reorganization from creditors and stockholders. Solicitation packages will be distributed by June 20 and the voting deadline is July 29. The hearing before the Court to consider confirmation of the Plan is scheduled for August 15, 2013.

The Plan is supported by the Official Committee of Unsecured Creditors. Holders of approximately $1.6 billion of prepetition unsecured claims also have committed to vote to accept the Plan.

“This is a significant step forward in our efforts to complete the most successful restructuring in aviation history,” said Tom Horton, AMR’s chairman, president and CEO. “We’re in the home stretch of our restructuring and thanks to the hard work of our team, we are positioned to emerge a highly competitive, leading global airline focused on delivering the very best for our customers, our people, and our investors.”

The proposed Plan is to become effective concurrently with the consummation of a merger with US Airways. The proposed merger is expected to maximize recoveries for all of the company’s economic stakeholders and the proposed Plan provides a recovery of 3.5% of the common stock (on an as-converted basis) of the combined company for holders of existing AMR equity securities, with the potential for such holders to receive additional shares.

Under the terms of the Merger Agreement with US Airways, stockholders of US Airways will receive one share of common stock of the combined company for each share of US Airways common stock then held. The aggregate number of shares of common stock of the combined company issuable to holders of US Airways equity instruments (including stockholders, holders of convertible notes, optionees, and holders of restricted stock units) will represent 28% of the diluted equity ownership of the combined company. The remaining 72% of the diluted equity ownership of the combined company will be issued under the Plan to AMR’s stakeholders, AMR’s labor unions, and certain employees of AMR.

Read the full report from Reuters: CLICK HERE

American Airlines:

AMR reports a net profit of $8 million in the 1Q (excluding reorganization costs) and a GAAP net loss of $341 million

AMR Corporation (Dallas/Fort Worth) today reported its financial results for the first quarter. The holding company of American Airlines (Dallas/Fort Worth) and American Eagle Airlines (Dallas/Fort Worth) issued this statement:

In the first quarter, AMR reported a net profit of $8 million, excluding reorganization and special items, a $256 million improvement compared to the prior-year period. AMR incurred a GAAP net loss of $341 million versus a GAAP net loss of $1.7 billion in the first quarter of 2012. First quarter results were negatively impacted by $349 million of reorganization and special items, which are detailed below.

Restructuring Progress

AMR is on track to realize savings targeted in the restructuring process. To date, AMR has completed the majority of its financial restructuring, including reducing debt, renegotiating aircraft leases and facilities agreements, grounding older aircraft, rationalizing the regional fleet, renegotiating supplier relationships, and making a number of other important changes.

“The fundamental changes we have been able to achieve in streamlining our cost structure and making our operations more efficient are yielding substantial results,” said Bella Goren, AMR’s chief financial officer. “Building on the substantial progress that is evident in our results, we are continuing to implement initiatives that create greater value for our financial stakeholders, employees and customers.”

Year-over-year cost reductions in salary, benefit and non-operating expenses were driven by AMR’s restructuring efforts. Through the restructuring process, American reached six-year agreements with all workgroups and reduced management positions, making American’s management staffing the leanest among network carriers.

AMR also realized improvements in depreciation and amortization expense, offset by increased aircraft rent expense with the company taking delivery of a combined 36 new modern, fuel efficient Boeing 737-800 and 777-300ER aircraft over the past 12 months, all of which have been leased. American is in the midst of significant renewal and transformation of its fleet and expects to take delivery of 59 new mainline aircraft during 2013.

Throughout the remainder of the year, AMR expects to realize additional savings improvements as the company gains court approval to implement new terms negotiated with certain vendors and suppliers. It also plans to build on momentum from restructuring by implementing new scope clauses established in new labor agreements that will enable AMR to compete more effectively in certain markets by better matching aircraft size with demand as American begins operating larger regional jets and expands codeshare agreements.

Revenue Performance

For the first quarter of 2013, AMR reported consolidated revenue of $6.1 billion, approximately 1.0 percent higher compared to the prior-year period on 1.3 percent less capacity. First quarter consolidated and mainline passenger revenue per available seat mile (PRASM) increased 2.6 percent and 2.7 percent year-over-year, respectively. Consolidated revenue performance was driven by record passenger yield, or average fares paid, of 16.27 cents per mile, a 0.6 percent year-over-year improvement, and strong consolidated and mainline load factors, or percentage of seats filled, of 79.9 percent and 80.6 percent, respectively.

Domestic PRASM improved 2.7 percent in the first quarter versus the first quarter of 2012, with PRASM increases across all five of American’s hubs, with the Los Angeles and Chicago hubs showing particular strength. International PRASM increased 2.6 percent in the first quarter of 2013 over the prior-year period, driven by strong performance in the Atlantic entity. Absolute PRASM and yields in the Latin entity remain robust and further American’s belief that targeted growth in the region will be accretive to earnings.

Other revenues in the first quarter increased 1.2 percent compared to the prior period, driven primarily by an increase in AAdvantage^® miles sold to partners and by growth in American Eagle’s ground-handling business performed for third parties.

“We achieved a quarterly yield that was the highest in company history for any quarter, and an all-time first quarter record in revenue,” said Virasb Vahidi, American’s chief commercial officer. “As we look to the second quarter, we remain focused on delivering for our customers through new products and services, the renewal of our fleet and greater access to more destinations across our growing global network.”

Operating Expense

For the first quarter, AMR’s consolidated operating expenses decreased $80 million, or 1.3 percent, versus the same period in 2012. Excluding special items, AMR’s consolidated operating expenses decreased $142 million, or 2.3 percent, year-over-year. American’s mainline cost per available seat mile (unit cost) in the first quarter decreased 0.6 percent, including special items in both periods, and 1.7 percent versus the same period last year, excluding special items. Taking into account the impact of fuel hedging, AMR paid $3.26 per gallon for jet fuel in the first quarter of 2013 versus $3.24 per gallon in the first quarter of 2012, a 0.7 percent increase. As a result, the company paid $14 million more for fuel in the first quarter of 2013 than it would have paid at prevailing prices from the prior-year period.

Excluding fuel and special items, mainline and consolidated unit costs in the first quarter of 2013 decreased 4.1 percent and 3.2 percent year-over-year, respectively, primarily driven by the company’s restructuring efforts. Despite lower capacity, this was the second consecutive quarter of non-fuel unit cost reduction. In addition, AMR achieved an operating profit of $125 million and an operating margin of approximately 2.0 percent, an improvement of approximately $203 million and 3.3 points, respectively, over the prior-year period, excluding special items.

An unaudited summary of first quarter 2013 results, including reconciliations of non-GAAP to GAAP financial measures, is available in the tables at the back of this press release.

Cash Position

AMR ended the first quarter with approximately $5.1 billion in cash and short-term investments, including a restricted cash balance of $853 million, compared to a balance of approximately $5.6 billion in cash and short-term investments, including a restricted balance of approximately $771 million, at the end of the first quarter of 2012.

Operational Performance

American ran a strong operation in the first quarter, achieving an on-time arrival rate of 80.8 percent. In the month of March, 81.8 percent of American’s mainline flights arrived on time, American’s best March performance since 2003. American’s solid operational results for the quarter also include posting a completion factor of 98.4 percent.

Other First Quarter Highlights

In January, American Airlines became the first and only U.S. airline to introduce the Boeing 777-300ER (Extended Range) aircraft – the new flagship of American’s fleet. The company now has five 777-300ER aircraft in service, operating between New York Kennedy and both London Heathrow and Sao Paulo, and between Dallas/Fort Worth and London Heathrow.
LATAM Airlines Group announced it will join oneworld^®, and American filed applications with regulators for codeshare agreements with TAM and LAN Colombia. Pending approval, this will strengthen American’s existing service to Latin America by offering customers greater travel options and convenience.
American and Finnair announced Finnair’s intent to join the transatlantic joint business American shares with British Airways and Iberia, providing our North American and European customers more choices and better connections across the Atlantic.
American signed agreements with oneworld member-elect Qatar Airways, based in Doha, Qatar, and the newest oneworld member, Malaysia Airlines, to codeshare on each other’s flights, which will provide new growth opportunities for American in the Middle East and Southeast Asia, as well as for our new partners in the United States.
American and Alaska Airlines announced an expanded codeshare agreement
American filed an application with the U.S. Department of Transportation for the right to fly additional frequencies from its Los Angeles and Chicago hubs to Brazil, beginning in 2013 and 2014, respectively.
American completed its private offering of two tranches of enhanced equipment trust certificates (EETC) in the amount of $664.4 million. This marked the first EETC financing in history for an airline in restructuring.

Pending Merger Transaction

On Feb. 14, AMR and US Airways Group, Inc. (Phoenix) announced that the boards of directors of both companies unanimously approved a definitive merger agreement under which the companies will combine to create one of the world’s largest global airlines, which will have an implied combined equity value of approximately $11 billion based on the price of US Airways stock as of Feb. 13, 2013. The merger will offer benefits to both airlines’ customers, communities, employees, investors and creditors. Among other things, the combined company is expected to:

Benefit customers due to an expanded global network and investment in new aircraft, technology, products and services
Enhance the oneworld alliance, offering a seamless global network
Improve loyalty benefits for both airlines’ members by expanding opportunities to earn and redeem miles
Provide a path to improved compensation and benefits with greater long-term opportunities for employees of both companies
Enhance recoveries for financial stakeholders – AMR stakeholders to own 72 percent and US Airways shareholders to own 28 percent of the combined company’s diluted common stock
Build upon the iconic, globally recognized American Airlines brand
Be headquartered in Dallas/Fort Worth, with a significant operational presence in Phoenix

American’s proposed Plan of Reorganization provides the potential for full recovery for American’s creditors and a recovery of at least 3.5 percent of the aggregate diluted common stock of the combined airline for the company’s shareholders. It is unusual in Chapter 11 cases – and unprecedented in recent airline restructurings – for shareholders to receive meaningful recoveries.

Merger Milestones

The following merger milestones have been achieved to date:

Jan. 31: Filed the required notification materials under the Hart-Scott-Rodino Act (HSR) with the U.S. Department of Justice and U.S. Federal Trade Commission
Feb. 14: Announced the definitive merger agreement between AMR and US Airways
Feb. 25: AMR and US Airways announced that Beverly Goulet, senior vice president and chief integration officer for American Airlines, and Scott Kirby, president of US Airways, will jointly lead a transition-planning team to design and oversee the new American integration
March 21: AMR and US Airways announced the creation of the Integration Management Office (IMO) to support the transition team and the selection of McKinsey & Company to advise the IMO
March 28: AMR received court approval to merge with US Airways
April 15: AMR filed its Chapter 11 Plan of Reorganization, Disclosure Statement and Registration Statement; a hearing to consider approval of the Disclosure Statement is scheduled for June 4

The merger is conditioned on the approval by the Court, regulatory approvals, approval by US Airways shareholders, other customary closing conditions, and confirmation and consummation of the Plan of Reorganization in accordance with the provisions of the Bankruptcy Code. The combination is expected to be completed in the third quarter of 2013. Prior to closing of the transaction, the transition-planning team composed of leaders from both companies will develop an integration plan designed to assure a smooth and sustainable transition with a focus on maximizing the potential value of the merger.

Reorganization and Special Items

AMR’s first quarter 2013 results include the impact of $349 million in reorganization and special items.

Of that amount, AMR recognized a $160 million loss in reorganization items resulting from certain of its direct and indirect U.S. subsidiaries’ voluntary petitions for reorganization under Chapter 11 on Nov. 29, 2011. These items primarily result from an adjustment to previously recorded estimated allowed claim amounts for certain special facility revenue bonds, as well as for professional fees.
The company recognized interest charges of $116 million to recognize post-petition interest expense on unsecured obligations which is to be allowed pursuant to the company’s Plan of Reorganization filed on April 15.
The company’s operating expenses for the first quarter also include special charges and merger-related expenses of $28 million, and a $45 million charge to benefits expense due to an increase in workers’ compensation claims in recent months, as well as adverse developments on older claims.

Capacity Guidance

AMR estimates consolidated capacity in the second quarter of 2013 to be up approximately 1.0 percent versus the second quarter of 2012. For the full year 2013, consolidated capacity is estimated to increase approximately 1.5 percent versus the prior year.

American continues to make progress in implementing Main Cabin Extra, removing certain seats to provide customers with more leg room in the Main Cabin. To date, American has completed the retrofit of its Boeing 757 and 767 fleets and more than 90 percent of its 737 fleet. The retrofit of the MD-80 fleet commenced in January 2013, and to date, Main Cabin Extra has been added to approximately two-thirds of the MD-80 fleet with completion targeted for the second quarter of this year.

Copyright Photo: Brian Peters. Boeing 777-323 ER N718AN (msn 41665) climbs gracefully into the sky from the Dallas/Fort Worth main hub.

American Airlines: