* US Air makes all-stock merger proposal in mid-Nov-sources
* Deal gives AMR creditors 70 pct in combined
carrier-sources
* AMR pilots ratify new labor contract on Friday
* Pilots’ union says continues to support US Air merger
By Soyoung Kim and Nick Brown
NEW YORK, Dec 7 (Reuters) – U.S. Airways Group Inc
has made a formal merger proposal to American Airlines parent
AMR Corp and its creditors that could value the
combined airline at around $8.5 billion, two people familiar
with the matter said on Friday.
Details of the merger proposal emerged as American Airlines
pilots voted to ratify a new union contract on Friday, ending a
years-long labor dispute and stabilizing the carrier as it tries
to emerge from bankruptcy.
Under an all-stock merger US Airways proposed in
mid-November at a meeting with AMR’s unsecured creditors
committee, AMR creditors would own 70 percent of the merged
company and US Airways shareholders 30 percent, the people said.
US Airways and AMR are currently negotiating toward a
potential merger agreement that the smaller rival hopes could
come as soon as January, one of the people added, asking not to
be named because the matter is not public.
The combined AMR and US Airways could have a value similar
to Delta Air Lines Inc, which has a market
capitalization of around $8.6 billion, the person said.
At the same time, AMR is still pursuing a plan to emerge
from bankruptcy proceedings as an independent airline, which
will be compared against the merits of a merger with US Airways,
the people said.
The companies have yet to narrow differences on a number of
significant issues before any deal could be agreed, including
how much of the combined carrier each side should own, the
people said.
AMR creditors think they should get an equity stake of
closer to 80 percent in a merged entity, rather than the 70
percent proposed by US Airways, the people said. AMR and US
Airways also disagree on potential cost and revenue benefits
from a merger as well as labor integration challenges, they
added.
Representatives of AMR, US Airways and the creditors
committee all declined to comment. The Wall Street Journal
reported details of US Airways’ proposal earlier on Friday.
NEW AMR PILOTS DEAL
The new labor contract, approved by nearly three-quarters of
the AMR pilots who voted, gives the Allied Pilots’ Association a
13.5 percent equity stake in AMR and offers what the union sees
as a path to “industry-standard” pay, union spokesman Dennis
Tajer told Reuters.
AMR filed for bankruptcy in November 2011, primarily due to
high labor costs. It said it needed to cut those costs by $1
billion a year. It achieved concessions from its ground workers
and flight attendants but remained at odds with pilots in bitter
labor talks that date to 2006.
AMR creditors had deemed labor peace a major priority,
saying labor uncertainty could make it difficult for creditors
and potential investors to assess the company’s post-bankruptcy
viability.
Friday’s vote could be seen as addressing that concern and
providing AMR a clearer path toward exiting Chapter 11.
The pilots had been working under strict labor terms imposed
unilaterally by AMR as part of its bankruptcy process while
negotiations dragged on. The pilots struck down a previous
contract offer in August, which at the time AMR had framed as
its “last, best” offer.
How the company will look when it exits bankruptcy is still
unclear. The pilots’ union says it has lost faith in AMR
management, led by Chief Executive Tom Horton, and strongly
supports a US Airways takeover.
“This ratified agreement should not in any way be viewed as
support for the American standalone plan or for this current
management team,” Tajer said. “This contract represents a bridge
to a merger with US Airways.”
At least one large group of bondholders, including JPMorgan
Chase & Co, Pentwater Capital Management and York
Capital Management, has expressed interest in providing an
equity infusion to fund AMR as a standalone entity.
The group was strengthened recently when other significant
stakeholders, including Marathon Asset Management, joined forces
with it, according to court papers filed by the group on
Thursday.
The case is In re AMR Corp et al, U.S. Bankruptcy Court,
Southern District of New York, No. 11-15463.
