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Puckinflight

An all things aviation blog

So yesterday one news agency reported that AA and US were getting close to inking their merger deal. Then every aviation blogger and news agency that cared repeated the same information. For the most part they got it all wrong. Now Doug Parker and his merry gang of US executives have been searching for a merger partner for years. They tried to buy Delta in bankruptcy, United started talks with them when Continental balked at merging (The CO board overrode then CEO Larry Kellner’s refusal to merge, ousted him, installed the current CEO Jeff Smisek and inked the merger deal with United), and now they are working on American.

Right now we know that American and US Airways are doing the due diligence, and these talks have been going since 2010. While the preliminaries of a deal are in place, both board of directors have to approve the deal. Also in the case of American Airlines the creditors committee has to approve the deal. Neither board is scheduled to meet soon as far everyone knows and getting a deal through the creditors committee is no sure thing. AA has made repeated statements on how it wants to remain a stand alone airline.

 

It’s easy to see why AA wants to remain independent. Doug Parker is a controversial figure in American aviation. Doug Parker has to be one of the most capable airline CEO’s in the business, coming in second to Gordon Bethune. However, the decisions he has made have been universally unpopular with both staff and customers. But they are popular with the shareholders. By virtue of that fact, it is clear that if the companies merge Doug with take over as CEO of the combined airline. That is not something AA executives and staff want as cuts will be coming.

So here are the courses of action possible.

If the AA board rejects the merger, then US airways can pitch the merger to the creditors committee themselves. US bought a nominal amount of AA debt to gain access to the committee, though they do not have enough debt for a seat at the table, they do have access. If the committee green lights the US buy out plan for AA then AA board gets de facto fired by the bankruptcy judge and AA ceases to exist.

If the AA executive suite rejects the merger and the board green lights it, expect to see what happened in the CO/UA merger. The CEO will get fired followed by a joint merger announcement. Then as long as it passes the creditor committee then it goes through.

With either option the creditor committee will have the final say. But until news happens, everyone calm down ok?

 

Happy travels

Colpuck.

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