CNBC's Thompson: AMR Report Fuels Talk of Airline Consolidation

Shares of American Airlines' parent AMR rose Friday after a media report that the company may attract a takeover bid from GoldmanSachs and British Airways.

CNBC’s Mary Thompson said the report, which was met by widespread skepticism, has fueled speculation about further consolidation in the troubled airline industry. Besides AMR, shares of United parent UAL rose, while British Airways fell.

Thompson noted that a merger between American and British Airways was attempted and abandoned once before, in 1996.

Business Link

This time, though, the two carriers already have a business link via the Star Alliance, a transatlantic airline association. And British Airways would like a foothold in the U.S. in case the federal government lifts its 25% foreign-ownership cap, Thompson said.

For now, Thompson said, analysts don’t see a merger happening. Prudential is "skeptical" that regulators would approve any combination, having quashed Virgin Airlines' plans to expand into the U.S. And Morgan Stanley says AMR’s debt load renders it unattractive to private equity.

Business Week reported in its Feb. 26 issue that the investor group is planning to bid between $46 and $52 per share--or $9.8 billion to $11.1 billion--for AMR. That would represent a healthy premium over AMR's closing price Thursday of $38.05.

The magazine article, based on unnamed sources, said a bid is not certain.

Spokesman Tim Smith said AMR doesn't talk about consolidation that could affect the Fort Worth, Texas-based company.

Profit Last Year

AMR earned a profit last year after five straight losing years but has lost $7.9 billion since early 2001. The company has been paying down its debt but still had $18.4 billion in debt at the end of last year.

The heavy debt load has prevented the company from upgrading its aging fleet of 672 planes, including 300 fuel-guzzling MD-80s. Chairman and Chief Executive Gerard Arpey said last month that the company must "do a lot better" than its $231 million profit in 2006 to replace planes and other assets.

There has been widespread speculation about consolidation in the airline industry. The speculation has grown since US Airways Group launched a hostile bid for Delta Air Lines Inc. late last year, although Delta rebuffed the advance.