DALLAS — With the worst recent financial record in the industry and poisonous labor relations, American Airlines wasn't a very attractive target for buyers.
That view is changing now that American and parent AMR Corp. are reorganizing under the bankruptcy process at the same time that most other airlines have returned to profitability. Mergers have reduced competition and helped drive up fares.
Suddenly, American Airlines is in play. US Airways Group Inc. has hired advisers to study AMR, according to a source familiar with the situation, and reports say that Delta Air Lines Inc. and buyout firm TPG Capital are also weighing bids. None of the companies would comment.
Industry insiders expect every major U.S. airline to take a look at AMR. Despite losing money every year since 2008 and missing out on the airline merger mania of the past few years, American is still the world's third-biggest carrier by passenger traffic. In bankruptcy, AMR could shed billions in debt, reduce its costs and still afford new planes — a trifecta that has caught the eye of rivals.
"Everybody has to be thinking about how to deal with AMR in two years," said Darryl Jenkins, a consultant who has worked for airlines on previous mergers. "They will be the most efficient carrier with a new fleet. They're going to be very desirable."
AMR's CEO has said the best course for American is to remain independent. But if another airline makes an offer that sounds good to creditors and the bankruptcy judge, then it could make more sense for AMR to simply sell itself.
Wolfe Trahan & Co. analyst Hunter Keay put the chances of AMR emerging from bankruptcy as a stand-alone airline at no better than 20 percent. He thinks that with Delta's access to borrowing and US Airway's connections to deep-pocketed TPG, there could even be a bidding war for AMR.
Several other airlines or other suitors could pursue AMR. Each combination would carry its own pros and cons:
— US Airways would get needed size. In the last few years, it failed in bids to buy or merge with Delta and United and now finds itself the nation's fifth-largest airline.
"The combination that makes the most sense is US Airways with American because they both need a bigger presence to appeal to business travelers," said Saranthi Syth, an analyst for Raymond James Financial Inc.
The US Airways hub in Philadelphia could help American expand service from the eastern U.S. to Europe and take pressure off American's trans-Atlantic bottleneck at New York's Kennedy Airport, said Bob McAdoo, an airline analyst for Avondale Partners.
Other analysts, however, said US Airways wouldn't offer much help in key markets such as Asia, where American is weaker than United and Delta. Its hubs, including Charlotte, N.C., and Phoenix, are in the kind of secondary cities from which American has been retreating. And such a deal would merge two airlines with already poor labor relations and pilots represented by different unions.
US Airways has not yet discussed a merger directly with American, but has hired investment adviser Jim Millstein and Barclays Capital to study how a deal might look, a source with knowledge of the situation said. This person requested anonymity because the status of the airline's examination of American has not been publicly disclosed.
— Delta would love to get American's routes in Latin America, but analysts think a combination of these two would be too big to win regulatory approval without major divestitures — both are already big in New York, for example. That has some experts thinking that Delta is only interested in cherry-picking parts of AMR if it is broken up.
— United Continental Holdings Inc., the world's biggest airline, would benefit by adding American's operations at London's Heathrow Airport. But a United bid would face the same — or even tougher — regulatory scrutiny than a Delta offer, and the company is still busy absorbing Continental. But few would be surprised if United is intrigued.
"If Delta is going to take a look at AMR, United will take a look at AMR," said Sterne Agee analyst Jeff Kauffman.
— TPG Capital would have one advantage: not being an airline, it would presumably face fewer regulatory hurdles. It has worked amicably with AMR and its new CEO. But it's not clear how a buyer that's not an airline will help boost AMR revenue and some analysts don't believe TPG will be a serious bidder in the end.
American's labor unions, despite a history of poor relations with management, are wary of a takeover. James C. Little, president of the Transport Workers Union, which represents American's mechanics and other ground workers, said he fears that a buyer would send aircraft-overhaul work overseas. American employees do most of that work in the U.S., while rival airlines have outsourced it.
For now, at least publicly, American Airlines is taking the position that it would prefer to remain independent.
New CEO Thomas Horton, in a letter to employees two weeks after the bankruptcy filing, said "opportunists" might try to buy the company while it's down but that "the best path for American is the one that leads us back to the top."
McAdoo, the Avondale analyst, thinks American will most likely remain independent because its labor unions and new CEO might prefer that to being bought by another airline that has its own unions and CEO.
"Here's a guy (Horton) who just got promoted to CEO," McAdoo said. "Is he going to want to give up that title, and pair up with a company where he isn't the CEO?"
Gordon Bethune, a former Continental Airlines CEO who evaluated offers for Delta during that airline's bankruptcy, said AMR greatly helped its chances of remaining independent by filing for Chapter 11 when it still had $4 billion in cash — enough to buy time.
"They don't need financing," Bethune said. "They don't need to go begging and get involved with somebody they don't want to get involved with."
Airlines Writer Joshua Freed in Minneapolis contributed to this report.
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