Omar Villafranca and Kevin Cokely, NBC 5 News
Both Reuters and The Wall Street Journal are reporting that US Airways has made a formal merger proposal to AMR Corp.
Two reports have the aviation business buzzing about a formal merger proposal between US Airways and Fort Worth-based American Airlines.
Reuters and The Wall Street Journal both reported on the formal merger proposal. The proposal would value the new airline at more than $8 billion, with American credit holders owning 70 percent and US Airways shareholders owning 30 percent.
A spokesman for American Airlines said the company could not comment, citing a non-disclosure agreement.
Denny Kelly, an aviation expert and consultant, suggested that it wasn’t in American’s best interest to merge while in bankruptcy.
“American's best interests would be served to come out of bankruptcy, stand alone, be strong and be able to pick who they want to merge with if they want to merge,” Kelly said. “It's not in their best interest to merge when they're in bankruptcy because the perception is going to be that they're the weaker of the two since they're in bankruptcy.”
But Mark Ralston, a Dallas bankruptcy attorney disagreed, saying that American had a better legal position to merge while in bankruptcy. Ralston also said the proposal could just be a first offer and that American could offer a counter proposal with new numbers if it wanted.
American Airlines is closer to exiting from bankruptcy after its pilots approved a new labor contract Friday.
The Allied Pilots Association announced Friday that 74 percent of its members voted to ratify a new contract three months after they rejected a similar offer. Union leaders lobbied hard for passage the second time around. They favor a merger and believe that Friday's vote made a deal more likely.
"This contract represents a bridge to a merger with US Airways," said pilots' union spokesman Dennis Tajer. He said the vote "should not in any way be viewed as support for the American stand-alone plan or for this current management team."
With the pilots' deal, American has negotiated new, lower-cost contracts with all its unions since filing for bankruptcy protection just more than a year ago.