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April 16, 2013

Detailed timeline of merger talks between American and US Airways

If you want to know all the back and forth between American Airlines and US Airways during their merger negotiations in the past year, the Securities and Exchange Commission filing made on Thursday provides a day-by-day timeline.

As early as April 2011, US Airways board of directors considered making a merger offer to American Airlines.

According to the filing, US Airways senior management presented an analysis of a possible merger with American at its board meeting in April 2011.

Horton then approached Parker at an industry event in September to discuss a possible combination, although Horton said the two companies should speak after American secured new labor contracts.

In October, AMR chief executive Gerard Arpey encouraged US Airways to leave United Continental's Star Alliance and join American's Oneworld alliance as an "initial step" that could result in a deal later.

It wasn't until after AMR filed for bankruptcy in November 2011 and Arpey resigned that the two parties began serious negotiations, although AMR approached other airlines to gauge their interest in a merger last summer.

After months of negotiations in the fall, the two carriers announced the merger in February.

Keep reading for the full timeline printed in the SEC filing.

-Andrea Ahles

From the S-4 registration filing

To that end, on April 14, 2011, at the regularly scheduled meeting of the US Airways Group board, senior management of US Airways Group presented an analysis of a potential combination with AMR. Following a discussion, the US Airways Group board instructed management to continue its evaluation of that potential combination, which management did throughout the remainder of 2011.

On September 7, 2011, Mr. Thomas W. Horton, then president of AMR, approached Mr. W. Douglas Parker, US Airways Group’s chairman and CEO, at an industry event. Mr. Horton explained that AMR had recently completed the then-largest ever order of new aircraft and that upon entering into new labor agreements AMR might soon be positioned to engage in discussions about strategic alternatives, including a combination with US Airways Group. Mr. Parker agreed that a combination of the two airlines could be beneficial to both parties, and that the two should speak again after AMR had secured new labor agreements.

In an October 2011 telephone conversation, Mr. Gerard J. Arpey, then AMR’s chairman and CEO, told Mr. Parker that he was aware of the earlier discussion between Mr. Horton and Mr. Parker. Mr. Arpey said that once AMR had achieved new labor contracts, he would be open to discussing potential strategic transactions. However, he encouraged Mr. Parker to consider the possibility of US Airways departing the Star Alliance and becoming a member of the oneworld alliance as an initial step, but one that might result in a larger transaction sometime in the future.

On November 29, 2011, and after exhaustive attempts to reach consensual agreements with its labor unions and otherwise bring its labor costs in line with those of its competitors, AMR and certain of its domestic subsidiaries filed for relief under Chapter 11. That day, Mr. Horton, who had been elected chairman and CEO of AMR on the eve of AMR’s Chapter 11 filing, reached out to other senior airline executives, including Mr. Parker, to alert them to AMR’s filing.

On December 21, 2011, Mr. Parker called Mr. Horton and asked if he and members of his management team could meet with Mr. Horton to discuss a potential combination. Mr. Horton said to Mr. Parker that while he believed a combination could be beneficial to both companies and that he was always willing to talk, AMR and its board of directors were completely focused on completing the company’s restructuring.

On January 12, 2012, Mr. Parker called Mr. Horton to inform him that US Airways Group had engaged Millstein & Co., Barclays and Latham & Watkins LLP to assist it in connection with an evaluation of options related to AMR’s Chapter 11 filing. Mr. Horton thanked Mr. Parker for the call but reaffirmed that AMR was completely focused on completing its restructuring.

On January 19, 2012, at a regularly scheduled meeting of the US Airways Group board, Mr. Parker made a presentation on the impact of consolidation in the airline industry and provided additional background on a potential combination transaction with AMR.

In early February 2012, Mr. Horton called Mr. Parker. Mr. Horton said he understood that representatives of US Airways Group had begun reaching out to AMR’s stakeholders regarding a potential transaction. Mr. Horton said that such discussions were best left until after AMR had completed its restructuring.

On February 14, 2012, Mr. Parker provided an update to the US Airways Group board with respect to the evaluation of a potential combination transaction with AMR, including his recent conversation with Mr. Horton.

On March 9, 2012, representatives of US Airways Group and its advisers met with the UCC’s Advisers to discuss the benefits of a combination of AMR and US Airways Group, and to present preliminary estimates of revenue and cost synergies and one-time transition costs associated with a potential transaction.

On March 30, 2012, the US Airways Group board again met to discuss a potential merger with AMR. At the meeting, senior management reviewed recent developments, including the meeting with the UCC’s Advisers. Senior management also presented the strategic rationale for a combination with AMR, and discussed their assessment of AMR’s other strategic alternatives. In addition, preliminary estimates of revenue and cost synergies and one-time transition costs were reviewed. Advisers to US Airways Group also reviewed the status of the Chapter 11 Cases, including the filing of Section 1113 motions by AMR to reject its CBAs, and likely next steps in the Chapter 11 Cases. Senior management discussed potential next steps, which included engaging in discussions with representatives for AMR’s principal labor unions and continuing discussions with the UCC’s Advisers.

In early April 2012, US Airways Group commenced discussions with APA, APFA, and TWU on the terms of a CLA, which would become effective only upon a business combination of US Airways Group and AMR while AMR was in Chapter 11.

On April 6, 2012, the US Airways Group board met and received updates on the discussions with representatives of AMR’s principal labor unions and of upcoming discussions with the UCC’s Advisers. In addition, US Airways Group’s financial advisers presented a preliminary financial analysis of a potential combination transaction, including preliminary relative valuations of AMR and US Airways Group.

On April 9, 2012, the financial advisers to US Airways Group met with the UCC’s Advisers to discuss a potential merger between AMR and US Airways Group, review preliminary relative valuation analyses, and review the status of discussions between US Airways Group and representatives of AMR’s principal labor unions.

At a regularly scheduled meeting on April 12, 2012, the US Airways Group board received an update on the status of discussions relating to a potential merger. US Airways Group’s legal counsel reviewed with the directors their fiduciary duties and other legal matters in connection with considering a potential combination transaction with AMR. Senior management reviewed with the directors the status of discussions with the representatives of AMR’s principal labor unions, the terms of potential CLAs with each of those unions, and the effects of the CLAs on revenue and cost synergies and labor cost estimates in connection with a potential combination. Following the presentation and discussion, US Airways Group’s board authorized management to enter into the CLAs. Advisers to US Airways Group then reviewed with the board their prior discussions with the UCC’s Advisers, revised preliminary valuation analysis materials, and the terms of a potential merger proposal to AMR.

On April 20, 2012, Mr. Parker called Mr. Horton to advise him that US Airways Group would be sending AMR a non-binding indication of interest containing the terms of a proposed merger (the April 20 Indication of Interest). The April 20 Indication of Interest contemplated AMR’s unsecured creditors receiving 49.9% of the common stock of the combined company and $1.5 billion of new senior unsecured debt obligations of the combined company and that US Airways Group equity holders would retain 50.1% of the common stock of the combined company. US Airways Group’s management and advisers estimated, based on then available information, that the consideration offered to AMR’s unsecured creditors represented 67% of the value of the combined company but US Airways did not provide that estimate in the April 20 Indication of Interest and had no discussions with AMR or its advisers on the April 20 Indication of Interest. The April 20 Indication of Interest also proposed that the combined company would fly under the American Airlines brand and would be headquartered in Ft. Worth, Texas. Mr. Parker also advised Mr. Horton that US Airways Group had signed the CLAs with APA, APFA, and TWU. Mr. Horton reiterated AMR’s focus on its restructuring, but stated that AMR would review the April 20 Indication of Interest. APA, APFA, TWU, and US Airways Group publicly announced these CLAs the same day, and US Airways provided the April 20 Indication of Interest to the UCC’s Advisers. Later that day, Mr. Horton discussed with the AMR board the April 20 Indication of Interest and the substance of his conversation with Mr. Parker.

Effective May 1, 2012, AMR and the UCC entered into a Joint Exploration and Protocol Agreement with respect to exploring consolidation opportunities on a collaborative basis through December 28, 2012 (the Protocol). The Protocol also provided that prior to December 1, 2012, AMR would not file a plan of reorganization without the support of the UCC. AMR and the UCC’s Advisers agreed that it was important that AMR continue to develop an independent plan of emergence against which other alternatives could be evaluated.

On May 15 and 16, 2012, AMR’s board, together with management and AMR’s legal counsel and financial adviser, Weil, Gotshal & Manges LLP and Rothschild Inc., further considered the April 20 Indication of Interest. AMR’s management noted that AMR’s creditors would only be entitled to 49.9% of any synergies produced by a combination based on the April 20 Indication of Interest, and that the proposal valued AMR at less than the value indicated by AMR’s independent emergence plan as then formulated. Accordingly, AMR’s board determined that the April 20 Indication of Interest did not merit further discussion. However, Mr. Horton explained that at a significantly different equity split a combination with US Airways Group could be attractive to AMR and its stakeholders.

On June 14, 2012, at a regularly scheduled meeting, the US Airways Group board received an update on a potential transaction with AMR from management and US Airways Group’s advisers. The update included a review of the Chapter 11 Cases, including efforts by AMR to reach consensual CBAs with its principal labor unions, and a discussion of the view that the Section 1113 process would need to be completed and consensual CBAs reached before progress could be made on a merger. US Airways Group’s financial advisers also presented an updated valuation analysis to the board.

On July 10, 2012, AMR announced that, in cooperation with the UCC, it would begin a review of strategic alternatives, including a potential merger.

Also on July 10, 2012, Mr. Horton and other senior members of AMR’s management team made a presentation to the UCC regarding AMR’s independent emergence plan, its process to consider strategic alternatives, and the relative merits of a potential combination with various airlines, including US Airways Group. Mr. Horton explained to the UCC that both he and AMR had long been a proponent of industry consolidation, and that AMR had been evaluating strategic alternatives, including possible combination transactions with a number of airlines. Mr. Horton reiterated that the April 20 Indication of Interest was insufficient and that the economics of a potential transaction must reflect the relative size, value and prospects of each company, and that any potential transaction would need to be measured against AMR’s independent plan of emergence and/or other strategic alternatives. AMR’s board received an update of this meeting later the same day.

On July 17, 2012, AMR’s board received a further update on the July 10, 2012 UCC meeting. Mr. Horton reviewed the various options available to AMR, including a potential transaction with US Airways Group, and discussed the risks attendant to any potential transaction. Mr. Horton also advised that he believed the time had come to begin negotiating non-disclosure agreements with interested strategic partners so that alternatives could be properly pursued.

On July 19, 2012, at Mr. Horton’s request, Mr. Horton and Mr. Parker met to discuss matters regarding AMR’s Chapter 11 emergence process, including the prospect of a potential combination with US Airways Group. Mr. Horton informed Mr. Parker that on his recommendation the AMR board had authorized the establishment of a process to consider AMR’s strategic alternatives, including exploring a possible combination with a number of airlines, among them US Airways Group, and that the alternatives would be measured against AMR’s independent emergence plan. Mr. Horton also advised that a form of non-disclosure agreement would soon be made available to US Airways Group.

Effective July 19, 2012, AMR and the UCC entered into a Joint Protocol Side Letter Agreement, which modified and amended the Protocol and provided (i) the form of non-disclosure agreement to be provided by AMR to potential counterparties, including US Airways Group, and (ii) additional details regarding the participation by the UCC in AMR’s process to identify and pursue strategic alternatives (the Side Letter). The Side Letter was thereafter amended from time to time to extend the joint collaboration period and the date prior to which AMR would not file a plan of reorganization without the support of the UCC.

Throughout July and August 2012, in addition to discussions with US Airways Group, AMR and its financial advisers approached several other airlines to gauge their interest in a strategic combination. AMR also had discussions with potential financial investors with experience in the airline industry to gauge their interest in financially supporting an independent plan of emergence or other investment. AMR’s board was periodically apprised of the status of these potential alternatives.

On July 24, 2012, US Airways Group’s board met and received an update on the potential merger, including AMR’s recent announcement of its process to review strategic alternatives, and the likely terms of a non-disclosure agreement US Airways Group would be asked to enter into.

On July 27, 2012, AMR provided drafts of proposed mutual non-disclosure agreements to US Airways Group. During August 2012, AMR and US Airways Group engaged in negotiations regarding the terms of these agreements, and the US Airways Group board met on each of August 2, 2012 and August 30, 2012 to discuss the terms of the proposed mutual non-disclosure agreements and related matters.

On August 30, 2012, AMR and US Airways Group publicly announced that they had executed mutual non-disclosure agreements in order to share information and explore a potential transaction (the NDAs). The NDAs were thereafter amended from time to time to permit certain disclosure to additional third parties and to extend the termination date contained therein.

Throughout September and October of 2012, senior management from AMR and US Airways Group and their respective advisers engaged in substantial due diligence, both in person and telephonically, including analysis of the companies’ respective internal business plans and financial forecasts, and the potential revenue and cost synergies, one-time transition costs, operational and integration risks, including labor costs, and legal structuring. The parties spent significant time and effort attempting to understand and reconcile material differences in their respective assumptions and projection methodologies for potential revenue and cost synergies, one-time transition costs, and labor costs in connection with a proposed merger. The companies and their advisers also considered the operation of the CLAs and other labor integration issues. The UCC’s Advisers actively participated in these meetings, which they continued to do throughout the exploration and negotiation of a potential transaction.

On September 13, 2012, US Airways Group’s board received updates from management and US Airways Group’s advisers on the due diligence efforts taking place in connection with a potential merger.

On September 18-19, 2012, AMR’s board met to review the status of discussions with US Airways Group and AMR’s progress in its restructuring, including the development of AMR’s independent emergence plan. Mr. Horton discussed the opportunities and challenges attendant to a potential merger, and advised that while he could not recommend a transaction based on the terms contained in the April 20 Indication of Interest, a merger based on more favorable economic terms, and with an arrangement that mitigated potential labor costs and risks, could create meaningful value for AMR’s stakeholders.

On October 11, 2012, AMR’s board convened telephonically to receive updates on the status of discussions with US Airways Group.

On October 15, 2012, US Airways Group’s board received further updates on the due diligence efforts in connection with a potential merger.

On October 17, 2012, AMR’s board again convened telephonically to receive updates on the status of discussions with US Airways Group.

On October 22, 2012, AMR provided a draft merger agreement to US Airways Group to serve as a basis for any merger proposal to be made by them.

On each of October 24, 2012 and November 1, 2012, the board of directors of US Airways Group met to consider the terms and conditions of a merger proposal to be made to AMR. During the course of these meetings, the advisers to US Airways Group made presentations on the terms and conditions of the proposal, including the merger agreement, the fiduciary duties of the board in connection with a potential combination transaction, a financial analysis with respect to relative valuation of AMR and US Airways Group and other matters related to the proposal, including the significant improvement in macro-economic factors affecting the airline industry, since the US Airways Group proposal in April 2012. At the conclusion of the November 1, 2012 meeting, the board of directors authorized management to make a proposal (the November Proposal), which contemplated, among other things, an allocation of equity in the combined company (the Equity Split) whereby AMR’s stakeholders would receive 70% of the equity of the combined company, but no senior unsecured debt as contemplated by the April 20 Indication of Interest, and US Airways Group’s stockholders would own the remaining 30% of the combined company’s equity. This Equity Split was subject to a number of conditions, including a limitation on AMR’s secured debt at emergence and the elimination in the Chapter 11 Cases of AMR’s liability for other post-employment benefits (OPEB). The November Proposal also provided that the combined company would retain the American Airlines brand and would have its headquarters in Fort Worth, Texas. The November Proposal provided that Mr. Parker would be chairman of the board and CEO of the combined company, which would have an 11 member board, of which US Airways Group would designate 5 of the directors.

On November 2, 2012, Mr. Parker contacted Mr. Horton to present the November Proposal.

AMR’s board reviewed the November Proposal later that day. Notwithstanding its conclusion that the terms of the November Proposal were still insufficient and that the attendant labor uncertainty created unacceptable risk, at Mr. Horton’s urging the AMR board decided it was prudent to continue pursuing a potential transaction with US Airways Group, but to set aside any discussions about management or board composition until other aspects of a transaction were resolved.

On November 9, 2012, Mr. Horton and other senior members of AMR’s management team met with the advisers to the Ad Hoc Committee to discuss a potential merger with US Airways Group. Consistent with his recommendation to the AMR board, Mr. Horton told this group that on the right terms a merger with US Airways Group could create meaningful value for AMR’s stakeholders.

On November 10, 2012, AMR’s board received presentations from AMR senior management and AMR’s financial advisers and legal counsel regarding the November Proposal. Mr. Horton provided AMR’s board with a report on the status of discussions and negotiations between AMR and US Airways Group. AMR’s board also received updates on preliminary estimates of potential revenue and cost synergies, one-time transition costs and potential labor costs. At the conclusion of this meeting, and on Mr. Horton’s recommendation, AMR’s board expressed its general support for a potential transaction, but instructed Mr. Horton to inform Mr. Parker that uncertainty surrounding the combined company’s labor costs rendered it difficult to determine the right Equity Split, which AMR’s board believed needed to be in excess of 80%, and that these matters had to be addressed if discussions were to continue.

On November 12, 2012, representatives from AMR and US Airways Group met to discuss the potential merger and related labor matters. At the conclusion of these meetings, AMR’s advisers communicated that AMR believed that a merger with US Airways Group could create meaningful value and should be pursued, but that agreement needed to be reached on the Equity Split and that efforts should be made to reduce the uncertainty of labor costs for the combined company. The parties agreed to form the labor transition working group composed of representatives of AMR, US Airways Group, and the UCC’s Advisers to better understand the operation of the CLAs and to provide greater certainty regarding the labor costs of a combined company. The parties also discussed extending the term of the NDAs to allow those efforts to take place.

On November 13, 2012, senior executives of US Airways Group and its advisers met with advisers to the Ad Hoc Committee and gave presentations and engaged in discussions on the strategic rationale for a merger with AMR, the network advantages of the proposed combination, preliminary estimates of synergies and one-time transition costs, US Airways Group’s assessment of AMR’s independent emergence plan, valuation metrics, the terms of the November Proposal, and other matters.

Later that day, senior executives of US Airways Group and its advisers met with the UCC. Mr. Parker and Mr. Scott Kirby, the President of US Airways Group, and certain of US Airways Group’s advisers gave presentations on the strategic rationale for a merger with AMR, the network advantages of the proposed combination, preliminary estimates of synergies and one-time transition costs, US Airways Group’s assessment of AMR’s independent emergence plan, valuation metrics, the terms of the November Proposal, and other matters.

On November 14, 2012, Mr. Horton met with the UCC and advised that the proposed Equity Split for AMR’s stakeholders was insufficient and did not reflect the relative value contribution of each company, and that labor risks, including the magnitude of potential labor costs, needed to be adequately addressed. Mr. Horton also restated his position that, on the right terms, and subject to a satisfactory mitigation of labor risks, including the magnitude of labor costs, a merger with US Airways Group could create meaningful value for AMR’s stakeholders.

Later on November 14, 2012, Mr. Horton called Mr. Parker to indicate that the AMR board had expressed its general support for the transaction. He explained, however, that AMR’s share of the Equity Split likely needed to be above 80%, and that the uncertainty surrounding the combined company’s labor costs needed to be mitigated.

On November 15, 2012, at a regularly scheduled meeting, the US Airways Group board reviewed the status of discussions between US Airways Group and AMR, and AMR’s response to the November Proposal. The board also discussed management’s concerns regarding AMR’s proposal to extend the NDAs beyond the then scheduled November 30 expiry. After updates by senior executives of US Airways Group and its advisers, and discussion, the board informed senior management that given AMR’s views of an appropriate Equity Split as expressed in Mr. Horton’s November 14, 2012 call to Mr. Parker, the board did not support amending the NDAs as proposed by AMR and the UCC’s Advisers. In addition, the board instructed management to inform AMR’s advisers that if the AMR board’s view of an appropriate Equity Split was as communicated by Mr. Horton, then it was not productive to continue discussions.

At a meeting on November 16, 2012, Mr. Horton communicated to AMR’s board the substance of the November 14, 2012 UCC meeting and his subsequent call with Mr. Parker.

Between November 16, 2012 and November 25, 2012, a series of conversations between advisers to AMR, US Airways Group and the UCC occurred, which focused primarily on AMR’s views of an appropriate Equity Split and whether there was a basis upon which discussions between AMR and US Airways Group could continue.

On November 25, 2012, Mr. Horton phoned Mr. Parker and suggested that further discussions between the companies’ advisers regarding the proposed Equity Split should be deferred. Mr. Horton further advised that that while he believed there was likely a solution somewhere between the two parties’ respective positions on the Equity Split, it was not possible for AMR to reach a final conclusion on the Equity Split without first mitigating the potential labor costs and risks attendant to a potential merger. Mr. Parker agreed that the two parties should address the labor issues and make progress on negotiating the merger agreement prior to revisiting the Equity Split.

On November 27, 2012, AMR’s board received presentations and engaged in discussions on various topics, including an update on the status of the discussions and negotiations between AMR and US Airways Group and Mr. Horton’s November 25, 2012 conversation with Mr. Parker. In addition, AMR’s advisers explained that, dependent on AMR’s share of the Equity Split and subject to satisfactory mitigation of labor costs and risks, the proposed merger could likely result in a recovery for AMR’s equity holders.

On November 28, 2012, US Airways Group’s board met and received a summary of events since its last meeting. Senior management and advisers to US Airways Group described a series of conversations that had taken place since the last board meeting, including the November 25, 2012 conversation between Messrs. Horton and Parker. Following a discussion of those conversations and other matters, senior management recommended that US Airways Group amend the NDAs and undertake efforts to provide greater certainty regarding the labor costs of a combined company. The board concurred, and AMR and US Airways Group signed the NDA extensions on November 29.

On December 4, 2012, Mr. Horton met with the UCC regarding the status of the merger.

Commencing on December 4, 2012 and continuing through January 2013, the labor transition working group engaged in negotiations with the APA and USAPA aimed at reconciling the terms of the CLAs and the new American CBAs, and minimizing the potential labor risks and costs typically associated with airline mergers and the integration of employee work groups. As a result of those discussions, on December 29, 2012, American and US Airways announced a four-party MOU with APA and USAPA.

The labor transition working group also engaged in discussions with the TWU and APFA during December 2012 and January 2013 in an effort to further mitigate potential labor risks and costs associated with a merger as to the work groups represented by those unions. Those discussions resulted in a tri-party MOU among American, US Airways and TWU, along with a related letter agreement among American, US Airways and APFA. Separately, US Airways entered into a new CBA with the AFA that includes support for a merger.

On December 19, 2012, AMR provided US Airways Group with an update to its internal business plan and financial forecast, which the companies used to refine their financial projections.

On December 31, 2012, the US Airways Group board met to receive an update on the potential merger, including the progress in discussions regarding labor matters. The board also discussed a potential meeting with members of the Ad Hoc Committee and the expected changes to the negotiation process assuming that the Ad Hoc Committee became directly involved in the process.

On January 8, 2013, Mr. Horton met with certain members of the Ad Hoc Committee to discuss AMR’s restructuring and a summary of its review of a potential merger with US Airways Group. Mr. Horton explained AMR’s process, and advised that he continued to believe that a merger with US Airways Group could create significant value for AMR’s stakeholders.

On January 9, 2013, AMR’s board received further updates on the status of discussions regarding the proposed merger with US Airways Group, including an updated comparison of the value proposition for AMR’s stakeholders of an independent emergence plan versus the proposed merger, and a review of the material terms of the draft merger agreement.

On January 10, 2013, representatives of US Airways Group’s senior management and its financial advisers made a presentation to certain members of the Ad Hoc Committee, which included the strategic rationale for a merger with AMR, preliminary estimates of revenue and cost synergies, one-time transition costs, labor integration plans, and the terms of the November Proposal.

On January 15, 2013, Mr. Horton and AMR’s financial advisers made another presentation to certain members of the Ad Hoc Committee regarding the economic terms of the proposed transaction. The assembled group expressed their support for a merger with US Airways Group, indicating that they did not want disagreement over US Airways Group’s proposed 70/30 Equity Split to impede reaching agreement on a transaction but that they supported Mr. Horton’s efforts to improve the economics for AMR and its stakeholders.

Also on January 15, 2013, Mr. Parker and the UCC’s legal counsel engaged in discussions regarding the terms of the merger, including the merger consideration and governance arrangements.

On January 16, 2013, Mr. Horton communicated the substance of his January 15 meeting with the Ad Hoc Committee to the AMR board, where he again indicated his belief that a merger with US Airways Group would be beneficial to AMR’s stakeholders at the appropriate Equity Split.

On January 17, 2013, at a regularly scheduled meeting, the US Airways Group board received an update on the potential merger. US Airways Group senior management reviewed the status of discussions, potential financing alternatives with respect to US Airways Group’s existing debt, the development of retention plans for non-union employees who did not have existing change of control agreements, and considerations for a communications plan to be implemented upon announcement of a merger with AMR. Also at this meeting, advisers to US Airways Group provided a financial analysis of elements of a potential transaction, a summary on antitrust and regulatory considerations, a review of the merger agreement and the status of negotiations, an outline of the likely Chapter 11 process if a transaction were to be entered into, a review of the due diligence process with respect to AMR, and a discussion of a potential shareholder rights plan designed to protect the net operating loss position for federal income tax purposes of the combined company in the event of a transaction.

On January 23, 2013 Mr. Horton and AMR’s financial advisers again met with a group of Ad Hoc Creditors to review the proposed terms of the merger.

On January 24, 2013, Mr. Horton and Mr. Parker again met. Mr. Horton and Mr. Parker discussed the proposed Equity Split and governance arrangements for a combined company. At this meeting, Mr. Parker reiterated the key terms of the November Proposal, including a 70/30 Equity Split. Mr. Horton again expressed AMR’s view that this proposed Equity Split was insufficient. Mr. Horton also informed Mr. Parker that, assuming a transaction, while he would support Mr. Parker as CEO of the combined company, the AMR board believed that the continued involvement of senior AMR executives and managers, including Mr. Horton as chairman of the combined company’s board, was important.

Mr. Horton and Mr. Parker also discussed the synergies and one-time transition costs that were likely to result from a transaction and concluded that it was reasonable to expect the proposed merger would generate more than $1 billion in annual net synergies by 2015, and that a combined company would likely incur approximately $1.2 billion in one-time transition costs.

On January 25, 2013, the US Airways Group board met to receive an update on the status of discussions. In the course of this meeting senior management and the advisers to US Airways Group provided an overview of the status of the negotiations, including Mr. Parker’s January 24 meeting with Mr. Horton. Following the overview, the board discussed the status of negotiations and provided guidance to senior management as to future negotiations.

On January 27, 2013, by arrangement of Mr. Horton, Mr. Armando Codina, AMR’s lead independent director, and Mr. Parker met to discuss the potential merger. Mr. Codina repeated the AMR board’s belief that consolidation could benefit AMR and US Airways Group, subject to the resolution of three matters. First, Mr. Codina informed Mr. Parker that US Airways Group would need to improve upon the 70/30 Equity Split in order to receive the support of the AMR board for the merger. Second, Mr. Codina advised that it was of paramount importance to AMR’s board that the AMR’s existing equity receive a recovery in the Chapter 11 Cases. Mr. Codina acknowledged that AMR would need to resolve this matter with its creditors, but noted that an improved Equity Split would facilitate that resolution. Finally, Mr. Codina explained that the combined company needed a management structure that maximized the likelihood of full realization of the Expected Synergies and a board composition that more closely reflected the relative ownerships of AMR’s stakeholders and US Airways Group’s stockholders.

On January 28, 2013, Mr. Horton and Mr. Parker had discussions on the merger’s proposed Equity Split and governance arrangements. At the end of those discussions, Mr. Parker informed Mr. Horton that US Airways Group was prepared to increase the Equity Split to 72/28, subject to all the other terms of the November Proposal, including that AMR’s OPEB liability would be extinguished as part of the Chapter 11 Cases, and that US Airways Group was prepared to consider board composition of the combined company that more closely reflected the relative ownership of AMR’s stakeholders and US Airways Group’s stockholders. The parties ultimately agreed that directors on the board of the combined company be allocated so that AMR would designate three members (including Mr. Horton), the UCC would designate five members, and US Airways Group’s would designate four members (including Mr. Parker).

AMR’s board also met on January 28, 2013 to review the status of the discussions and negotiations, including Mr. Horton’s and Mr. Codina’s meetings with Mr. Parker, the new proposed Equity Split and potential governance arrangements.

On January 29 and 30, 2013, AMR and US Airways Group, along with their respective financial advisers and legal counsel, together with UCC’s Advisers, met to further discuss and negotiate the merger agreement and conduct due diligence on AMR’s OPEB liability and its treatment in the Chapter 11 Cases. Thereafter, and through February 13, 2013, legal counsel for AMR and US Airways Group continued to exchange drafts of the merger agreement and engage in periodic telephonic discussions and negotiations.

On January 31, 2013, Mr. Parker and the UCC’s Legal Adviser discussed the proposed governance structure of the combined company, and these parties then met in person on February 5, 2013 to continue these discussions.

On February 4, 2013, Mr. Parker called Mr. Codina and discussed the economic and governance terms of the potential merger. Mr. Parker informed Mr. Codina that US Airways Group was prepared to eliminate the requirement that AMR’s OPEB liabilities be extinguished as part of the Chapter 11 Cases, subject to reaching agreement on the Equity Split. Mr. Codina responded that under these circumstances, and while he was not speaking for AMR or the AMR board, he was prepared to support the merger if the Equity Split remained at 72/28. Mr. Parker and Mr. Codina also discussed Mr. Horton being chairman of the board of the combined company for limited period of time following the closing of the merger.

On February 5, 2013, Mr. Parker called Mr. Horton to communicate the terms upon which US Airways Group was prepared to proceed with the transaction, and advised that US Airways Group’s January 28, 2013 proposed 72/28 Equity Split would no longer be subject to AMR’s elimination of the OPEB liabilities in Chapter 11. Later that day, Mr. Parker emailed Mr. Horton to confirm these proposed economics. Mr. Parker also proposed that Mr. Horton be chairman of the board of the combined company, and that he serve in such role until the first annual meeting, at which point Mr. Parker would be elected chairman and continue as CEO.

Mr. Horton responded to Mr. Parker’s February 5 communications in an email sent on February 6, 2013. Mr. Horton explained that AMR had moved from its initial proposed 80/20 Equity Split to a 75/25 Equity Split, but nevertheless he would convey Mr. Parker’s new proposal to AMR’s board. With respect to governance, Mr. Horton expressed his general agreement with Mr. Parker’s proposal but reiterated that AMR board’s primary concern was a governance structure that was most likely to ensure a successful integration and a full realization of the Expected Synergies. Mr. Horton reminded Mr. Parker that AMR’s board still wanted assurance that the combined company’s management would be drawn from the “best of the best” of each company, and that he and Mr. Parker would be jointly involved in selecting senior executives for the combined company.

On February 7, 2013, Mr. Parker responded to Mr. Horton’s February 6 email, informing Mr. Horton that he would consult with him in the selection of the management team for the combined company.

On February 11, 2013, Mr. Horton together with members of the AMR management team, and Messrs. Parker and Kirby, met with the UCC as part of the UCC’s deliberation of the potential transaction, which the UCC voted to support on February 13.

On February 12, 2013, Mr. Horton and Mr. Parker met to finalize the proposed governance arrangements, and agreed that Mr. Parker would serve as CEO of the combined company and would select the management team of the combined company, consulting with Mr. Horton, and Mr. Horton would serve as chairman until the earlier of (i) one year from the closing of the Merger and (ii) the combined company’s first annual meeting, at which time Mr. Parker would become chairman.

On the afternoon of February 13, 2013, AMR’s management, financial advisers and legal counsel made presentations to AMR’s board regarding the Merger, including that AMR’s stakeholders would be entitled to 72% of the Expected Synergies.

At this meeting, after Mr. Horton recommended that the AMR board support the Merger, Mr. Parker was asked to address AMR’s board. Mr. Parker expressed his excitement and enthusiasm for the Merger, praised AMR’s brand, heritage and people, and affirmed his belief that consolidation would position the combined company to compete effectively with United and Delta. In response to questions, Mr. Parker also briefly reviewed his preliminary views on integration of AMR and US Airways Group, including his intention to select a management team for the combined company from the “best of the best” personnel from each of AMR and US Airways Group. Mr. Parker acknowledged that he and Mr. Horton would collaborate on this process.

After Mr. Parker departed the meeting, AMR’s board discussed extensively Mr. Parker’s presentation and the proposed transaction. AMR’s board then voted unanimously to approve the Merger Agreement.

Later that afternoon, the US Airways Group board met to consider the Merger. The board received an update from senior management and US Airways Group’s financial and legal advisers regarding the status of the potential merger. US Airways Group’s legal advisers also reviewed with the directors their fiduciary duties in connection with approving the proposed transaction, and reviewed the terms of the Merger Agreement and a shareholder rights plan contemplated by the Merger Agreement. In addition, senior management reviewed with the board the communications plans for investors, employees, regulators, government officials, and key commercial partners, and the terms of certain retention plans to be adopted by the board covering non-union employees who did not have existing change of control agreements. At the meeting, Barclays, US Airways Group’s financial adviser, presented its financial analyses and rendered its oral opinion to the US Airways Group’s board to the effect that, as of February 13, 2013, and based upon, and subject to the qualifications, limitations and assumptions stated in its opinion, from a financial point of view, the consideration to be received by the stockholders of US Airways Group in the Merger was fair to the stockholders of US Airways Group. At the meeting, Barclays also delivered its written opinion, dated February 13, 2013, which stated the same. See the section entitled “The Merger—Opinion of US Airways Group’s Financial Adviser” beginning on page 85. Following the presentation from US Airways Group’s financial advisers, and after discussion and consultation with its financial advisers and counsel, the US Airways Group board determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, were advisable and in the best interests of, US Airways Group and its stockholders, approved and adopted the Merger Agreement, and recommended that the US Airways Group stockholders vote to adopt the Merger Agreement. In addition, the board approved certain employee retention plans and other matters related to the transaction.

Later that evening, AMR and US Airways Group entered into the Merger Agreement and AMR entered into the Support and Settlement Agreement with certain members of the Ad Hoc Committee holding, in the aggregate, approximately $1.2 billion in unsecured claims. The execution of the Support and Settlement Agreement (including the finalization of a Plan term sheet, of which the Merger constitutes a principal component) followed a period of negotiations that occurred simultaneously with that of the Merger Agreement and, among other things, resulted in the allocation of at least 3.5% of the combined company’s diluted equity ownership to AMR’s existing equity holders. Pursuant to the Support and Settlement Agreement, which is more fully discussed in the section entitled “The Plan of Reorganization—The Support and Settlement Agreement” beginning on page 142, the members of the Ad Hoc Committee party thereto agreed (among other things), subject to the approval of the disclosure statement by the Bankruptcy Court, to support and vote in favor of a plan of reorganization conforming to the terms of the term sheet attached thereto.

AMR and US Airways Group announced the execution of the Merger Agreement prior to the opening of trading on the NYSE on February 14, 2013. Mr. Horton and Mr. Parker held a press conference at DFW early that afternoon and then met with employees of AMR. Later that day, Mr. Parker held a meeting with US Airways’ employees in Phoenix.

On February 22, 2013, the Debtors filed a motion in the Bankruptcy Court seeking approval of the Merger Agreement.

 


Read more here: http://www.star-telegram.com/2013/04/15/4777412/amr-files-bankruptcy-reorganization.html#storylink=cpy

Read more here: http://www.star-telegram.com/2013/04/15/4777412/amr-files-bankruptcy-reorganization.html#storylink=cpy

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Sammie Sawee

So the new livery was all just a waste of money all along?

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