The boards of directors of AMR Corp. and could meet mid-week to vote on a merger agreement between the two operators, although the meetings could be deferred if the companies fail to cement crucial details.
This latest development, confirmed by a source close to the talks, indicates that a merger could be announced by the end of this week, although the source cautions that a deal is not inevitable.
Last week the negotiations centered on two main issues—management control and ownership structure—and it seems the ownership structure is close to agreement. An initial offer from US Airways called for an equal split between AMR’s creditors and the Tempe, Ariz.-based airline’s shareholders, but this was revised to 70:30 in favor of AMR when the larger operator’s management countered with an 80:20 proposal.
The latest compromise indicates that the ownership split to be considered by the boards will call for AMR creditors to hold a 72% stake in the “New” with the remainder granted to US Airways’ shareholders.
Management structure has still to be determined, says the source. Numerous media reports, however, say this too has been decided, and that US Airways Chairman and CEO Doug Parker will lead the new entity as CEO while AMR Chairman and CEO Tom Horton will hold the post of executive chairman.
The merger negotiations are now focused on the duration of Horton’s tenure, according to the reports.
The two boards will be asked to consider a deal that retains AMR’s brand and Fort Worth headquarters as the core of the new entity and combines the current route networks essentially untouched.
US Airways, when first promoting this merger concept, said the combined networks would make New American the largest domestic operator on the East Coast and across the Mid-West, although conceded thatand would be more dominant on the West Coast.
US Airways’ merger proposal also retains AMR’s Oneworld membership and current international strategy.
The merger accord could still collapse, but it has broad support from organized labor and Wall Street. Union support extends to accords for contract terms should a merger occur, and late Feb. 9 US Airways’ pilots approved a memorandum of understanding (MOU) that was supported by 75% of the members that voted.
That deal will provide US Airways pilots with the same pay and benefits as pilots at AMR’s American Airlines mainline division. American’s pilots union already approved its own MOU.
“In the past, US Airways management has refused serious standalone negotiations with your union until seniority integration was resolved. Since management put that argument aside in the MOU negotiations, they can no longer use it as an excuse should the merger not occur,” Gary Hummel, president of the US Airline Pilots Association tells US Airways pilots in a union notice.
“The next step is finding out whether there will be a merger with American Airlines in bankruptcy. We expect that answer soon. If so, we will begin further negotiations with the parties to the MOU regarding the JCBA [joint collective bargaining agreement] and finally, seniority integration,” Hummel adds.
AMR’s unsecured creditors committee, which includes the company’s largest creditors and its three unions, is scheduled to meet tomorrow. The meeting was expected to include a vote on a finalized merger deal, but that is now considered unlikely.