US Airways' top executives said yestedya they are focused on showing AMR Corp.'s creditors that a merger would result in $1.2 billion in savings even as AMR's management pushes ahead with its own plan to emerge from bankruptcy on its own.
"We are eager to demonstrate to the creditors of AMR that our plan would result in higher returns than the AMR stand-alone strategy," US Airways CEO Doug Parker said on a conference call with Wall Street analysts discussing his airline's first-quarter earnings.
Parker briefed analysts on his company's potential bid to take over American Airlines' parent company just days after American's three major unions voiced support for the rival. AMR filed for bankruptcy in November.
After working with advisers for three months, Parker said, US Airways concluded that there is "an opportunity to do something that we think is in the best interest of both companies' owners, or creditors, in the case of AMR."
Fort Worth-based AMR's top managers made it clear to US Airways that they are focusing on a plan to emerge from bankruptcy independently.
So US Airways has instead worked to sway creditors and employees, Parker said. On Friday, American's three largest unions -- representing pilots, flight attendants, and mechanics and ground crew workers -- announced that they would back a takeover bid by US Airways.
"Our goal has been to first get the support of the unions, then the full unsecured creditors committee, after which point we would look forward to a cooperative and consensual process with AMR's board and management team," Parker said.
In New York, as a hearing continued in U.S. Bankruptcy Court over American's motion to void its union contracts, an investment banker for the airline said it will probably consider a merger later in the process.
David Resnick, chairman of Global Financing Advisory at Rothschild Inc., was asked whether American would even consider a merger before exiting bankruptcy. He said it's likely because American is obliged to get the highest value for stakeholders.
"Stakeholders would want to ensure they are getting the highest possible value, so they would want the debtor to look at alternatives to a stand-alone plan," he said.
Without going into details of its agreement with American's unions, US Airways President Scott Kirby said on the conference call that employees should benefit from some of the merger's savings.
"Since the new American will have revenue-generating capabilities like United and Delta, it should also have labor costs like United and Delta," Kirby said. "The result is better contracts than American can pay independently and much better than they are attempting to impose on their employees through the 1113 process."
Kirby said US Airways conservatively estimates that it can save $1.2 billion if the airlines merge.
"The impact to labor and jobs is far less Draconian because some of the synergies have been appropriately shared with labor through better pay and fewer job cuts," Kirby said.
Tempe, Ariz.-based US Airways posted a $48 million profit for the first quarter thanks primarily to a transaction with Delta Air Lines.
US Airways gained $73 million by swapping gates with Delta at New York's LaGuardia Airport and Washington, D.C.'s Reagan National Airport.
Excluding the swap and one-time accounting items, US Airways reported a $22 million loss, or 13 cents per share. Wall Street analysts had expected the company to lose 25 cents per share, excluding special charges.
Revenue rose 10 percent to $3.3 billion as the airline increased its capacity by 3 percent.
Delta said it recorded a $124 million profit for the quarter as its revenue rose 8.6 percent to $8.41 billion. Excluding one-time items such as a $151 million fuel hedge gain, the Atlanta-based airline had a $39 million operating loss, wider than Wall Street analysts had expected.
Delta's fuel bill for the quarter was $2.2 billion, an increase of about 3 percent from last year, becoming its biggest expense ahead of labor. Delta trimmed capacity by 3.2 percent, which helped lower costs and increase revenue for each seat flown a mile by 14 percent.
This report includes material from Bloomberg News.
Andrea Ahles, 817-390-7631
Twitter: @Sky_Talk
Copyright 2012 - Fort Worth Star-Telegram, Texas
