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AMR, US Airways Said Near Merger Deal as Boards to Vote

The boards of American Airlines parent AMR Corp. and US Airways Group Inc. are prepared to vote on a merger on Feb. 11 as executives and advisers work on final terms this weekend, people familiar with the matter said.

The sides have agreed that AMR’s bankruptcy creditors would get 72 percent of the equity in the new carrier, with 28 percent for US Airways shareholders, said two of the people, who asked not to be identified because the talks are private. US Airways Chief Executive Officer Doug Parker will run the airline as AMR CEO Tom Horton becomes non-executive chairman, the person said.

Horton’s tenure in that post is still being negotiated, and will be limited to one or two years, one of the people said. AMR’s bankruptcy creditors committee is poised for a vote early next week on any merger accord, with an announcement as soon as Feb. 12, two people said.

Leadership and the division of the equity had been the final major issues in the discussions, people familiar with the talks have said. A tie-up between American, the third-largest U.S. airline, and No. 5 US Airways would create the world’s biggest carrier by passenger traffic.

American declined to comment on the deliberations, said Mike Trevino, a spokesman for the Fort Worth, Texas-based carrier. Kelly Sullivan, a US Airways spokeswoman who works for public-relations firm Joele Frank, Wilkinson Brimmer Katcher, also declined to comment.

Photographer: Andrew Harrer/Bloomberg

A US Airways Group Inc. aircraft, back, taxis after landing behind an aircraft of AMR Corp.'s American Airlines, at Reagan National Airport in Washington, D.C. Close

A US Airways Group Inc. aircraft, back, taxis after landing behind an aircraft of AMR... Read More

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Photographer: Andrew Harrer/Bloomberg

A US Airways Group Inc. aircraft, back, taxis after landing behind an aircraft of AMR Corp.'s American Airlines, at Reagan National Airport in Washington, D.C.

Jack Butler, an attorney for the creditors committee, didn’t respond to an e-mail or phone call seeking comment.

New Stock

Besides the split of equity between AMR creditors and US Airways investors, the proposed merger calls for existing AMR stockholders to get shares in the combined company, two of the people said. Details of that plan are still being negotiated, one person said.

AMR’s $460 million of 6.25 percent convertible notes due in October 2014 have soared more than fivefold since the company filed for bankruptcy on Nov. 29, 2011. They rose 2.1 percent to 97.5 cents on the dollar yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

US Airways fell 2.4 percent to $14.75 at yesterday’s close in New York. The shares have more than tripled since the day before AMR’s bankruptcy filing.

Reuters reported on Feb. 8 on the timing of the airlines’ board meetings and possible announcement.

Merger Benefits

A merged airline would realize at least $1.2 billion a year in savings and new revenue, according to Tempe, Arizona-based US Airways, which has said it would keep the American name in a merger and its Fort Worth headquarters. It began pursuing American in January 2012.

A group of AMR bondholders with about $1.5 billion in unsecured debt said last month it was backing a merger and pushing for an agreement by mid-February. The bondholders concluded after reviewing confidential data that a merger would provide more cost savings and other financial benefits than a stand-alone American, one person said.

US Airways’ pilots union said yesterday that members ratified interim contract terms if a merger occurs. The accord, approved with 75 percent of the vote, would bring US Airways’ pilot pay up to that at American and includes $1.6 billion in “economic improvements” over six years, said Gary Hummel, president of the US Airline Pilots Association.

The agreement was approved earlier by leaders at American’s Allied Pilots Association.

The case is in re AMR Corp., 11-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Jeffrey McCracken in New York at jmccracken3@bloomberg.net; Mary Schlangenstein in Dallas at maryc.s@bloomberg.net; David McLaughlin in New York at dmclaughlin9@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net; Jeffrey McCracken at jmccracken3@bloomberg.net

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