logo
Share SHARE
FONT-SIZE Plus   Neg

WSJ: US Airways Pushes For Merger With American

US Airways Group, Inc. (LCC), which is trying to merge with AMR Corp.'s American Airlines, has told some of the creditors of the airline that a combination of the two carriers could translate to over $1.5 billion in revenue and cost savings, the Wall Street Journal reported, quoting people familiar with the matter.

AMR Corp. and some of its subsidiaries, including American Airlines and American Eagle, filed for Chapter 11 bankruptcy protection in November 2011. The carrier had cited its cost disadvantage compared to larger competitors and said that the bankruptcy filing was to achieve a cost and debt structure that is industry competitive.

It was reported earlier that US Airways was in talks with some creditors and advisers of bankrupt American Airlines regarding a takeover of the carrier. Some members of the unsecured creditors committee were said to have given a positive response to US Airways' plan for the combined airline. The objective was to complete the combination before AMR exits Chapter 11 protection.

The WSJ report added that the efforts of US Airways to arrive at a deal could prolong the bankruptcy proceedings for American as regulators may require to conduct an antitrust review as well. This could in turn hurt creditors' recoveries if the value of the carrier was hit further by its longer stay in the bankruptcy court.

Three main unions of American are part of the creditors' committee.US Airways is said to have told creditors that a combination could generate $1 billion in additional revenue and $500 million in non-labor cost savings.

After the 9/11 attacks and subsequent downturn, AMR was one of the few airlines that averted bankruptcy. However, the company reported losses in the following years even as peers resolved cost issues and returned to profit.

While labor unions had made concessions to AMR in 2003, they were now seeking improved pay scales. The carrier is now trying to rework contracts with them.

US Airways could project the increased revenues from the combination in its talks with unions that include pilots, flight attendants, mechanics and airport ground workers.

LCC closed on Tuesday at $7.74, up $0.27 or 3.61 percent, on a volume of 6.95 million shares.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

Business News

Editors Pick
Electric car maker Tesla's Chief Elon Musk confirmed that there will be no discount on new cars. Through several tweets and an email addressing its employees, Musk said, "It is absolutely vital that we adhere to the no negotiation and no discount policy that has been true since we first started taking orders 10 years ago." Shares of National Beverage Corp. fell about 15 percent on Wednesday after short selling firm Glaucus Research Group has said it is shorting the soft-drink maker and accused the company of manipulating earnings. In a research report, Glaucus alleged that National Beverage achieved its "remarkable history of financial performance in part by manipulating earnings." Canadian pipeline operator Enbridge Inc. said it has agreed to sell its liquids pipeline assets in the South Prairie Region, including the Saskatchewan pipeline system, to privately-held midstream company Tundra Energy Marketing Ltd. for C$1.075 billion in cash.
comments powered by Disqus
Follow RTT