DealBook: Delta and TPG Said to Weigh Bids for American Airlines

Scott Olson/Getty ImagesThe American Airlines baggage area at O’Hare Airport in Chicago.

9:05 p.m. | Updated

As American Airlines trudges through its bankruptcy proceedings, potential suitors are coming out of the woodwork.

Delta Air Lines and TPG Capital, the private equity firm, are considering separate bids for AMR Corporation, American’s parent company, according to two people briefed on the matter.

Delta has hired the Blackstone Group and is weighing a potential bid, according to a person briefed on the matter who was not authorized to speak about it publicly. Blackstone advised Delta in that airline’s own bankruptcy and on its merger with Northwest Airlines.

TPG is also taking a look, according to a person briefed on the matter. TPG is no stranger to airlines, having invested in Continental and Midwest Air and having made an unsuccessful bid for Qantas of Australia alongside the investment bank Macquarie. The firm also worked with AMR on a proposed investment in Japan Airlines that was eventually rejected.

US Airways is also reportedly considering a bid, according to Bloomberg News, which cited a person familiar with the process.

American’s restructuring is still in its early days. The company has yet to outline its plan to the bankruptcy court. It is expected to formally present a new strategy in the next few months. The company, among other things, seeks to reduce its costs by renegotiating contracts with its labor groups.

A purchase of American Airlines would have to be reviewed by the creditors’ committee and approved by a judge.

American, meanwhile, signaled on Thursday it was “not necessarily” looking to terminate its pension plan although that option was on the table. The company has been coming under increasing pressure from some of its labor groups as well as the Pension Benefit Guaranty Corporation in recent days to rapidly state what it planned to do with its employee pension plan.

American has argued that its pension plan, which is underfunded, was very expensive, and that it spent more than other airlines do. However, the PBGC pointed out in a statement on Thursday that Delta paid an average of $13,210 per employee in pension costs, almost two-thirds more than American’s prebankruptcy cost of $8,102.

Some airlines, like United Airlines, that have gone through bankruptcy restructuring in the past decade have terminated their pension plans for some of their labor groups. But not everyone did. Delta terminated its pension plan for pilots but not for other labor groups, like flight attendants. Northwest Airlines kept its plan going after its bankruptcy.

“American should have to prove in court that this drastic step is necessary,” said Joshua Gotbaum, the pension benefits agency director.

The interest in American Airlines was reported earlier by The Wall Street Journal. A bid from Delta, which would create the top carrier in the country, would draw intense scrutiny from the Justice Department and might have trouble being approved without significant concessions.

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