AMR CEO to Brief Pilots as Union Urges Merger Readiness

American Airlines pilot union leaders remained steadfast in backing a merger with US Airways Group Inc. (LCC) after a meeting in which Chief Executive Officer Tom Horton outlined his plan for a stand-alone exit from bankruptcy.

Horton used about half the three-hour meeting today to explain the Fort Worth, Texas-based carrier’s restructuring plan and the rest answering questions from Allied Pilots Association leaders, said Tom Hoban, a union spokesman. The APA hopes to meet next week with US Airways CEO Doug Parker, Hoban said.

The union, which has supported a merger since April, this week joined confidential talks where American parent AMR Corp. (AAMRQ)’s independent plan is being evaluated against US Airways’ merger bid. The US Airline Pilots Association, representing US Airways flight crews, also is taking part.

Horton is “trying to promise greater growth and pilot jobs through organic growth, but nobody is willing to give this management group the benefit of the doubt based on past experience,” Hoban said.

The APA was guaranteed a 13.5 percent equity stake in a stand-alone AMR when pilots approved a cost-cutting contract with American on Dec. 7. The union also has a seat on the airline’s creditors committee, which has a voice in major decisions during bankruptcy. Unions for flight attendants and for ground crews and mechanics also hold seats on the committee.

“While I will refrain from speculation, we must be ready to move quickly toward a potential merger,” APA President Keith Wilson told members yesterday. He said some analysts are predicting that “a merger of the two carriers is all but inevitable.”

‘Next Steps’

Horton met with pilot leaders to “thank them for their leadership in reaching a new agreement, discuss the next steps in our evaluation of strategic alternatives and exchange information and thoughts about how to continue the positive momentum we are creating for our people and our customers,” Mike Trevino, an American spokesman, said in an e-mail.

Robert Mann, president of aviation consulting firm R.W. Mann & Co., said he didn’t expect Horton’s remarks to focus on a possible merger.

“It’s too premature,” he said. “There are too many moving parts.”

Inclusion of the pilot unions in talks overseen by the creditors committee may lead AMR to accept a merger offer by Christmas, Vicki Bryan, a Gimme Credit LLC bond analyst, said in a note yesterday. Horton has said he prefers for American to exit bankruptcy on its own and then consider mergers.

Bond Prices

Investor optimism about a merger has helped fuel a rally in AMR debt. The $460 million of 6.25 percent convertible notes due October 2014 rose closed today at 83.25 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The notes traded at 17.75 cents after AMR’s filing.

American is close to completing its reorganization plan, after securing agreements to cut $1.06 billion from annual labor costs, restructuring supplier contracts and shedding inefficient aircraft, Horton said this week. The carrier sought bankruptcy protection on Nov. 29, 2011.

“There were a lot of questions about how this plan resolves network disparities and revenue disparities with the competition,” Hoban said of the meeting with Horton. “It doesn’t give us critical mass anytime soon. You can’t expect the competition to stand by and do nothing.”

AMR creditors prefer an all-stock deal in a possible merger over one that would pay some claims in cash, Reuters reported yesterday, citing three unidentified people familiar with the matter. A decision on pursuing a merger or remaining independent is expected as soon as January, the people said.

The APA and unions for American’s flight attendants, mechanics and airport ground workers reached labor agreements with US Airways in April, contingent on a merger.

A combination of US Airways, the fifth-biggest U.S. carrier, and No. 3 American would pass United Continental Holdings Inc. as the world’s largest airline, based on passenger traffic.

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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