How US Airways Snagged Merger With American Airlines

"The confidentiality agreement said we had to stop talking to the media, to elected and civic officials, and, most importantly, we had to stop talking to American's labor unions," one official said.

"We were nervous about that. It could be the basis for putting us on the sideline and muzzling us -- and taking away our principal strategy. We did sign it. We were convinced it was really important to do this collaboratively."

In the fall, meetings continued between the creditors and the airlines about the economic benefits of a merger. US Airways estimated $1.4 billion in annual cost savings on $40 billion in revenue.

In November, US Airways offered a 70-30 equity split. American countered with 80-20, but hinted that it would consider 75-25.

In the agreement announced Feb. 14, American creditors will own 72 percent, and US Airways shareholders 28 percent in an all-stock transaction.

"A critical issue was the value of synergies," Miller said. "You were talking very significant numbers -- in the billions."

"As the Chapter 11 case progressed, American became stronger in terms of its operations," Miller said. "Mr. Horton was able to put into place new practices, a reduced infrastructure, and the airline responded very positively. That created more leverage on the American side, so that you ultimately got to the 72/28."

Horton wanted to be the CEO, as did Parker. Several members of the AMR board and creditors told Horton it wasn't going to happen. He is getting a nearly $20 million payout, and will serve as chairman until the first annual shareholder meeting in 2014.

"It was clear that Doug Parker started this process with the intention that if there was a consolidation, he would be the CEO," Miller said. "Tom Horton did not become CEO until a few days before the filing of Chapter 11. Doug has a record -- he took over America West. He acquired US Air. He did a very admirable job in keeping that airline economically viable."

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Contact staff writer Linda Loyd at 215-854-2831 or lloyd@phillynews.com.

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