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US Airways confirms interest in bid for AMR

by Lou Whiteman  |  Published January 25, 2012 at 3:51 PM
AMR-shares-down-10-on-pilot-proposal227.jpgUS Airways Group Inc. confirmed Wednesday, Jan. 25, that it has retained advisers to explore a potential bid for the parent of American Airlines Inc., but cautioned that it is unlikely to make a quick move for its bankrupt rival.

Doug Parker, chairman and CEO of the Tempe, Ariz.-based airline, said during an earnings conference call that the company has retained Barclays Capital, Millstein & Co. and Latham & Watkins LLP to help it monitor AMR Corp., which fell into Chapter 11 protection late last year. Reports have surfaced in recent weeks that US Airways along with Delta Air Lines Inc. and private equity firm TPG Capital have all separately hired advisers to explore options relating to AMR.

Fort Worth-based AMR has fallen from being the world's largest airline to just the third-largest in the U.S. following mergers between Delta and Northwest Airlines Corp. and between United Airlines Inc. and Continental Airlines Inc., and the company has been criticized by analysts for having a route network that can not compete against the newly formed behemoths. American Airlines CEO Tom Horton in a December letter to employees warned that acquisition talk might surface, but the company is focused on emerging from bankruptcy as an independent.

Parker, an outspoken advocate of consolidation, on the call Wednesday told analysts that the deals that have occurred have helped to pull excess capacity out of the system and made it easier for airlines to generate a profit, lessening the need for further dealmaking. US Airways reported a profit of $71 million in 2011 on sales of $13.1 billion, results that Parker said showed "US Airways does not need to participate in consolidation."

Though improving fundamentals would allow US Airways to operate as a standalone, "we are, of course, always interested in studying potential value increasing scenarios," Parker said, noting that AMR is early in the restructuring process and that he anticipates the team "will be studying the situation for some time."

While any strategic deal for American Airlines would be a tough sell to the company's unions, which hold three seats on AMR's unsecured creditors' committee, US Airways is seen as the most likely of the potential acquirers because it would have an easier time getting a deal past regulatory scrutiny. US Airways is the smallest of the remaining prederegulation airlines, and a deal between it and American Airlines would create three large air titans to compete for U.S. market share.

Parker has said in the past that he believes that there is only one big merger left in the airline industry, and that deal will involve US Airways.
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Tags: American Airlines Inc. | Barclays Capital | Continental Airlines Inc. | Delta Air Lines Inc. | Doug Parker | Latham & Watkins LLP | Northwest Airlines Corp. | TPG Capital | United Airlines Inc. | US Airways Group Inc.

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