International Consolidated Airlines Group SA (IAG) said there are no plans to take a stake in ally AMR Corp. (AAMRQ), parent of American Airlines, after the U.S. company’s bankruptcy filing made it a potential takeover target.
“For the time being it’s not on the table,” IAG Chairman Antonio Vazquez said in an interview. “I don’t think a minority stake right now makes sense because the company is going through a totally different process. It’s not a question of equity.”
AMR must move quickly to secure $2 billion in cost cuts and fend off potential suitors, Chief Executive Officer Tom Horton said this month. Vazquez said yesterday that while there has been “a lot of noise” about IAG taking a stake in the third- largest U.S. carrier, that’s not an issue.
“The management of American Airlines is leading this process and they know very well what they have to do,” Vazquez said in London. “I don’t think there’s a question from our side of disrupting any process, and they are doing very well.”
AMR, which filed for Chapter 11 protection on Nov. 29, is right to opt for restructuring under bankruptcy and will emerge stronger, the executive said.
“It’s a way of refurbishing,” Vazquez said. “It’s the right thing. We hope that they’ll get through the process and they’ll get what they want and I think that we’re going to get a very solid partner the day after the process finishes.”
AMR, which plans 13,000 job cuts, has said it wants to exit Chapter 11 in 2012 and expects to do so independently. That would mean dodging potential bids from Delta Air Lines Inc. (DAL) and US Airways Group Inc. (LCC) David Bonderman’s TPG Capital, which like AMR is based in Fort Worth, Texas, also has studied whether to invest, people familiar with the matter have said.
“We are laser focused on continuing to deliver for our customers and proceeding through the well-defined Chapter 11 process,” an AMR spokesman, Sean Collins, said in a statement in response to Vazquez’s comments. “It is clear that we have the ability to create significant value and strengthen our foundation for long-term success.”
IAG, formed last year from a merger of British Airways with Spain’s Iberia, is “very supportive” of AMR’s turnaround plan and “very optimistic” about the outcome, Vazquez said. He declined to say whether London-based IAG had been approached by TPG about forming a bid group.
AMR is a founding member of the Oneworld alliance that includes British Airways and Iberia. American and BA coordinate flights between London Heathrow and New York’s Kennedy airport, with trips so frequent at some times of day that AMR’s Horton has likened the venture to a trans-Atlantic shuttle service.
“I wouldn’t say buying a minority stake is going out of fashion but, it’s the kind of move that airlines are more reluctant to make with oil at $100 a barrel,” said Douglas McNeill, a transport analyst at Charles Stanley in London, who recommends buying IAG stock. “They have got to think very carefully about how you keep your cash.”
British Airways has invested in the U.S. before, having acquired a 21 percent stake in US Airways in 1993 before selling the holding in 1997 to pursue the alliance with AMR.
IAG is optimistic about prospects for its own bid for Deutsche Lufthansa AG (LHA)’s U.K.-based BMI unit, Vazquez said. European Union regulators will rule on the takeover by March 16, according to a filing on Feb. 13.
“We do believe that we have a good business case and it makes a lot of sense,” Vazquez said, adding that IAG doesn’t expect to have to offer concessions to regulators over the improved position the deal would deliver at Heathrow, given the dominance of rival carriers in their own hubs.
There is no sale process as yet for Portugal’s state-owned TAP SGPS SA, in which IAG has declared an interest, he said.
IAG fell as much as 2.8 pence today and was trading 2.4 percent lower at 169 pence as of 3 p.m. in London, paring gains this year to 15 percent and valuing the company at 3.14 billion pounds ($4.9 billion). AMR, which no longer trades on the stock exchange, was priced 1.8 percent lower at 53 cents.