US Airways, Delta eye American Airlines for possible acquisition

AMR Corp.'s reorganization in bankruptcy has made the American Airlines parent a possible acquisition target for US Airways Group Inc. and buyout firm TPG Capital.

US Airways hired Millstein & Co. and Barclays as advisors, a person familiar with the matter said Friday. TPG, led by David Bonderman, is in the early stages of an evaluation, and Delta Air Lines Inc. is using Blackstone Group to study options for AMR, two other people said.

Mergers have thinned the ranks of major U.S. full-service airlines to four, counting AMR, from seven in 2005. American is now restructuring in Chapter 11 after sitting out those deals, posting annual losses since 2008 and falling to third place in the U.S. by traffic while rivals bulked up.

“It’s the last plum out there,” said Ray Neidl, a Maxim Group analyst in New York. Neidl said he expected interest from TPG in tandem with US Airways because “TPG knows airlines, and you’d really want an equity partner coming in there with you.”


TPG has reached no decision about whether to take a stake in AMR or buy the company outright, said one of the people, who like the others asked not to be identified because the discussions are private.

US Airways, the fifth-largest U.S. airline, and Delta, No. 2 in the world, also haven’t made any decisions, people familiar with the matter said. Barclays is US Airways’ affinity credit card provider, and Millstein & Co. is a turnaround firm founded by Jim Millstein, former Treasury Department chief restructuring officer.

Spokesmen for American, US Airways, Delta and Blackstone all declined to comment. AMR has exclusive rights for a minimum of 120 days to as long as 18 months to submit a plan of reorganization, keeping any unwelcome suitor at bay.

“It will be the middle of the year before we see anything definitive come out on these things,” said Robert Mann, a former American executive who is now president of aviation consultant R.W. Mann & Co. in Port Washington, N.Y.


Delta shares fell 2 cents to $8.85 on Friday and US Airways dropped 8 cents to $5.97.

Delta may be moving early in AMR’s bankruptcy to keep the carrier from developing broad support among the creditors committee for its own plan, Hunter Keay, a Wolfe Trahan & Co. analyst, said in a report Friday. Delta was a year into its own bankruptcy when it fought off a hostile bid from US Airways, largely on opposition from Delta’s creditors.

“We remain skeptical of the viability of AMR as a post-bankruptcy airline,” said Keay, setting the odds of AMR’s remaining independent at 20% at most.

US Airways, created in a 2005 combination between its predecessor of the same name and America West Holdings Corp., is the airline cited most often by analysts as a potential American partner. Chief Executive Doug Parker said in April that he sees “one big deal left” in the domestic industry, and that US Airways would be involved.

Delta bought Northwest Airlines Corp. in 2008, a year after thwarting US Airways’ bid, and in 2010 former United Airlines parent UAL Corp. merged with Continental Airlines Inc. to form United Continental Holdings Inc., the world’s largest carrier.

American held the top spot by traffic before the Delta and United deals. Its assets include flight slots at London’s Heathrow Airport, Europe’s busiest, and the biggest operations in Latin America among U.S.-based airlines.

Delta may be interested only in pieces of AMR shed while in Chapter 11 protection, Mann said.

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