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AMR unions plan to back takeover bid by US Airways

MIAMI, FL - OCTOBER 04: American Airlines planes sit on the tarmac at Miami International Airport on October 4, 2011 in Miami, Florida. The company's shares plunged 33% October 3, on fears that the nation's third-largest airline company by traffic may be forced to seek bankruptcy protection in a worsening economy. Joe Raedle/Getty Images

(CBS/AP) DALLAS — Unions at AMR Corp. (AMR), American Airlines' parent company, plan to support a potential takeover offer by rival US Airways Group Inc. (LCC), according to two people familiar with the situation.

The unions believe that combining with US Airways would give American the best chance to grow and preserve jobs, said the two, who spoke on condition that they not be identified because no decision has been announced.

An announcement from the unions is possible as early as Friday morning, they said.

A spokesman for American said Thursday that the company is focused on its own plan to reorganize under bankruptcy protection, which he called the best option for the airline's 73,000 employees.

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US Airways, based in Tempe, Ariz., declined to comment. It has previously confirmed hiring advisers to consider a bid for AMR Corp., based in Fort Worth, Texas.

AMR filed for bankruptcy protection in November and has since outlined plans to cut more than 14,000 jobs, including 13,000 held by union members. On Thursday, the company reported a $1.66 billion loss for the first quarter, mostly on bankruptcy-reorganization costs.

On Monday in New York, AMR is scheduled to begin presenting its case for throwing out union contracts and imposing new pay, benefits and work rules. A federal bankruptcy judge is expected to rule on the request in early June.

Unions for American's pilots, flight attendants and ground workers have been discussing supporting a takeover bid and were still working on details late Thursday, said the people familiar with the talks.

There is no US Airways proposal publicly available for the unions to support. AMR's management has exclusive rights to present a reorganization proposal to the bankruptcy court until late September, and it could ask to extend that period.

Each of American's three major unions has a seat on the nine-member committee that represents AMR's unsecured creditors. The unions also hope to win support for the US Airways bid from other committee members, who include a federal pension agency and aircraft maker Boeing Co.

Creditors' committees can wield great influence in bankruptcy cases. In 2007, US Airways dropped a hostile bid for Delta Air Lines Inc., which was then in bankruptcy, after the committee backed Delta's plan to remain independent.

US Airways executives have said that one lesson they learned from the failed Delta bid was the need for support from labor at the target airline.

Reports have swirled for weeks that US Airways was meeting with AMR creditors. AMR CEO Thomas Horton referred to the situation in a letter to employees Thursday.

"There continues to be much takeover speculation in the press fueled by those who seek to serve their own agendas," Horton wrote. "I expect this to continue and to escalate."

AMR spokesman Bruce Hicks said the company is in the middle of a complex restructuring process to return to profitability and find "the very best path forward for all of its stakeholders."

Horton has opened the door to merger talks, but only after AMR emerges from bankruptcy protection.

The unions, however, have signaled their lack of confidence in Horton's reorganization plan, which includes short-term cuts but promises long-term growth. They question whether American can catch up to bigger rivals United and Delta without a merger. Last week, the Allied Pilots Association, the Association of Professional Flight Attendants and the Transport Workers Union took the unusual step of criticizing elected officials who came to AMR's defense. Oklahoma Gov. Mary Fallin and U.S. Sen. Kay Bailey Hutchison, R-Texas, said that AMR should be left alone while it reorganizes and not become the prey in a hostile takeover. But the presidents of the three unions said that in looking out for their members' interests, "we must exercise due diligence and examine every possibility."