It suggested deal terms under discussion much like those I wrote about 3 weeks ago, that US Airways was offering American’s creditors 70% of a combined airline while some of those creditors were using an 80% share as a negotiating position.
The Journal says we’re not near a deal.
The discussions among American, its creditors and US Airways are expected to continue into next year, and the dynamics of the negotiations haven’t changed much since mid-November, said people close to the process.
But it seems as though American’s management now believes that a deal is going to happen, watching the way rhetoric has changed. When it became clear that there was real momentum behind a US Airways merger, American management shifted from dismissing it to suggesting they thought of it first.
Management’s incentives are to stay in control of the company, or at least emerge from bankruptcy independent, at least those are the default positions which align most with their financial interests.
Now, though, they seem to be toning down the bluster about the bright future as an independent airline, and also about their myriad strategic options.
Instead, I thought the latter portion of a letter from American Chairman Tom Horton to employees today sharing announcing that pilots had agreed to a new contract, was revealing about Management’s near-acceptance of a future combined with US Airways:
As we bring our restructuring to a close, we are also completing our review of strategic alternatives. As you know, we have been evaluating the merits of a combination under a non-disclosure agreement with US Airways. While we are confident the new American will be very strong, we are evaluating whether such a combination could create value for our owners and a positive outcome for our people and our customers. We expect to have a conclusion on this soon.
Regardless of the outcome, I hope you share my optimism and can feel the recovery that’s started.
No mention of other possible strategic combinations besides US Airways. No bluster about how they don’t need a partner. And conclusions like, “Regardless of the outcome.”
I was skeptical early on about the wisdom in a US Airways-American merger, primarily from a US Airways shareholder value perspective — potential acquirers usually overpay, mergers rarely generate the sort of synergies that are predicted, and they’re more costly and disruptive than anticipated. And I didn’t really take another takeover attempt from Doug Parker seriously, after his failed two bids for United and his failed bid for Delta (he’ll buy anything larger than his own airline). Although I’ve resigned myself to expect a merger since early summer.
And now it certainly does seem like American’s management now expects a merger with US Airways as well.