As the deal to create the world’s newest biggest airline moves toward completion, the departing chief executive of American Airlines today offered a slightly revised version of the merger’s history. It’s not that American never wanted to wed US Airways Group (LCC), Thomas Horton said in a speech to the Wings Club in New York. His airline was simply engaged in “a poker game” with a suitor that was offering the airline and its creditors a lousy deal for nearly a year.
In April 2012, US Airways announced labor agreements with the unions representing American’s pilots, mechanics, and flight attendants, a move that clearly rankled American’s top brass. “They’re trying to maximize value for their stakeholders, and that’s their job … but it wasn’t the right time for us,” Horton said today of US Airways, whose CEO, Doug Parker, suggested a merger in which US Airways controlled 51 percent of the equity in the combined airline. “So now we’re into a poker game.”
If it was a bluff, it was a good one. When Horton and other AMR senior executives visited with Bloomberg reporters and editors on Feb. 3, 2012, in New York, Horton was dismissive to the point of exasperation about rampant talk in the industry that American’s bankruptcy was an opportune time to merge the airline with another. American would be much better suited for M&A as an acquirer—after it restructured, Horton said. (He further noted US Airways’ prior failed merger efforts with Delta Air Lines (DAL) and United (UAL) and predicted the same fate for Parker’s American bid.)
Creditors—with US Airways’ help—saw things differently. A U.S. Bankruptcy Court approved the merger on March 27; the Dept. of Justice continues its review. Horton, who said the outcome of the poker game was far better for AMR, as it will control 72 percent of the new entity, will serve as nonexecutive chairman until some point next year. Horton is set to receive a $19.9 million severance award when he departs, a payment that has drawn objections in court.