US Airways Group Inc. moved closer to making a takeover offer for AMR Corp.’s American Airlines in bankruptcy, saying it reached agreements on contract terms with the carrier’s major unions.
US Airways said no bid has been made, and it didn’t specify how it would proceed on a tie-up with American, which has said it wants to exit Chapter 11 as a stand-alone airline. The labor accords are contingent on reaching a deal with AMR, US Airways said today in a regulatory filing.
“Combining American Airlines and US Airways would create a pre-eminent airline with the enhanced scale and breadth required to compete more effectively and profitably,” US Airways Chief Executive Officer Doug Parker said in a letter to employees.
Agreements with American’s three biggest labor groups would give Tempe, Arizona-based US Airways some leverage in any merger talks. The Allied Pilots Association, Association of Professional Flight Attendants and Transport Workers Union each have seats on AMR’s nine-member unsecured creditors committee.
While American holds the exclusive right to file a plan of reorganization through Sept. 28, the creditors panel can ask the U.S. Bankruptcy Court to end that privilege if the group concludes there is another viable option.
American had no immediate comment on US Airways’ disclosures, said Bruce Hicks, a spokesman.
‘Pressure on American’
“This unusual step ramps up the pressure on American to try and get its labor groups on board its own reorganization plan,” Jim Corridore, a Standard & Poor’s equity analyst in New York, said in a note today. The development “increases the likelihood that US Airways will be able to win once it has a chance to submit its own reorganization plan for American.”
US Airways fell 3.3 percent to $9.20 at 10:42 a.m. in New York. The shares surged 16 percent yesterday after people familiar with the matter said that American’s major unions agreed to support a takeover offer, fueling speculation that a bid might be announced today.
Blending American and US Airways, the fifth-largest U.S. carrier, would produce the world’s biggest airline, based on miles flown by paying passengers. It would keep the American name and Dallas-Fort Worth headquarters, according to terms from US Airways in documents provided to the unions.
“Our airline’s future is far brighter with this transaction and the US Airways team,” the Association of Professional Flight Attendants said today in a statement e- mailed to members.
AMR CEO Tom Horton has proposed cutting 13,000 union positions at the third-largest U.S. airline, aggravating labor tensions that predated the company’s Nov. 29 bankruptcy filing. Horton has said American would be open to a merger after leaving court protection, and sees itself as a possible acquirer.
US Airways’ filing didn’t spell out terms reached with the three unions, which represent about 48,000 active employees at American.
According to union documents sent to flight attendants, members wouldn’t face furloughs under a US Airways takeover, while their pension plan would be frozen and replaced with 401(k) retirement accounts. The Allied Pilots Association said the combined company would stay in the Oneworld airline alliance and complete pending jet orders with Boeing Co. and Airbus SAS.
American will go before the bankruptcy court in New York on April 23 as it seeks permission to throw out existing contracts and impose new terms to reduce labor spending by $1.25 billion a year.
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