Claremore Daily Progress

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July 11, 2012

American Airlines CEO says time to consider merger options

DALLAS — The head of American Airlines says it’s time to reach out to potential merger partners or investors, seven months into a bankruptcy restructuring.

CEO Thomas Horton said that American has improved its revenue, made progress on cost-cutting labor deals, and is well on its way to a successful restructuring.

“It now makes sense to carefully evaluate a range of strategic options, including potential mergers,” Horton said in a letter to employees. He said options including a merger “could make the new American even stronger.”

One potential partner, US Airways, has been pushing hard for a merger with American almost since the day that American and its parent, AMR Corp., filed for bankruptcy protection in November. But Horton has taken a slower approach, saying he preferred to wait until after AMR cut costs and emerged from bankruptcy protection.

Tuesday’s comments continued an evolution in AMR’s public statements about a possible merger. AMR told the bankruptcy judge in May that it would work with creditors to consider alternatives to Horton’s plan of emerging from bankruptcy as an independent company.

Horton’s letter followed a meeting where AMR’s management discussed multiple strategic options with its creditors.

US Airways has lined up support for a potential takeover from American’s three unions by promising them fewer job losses and smaller concessions than American has demanded.

AMR has continued to lose money while it’s been in bankruptcy, but lately the company has posted better revenue numbers than its main rivals. On Monday, AMR said revenue for each seat flown one mile — a key measure of airline performance — rose 8.6 percent in June after a 7.3 percent jump in May. The figures show American’s ability to raise fares while still filling seats. Analysts say it has benefited from cutting unprofitable flights.

In the past two months, American also won labor approval of cost-cutting contracts from thousands of ground workers, and pilots are voting now on a company contract proposal. American says it has the highest labor costs in the airline industry. Agreements with its unions would give American certainty about labor costs for several years.

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