US Airways CEO Argues Benefits of American Airlines Merger to Shareholders
By James Shillinglaw
June 17, 2012 9:36 PM
Doug Parker, chairman and CEO of US Airways Group, last week tried to solidify shareholder support for his proposed merger with American Airlines, which is currently operating under bankruptcy protection. Parker asserted that the financial community already likes the idea and the two airlines would make a strong combination.
Speaking at US Airways’ annual shareholder meeting in New York, Parker said a merger with American would create "an airline that can compete with anyone, that can be the best airline in the world." US Airways disclosed its interest in merging with American in January. American's parent, AMR Corp filed for bankruptcy protection in November of last year.
Parker said an American-US Airways merger would make the combined carrier much stronger in areas where both carriers individually are currently weak. He added that US Airways' stock price, which has more than doubled this year, has been aided by financial community support for the proposed merger. He also pointed out that American had lost marketshare in certain areas of the United States "because they've sat out consolidation." He said mergers have helped airlines become more profitable in recent years.
Although American parent AMR has said would like to exit Chapter 11 as a standalone carrier, it did agree with its unsecured creditors committee last month to explore various merger scenarios in bankruptcy. Parker said US Airways understands that process is due to start after a ruling, expected by June 22, in a court proceeding currently under way in which American is seeking permission to throw out collective bargaining agreements.
Since US Airways first expressed interest in acquiring American, its plan has won the backing of three unions that represent American's ramp workers, pilots and flight attendants.
For its part, American points to recent progress in its reorganization and improved results. For example, passenger revenue per available seat mile rose 7.3 percent at American in May. In addition, Thomas Lawton, a visiting professor at Dartmouth’s Tuck School of Business, wrote a report saying American was well positioned to emerge from bankruptcy protection.
“The company bullishly predicts exiting from Chapter 11 in late 2012,” Lawton wrote. “Revenue has improved across all regions of the business. Domestic unit revenue was up almost 10 percent and Latin American revenue has increased by close to 11 percent in the first quarter of 2012 compared to the same period the prior year. American Airlines is performing better than other airlines that have filed for protection and has done so without slashing capacity. In short, American is doing the right things to return to business efficiency and customer effectiveness.”