In path to American's merger,
One CEO had to leave


Tom Horton and Doug Parker both wanted to run American Airlines; how 1 ultimately relented
By Scott Mayerowitz, AP Airlines Writer | Associated Press – 1 hour 0 minutes ago.. .

It wasn’t an easy fight, but by the end of this year the 51-year-old Parker will be at the helm of a combined American and US Airways, the world’s largest airline. Horton, also 51, will step aside, getting $19.9 million in cash and stock as well as a lifetime of free first class flights, excluding taxes, on American for himself and his wife. Horton will serve as chairman for about a year before stepping down. (AP Photo/LM Otero, File)

NEW YORK (AP) -- The 14-month battle for control of American Airlines came down to two men who got their start there.

When the airline filed for bankruptcy in November 2011, Tom Horton was simultaneously elevated to CEO. But from the minute he reached the top, a number of forces started converging against him. The airline's unions didn't trust him. Those owed money by American questioned his plans.

The strongest opposition, however, soon came from his old friend Doug Parker. The two had worked side-by-side as financial analysts at American's Fort Worth, Texas, headquarters in the 1980s, until Parker moved on to other airlines, eventually becoming CEO of rival US Airways.

Parker had spent the last five years looking to merge with another airline. With American in bankruptcy, he sprang into action.

By the end of the year, the 51-year-old Parker will be at the helm of a combined American and US Airways — the world's largest airline. Horton, also 51, will serve as chairman for about a year and then depart the company he worked at for nearly a quarter century. For his efforts, he will receive $19.9 million in cash and stock as well as a lifetime of free first-class tickets on American for himself and his wife.

Parker and Horton have spent most of their lives in the airline business. But that's about where the similarities end.

Horton is a buttoned-up guy who loves long runs and starts each morning with a bowl of oatmeal and freshly cut Texas peaches. Parker, on the other hand, is easily the life of a party. He commands a room and fills his conversations with energy.

There was never going to be room for both at the top of American.

This is the story of how two old friends and former protégés of legendary American Airlines CEO Robert Crandall found themselves on opposite ends of what may be the last great airline merger in the U.S. Horton and Parker declined to comment but interviews with executives, union officials, lawyers and others connected to the deal — agreed to late Wednesday — outline how it was filled with tactical negotiations, clandestine meetings and gut-wrenching decisions. The prize: A chance to bring American back to its glory days.

Horton initially was safe in his job.

When American's parent, AMR Corp., filed for bankruptcy five days after Thanksgiving in 2011, it did so from a unique position. It had lost more than $12 billion during the past decade but still had $4.1 billion in cash. That meant it didn't need to borrow money to keep operating, and that gave Horton more autonomy and control over the company's fate.

His first task was to get the airline to stop bleeding money. Aircraft leases and vendor agreements were quickly changed. The airline reviewed every part of its revenue and moved to cut labor expenses.

This was not the time to work out a merger, although Wall Street analysts were already speculating.
The official line became: American was open to a merger, but only after it emerged from bankruptcy protection. Horton's preference was for American to remain an independent airline. The unspoken reason was that American wasn't worth as much as executives hoped it would be later.

And that's exactly why Parker wanted to move quickly, while he still had the upper hand and could pay significantly less. US Airways hadn't signed new contracts with its unions in years. That was benefiting shareholders. Eventually, Parker would need to pay out large raises which would weaken his position in any merger. Time was of the essence.

In January 2012, Parker decided to shop around his idea for a merger on Wall Street and in Washington.

He wasn't the only one floating the idea of a merger.

Horton was also feeling pressure from American's creditors, who were owed $29.6 billion. Bankruptcy law gives a company 18 months to exclusively present its own plan to return to profitability. The creditors and judge have to sign off on the plan but typically sit on the sidelines.
American's creditors took a much more active role.

It started with their choice of lawyers. After American filed for bankruptcy protection, the creditors interviewed several law firms in a basement ballroom of the Sheraton New York Times Square Hotel.
"You have to decide whether you are going to be proactive or reactive," Jack Butler, of Skadden Arps Slate Meagher & Flom, told the committee.

The creditors chose proactive, and Butler's team was hired.

It probably helped that Butler had represented US Airways in its 2002 bankruptcy and Skadden's head of restructuring, Jay M. Goffman, had worked closely with Parker after 9/11, when Parker ran America West. Skadden was also America West's counsel when it later merged with US Airways.
"We said: You should pick a firm that does a lot of deals," Goffman recalled.

The full press started in February 2012, when the committee's lawyers invited Horton and two of his top lieutenants to a dinner at the firm's Times Square office. There, 38 floors above the city, overlooking the Empire State Building, creditor representatives talked about the merits of a merger. They didn't like American's plan to stay independent, thinking they could get back more of the money they were owed through a merger.

Horton stood firm, preferring to consider a merger only after American emerged from bankruptcy.
Then came American's unions.

David Bates, who was head of American's pilots' union at the time, was worried that the airline's plan would fail and the company would shortly return to bankruptcy. He also wanted to stop Horton from gutting his members' pay and benefits. So he turned to US Airways for a better deal.
"If we had hope of a better outcome, I needed to move very quickly," Bates said.

Through a mutual friend, he set up a dinner on March 12, 2012, with Scott Kirby, president of US Airways and Parker's right-hand man. They were both in New York for an investor conference and met at Oceana, an upscale seafood restaurant in the heart of Manhattan.

Kirby had reserved a private table. It turned out to be in the kitchen.

"It was private," Bates said. "Just noisy."

Bates and another union leader — Dennis Tajer — ordered a mix of East Coast and West Coast oysters. A joke was made because US Airways has two separate unions, referred to as east and west.
Kirby passed on the appetizer.

"I found out he's not a fan of oysters," Bates said.

The meeting otherwise went well. Bates and union vice president Tony Chapman flew to Phoenix 10 days later for dinner with Kirby and Parker. A steakhouse dinner quickly followed with the union's entire leadership team and most of US Airways management.

Steps were taken to ensure the meetings remained a secret.

Too many American pilots recognize Bates and the other union officials. So they flew US Airways.
Pilots will often fly other airlines in uniform and chat with the crew. That couldn't happen on these flights.

"Everybody was told to be invisible, not to talk to anyone," Bates said.

When Parker and Kirby flew to Texas to make their case to the union, there was even a higher level of secrecy. They used a private jet and Bates personally made the 12-mile drive to the meeting site in the union's red Chevrolet Suburban.

Union security guards were stationed around the Hilton Arlington, but when Bates pulled up at the back entrance, he recognized a reporter lurking nearby. He quickly made a U-turn and the meeting was moved to the union's headquarters.

Similar meetings were being held with the flight attendant union and one that represents ground service employees and maintenance workers.

Around this time, Parker sent a letter to American formally proposing a merger. US Airways would own 51 percent of the new airline. The offer wasn't taken seriously.

On April 20, Parker publically announced that American's three unions were backing a merger.
It was an audacious move.

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 publically 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 6:15 a.m. breakfast on July 19 at the Jefferson Hotel in Washington. Both men had oatmeal. 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.

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 barbeque 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 between sips of Dr. Pepper and iced tea.

"We wowed them with Mexican food and BBQ," said Glenn West, a partner with Weil who oversaw American's negotiations.

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 advisors met with Horton and appealed to his principles. It was time to do what was right for American. The airline needed a fresh start. Horton agreed and prepared to hand over the reins to Parker, his friend and rival for three decades.

"He's put his heart and soul into this for most of his career," says Beverly Goulet, American's treasurer and chief restructuring officer. "All things being equal, he might prefer to be the guy sitting in the CEO chair."
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Scott Mayerowitz can be reached at http://twitter.com/GlobeTrotScott.
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US Airways will join list of extinct airlines

After merger with American, US Airways will join list of airlines that have disappeared

By The Associated Press | Associated Press – 17 hours ago

Pan Am. TWA. Eastern. Braniff.

Their planes were once familiar sights at airports across the country and even around the globe. They helped define air travel for decades.

Today they exist either in name only or in collectors' memorabilia.

The U.S. airline industry was once filled with dozens of carriers whose planes crisscrossed the nation and flew over oceans, but consolidation has culled the flock to just a handful of companies.

The pending merger of American Airlines and US Airways will leave four big airlines that will dominate the U.S. travel market — the post-merger American, United, Delta and Southwest — and a smattering of smaller rivals.

Even if their merger is approved this year, American and US Airways will continue to operate as separate airlines for at least several months. But eventually, executives say, the US Airways name will disappear.

The same will happen over the next few years with AirTran Airways, which was bought by Southwest in 2011. AirTran planes will be repainted in Southwest's logo and colors.

Here are some famous airlines that failed or were bought out by rivals:

— Pan Am. It started with mail delivery in the 1920s and grew into a giant of international passenger service. It started operating jets in 1958, was a symbol of luxury travel in the 1960s. Years of financial trouble and rising competition took their toll. Pan Am sold off valuable assets including its Pacific routes and New York-to-London route. It failed in 1991, although other companies have reused the name since.

— TWA. Trans World Airways was a major domestic player and competed with Pan Am on international routes. Known for leading technology, TWA used pressurized planes and was an early proponent of jets. It struggled with high fuel prices in the 1970s and — after deregulation of the airlines — competition from low-fare carriers in the 1980s. Corporate raider Carl Icahn bought it and sold many routes. American Airlines bought TWA out of bankruptcy in 2001 and retired the name.

— Braniff. It built a powerful hub airport operation in Dallas and roamed across the middle of the country and even as far as Hawaii with a fleet of colorfully painted planes. Braniff was squeezed by competition from American and upstart Southwest Airlines, however, and it shut down in 1982. Jay Pritzker, whose family owned the Hyatt Hotels chain, resurrected an airline that came to be known in the industry as Braniff II, but it too failed.

— Eastern Air Lines. Famed aviator Eddie Rickenbacker bought Eastern, which had been pieced together from several predecessors, in 1938. It built a successful network along the East Coast and launched low-fare shuttle flights from New York to Washington and Boston. It was hurt by competition from Delta and People Express and was beset by labor-management tension, including strikes, under Frank Lorenzo. It failed in 1991.

— People Express. One of the first airlines to take advantage of deregulation. People Express was modeled after a British low-fare airline, and started flying in 1981 in Newark, N.J. It grew quickly — maybe too quickly. Burdened with debt, it was merged with Continental in 1986. A new carrier began using the name last year.

— Northwest Airlines. The Minnesota-based carrier was noted for its strong routes across the Pacific to Japan. In 1993, it formed a partnership called a code-sharing agreement with Dutch carrier KLM, and that deal became the forerunner of modern airline alliances. Delta Air Lines bought Northwest in 2008, making Delta the biggest airline in the world — at least until 2010.

— Continental Airlines. It began as Varney Speed Lines in the 1930s and eventually grew to offer transcontinental and international service. Lorenzo's Texas International bought the airline and combined it with others including Frontier and New York Air. It went through two bankruptcies but was brought back from the brink by CEO Gordon Bethune. It combined with United Airlines in 2010, allowing United to surpass Delta as the world's biggest airline. The final Continental flight landed in March 2012.

 

AMR and US Airways

The last great American airline merger

…and the last great American airline bankruptcy?
 Jan 12th 2013 |From the print edition of The Economist

The bankruptcy courts in America have had to restructure distressed airlines so often that they may as well have installed check-in desks and duty-free shops. Of surviving carriers, US Airways has been through Chapter 11 proceedings twice, and United and Delta once each.

Until recently AMR, the parent of American Airlines and its smaller sibling American Eagle, proudly resisted using insolvency to get out of trouble. It had also stayed out of the industry’s bout of mega-mergers, in which Delta has combined with Northwest,

Southwest with AirTran and United with Continental. But in late 2011, as it staggered through its fourth successive year of losses, AMR filed for Chapter 11, in the hope of emerging leaner, stronger and still independent. Now it looks like falling prey to a reverse takeover from the much smaller US Airways, creating one of the world’s largest airlines by capacity.

US Airways’ boss, Doug Parker, has won backing for the bid from AMR’s disgruntled labour unions, his own staff and Wall Street analysts, forcing AMR to negotiate. On January 9th its board met to examine US Airways’ proposal: there was no immediate announcement but earlier AMR’s boss, Tom Horton, had promised a decision in “a matter of weeks”.
High pay, low morale

Before its bankruptcy AMR somehow managed to combine some of the best pay and conditions in America’s airline industry with some of its worst labour relations. So its unions have warmed to being taken over by US Airways, even though it has still not got its own pilots to agree on a unified labour contract following its 2005 merger with America West.

AMR has had to cut pay and pensions and alter working conditions. But employees hope that any future pain will be less under a merger with US Airways than if AMR stays independent, says Helane Becker of Dahlman Rose, an investment bank.

The two airlines make a good fit, with little overlap, notes Henry Harteveldt of Hudson Crossing, a consultancy. They overlap on only a dozen routes, and on most of those there is already at least one other competitor. So antitrust regulators may have few objections to a merger.

Joining US Airways would fill some gaps in American’s coverage, especially in the eastern United States, that have driven business customers to Delta and United. Jamie Baker of J.P. Morgan, another bank, says American used to enjoy higher revenues per available seat-mile than other full-service airlines but now, as a result of its weak network, it does worse even than the low-cost carriers.

A merger would also benefit the oneworld global alliance, to which American belongs and which the merged airline would almost certainly stick with. US Airways (which would thus leave the Star Alliance) has a relatively modest international route network of its own, and will gain from taking over American’s more ample one.

Assuming US and American merge, the result will be that America’s skies are dominated by three full-service carriers plus a fourth, Southwest, that began life as a low-cost airline but has come to resemble its traditional rivals. Between them they will have about four-fifths of the domestic market (see table). So, says Mr Harteveldt, it will be “the last big airline merger allowed to happen” in America.

Whereas the best-run low-cost airlines have attractive profit margins, the full-service airlines’ returns have long been dismal. However, a drastic change is in prospect. The biggest carriers have all been through bankruptcy, wringing out many of their excess costs; they have learned just how much they can rake in from charging separately for baggage, meals and the like; they at last seemed to have learned not to overexpand in a mad dash for market share; and now the industry is consolidating to just four main participants.

Analysts are daring to dream of a golden age of airline profits. Mr Baker hopes AMR’s Chapter 11 may prove to be America’s last great airline bankruptcy too.

This sounds wonderful for investors; less so for passengers. Domestic air fares, having fallen by about a third in real terms in the decade to 2009, have since started rising. This is mainly due to higher fuel costs, though the industry’s increasing concentration may make it easier for price increases to stick. The airlines’ improved discipline on capacity means flights sell out more often—bad news for late bookers.

And then there are the issues of comfort and reliability. Skytrax, an influential rater of airlines, gives just three stars out of five to America’s main carriers, putting them on a par with Papua New Guinea’s national airline, Air Niugini. Delays and cancellations have decreased in recent years but still only four-fifths of flights arrive on time. In the short term a merger may make things worse: as shown by United’s recent computer failures and other glitches as it integrates Continental, airline mergers can inflict years of misery on passengers.

Given the volume of travellers’ moans, there ought to be a market in providing a better service at a slightly higher price. But, notes Mr Harteveldt, Virgin America is seeking to do just that, and is still losing money, five years after its inception. So travellers may find that for them, the golden age of airline profits will be a dark age of pricey tickets and poor service.

American-US Air merger: Integration will be painful

Dennis Schaal, Skift.com, Skift

Get ready for a possibly painful, problem-ridden, and prolonged merger of American Airlines and US Airways if the deal goes through.

But, some could argue that on the positive side, at least the paint job and uniform issues likely have been settled.

The integration of the two airlines, with all of the labor, technological and logistical issues to sort out, will undoubtedly take years, and the stakes are extremely high, as United-Continental’s bumpy track record in their merger highlights.

Getting a handle on integrating US Airways’ and American Airlines’ pilots, flight attendants and other labor groups will be an overriding issue, as former American CEO Robert Crandall and numerous analysts point out.

Pilot deal could ease some of the pain

Although the details aren’t publicly known, the pilots unions at American and US Airways have made significant progress toward a framework if their respective boards seal the deal.

The potential complications are exacerbated, however, because at US Airways itself, two pilots groups still exist, a legacy of the 2005 AmericaWest-US Airways merger, so there has been a lack of a true melding more than seven years after that acquisition.

“US Airways and America West pilots still aren’t integrated, almost a decade later,” says Scott Hamilton, managing director of aviation-consulting firm Leeham Co. ”Pissed-off employees can screw up a merger for years. See Texas Air Corp. as the worst example.”

A big job without reservation

In early March 2012, United abandoned its decades-old Apollo reservations system and migrated to HP’s SHARES platform, which had been handling Continental for years. Four months later, in July, United’s flights notched just a 64.1 percent on-time arrival rate in as problems persisted with the reservations systems transition, although United recently seems to have moved past the worst of it.

The problems have been so acute that United CEO Jeff Smisek recently made a plea for straying business travelers to return to the airline.

That serves as a warning to the management of a merged American Airlines-US Airways: a botched merger can alienate your most important customers and really screw up the bottom line for a long time to come.

The relatively problem-free Delta-Northwest merger and migration may serve as a case study for American and US Airways to emulate, in some respects, at least.

Delta moved the Northwest PARS reservations system to Deltamatic, both of which were operated by Travelport’s Worldspan unit, at the end of January 2010, and there is now a single revenue management system for the combined airlines.

Beyond the nuts and bolts of getting the technology right, Delta did a great job of retaining key people from Northwest and sharing best-practices and procedures across both airlines, says Henry Harteveldt, travel industry analyst at Hudson Crossing.

On the other hand, Continental ran the show in the United-Continental merger, and was dismissive of a lot of what United was doing, including its Economy Plus seats, which the merged United eventually adopted.

“There was a huge amount of arrogance on the part of Continental Airlines,” Harteveldt says.

A little from column A, a little from column B
American Airlines is by far the larger of the two airlines, but US Airways has been the more profitable and scrappy carrier. All signs point toward Doug Parker and Scott Kirby, US Airways CEO and president, respectively, heading the new American Airlines, with a role for current American Airlines CEO Tom Horton likely a sticking point and being negotiated.

Some reports have speculated that Horton may emerge as the chairman of the merged airline.

US Airways currently runs on the HP SHARES reservation system, the same basic system that United uses, and it’s likely in the event of a merger that US Airways would migrate to SabreSonic, which hosts American Airlines’ reservations. Before it merged with AmericaWest in 2005, US Airways used Sabre so this would be a homecoming of sorts.

Parker and Kirby, if they are heading the combined American Airlines-US Airways, would be wise to take the best of from US Airways, including their skills in turning a profit, and also take advantage of American’s superior attributes, including technology infrastructure and marketing prowess.

Harteveldt believes that the merger of the two airlines could take up to four years to complete after the transaction closes.

Hamilton of Leeham Co. recalls that both US Airways and American have experience in mergers, although American “screwed up” mergers with Reno Air (1999) and TWA (2001).

Those blunders, coupled with American’s decision not to file for bankruptcy right after September 11, 2001, as competitors did, “have fueled labor discord among pilots and flight attendants to this day,” Hamilton argues.

Says Hamilton: “US Airways has been through this before and so has American so hopefully there should be lessons learned.”

That’s if the much-hyped merger becomes a reality.

Copyright 2013, Skift.com

How airlines prepare for big storms

Scott Mayerowitz, The Associated Press– 1 day

 

NEW YORK -- As the Northeast braces for its largest winter storm in more than a year, airlines are already employing a strategy that has served them well in recent years: Cancel flights early and keep planes and crews — and passengers — away from snowed-in airports.

Up to 3 feet of snow was forecast along the densely populated Interstate 95 corridor from the New York City area to Boston and beyond. In response, the major airlines plan to shut down their Northeast operations by Friday afternoon, and canceled nearly 1,100 flights for Saturday.

 

 

That means emergency planning for Boston's Logan International Airport, the three major airports in the New York Metropolitan area and smaller airports around the region.

 

Here are some questions and answers about what the airlines are doing:

 

Q: What are the airlines doing differently?

A: Just a few years ago, a powerful storm dumping two feet of snow on the Northeast would have brought havoc to some of the region's busiest airports. Passengers would sit on a plane for hours, hoping to take off. Families slept on the airport floor with luggage piled up around them. The only meal options came from vending machines.

Now, having learned from storm mismanagement and the bad public relations that followed, U.S. airlines have rewritten their severe weather playbooks. They've learned to cancel flights early and keep the public away from airports, even if that means they'll have a bigger backlog to deal with once conditions improve.

 

Travelers can still face dayslong delays in getting home, but the advanced cancellations generally mean they get more notice and can wait out the storm at home or a hotel, rather than on a cot at the airport.

 

Q: Why is it smarter to cancel early?

A: It allows the airlines to tell gate agents, baggage handlers and flight crews to stay home — keeping them fresh once they're needed again.

And by moving planes to airports outside of the storm's path, airlines can protect their equipment and thereby get flight schedules back to normal quickly after a storm passes and airports reopen.

These precautions make good business sense. They also help the airlines comply with government regulations that impose steep fines for leaving passengers stuck on planes for three hours or more. And they reduce the chance of horror-story footage of stranded passengers showing up on the nightly news.

 

Q: When did airlines change their storm preparations?

A: Things changed almost exactly six years ago. JetBlue was late to cancel flights as a massive snowstorm hammered the East Coast on Valentine's Day weekend in 2007. Passengers were stranded on planes for hours. When the storm finally cleared, other airlines resumed flights but JetBlue's operations were still a mess.

 

Other airlines took note. Severe weather manuals were updated. Reservation systems were programmed to automatically rebook passengers when flights are canceled. And travelers now receive notifications by email, phone or text message.

Q.: What should passengers do?

 

A.: Daniel Baker, CEO of FlightAware, says that any traveler planning to fly through the Northeast, or has a connection at one of its airports, should "change their travel plans immediately." He recommends using the airlines' websites over potentially backed up call centers.

 

In general, passengers shouldn't rush to the airport in hopes of getting a flight before the snow falls. Check with your airline, which will likely cancel your flight before the storm is near your airport.

The good news is that if you miss your connection, the airlines will automatically rebook you on the next available flight. The bad news is that next flight could be a while if you're traveling to or from a city that is buried under a foot or more of snow.

 

If you're unhappy with your rebooked flight pick up the phone and call the airline directly. Or go onto the airline's website and even consider sending a Tweet.

 

Q.: How tough is it for the airlines to get operations back to normal?

A.: Once the clouds clear, flights won't start up immediately.

When Superstorm Sandy hit the New York area, JetBlue's Rob Maruster, the airline's chief operating officer, equated starting up the airline again to putting together a 1,000-piece jigsaw puzzle. It's not about staffing levels, but an overall game plan that makes sense. "At a certain point, putting more hands on the table doesn't help get it solved faster," he said.

 

The airlines will need to ask a lot of questions before bringing in planes.

First, are the runways open?

 

Next, is there public transit to get workers to the airport? If not, does the airline have enough staff staying at nearby hotels that can be bused in?

 

Finally, the airline has to check on all the other people needed to run an airport: the Transportation Security Administration, customs officials, caters, fuel trucks and even the people who push wheelchairs through the terminal.

 

Baker, the FligthAware CEO, notes that the timing of this storm does work in the airlines' favor.

"Fortunately, Saturday is the lightest travel day of the week, so airlines can use the day to restart their operations in time for the Sunday evening travel rush," Baker says.

 

© 2013 The Associated Press. All rights reserved.         

EXCLUSIVE AMR creditors to meet Feb. 11 May vote on US Air merger Thu Feb 7, 2013 7:24pm EST * US Air board, AMR board could also meet Monday-sources * Deal may come as soon as Tuesday, but timing could slip (Adds negotiation details) By Soyoung Kim and Karen Jacobs NEW YORK/ATLANTA, Feb 7 (Reuters) - AMR Corp creditors plan to meet on Monday and could vote on a potential merger agreement between the bankrupt parent of American Airlines, and US Airways Group Inc, several people familiar with the matter said. The two airlines are working to finalize deal terms so the board of each company could also meet to vote on a merger on Feb. 11, the same day AMR's unsecured creditors' committee is scheduled to convene, the people said. If the parties meet this potential timetable - as currently envisioned but seen as aggressive - a merger agreement could come as soon as Tuesday, the people said, asking not to be identified because the matter is not public. AMR filed for bankruptcy in November 2011 citing high labor costs. A combination with US Airways would create the world's largest airline by passenger traffic and help the two carriers better compete with rivals United Continental Holdings Inc and Delta Air Lines Inc. Discussions are continuing and could still fall apart, they cautioned. While timing of a deal remains fluid, there is desire to get it done before Feb. 15, when the confidentiality agreements AMR bondholders signed are set to expire, the people familiar with the matter said. Under terms of the non-disclosure agreements, the group of influential AMR bondholders is not allowed to trade the airline's debt, people familiar with the matter have said. Detailed financial information related to the merger talks is set to be publicly disclosed on Feb. 15 so that the bondholders can resume trading without possessing confidential information. That is putting pressure on all the parties to reach a deal before then, the people have said. US Airways, AMR and its creditors are hoping that the bondholders group will support the deal terms before the parties announce a merger agreement, the people said. Representatives of the creditors committee, AMR and US Airways declined to comment. The bondholder group did not immediately respond to requests for comment. FINAL DEAL TERMS Negotiations in recent weeks have largely come down to a few major sticking points, including how ownership of the combined company would be split between shareholders of US Airways and creditors of AMR, and who will run the merged airline, the sources have said. While no final decision has been made, AMR creditors are expected to receive between 70 percent to 75 percent of the ownership in the combined company, the people said. US Airways' formal merger offer made in November proposed that AMR creditors own 70 percent of the equity and shareholders of US Airways own the rest. US Airways may also assume AMR's retiree liabilities excluding pensions, in the event of a merger, the people said. The combined airline could take on retiree health and welfare liabilities, known as Other Post-Employment Benefits (OPEB), that AMR has been trying to reject through the bankruptcy process, the people said. US Airways' original merger proposal had assumed that there would be no OPEB liability, the people said. US Airways Chief Executive Doug Parker is widely expected to become chief executive of the merged airline, while AMR Chief Executive Tom Horton could become non-executive chairman of the board for a limited time to allow for a smooth transition, the sources said. Horton rebuffed an aggressive takeover push from US Airways early in the bankruptcy process, saying the airline preferred to exit court protection on its own and consider a deal later. But after several months of talks with its own creditors as well as US Airways, Horton has softened his approach and agreed to consider all options. A combined American-US Airways would provide the scale to match bigger rivals that are upgrading service and expanding international routes. The merged company would have revenue of $38.69 billion based on 2012 figures, ahead of United Continental which had revenue of $37.15 billion last year. The new American would have a solid presence on the important U.S. East and West coasts and on North Atlantic routes, given American's revenue-sharing joint venture with British Airways and Iberia. The case is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463. (Reporting by Soyoung Kim in New York and Karen Jacobs in Atlanta;

Attorney Was AMR Deal Key

By MIKE SPECTOR AND SUSAN CAREY
Two of the world's largest airlines are rushing to finalize a $10 billion-plus merger. One of the biggest reasons: Jack Butler.

Mr. Butler, a 56-year-old bankruptcy lawyer, was instrumental in getting American Airlines' parent AMR Corp. AAMRQ +2.46%to the negotiating table with US Airways Group Inc. LCC +3.78%by prodding and coaxing Tom Horton, AMR's chief executive, and his advisers. He also has pestered American's unions and US Airways pilots and executives for over a year.

As the lead lawyer for the creditors committee watching over American's bankruptcy case, he begged to differ when the airline said it planned to emerge from Chapter 11 before considering mergers.

Mr. Butler declined to comment on the details of the merger negotiations, which The Wall Street Journal reported Wednesday were in their final stages. This account of his role in American's restructuring is based on interviews with more than a dozen people close to Mr. Butler and the events of the airline's bankruptcy case.

Mr. Butler last February invited a cadre of American executives led by Mr. Horton, as well as the company's lawyers and bankers, to his New York office at law firm Skadden, Arps, Slate, Meagher & Flom LLP.
American's bankers from Rothschild Group arrived at a conference room in the Condé Nast building 38 floors above Times Square with a bottle of the investment bank's namesake Bordeaux as a goodwill gesture.

As they gazed at the Empire State Building, Mr. Horton told Mr. Butler and others that the airline already had evaluated mergers and expressed skepticism about teaming up with US Airways, especially when American was at its weakest.
Mr. Butler, with others, objected. The unionized workers on Mr. Butler's committee—not to mention bondholders and suppliers—wanted alternatives to American's plan to stay independent so they could realize the best payout, he explained. Mr. Horton demurred but then relented months later amid continued pressure. A Rothschild banker later expressed regret to creditor advisers about bringing the wine. A person close to Mr. Horton said he was always open to exploring mergers once American finished redoing labor contracts and took other restructuring measures.

Companies under bankruptcy protection like to think they have wide latitude to control their reorganizations, especially because the law often prevents creditors from offering competing plans. But Mr. Butler's relentless activism in the American case is a reminder that bondholders, employees and suppliers have the last legal word on what happens in a Chapter 11 case and can exert their will to influence the outcome.

The bespectacled Mr. Butler, a father of four with a powerful build and slicked-back white hair, was an unlikely choice to represent American's creditors committee. He has mused to colleagues that he has terminated more pensions than any other lawyer in the U.S. Indeed, Mr. Butler advised Delphi Corp. DLPH -0.75%and US Airways when they unloaded $6.2 billion and $2.5 billion, respectively, on the federal Pension Benefit Guaranty Corp., now his client as an AMR committee member.

A native of a Detroit suburb, he graduated from the University of Michigan's law school in 1980. He arrived at Skadden in 1990 and soon took on megabankruptcy cases.

In American's case, Mr. Butler shunned deference from the outset. He filed an unusual "mission statement" that declared, among other things, that the creditors committee's "oversight responsibilities are highlighted and particularly essential" since the airline didn't have a bankruptcy loan requiring it to meet certain milestones.

Mr. Butler has "been successful because…he's always very involved in the details," said David Resnick, a former Rothschild banker who represented American before becoming president of investment firm Third Avenue Management LLC last year. He said Mr. Butler can get "too engaged by the facts" but usually sees the big picture in the end.

Others are blunter. "It's sort of Jack's way or the highway," said Rick Chesley, a bankruptcy lawyer at DLA Piper who has squared off against Mr. Butler in other cases. Mr. Butler is "extremely well prepared" and "he wants to win at all costs."

A person close to Mr. Butler acknowledged the lawyer has a forceful personality and a penchant for details but said he takes principled decisions that drive people to reach deals.

A stickler for rules who sometimes becomes red-faced during negotiations, Mr. Butler officiated at high-school and small-college football games for 25 years. With American, he started throwing penalty flags early in the case.

That irked rival Harvey Miller, the 79-year-old Weil, Gotshal & Manges LLP bankruptcy lawyer representing American. During a court hearing in December 2011, Mr. Miller told the airline's judge that he and the company felt "bushwhacked" by the unusual mission statement Mr. Butler filed and called parts of it "inflammatory" and "erroneous." Mr. Butler didn't respond to the concerns.

During the February dinner, other creditor advisers aided Mr. Butler. Jay Goffman, another Skadden partner, said creditors wouldn't ignore merger possibilities. Afterward, Moelis & Co. banker Bill Derrough suggested a "protocol" that would require American to explore "strategic alternatives." Mr. Butler later negotiated the document.

At the same time, Mr. Butler, along with American, wanted the airline to have a robust stand-alone restructuring plan that creditors could weigh against a merger so each plan would compete to offer creditors the best deal.

That plan depended on American getting a new contract with its pilots. In late August, American's unionized pilots rejected a new contract offer containing meager pay raises, higher health-care costs and more time in the cockpit—despite a promise for a 13.5% ownership stake in a reorganized airline. Mr. Butler tried to restart talks, rankling some at American. The pilots later negotiated a new deal.

Mr. Butler then traveled more than 7,000 miles in a weeklong period in late November and early December to San Diego, New York and Dallas to try to persuade pilots to approve it and finish American's stand-alone restructuring.

At a pilot's home in San Diego, he relinquished his jacket and tie, rolled up his sleeves and fielded questions from pilots for two hours while joining them in a lunch of ribs, soda and beer. He reminded the pilots that he helped safeguard their potential ownership interest in American.

He told the roughly 50 assembled pilots it was "remarkable" that other creditors approved their getting such upside in a potentially rejuvenated airline. There wouldn't be a third bite at the apple, he warned.

The pilots approved the new contract Dec. 7.

Mr. Butler next turned to organizing executives and pilots at American and US Airways to negotiate how to integrate employees should the two airlines merge. He succeeded. In January, he flew to Phoenix to have lunch with US Airways Chief Executive Doug Parker to discuss the merger and whether American's Mr. Horton could have a role. Mr. Parker is expected to be chief executive of the merged airline, with Mr. Horton becoming nonexecutive chairman for a finite period, according to people familiar with recent discussions.

Write to Mike Spector at mike.spector@wsj.com

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