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Why Is American Stalling On A Merger With US Airways?

Filed by KOSU News in Business.
July 18, 2012

Could it be that American Airlines CEO Tom Horton is resisting the warm embrace of US Airways CEO Doug Parker over a little thing like money?

During a National Press Club luncheon Wednesday, Parker didn’t exactly shoot down suggestions that American’s leadership has been stalling on a merger of the two carriers because of the potential for personal gain.

Asked whether Horton is focused on the payday he would get if American were to remain independent a while longer, Parker hesitated. For more than 8 seconds, his answer was: “Um. The. Uh. Let’s see.”

Then Parker plunged ahead. “I find it noteworthy that the only opposition that seems to exist to this merger is the senior management at American,” he said. “I don’t want to guess why.”

Parker’s halting response came when he was asked about reports questioning Horton’s initial negative reaction to a merger that Wall Street analysts generally agree is both desirable and inevitable. US Airways, the country’s fourth-largest airline, wants to merge with American, the third largest airline, to better compete with the top two giants, United and Delta.

But Horton has argued that American should emerge from its bankruptcy filing as a stand alone company. Recently, the airline said it would study various merger possibilities.

A recent “Dealbook” column in The New York Times said American executives may be resisting a speedy, slam-dunk deal with US Airways for a good reason: “a giant payday. Mr. Horton and his management team stand to receive somewhere between $300 million and $600 million if he can make it through bankruptcy court without merging first with a rival like US Airways.”

US Airways says its proposal is the right fit, and would work well only under the protection of a bankruptcy court.

“US Airways is here now and ready to get this done, and there is no guarantee that will be the case forever,” Parker said.

At the Press Club’s head table, Parker invited as his guests the top officials from unions representing pilots, ground workers and flight attendants at American. Those unions support the merger idea.

Separately on Wednesday, American’s parent company, AMR Corp. reported a second-quarter loss of $241 million, an improvement over last year’s loss of $286 million in the same period. Most of this year’s losses were tied to bankruptcy costs. Revenues set a quarterly record at $6.46 billion.

In a letter to employees Wednesday, Horton said the company was “well on our way toward building the new American.”

AMR filed for bankruptcy in November, following losses of about $10 billion over a decade. [Copyright 2012 National Public Radio]

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