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US Airways CEO talks up a deal for AMR

by Lou Whiteman | Published July 18, 2012 at 3:28 PM

The chief executive of US Airways Group Inc. said Wednesday, July 18, that a merger between his airline and bankrupt American Airlines Inc. would provide both companies with their best chance to compete in a consolidating industry.

Doug Parker, whose Tempe, Ariz.-based US Airways has been pushing for a deal with American parent AMR Corp., in a speech at the National Press Club in Washington said that both American and US Airways on their own can not match the revenue generation capability of Delta Air Lines Inc. or United Continental Holdings Inc., both products of recent mergers.

"American Airlines sat out the last round of mergers, and that has left them strategically compromised," Parker said. "Together, American and US Airways can connect more communities and provide greater benefits for American's creditors and US Airways' shareholders than either airline could on a standalone basis."

US Airways has not formally launched a bid for AMR, but has for months been lobbying creditors and labor groups about the benefits of a potential deal. Significantly, the heads of American's three largest unions have endorsed the proposed merger, and all three attended the speech as guests of Parker.

Fort Worth-based AMR filed for Chapter 11 protection in November seeking to extract more than $2 billion in annual cost cuts and revamp its operations. The company in the months since has struggled to win new deals with its labor groups, but of late has been reporting progress.

American earlier this month told employees it was ready to consider its options, including exploring potential mergers with a number of different airlines. Company executives, while pledging to review all options to exit bankruptcy, have expressed a preference to emerge as an independent before considering consolidation options.

Parker in his speech countered that bankruptcy allows for a cleaner deal because it gives the combining companies more flexibility to rework their fleets and vendor deals. He also cautioned AMR creditors that there is no guarantee that his company will still be there ready to do a deal after the Chapter 11 process is complete.

"US Airways is here now and we're ready to do this now, there is no guarantee that will be the case forever," Parker said. The executive said he would like to begin the process of seeking antitrust approval for a deal by the end of the year, saying "all that we want is a fair chance to present our plan, and to compare it to all others in a process that doesn't disadvantage any of the options."

The speech comes on the same day that AMR announced a bankruptcy-assisted second-quarter net profit of $95 million excluding restructuring costs on sales of $6.46 billion, the company's highest quarterly revenue figure in its history. AMR chief executive Tom Horton in a statement called the result proof that the company's restructuring is progressing, and pledged better results in future quarters.

"This improvement reflects only a fraction of our ongoing restructuring progress," Horton said. "While there is still much to be done, we expect this momentum to build quickly as the new American re-emerges as an industry leader."

The company ended the quarter with $5.8 billion in cash and short-term investments on its balance sheet.

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