Phoenix Bankruptcy Law News

Merger Talks Back On Between US Airways and American?

Last month, we reported that American Airlines CEO Tom Horton told the press that a merger with US Airways was probably not going to happen.

Now, it looks like a merger may be back on the table. Tempe-based US Airways is currently deciding whether to sign American's non-disclosure agreement, USA Today reports. The agreement would allow the two airlines to share sensitive information with one another and possibly work toward a merger.

American's parent company, AMR, filed for Chapter 11 bankruptcy in November. Since then, US Airways has been courting American over a possible merger between the two companies.

In a Chapter 11 bankruptcy, the debtor company must file a plan of reorganization describing how it plans to cut costs and become profitable again. In order to do so, companies often close off branches, renegotiate contracts, sell certain assets, or merge with another company.

Doug Parker, CEO of US Airways, insists that a merger is the best way for American to exit bankruptcy and get back on its feet. Last month, Horton announced that the merger was originally his idea and it wasn't going to happen, claiming that it would be more advantageous to US Airways than to American.

Lately, however, American seems to be softening its stance on the merger. The company has agreed to evaluate strategic alternatives and has sent out its non-disclosure agreements to potential partners. American's executives insist that if the company does decide to merge, it will do so after emerging from Chapter 11 bankruptcy.

US Airways as well as American's worker unions, on the other hand, want the merger to take place while the company is still in bankruptcy to better allow for the renegotiation of employment contracts and airplane leases. When asked recently about the possibility of a merger, US Airways CEO Doug Parker said, "We feel good about the chances."

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