When US Airways first started trolling around the American Airlines bankruptcy, they hoped to snatch it up cheaply. Since American has gotten labor agreements done with its various workforces (and even has had its pilots union send out a new contract with recommendation or a vote of approval), has gotten various other costs down, and has killed off several unprofitable routes, the airline has gotten much more expensive as a potential acquisition target.
US Airways initially saw likely equity split as 50-50 if it merged with the larger airline. Now US Airways is looking at 70% of a combined company going to American’s creditors, while some creditors see 80% as their negotiating position.
Regardless, this suggests a deal has become much more likely. Certainly American is not adamantly opposed, although any deal likely benefits current management more upon emerging from bankruptcy rather than during the bankruptcy process (although presumably a deal could compensate for this). Back in July American leaked the story that they were actually the first ones to broach the subject of a US Airways merger
As I relayed in writing about a potential merger between the two airlines back in July, one of my favorite (apocryphal) stories is about Winston Churchill asking a British socialite if she’d sleep with him for a million pounds sterling? She agrees. Then he asks if she’d consider it for 50 pence? She was appalled, “What kind of woman do you think I am?” and his reply? “We’ve already established that madam, now we’re just haggling over price.”
While they may not ultimately come to an agreement, it does appear as though they’ve begun haggling over price.
Apparently with the operational disaster that United has been since combining its reservation system with Continental back in March, Jeff Smisek relishes the idea of an American-US Airways merger. Since such mergers are incredibly costly and hard to do. I would be genuinely shocked if the benefits of merger aren’t far less than projected by an overeager Doug Parker of US Airways, and if the costs associated with that merger aren’t well more than anticipated, too.
But it all comes down to price, if American’s creditors were to receive enough of a share in the combined entity, they’d be better off with the merger, even if current US Airways shareholders are not. And my hypothesis has long been that Parker is much more interested in running the largest airline he possibly can (as evidenced by his indiscriminate past attempts to combine with not just American but also United and Delta), rather than looking out for the best interests of his current shareholders.