US Air makes merger offer, AMR pilots approve labor deal

Fri Dec 7, 2012 6:35pm EST
 

By Soyoung Kim and Nick Brown

NEW YORK (Reuters) - US Airways Group Inc has made a formal merger proposal to American Airlines parent AMR Corp and its creditors that could value the combined airline at around $8.5 billion, two people familiar with the matter said on Friday.

Details of the proposal emerged as American Airlines pilots voted to ratify a new union contract on Friday, ending a years-long labor dispute and stabilizing the carrier as it tries to emerge from bankruptcy.

Under an all-stock merger that US Airways proposed in mid-November at a meeting with AMR's unsecured creditors committee, AMR creditors would own 70 percent of the merged company and US Airways shareholders 30 percent, the people said.

US Airways and AMR are negotiating toward a potential merger agreement that the smaller rival hopes could come as soon as January, one of the people added, asking not to be named because the matter is not public.

The combined AMR and US Airways could have a value similar to Delta Air Lines Inc, which has a market capitalization of around $8.5 billion, the person said.

At the same time, AMR is still pursuing a plan to emerge from bankruptcy proceedings as an independent airline, which will be compared against the merits of a merger with US Airways, the people said.

The companies have yet to narrow differences on a number of significant issues before any deal could be agreed, including how much of the combined carrier each side should own, the people said.

AMR creditors think they should get an equity stake of closer to 80 percent in a merged entity, rather than the 70 percent proposed by US Airways, the people said. AMR and US Airways also disagree on potential cost and revenue benefits from a merger as well as labor integration challenges, they added.   Continued...

 
A US Airways plane passes American Airlines planes at Ronald Reagan National Airport in Washington April 23, 2012. REUTERS/Kevin Lamarque