AMR, creditors will explore merger option: source

(Reuters) - AMR Corp, the bankrupt parent of American Airlines, will consider merger options with rivals, including US Airways Group Inc, a deal AMR has long resisted, a source familiar with the matter said on Friday.

The airline has reached an agreement with its creditors to explore whether a merger would create more value than its plan to exit bankruptcy as a stand-alone carrier, the source told Reuters.

"AMR has agreed to compare, to investigate whether an alternative transaction with US Airways or anyone else makes sense versus a standalone plan," the source said, adding that AMR has not committed to pursuing a deal with US Airways or anyone else.

The source declined to be named because the matter is not public.

Spokesmen for AMR and US Airways did not immediately respond to requests for comment.

AMR filed for bankruptcy in November, citing a need to slash uncompetitive costs. The company has said it intends to cut its overall costs by $2 billion a year. More than half of the savings will come from labor costs.

AMR has long said it intends to emerge from Chapter 11 as a stand-alone carrier, shrugging off US Airways' interest in a deal. But the airline has not ruled out taking a merger partner after it exits Chapter 11.

Chief Executive Tom Horton has said the airline is focused solely on its bankruptcy for now, calling those who would attempt to acquire the company in bankruptcy "opportunists."

US Airways has been courting AMR's creditors, including labor unions unhappy with AMR's proposed cost cuts.

American's three labor unions have said a merger with US Airways would create a stronger airline and save more jobs than AMR's stand-alone plan. US Airways has not made a bid for AMR, which has a court-granted right to reorganize without intrusion by outsiders. That right extends to September.

Unions representing pilots and flight attendants at American Airlines on Friday again denounced the company's stand-alone business plan, calling on the managers to explore merger options with rival US Airways.

The workers staged rallies in New York and Fort Worth, Texas, where AMR is based, to declare "no confidence" in the company's ability to produce a viable business plan.

The protests came as the two sides prepared to spar in court on Monday over AMR's request to void the labor contracts it has with the unions. The airline and its unions are on a two-week hiatus from their court battle over that request.

"US Airways management's plans for merging the two carriers call for preserving and enhancing the American Airlines brand, retaining our Fort Worth home and saving thousands of jobs that will be eliminated under AMR management's stand-alone plan," David Bates, president of the Allied Pilots Association, said in a statement.

The airline, which has about 74,000 full-time and part-time workers, has said it must cut 13,000 union jobs.

The carrier won steep concessions from labor in 2003 as it dodged bankruptcy at the time. AMR had been locked in fruitless labor talks with unions for years before filing for bankruptcy.

(Reporting by Soyoung Kim and Kyle Peterson; Editing by Gary Hill)