The Telegraph
Monday , February 11 , 2013
Since 1st March, 1999
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No. 1 airline in the making

New York, Feb. 10 (Reuters): US Airways Group Inc and AMR Corp are nearing a $11-billion merger that would create the world’s largest airline and could announce a deal within a week, after resolving key differences on valuation and management structure, people familiar with the matter said.

Under the terms of a deal that are still being finalised, US Airways chief executive Doug Parker would become the CEO, while AMR’s Tom Horton would serve as non-executive chairman of the board until the spring of 2014, when the combined company holds its first annual meeting, sources said.

The deal would come more than 14 months after the parent of American Airlines — AMR Corp — filed for bankruptcy in November 2011, and would mark the last combination of legacy US carriers, following the Delta-Northwest and United-Continental mergers.

The all-stock merger is expected to value the combined carrier at between $10.5 billion and $11 billion, and would give AMR creditors 72 per cent of the ownership in the new company and US Airways shareholders the rest, they said.

The board of each airline is expected to meet in the middle of the coming week to vote on the proposed deal, and an announcement would likely come in the latter part of the week, sources said, asking not to be named because the matter is not public.

Negotiations are continuing and could still be delayed or fall apart, they cautioned.

The companies had initially tried to schedule board meetings for Monday, the day that AMR’s creditors committee planned to convene, and had aimed to announce a deal as soon as Tuesday, sources had said previously.

But AMR needed more time to finalise the details and the boards of the two airlines are now not expected to gather until around Wednesday.

The AMR creditors committee is still meeting on Monday in New York, as initially scheduled, and will continue discussions as the airlines finalise negotiations.

A lawyer for the creditors committee declined to comment. Representatives for AMR and US Airways refused to comment.

A combination with US Airways would create the world’s top airline by passenger traffic and help the two carriers better compete with rivals United Continental Holdings and Delta Air Lines Inc.

A near-$11 billion valuation of the combined American-US Airways compares to some $12.4-billion market capitalisation for Delta, and $8.7 billion for United Continental.

The planned equity split ratio between AMR creditors and US Airways shareholders implies a roughly $3 billion valuation for US Airways and some $7.5 billion to $8 billion valuation for AMR.

American Airlines

US Airways will follow through on its agreement with AMR labour unions last year that the combined carrier would be branded American Airlines and be based in Fort Worth, Texas, where AMR is based, sources said. US Airways has its headquarters in Tempe, Arizona.

As part of the merger, US Airways will also leave the Star Alliance to join the oneworld global airline alliance, of which American Airlines is an anchor member along with British Airways.