Did American Airlines Thrust Itself Into US Airways’ Arms?

AMR's bid to scrap union contracts might have set up suitors

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Did American Airlines Thrust Itself Into US Airways’ Arms?

The unions and other creditors have until April 3 to submit objections to AMR’s filing. The court will hold a hearing on the matter on April 10.

For his part, AMR’s Horton is committed to work through the Chapter 11 process — and would prefer to do so without the distraction of any marriage proposals. “I want to go as quickly as we can,” he told the Associated Press earlier this week, noting that he’d like to finish the bankruptcy process by the end of this year.

While Horton grants that consolidation has been “healthy and constructive for the U.S. airline industry,” he contends that now is not the time for American to explore a merger. “We are in the midst of a very complex restructuring and so our focus is singularly on returning the company to growth,” he said. “The idea of doing the two together strikes me as a bridge too far.”

Bottom Line

Horton wants to preserve AMR as an independent entity — that’s why he’s trying to blaze through reorganization before prospective acquirers can get their ducks in a row. He has a little help: IAG, the parent of British Airways and Iberia, is mulling the prospect of buying into AMR to fend off unwelcome advances from US Airways and others.

Besides US Airways, potential suitors include Delta and David Bonderman’s private equity firm TPG Capital. LCC still is the most likely partner, though, because it would raise fewer antitrust concerns.

But Horton also must weigh the potential perils of pushing his unions too far too fast because it might make them more motivated to throw in with a potential suitor. Union opposition skunked up US Air’s plans to acquire Delta, and Doug Parker has learned from those mistakes and won’t likely repeat them.

Expect Parker to embark on a charm offensive with American’s unions and other creditors — including Boeing (NYSE:BA), several banks and the Pension Benefit Guaranty Corp., the federal agency that guarantees the airline’s pensions.

AAMRQ shares were down more than 3% on Wednesday and the stock is unlikely to experience any rebound until at least after the court rules on the union contract issue. One thing is certain: Horton is on the clock, and he has precious little time left to craft his airline’s destiny.

As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2012/03/did-american-airlines-thrust-itself-into-us-airways-arms/.

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