In news that was developing throughout the day on Wednesday and made public by Reuters Wednesday night, it appears that creditors are suggesting to AMR to seriously consider merger options.
The creditors, which includes Banks, Bondholders, the Pension Benefit Guaranty Corp (A quasi-US Government Agency charged with insuring private sector pension plans) and even LABOR UNIONS are asking AMR (American Airlines’ Parent) to seriously consider exploring merger options after reviewing the airline’s initial plans to function as an entity after clearing bankruptcy.
Obviously, creditors want every possible opportunity to recover their investments when a company files for bankruptcy protection, so this should come as no surprise. A merger would likely be the best case scenario for creditors because they would then receive in some form or fashion, equity or debt in the acquiring company versus settling for pennies on the dollar, or LOSING EVERYTHING, as a result of the bankruptcy process.
According to the Reuters article, no one is commenting on this recent development, but the idea of a merger is gaining popularity with Creditors, and I AM POSITIVE we will hear more about this in the coming days and weeks.
Ever since AMR filed for bankruptcy protection, Delta and US Air have both been mentioned as potential suitors. Both airlines have gone as far as retaining advisors to solicit their opinions on the merits of acquiring American Airlines.
I have covered this topic in previous posts, and if you’d like to catch up on it, you can read about it here:
US Airways Getting Serious About Bidding For American…..
Delta and US Airways Among Potential Suitors For American…..
American Eagle Pilots And Flight Attendants Among First Potential Casualties….
Well, they’ve pretty much all been through bankruptcy.
I merger with BA is pretty much prohibited by U.S. laws. The laws have 2 rationales. One is that the U.S. airplane fleet can be commandeered by the gov’t in the event of war, and they want that U.S. owned. The other is that U.S. unions don’t want to compete with foreign labor and labor laws. If AA merged with BA, they could staff the international flights with British FAs
I think it would be really interesting to see AA merge with BA, though regulators may not like that.
Side note: I remember just at Christmas I was at a party and someone with EXP was trying to pick a fight with me about how much better AA was than UA. He had some points, but I find it amusing his favorite declared bAAnkruptcy a few weeks later.
I don’t think AMR’s restructuring proposal will prevail. AMR’s proposal is really just to continue as in the past, except jetisoning their pension obligations, laying off a lot of people and reducing pay, and gaining a lot of flexibility in work rules, outsourcing, etc.
The court has an obligation to seek the best deal for creditors, and it’s like that a more radical restructuring of AMR’s business will offer a better deal. Perhaps it’s a merger with USAir, while abandoning some of the less profitable operations. Perhaps it’s a sale of MIA operations (incl. South America) to UA or DL, and DFW & Europe to USAir.