Transport Airlines

American-US Airways talks on tie-up may be knotted over Horton’s role

Feb 12, 2013 12:40 pm

Skift Take

Horton’s role and the composition of the board seem to be holding up a deal, which many view as inevitable.

— Samantha Shankman

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A potential merger deal between American Airlines and US Airways remained in a holding pattern Monday, with an announcement possible Thursday, sources said Monday.

Still unresolved was AMR Chief Executive Tom Horton’s role in a combined company, as well as his compensation package. He reportedly is being offered the title of nonexecutive chairman for a limited time.

The boards of directors for American’s parent, AMR Corp., and US Airways are expected to meet Wednesday, The Wall Street Journal reported. The airlines are also discussing the makeup of a new board of directors, including the number of members and who will appoint them, the report said.

The sources, who are familiar with the negotiations but not authorized to speak publicly, cautioned that even though the parties want to reach an agreement by the end of the week, when a nondisclosure agreement with bondholders is scheduled to expire, negotiations could stretch out if the bondholders and others agree to an extension. Any deal would still need to be approved by AMR’s Bankruptcy Court.

American and US Airways both declined to comment on the status of discussions.

Wall Street analysts, who have speculated about a merger since American’s parent company filed for bankruptcy in November 2011, view a merger announcement as inevitable.

Stern Agee analyst Jeffrey Kauffman told investors that a merger is in the best interest of both carriers.

“We believe that the stand-alone plan would have left AMR with a disadvantaged infrastructure, too small to compete effectively with carriers 40 percent larger for business travel, and too large to be a niche carrier and compete with carriers smaller and more nimble,” Kauffman wrote in a research note. “In the case of [US Airways] they have been exceeding our expectations for some time, but would have been relegated to scrapping out an existence in niche markets.”

With reports that the merged company will be 72 percent owned by AMR creditors and 28 percent by US Airways shareholders, analysts say the new carrier will have a market value of about $8.5 billion. Dahlman Rose & Co. analyst Helane Becker questioned the valuation of the new company in a research note Monday.

“We believe the valuation could be aggressive given the combined company would lack a presence in Asia, the fastest-growing aviation market in the world, and a market where United is a dominant name,” Becker told investors in the note.

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