AMR Said to Seek Extension to File Bankruptcy Plan
American Airlines parent AMR Corp. (AAMRQ) will seek a three-month extension to its exclusive right to file bankruptcy reorganization plan as a pilots union vote pushes back the timetable for winning labor savings.
A request may be filed as soon as next week in U.S. Bankruptcy Court, said people familiar with the matter, who asked not to be identified because the talks are private. AMR said yesterday in a statement the move is being made jointly with its unsecured creditors committee, without details.
Extending the deadline to Dec. 27 from Sept. 28 would delay any formal merger proposal to creditors from US Airways Group Inc. (LCC), which is weighing a takeover. It also may mean missing Chief Executive Officer Tom Horton’s goal of a 2012 bankruptcy exit as he works to keep Fort Worth, Texas-based American independent while the airline restructures.
“More time does not mean we will slow down,” Missy Cousino, an airline spokeswoman, said in a separate e-mailed statement, without giving details of AMR’s plans. “We have one chance to get this restructuring right, so it’s important we approach this process in a methodical and disciplined manner.”
While pilots union leaders agreed this week to let members vote on $315 million in givebacks, balloting won’t end until Aug. 8. That timeline wasn’t part of AMR’s initial bid to secure concessions in bargaining or via a ruling from Bankruptcy Judge Sean Lane in New York to void existing contracts by yesterday.
The extension made sense for AMR because of the six weeks required for the pilots union to brief members on the tentative contract and then conduct a vote, one person said. The airline is set to resume talks on givebacks next week with flight attendants, mechanics and aircraft stock clerks.
Creditors secured an agreement in May for American, the third-largest U.S. airline, to vet consolidation options against its independent plan. That process was supposed to begin before the September expiration of the current exclusivity period, people familiar with the plan said at the time.
US Airways fell 0.5 percent to $13.33 at the close yesterday in New York, as rising oil prices damped U.S. airlines’ shares amid a rally for broader market indexes. Tempe, Arizona-based US Airways has more than doubled this year on speculation that an AMR bid would be successful.
Horton said this month that the struggle to obtain labor concessions was the biggest threat to his target to have AMR leave bankruptcy in 2012, after filing for court protection on Nov. 29. AMR’s plan calls for cutting $2 billion from annual spending, with $1.25 billion in savings from labor.
Lane has delayed until Aug. 15, after the pilots vote, a ruling on whether American can reject the contracts of flight attendants, mechanics and stock clerks if agreements aren’t reached before that deadline.
The mechanics and clerks are represented by the Transport Workers Union, which has had five other work groups, including baggage handlers and other airport ground employees, agree with American on concessions.
US Airways already has secured agreements with American’s unions that would take effect if the airlines combined. While the carrier hasn’t made a formal offer, it has been building support for its plan among AMR’s bondholders and other creditors.
US Airways can’t offer an alternative reorganization plan until the court ends AMR’s exclusivity rights. The creditors committee has the right to ask Lane to end that period.