Transport Airlines

US Airways and American Airlines talks are getting intense

Feb 07, 2013 12:01 am

Skift Take

Whoever made a bet on US Airways’ stock fourteen months ago must be smiling big. Now AMR’s creditors would like in on that happy action just a little bit.

— Jason Clampet

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US Airways Group Inc.’s merger talks with bankrupt American Airlines are intensifying as the two sides try to agree on control of a combined company before confidentiality agreements expire next week.

No decisions have been made on how ownership would be split between creditors of American parent AMR Corp. and US Airways investors or who would lead the company, said four of the people, who asked not to be identified because the talks are private.

A deal would create the world’s largest airline, giving American the scale to compete with rivals that surpassed it in size amid a wave of consolidation during the past decade. The possible merger gained support late last month from a group holding $1.5 billion in unsecured AMR debt, people familiar with the matter said then.

The bondholders are pushing for a deal by Feb. 15, the expiration date for a non-disclosure agreement they signed with the two airlines. Talks may still falter, and there is no guarantee of an agreement by that date, the people said.

Ed Stewart, a US Airways spokesman, declined to comment, as did Sean Collins, a spokesman for American.

AMR has urged that creditors get 80 percent of the equity versus 20 percent for US Airways shareholders, while US Airways favors a 70 percent to 30 percent division, people familiar with the matter have said.

US Airways Chief Executive Officer Doug Parker has been pursuing a merger since January 2012. AMR CEO Tom Horton agreed to consider merger options in restructuring after saying the airline preferred to exit court protection and then weigh consolidation.

US Airways has more than tripled since Nov. 28, 2011, the day before AMR’s Chapter 11 filing, amid speculation that Parker would succeed, compared with a 27 percent advance by the Standard & Poor’s 500 Index.

AMR’s $460 million of 6.25 percent convertible notes due in October 2014 have soared more than fivefold during its time in bankruptcy. They rose 0.7 percent to 97.063 cents on the dollar today in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Editors: James Langford, Elizabeth Wollman. To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net; Beth Jinks in New York at bjinks1@bloomberg.net. To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net; Jeffrey McCracken at jmccracken3@bloomberg.net.

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