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American Airlines Further Explores Potential Merger

American Airlines has signed non-disclosure agreements with US Airways and British Airways as the bankrupt carrier further explores merging or selling a stake to another carrier.

American Airlines 767-200
Photo by Darren Booth for CNBC.com
American Airlines 767-200

The agreements mean AMR will exchange financial and confidential information with both U.S. Airways and British Airways. It also means all three airlines are now in a period where they agree not to discuss details of a possible merger with other parties like labor unions or potential private equity investors.

Both US Airways and AMR acknowledged the signing of the non-disclosure agreement, with US Airways CEO Doug Parker saying he would not discuss a possible merger any further until a deal is announced or negotiations end.

In a memo sent to employees, Parker said the airline “will not be able to be as open and candid about discussion with American as we usually are about issues important to us.”

While Parker may not be talking, investors are clearly discussing a possible merger between bankrupt American and US Airways. Shares of LCC were higher throughout the day on the discussion of further consolidation in the airline industry. (Read More: Legroom Crunch: More Airlines Reduce Space, Add Rows.)

OneWorld Alliance

British Airways’ interest in possibly taking a stake in AMR is not surprising given the long relationship the two carriers have enjoyed. They already have a joint business agreement for flights between the U.S. and Europe.

Another factor is the OneWorld frequent flier alliance. Both were founding members of the alliance and British Airways wants to make sure American remains a part of the team. US Airways CEO Doug Parker has said that he would keep American Airlines part of the OneWorld Alliance if he successfully completed a merger. US Airways is currently part of the Star Alliance.

British Airways alone could not buy American Airlines. Federal law restricts foreign ownership of U.S.-based airlines to 25 percent. Those familiar with the British Airways interest in American say the UK carrier would bring in private equity investors if it were to make an official play for American.

Deal in or out of bankruptcy?

AMR CEO Tom Horton has been adamant that his airline wants to emerge from bankruptcybefore merging with another airline.

One reason is the financial pay-off he and other top executives will receive for guiding American through bankruptcy as a standalone airline. Another factor is ability to dictate terms of any merger. Outside of bankruptcy court, AMR would have more say in how a merger takes place, the executives who stay and what happens next at the airline. (Read More: How American Airlines Gets Social Media Right.)

All of this means the unsecured creditors committee will continue to have significant say on the future of American over the next couple of months. The committee has already forced American management to consider a merger. Now it will play a pivotal role in assessing the possible bids for the bankrupt carrier.

—By CNBC's Phil LeBeau
@Lebeaucarnews

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