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American begins key restructuring

NEW YORK - As American Airlines’ board meets next week, expectations are high that it will give more concrete shape to the airline’s plans to either merge with US Airways or stay independent.

The directors of parent AMR Corp plan to review a tie-up with its smaller rival against an alternative plan to exit bankruptcy as a standalone company, several people familiar with the matter said.

But the people close to the talks told Reuters they do not expect the AMR board to formally choose one option over the other next week, as detailed terms of a deal, such as price and the new management team, have yet to be hammered out. There are currently no plans for an announcement after the meeting.

The meeting that starts on Wednesday could still provide clues about whether American is finding merit in the idea of merging with US Airways while it is still restructuring in bankruptcy. AMR Chief Executive Tom Horton rebuffed an aggressive takeover push from US Airways early in the bankruptcy process, saying American preferred to exit court protection on its own and consider a deal later.

Now, after several months of talks with US Airways and AMR’s creditors, Horton has softened his approach at the insistence of the creditors’ committee and agreed to consider all options.

In a message to employees on Thursday, Horton said there’s no specific deadline for the evaluation to end, but the company expects to “bring this to a conclusion within a matter of weeks.”

“I can assure you we are conducting a collaborative, fact-based analysis to determine the best path forward for American,” he said.

US Airways, which has pursued the merger for more than a year, is hoping that AMR’s board recognises the benefits of a combination and will choose to move quickly to negotiate final terms of a deal as soon as this month, the people said. US Airways declined to comment for this story.

A deal in bankruptcy remains uncertain and could still founder on price or other issues. The pilots union for US Airways must still vote on how to integrate labour contracts, but the process got a boost late on Friday with a recommendation by the board of the US Airline Pilots Association. Other unions also are reviewing the details. The equity split also remains at issue. US Airways’ formal merger proposal in November suggested that AMR’s creditors would own 70 per cent of the merged entity, and the US Airways shareholders the remainder. AMR has said its creditors deserve closer to 80 per cent.

Still, Horton’s new tone and other recent events suggest the combination long championed by US Airways and by pilot unions at both airlines will get a serious review by AMR’s board.