AMR Wants a British Airways Merger

AMR President Tom Horton Would Like to See an AA/BA Merger

AMR president Tom Horton stated recently that he hopes for an American Airlines merger with British Airways. While current laws don't allow for foreign ownership, it's just a matter of time before those rules are relaxed. Following are two articles regarding Mr. Horton's comments.

These comments raise some very interesting questions with regard to APFA's free endorsement for antitrust immunity: mainly, why the endorsement wasn't voted on by the APFA Board of Directors. By all accounts, it appears that this endorsement was the sole decision of Laura Glading. That said, it just baffles me that not one single Board Member has spoken out about having the memberships' voice omitted from this very important process by bypassing the Board's authority.

While APFA allowed the company to promote the union’s endorsement, the pilots' union adamantly opposed antitrust immunity for American, stating:

"APA believes that, if approved, this 'virtual merger' would have a dramatic impact on hard- working Americans. When companies cooperate and consolidate as a part of a global airline alliance, some jobs are bound to become redundant," Hill added. "Our government is spending billions of dollars on economic stimulus, but at the same time, advocating business practices and partnerships that outsource American jobs. It's time to put a stop to the bleeding."

Obviously, there's a lot going on that we don't know about. And it certainly appears that AMR is posturing American for some sort of marriage that will thin the employee ranks and once again grossly enrich the executives. When you consider that any potential merger is going to be based on concessionary contributions that were forcibly taken from flight attendants and given to American, it certainly appears to me that we could very well be building our own gallows.

American Airlines touts deal with British Airways
The Australian August 02, 2011

Thomas " Tom" Horton,
President of AMR Corp and American Airlines.
(Picture: Ahmed-bloomberg Munshi)

AMERICAN Airlines has raised the prospect of a merger with British Airways and Iberia in a move that would create the world's largest carrier.

Tom Horton, president of American Airlines, said he believed that limits on the foreign ownership of US carriers would be relaxed before he retires. He is 50.

International Airlines Group, which owns the BA and Iberia brands, was given regulatory approval to form a transatlantic alliance with AA last year.

The $US7 billion-a-year ($6.36bn) joint venture allows them to co-operate on schedules, sell tickets for each other's flights and share revenue from transatlantic operations.

That is as far as the co-operation extends, because the US restricts foreign ownership of domestic carriers to 25 per cent, although Washington is under pressure from the European Union to relax these rules.

Mr Horton said: "This alliance agreement with BA and IAG is effectively a synthetic merger. Over time -- I think in my working lifetime -- foreign ownership rules in the US will become more flexible. This alliance could form the basis of a cross-border merger between our airlines."

If AA and IAG were to combine, the resulting entity would have about 163 million passengers a year, overtaking United Airlines, with 162 million.

While a full merger remains a possibility, Mr Horton said that AA and IAG were working on plans to develop their existing alliance. They have already co-ordinated schedules so that AA and BA do not have flights leaving at the same time.

That has allowed them to create a shuttle service from New York to London, with flights leaving every 30 to 60 minutes during evenings.

The partners are also considering how to price their products to offer passengers as many options as possible. For example, BA's business class is widely regarded as superior to AA's and this creates the option to have a premium-priced business class and a cheaper option. Mr Horton said: "The alliance with BA is a huge deal and is really just now getting traction. We are looking at putting as much product on the shelves as we can. In BA's business class, the beds are fully flat and selling that at a different price to our business class is under discussion."

AA announced a $US41bn deal last week to buy 460 aircraft from Boeing and Airbus. The purchase could rise in value to $US80bn if AA exercises all its options. The deal is significant for Airbus as it is the first time that a big US carrier has used a European aircraft for its domestic fleet.

Mr Horton said: "If we had made the deal with just Airbus, there might have been some raised eyebrows, but we are a global company so it makes sense to source globally. Airbus wanted our order to validate their position in North America. Boeing doesn't want to lose us as a customer and that tension created very good competition for us."

THE Times


AUGUST 1, 2011, 11:50
American Airlines Hopes for a B.A. Merger

Could another big airline merger take off? The president of American Airlines' parent company hopes so.

Thomas W. Horton, president of the AMR Corporation, told The Times of London that he hoped to see a merger of his company with the International Airlines Group, which owns British Airways and Iberia.

There is just one issue right now: United States law prohibits foreign entities from owning more than 25 percent of an American airline. But Mr. Horton said he hoped that would change in his lifetime.

American Airlines and British Airways already have an alliance in which the two share revenue and coordinate flight schedules. Mr. Horton said that a formal merger of the two was an inevitable next step:

"This alliance agreement with B.A. and I.A.G. is effectively a synthetic merger. Over time -- I think in my working lifetime -- foreign ownership rules in the U.S. will become more flexible. This alliance could form the basis of a cross-border merger between our airlines."

The International Airlines Group is the far bigger company, with a market value of $7 billion compared with AMR's $1.36 billion.

Shares in AMR were down 3.3 percent, at $4.10, in late morning trading on Monday. Shares in the International Airlines Group were down 2.9 percent, at 230.5 pence.