American Airlines Files Reorganization Plan, Merger with US First Mentioned in Fall 2011

An American 777-300ER in Dallas

As it prepares to exit bankruptcy, American Airlines’ parent AMR Corp. filed a 561-page registration statement with the U.S. Securities and Exchange Commission on Monday.    The airline is also set to file its reorganization plan with the U.S. Bankruptcy Court that is overseeing its case.  The documents include five-year financial projections and how it will implement the merger.

The SEC filing revealed that AMR executives had briefly discussed a potential merger with US Airways prior to filing for bankruptcy.  While US Airways began to indicate interest in such a deal, American executives said that any merger would have to occur after it had emerged from bankruptcy protection so that the company could remain “completely focused” on the restructuring.

The company will have 60 days to gain creditor approval for the plan.  Since the bankruptcy court judge, Sean H. Lane, already signaled his approval of the planned merger, which will take the company out of bankruptcy, on March 27, and the airline’s major creditors were closely involved in negotiations that lead to the merger announcement in February, it is likely to gain quick approval.  Judge Lane did at the time balk at the $19.9 million severance package for Tom Horton, American’s CEO.

American sought bankruptcy protection on November 29, 2011 with a goal of lowering its operating and labor costs.

The combined company, which will take the name American Airlines Group, will be the world’s largest airline based on the number of passenger miles flown.  It will operate more than 6,700 flights each day to 336 destinations in 56 countries and will have roughly 100,00 employees.

After the deal closes, AMR’s creditors and unions will own 72% of the new company. US Airways shareholders will get the remaining 28%.

The only possible roadblock is the possibility that the U.S. Department of Justice might impose conditions on the deal, such as requiring the combined entity to give up takeoff and landing slots at airports where it is the dominant carrier, such as at Reagan National Airport in Washington or in New York.

“With these materials filed, we are one step closer to completing the merger, which we expect to occur in the third quarter of this year,” US Airways officials told its employees in a company-wide memo.

(Photo: Accura Media Group)