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American Receives Merger Offer from US Airways, Approves Pilot Labor Deal

December 10, 2012 – US Airways has announced a formal merger offer to AMR Corp, the parent company of American Airlines. The merger values the two airlines together at over $8.5 billion.

Exact details of US Airways’ proposal emerged while pilots in American Airlines were voting to ratify a contract Friday. The vote ended a long labor dispute between the airline and pilots and stabilized the company as it attempts to emerge from its bankruptcy.

Under the proposed all stock merger that was proposed to AMR back in the middle of November at a meeting with the airline and its unsecured creditors, the creditors of AMR would be owners of 70% of the new airline, while US Airways shareholders would own the other 30%.

AMR and US Airways are currently negotiating towards the potential merger that US Airways hopes will happen prior to the end of January. The two merged airlines would have a new value equivalent to or similar to Delta Airlines, whose market capitalization is $8.5 billion.

AMR is also pursuing its plan to leave bankruptcy protection remaining an independent airline.

There are still differences in many significant issues that must be resolved prior to any deal taking place. They include how much each company should own of the combined carrier.

Creditors of AMR believe they should receive an equity stake worth more than the 70% proposed. They feel 80% is fairer. The two carriers are also in disagreement with the cost and revenue benefits the merger would give the airline, along with the challenges of integrating the labor force.

Tom Horton the CEO of AMR sent a note to workers at American Airline that said the company was determining whether the merger would create value for the owners and an outcome that would be positive for customers and the workforce.

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