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AMR CEO Horton's fate in balance as US Airways merger nears

American Airlines CEO Tom Horton attends a ceremony marking German carrier Airberlin's accession to the Oneworld network of airlines, at the
American Airlines CEO Tom Horton attends a ceremony marking German carrier Airberlin's accession to the Oneworld network of airlines, at the

By Soyoung Kim and Nick Brown and Karen Jacobs

NEW YORK (Reuters) - As US Airways Group Inc and American Airlines parent AMR Corp hammer out the final details of a merger, one of the most thorny issues has been whether AMR Chief Executive Tom Horton stays or goes.

After rebuffing an aggressive takeover push from smaller rival US Airways early in its bankruptcy, AMR of late has embraced a deal, but is now eyeing a high-level position for Horton in the merged airline, according to several people familiar with the matter.

With US Airways CEO Doug Parker angling to become both chief executive and chairman of the new company, AMR has proposed splitting the roles and making Horton chairman of the board should Parker become CEO, the people said.

The AMR board has a high regard for Horton, who has spearheaded bankruptcy restructuring, but the airline's unions and creditors are wary of his rocky relationship with labor, as is US Airways, itself no stranger to bankruptcy, according to the people familiar with the matter.

There is also concern that splitting up the chairman and chief executive roles would create a strategic clash at the top at a time when the newly merged airline should embark on a major transformation, they said.

The carriers are still negotiating management structure and no decisions have been made about who will run a merged airline, the people said. But Horton's fate has proved to be one of the major sticking points of the negotiations.

They people asked not to be named because the matter is not public. AMR and US Airways declined to comment for the story.

"I think it's very hard to predict how things will ultimately pan out," said one of the people close to the situation. "Tom is making the strongest push he can for some role coming out of this, but people are very concerned for creating a dynamic that might create chaos or disharmony."

LABOR A CRUCIAL VOICE

In many merger deals, the chairman and CEO roles are split between the two former heads of the merging entities.

But in a potential US Airways-AMR merger, any leadership role for Horton would likely face tough resistance from AMR's unionized workers, industry analysts said.

The unions representing American's pilots, flight attendants and ground workers threw their support behind a potential merger with US Airways last year, saying Parker's team would save more jobs than a plan by AMR to reorganize as an independent carrier.

AMR's three labor unions are members of its unsecured creditors committee in bankruptcy and each have a say in how the airline will restructure.

The three labor unions, as well as AMR's creditors' committee, declined to comment for this story. A lawyer for a separate committee of AMR bondholders, which is involved in the merger talks, did not respond to requests for comment.

"There's been a really toxic relationship" between labor and AMR management, said Robert Mann, an airline consultant in Port Washington, N.Y.

"That is what drove labor's interest in a US Air deal. That's what driven a variety of interested parties to advise AMR labor that there would be changes."

American Airlines has had a bitter history with its unions dating back at least to 2003, when it won steep concessions from labor as a way of avoiding bankruptcy. AMR had been locked in fruitless labor talks with unions for years before it filed for bankruptcy in late 2011.

"There's such angst over a continuing role by some of the current AMR managers that, if they were to continue in an operating role, that would likely disappoint some of the folks who believe they have been promised a change," Mann said.

Last May, more than 90 percent of American's pilots represented by the Allied Pilots Association union signed a petition expressing "no confidence" in Horton's ability to lead the company to a better path.

Meanwhile, AMR's ownership of a luxury townhouse in London drew criticism from the Transport Workers Union that represents AMR's baggage handlers and other ground workers, which said it showed how management enjoyed excesses as workers suffered.

American got court permission to sell the $23 million house earlier this year.

US Airways has not had the smoothest labor relations either. Pilots and flight attendants at the carrier have been working under the same contracts they had when the airline merged with America West in 2005.

But just last week, US Airways announced a tentative agreement with the Association of Flight Attendants that would provide pay raises and job protections for the airline's 6,800 flight attendants.

If approved, the tentative agreement would combine the contracts of the pre-merger America West and pre-merger US Airways workers. Flight attendant union leaders at US Airways urged ratification of the pact and issued a statement endorsing Parker's plan for a merger with American.

(Reporting by Soyoung Kim and Nick Brown in New York, Karen Jacobs in Atlanta. Editing by Ben Berkowitz and Andre Grenon)

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