US Airways considers acquiring American Airlines

AMR Corp.'s reorganization in bankruptcy has made American Airlines a possible acquisition target for US Airways Group and buyout firm TPG Capital, in what may be a final round of industry consolidation.

Tempe, Ariz.-based US Airways has hired advisers to assess a potential bid. TPG, led by David Bonderman, is in the early stages of an evaluation, people familiar with the matter said.

And Delta Air Lines is also using Blackstone Group to help study options for Fort Worth, Texas-based AMR, one person said.

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 Officer Doug Parker said in April that he sees "one big deal left" in the domestic industry, and that US Airways would be involved.

Any tie-up between US Airways and American could have a big impact on Charlotte Douglas International Airport. US Airways and its subsidiaries operate about 90 percent of the airport's daily flights, and Charlotte Douglas is the airline's busiest hub. Some three quarters of fliers at Charlotte Douglas are passengers switching flights before heading to their final destinations.

After the America West combination, US Airways was thwarted in 2007 in a hostile bid for Delta. A year later, Delta bought Northwest Airlines, and in 2010 former United Airlines parent UAL Corp. merged with Continental Airlines Inc. to form United Continental Holdings, the world's largest carrier.

American is now restructuring in Chapter 11 after sitting out those deals, posting annual losses since 2008 and falling to third place in the United States 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.

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.

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 just in any pieces of AMR shed while in Chapter 11 protection, Mann said in an interview.

The larger airline also may be trying to disrupt AMR's trek through bankruptcy and a possible combination with US Airways, said Jeff Straebler, an independent airline analyst based in Stamford, Conn.

"It's a cynical ploy to disrupt others, to confuse the process and make it more difficult," Straebler said in an interview. Delta butted heads with AMR in 2009 over an alliance with Japan Airlines Co. A combination of the two U.S. airlines probably couldn't win regulatory approval because it would have too much control in the domestic market, Straebler said.

TPG is "among the usual suspects" for possible airline investments, and may be assessing whether to get involved with AMR alone or with a partner, said Mann, the consultant.

The Fort Worth-based private-equity firm has had a close relationship in the past with US Airways, and Bonderman, 69, is now chairman of Ryanair Holdings Plc after holding that post at Continental in the 1990s.

Formerly known as Texas Pacific Group, TPG bought Continental out of bankruptcy in 1993 and invested in Midwest Air Group, America West, Tiger Airways and Ryanair. The firm backed a failed takeover bid for Australia's Qantas Airways in 2007 and lost an attempt to acquire US Airways in 2002.

TPG worked with American in 2009 on an offer to pump $1.1 billion into Japan Airlines to help avert bankruptcy and keep Delta from luring the carrier out of the Oneworld alliance. While Japan Airlines eventually restructured in bankruptcy, it stayed in American-led Oneworld. The investment never occurred.