IAG Mulling Stake In American Airlines

(RTTNews) - International Consolidated Airlines Group S.A. (IAG.L, BAY.L, BAIRY.PK) or IAG, has signed a non-disclosure agreement with AMR Corp.'s (AAMRQ) subsidiary American Airlines in order to fulfill its long cherished interest of acquiring a stake in the U.S. carrier, according to media reports on Monday. Under the agreement, IAG will gain access to American's financial books to evaluate a potential stake acquisition.

IAG, the owner of British Airways and Iberia, and American Airlines are members of the oneworld global alliance, and both already have an ongoing revenue sharing deal on transatlantic routes.

However, IAG has not revealed the size of the stake and it is not clear if IAG is interested in taking a stake in a restructured American Airlines or the merged entity, which would rival United Continental Holdings, Inc. (UAL). Meanwhile, the U.S. law would prevent IAG from taking more than a 25 percent stake in the carrier.

This move comes a few days after AMR signed a non-disclosure agreement with smaller rival US Airways Group, Inc. (LCC) in order to evaluate a potential merger of American Airlines and US Airways. That marked a shift in thinking by AMR, which had shrugged off takeover interest expressed by smaller rival US Airways, and insisted on a stand-alone restructuring plan.

Meanwhile, reports in late March indicated that IAG was considering acquiring a stake in American Airlines to stop the carrier from being bought by a rival.

American Airlines' parent AMR and some of its subsidiaries, including American Airlines and American Eagle, had filed for Chapter 11 bankruptcy protection in November 2011. AMR has until late December to present a restructuring plan to exit bankruptcy protection.

Meanwhile, the efforts of US Airways to arrive at a deal with AMR could prolong the bankruptcy proceedings for American Airlines as regulators may ask for an antitrust review as well. This could in turn hurt creditors' recoveries if the value of the carrier was hit further by its longer stay in the bankruptcy court.

US Airways already has the support of American's unions and is currently seeking backing from major creditors. Some members of the unsecured creditors committee are said to have given a positive response to US Airways' plan for the combined airline, targeting to complete the combination before AMR exits bankruptcy.

US Airways had begun talks in late March with some creditors and advisers of bankrupt American Airlines regarding a merger of the carriers. US Airways said then that a merger of the two could translate to over $1.5 billion in revenue and cost savings. Three main unions of American are part of the creditors' committee.

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