Back on Nov. 29, 2011, American Airlines filed Chapter 11 bankruptcy protection to give them time to come up with a restructured financial plan to deal with the mounting costs of running an airline. They have until Dec. 28 of this year to submit a plan to the courts for approval if there isn’t a merger by then.
Last Friday, it was announced that American and US Airways have exchanged confidentiality agreements which gives the two companies the ability to share financial information in respect to a potential merger. USAir has been pushing for that over the last few months, going so far as establishing agreements with American’s employee unions supporting the tie-up.
USAir CEO Doug Parker wrote in a note to employees, “It does not mean we are merging – it simply means we have agreed to work together to discuss and analyze a potential merger.”
It also was revealed that British Airways’ parent company International Consolidated Airlines Group has also signed a confidentiality agreement with American. Since foreign corporations cannot by law own more than 25 percent of a U.S. airline, it is thought that a cash infusion is on the table. (Note, Hawaiian Airlines was able to get a temporary exemption for this provision coming out of one of its past bankruptcies.)
American emerging from bankruptcy alone is even more of a possibility now as a federal judge has cleared the way for the airline to negate its labor agreements. On top of that, when American filed for bankruptcy last November, it was sitting on about $6 billion in cash. Additionally, the company just reported a profit of $135 million in July, after $54 million in bankruptcy expenses on revenues of $2.33 billion. Granted, July is traditionally a very strong month for U.S. carriers, but this was achieved on existing labor contracts and high fuel costs. A profit is not a loss.
American currently serves approximately 250 cities in more than 40 countries with about 3,400 daily flights, whereas USAir is in 200 cities, 28 countries with about 3,200 daily flights. The theory is that American will provide the international flights, especially to South America, for USAir, which will be a good feeder from its domestic flights to American.
I am rooting for a stand-alone American coming out of bankruptcy as I am a “platinum” frequent flier and am concerned about my hard earned frequent flier miles. Also, I have been consistently treated well by the airline which is unique in these times of the industry.