February 19, 2013

Twist ends 'friendly' fight to run largest airline

Runner-up gets $19.9 million and a free ticket to ride.

SCOTT MAYEROWITZ The Associated Press

(Continued from page 2)

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US Airways CEO Doug Parker, right, and American Airlines CEO Tom Horton pose at DFW International Airport on Thursday in Grapevine, Texas.

The Associated Press

American was still in control of its bankruptcy but suddenly there was another option on the table. The unions told the court that jobs and wages didn’t need to be cut.

Wall Street analysts supported a merger, preferring Parker as the new CEO.

Horton publicaly told employees “nothing changes as a result of these announcements.” But privately he and other top American executives were rethinking a deal.

American had originally planned to emerge from bankruptcy and talk to several airlines, including US Airways. Horton became convinced that if he waited too long, a deal might not be available to him.

“He’s a great numbers guy,” said Thomas Roberts, a partner with Weil, Gotshal & Manges, the law firm that represented American.

In summer, Horton alerted his board that it was time to investigate a merger.

He reached out to Parker and arranged a breakfast July 19 in Washington. They spoke about sharing financial documents and Horton asked Parker to ratchet down the public push for a merger.
A deal and decision about who would run the new airline was still way off.

Three days later, Horton started to spin the idea of a merger as his own.

CONQUERORS OF THE SKIES

He told The Associated Press that the first conversation the two men had about a possible merger took place in September 2011, when Horton was just American’s president. They were at an exclusive gathering of top airline executives in Wyoming known as “conquistadores del cielo,” or the conquerors of the skies. During a barbecue lunch, Horton approached Parker, saying there could be value in a merger.

“I made that pitch. We nodded heads to one another,” Horton had said in July 2012.

On Aug. 31, the airline announced that nondisclosure agreements had been signed and they were considering a merger.

“It does not mean we are merging – it simply means we have agreed to work together to discuss and analyze a potential merger,” Parker told employees.

For the next three months, teams of lawyers, accountants and consultants started reviewing each airline’s books. There were so many people that eight separate conference rooms in Weil’s Dallas office were required.

US Airways executives came to Dallas to hammer out details.

By this point, American had secured new contracts from its unions, cut other costs and improved its revenue.

After months of negotiations, US Airways presented the merger to the creditors on Jan. 10. It proposed giving 70 percent of the new airline to them and American’s employees and the remaining 30 percent to US Airways shareholders. The creditors were sold. But Horton wasn’t.

His team eventually was able to shift another 2 percent ownership away from US Airways shareholders, ensuring that American’s pre-bankruptcy shareholders would see some money. The new airline would be valued at $11 billion.

The only sticking point was who would lead it.

Parker badly wanted to be the one in charge. Horton, who had spent a year fixing a broken American, believed he should be able to finish what he started.

A small group of advisers met with Horton and appealed to his principles. The airline needed a fresh start. Horton agreed and prepared to hand over the reins to Parker, his friend and rival for three decades.

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