US Airways is cool if American Airlines just wants to take it slow

Source: Reuters
Author: John Crawley

US Airways Groupis in no rush to merge with bankrupt American Airlines and expects its rival to defer any review of a possible deal now that it has asked a judge for more time to formulate an exit plan on its own.

“That delay is fine by us – there is certainty no urgency to merge,” US Airways’ chief executive, Doug Parker, said in a note to employees on Wednesday.

“American is in bankruptcy and we need to respect the bankruptcy process, so we are doing just that,” Parker said.

US Airways has not made a formal bid, but would like to do so as part of American’s exit from Chapter 11 protection from creditors.

Parker said it seems “highly unlikely” that American will step out of bankruptcy before year’s end, and speculation about a US Airways-American tie-up will “continue for at least several more months.”

American had no immediate comment.

American’s parent, AMR Corp, and its creditors last week sought permission from a U.S. bankruptcy judge in New York to extend through December the period during which it can develop a reorganization plan without outside interference.

It currently has until the end of September to do so, but would like more time now that it is making progress in long-stalled contract negotiations with its big unions.

American management reached a tentative deal with pilots last week and is again talking with flight attendants and mechanics.

Progress with labor added stability to its court restructuring and reduced the near-term possibility of a third-party forcing alternatives on the company and the court.

The airline wants to cut labor costs by more than $1.2 billion annually, most of it from unions that made steep concessions to keep American out of bankruptcy nearly 10 years ago.

American says new cost cuts are needed now to help it compete more fully with rivals that reduced labor and other expenses in bankruptcy.

American plans to emerge as a stand-alone carrier but has agreed to explore consolidation. Its unions are pushing for a deal with US Airways to help bolster American’s domestic and overseas route network.

American’s chief rivals, United Airlinesand Delta Air Lines, both strengthened their operations through mergers after bankruptcy.

The current US Airways was formed through a merger with America West in 2005.

Editing by Leslie Adler