Maine news, sports, weather from Portland Press Herald / Maine Sunday Telegram, Portland, Maine

July 25, 2012

American Airlines CEO bashes US Airways; calls it desperate

The Associated Press

BOSTON — American Airlines CEO Tom Horton wants to set the record straight: It was he who approached US Airways CEO Doug Parker about the possibility of combining the two airlines, not the other way around.

Horton has never made that fact public before, but he's doing so now to send a message. If American is going to combine with US Airways or any other airline, the decision will be Horton's.

Since American's parent AMR Corp. filed for bankruptcy last November, Parker has been aggressively promoting a combination of the two airlines as the only way to save American. Parker has championed the idea on Wall Street, in the media and lined up support from the three labor unions at American. Investors have treated the possibility as a near inevitability, pushing up shares of US Airways Group Inc. 150 percent over the past seven months.

But in an interview with The Associated Press Horton was emphatic that there's more financial pressure on US Airways than American to find a partner. And he cited Parker's repeated overtures as a sign of desperation.

Perhaps the biggest problem on the horizon for US Airways is that its labor costs are going to rise, Horton said. Unions there haven't had a new contract in more than seven years. Horton said Parker is in "a race against the clock" to somehow increase revenue before he has to pay higher salaries in a new contract. A combination with American would help do that because American flies many more international routes, which bring in higher fares per passenger.

"It would be tremendously unwise for us to pursue a combination with a company because they are seeking to solve their own problems," Horton said.

Elise Eberwein, US Airways executive vice president for communications, said in response: "Nothing could be further from the truth. We've got a very sustainable model."

On Wednesday, the Tempe, Ariz. airline reported that revenue rose 7.2 percent in the second quarter and it made $306 million in profit, its best quarter ever.

Horton and Parker started their airline careers together in the 1980s, sitting practically side-by-side in cubicles at American Airlines' headquarters in Fort Worth, Texas. And they've remained friends.

The first conversation the two had about a possible merger took place in September, when Horton was still just American's president. Horton wouldn't say where they met but two people familiar with the situation said it was at the A Bar A Ranch, a 100,000-acre retreat in southern Wyoming during an exclusive gathering of top airline executives informally known as "conquistadores del cielo," or the conquerors of the skies. The people spoke on the condition of anonymity because the executive meeting is supposed to be a secret. The discussion between Horton and Parker occurred during a barbeque lunch along the banks of the North Platte River.

"I said to Doug, standing by the river, I think there could be the potential for value creation in a combination," Horton recalled. "I made that pitch. We nodded heads to one another."

Two months later, on Nov. 29, American's parent company, AMR Corp., filed for Chapter 11 bankruptcy protection. On the same day, former CEO Gerard Arpey stepped down and American named Horton as its new CEO.

Within weeks, Parker started to publicly call for a merger. But Horton remained steadfast: his airline would emerge from bankruptcy independent.

(Continued on page 2)

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