By Soyoung Kim and Nick Brown
NEW YORK (Reuters) - US Airways Group
US Airways believes securing regulatory approval for its proposed deal would remove one key element of uncertainty from the picture, bolstering its case as AMR's creditors compare the merits of a merger with the carrier's standalone restructuring plan, the people said.
US Airways first confirmed its interest in merging with AMR in January.
A regulatory filing in the near future - as opposed to after reaching a deal - also reflects the fifth-largest U.S. carrier's desire to merge with AMR while the No. 3 U.S. airline is still in bankruptcy.
AMR's management has agreed, albeit reluctantly, to work with its creditors committee to develop consolidation scenarios, but has emphasized it prefers to exit bankruptcy as an independent entity before considering any merger.
Under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act, companies must not complete a merger until the U.S. Federal Trade Commission and Department of Justice determine that the transaction will not hurt competition.
Representatives for US Airways declined to comment. AMR said it did not have an immediate comment.
In addition to initiating the regulatory review process, US Airways also plans to conduct due diligence over the next few months before it can present the creditors committee with a formal proposal not subject to any conditions, the people said.
US Air plans to make the filings with the consent of AMR, the people said. While AMR has been reluctant to pursue a merger option aggressively, it has agreed to a general framework for exploring mergers, and that protocol may allow for the filing of HSR papers, the people said.
AMR's unsecured creditors committee, which helped craft the merger protocol, has not said exactly what the protocol includes, or where the committee stands on filing HSR paperwork in the near future. Jack Butler, the committee's lead attorney, declined to comment.
LABOR NEGOTIATIONS
The exact timing of a US Airways filing with antitrust regulators also depends in large part on the status of AMR's ongoing contract disputes with its three primary labor unions.
AMR sought bankruptcy protection from creditors in November and wants $1.25 billion in annual cost savings from labor. It has threatened to cancel collective bargaining agreements covering thousands of workers, including pilots and flight attendants, if new agreements are not struck soon.
AMR's creditors want the labor talks to conclude before they begin a detailed review of merger scenarios, because that will give a concrete sense of AMR's labor structure and provide a benchmark against which to measure the cost or savings of a merger, according to people familiar with the matter.
AMR and its unions are on the clock to try to reach new work deals by June 22. In the absence of consensual deals, Bankruptcy Judge Sean Lane has the right to grant an earlier request from AMR to scrap its current labor deals altogether and unilaterally implement new, interim labor terms.
AMR's labor unions believe the airline cannot remain competitive long-term without a merger, after four prominent rivals have already merged to form two mega-carriers at United Continental Holdings
In court papers filed last month, AMR said it was expanding the role of its adviser McKinsey LLC to include a merger analysis, such as "evaluating costs and risks of alternative restructurings" and "complying with all due diligence requests" from its creditors in connection with those alternatives.
(Reporting by Soyoung Kim and Nick Brown in New York, Editing by Paritosh Bansal and Matthew Lewis)
