S-4/A 1 d486518ds4a.htm S-4/A S-4/A
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As filed with the Securities and Exchange Commission on June 10, 2013

Registration No. 333-187933

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

AMENDMENT NO. 3

TO

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

AMR Corporation

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   4512   75-1825172

(State or other jurisdiction of

incorporation)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

4333 Amon Carter Blvd.

Fort Worth, Texas 76155

(817) 963-1234

(Address, including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices)

 

 

Gary F. Kennedy

AMR Corporation

Senior Vice President, General Counsel, and Chief Compliance Officer

4333 Amon Carter Blvd.

Fort Worth, Texas 76155

(817) 963-1234

(Name, Address, including Zip Code, and Telephone Number, including Area Code, of Agent for Service)

 

 

With copies to:

 

Thomas A. Roberts

Weil, Gotshal & Manges LLP

200 Crescent Court, Suite 300

Dallas, Texas 75201

(214) 746-7700

 

Mary R. Korby

K&L Gates LLP

1717 Main Street, Suite 2800

Dallas, Texas 75201

(214) 939-5500

 

Stephen L. Johnson

US Airways Group, Inc.

Executive Vice President – Corporate

and Government Affairs

111 West Rio Salado Parkway

Tempe, Arizona 85281

(480) 693-0800

 

Anthony J. Richmond

Latham & Watkins LLP

140 Scott Drive

Menlo Park, California 94025

(650) 328-4600

 

 

Approximate date of commencement of the proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective and upon completion of the merger described in the enclosed document.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large Accelerated filer  ¨      Accelerated filer                     x
Non-accelerated filer     ¨   (Do not check if a small reporting company)    Smaller reporting company   ¨

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ¨

Exchange Act Rule 14d-1(d) (Cross-Border Issuer Third Party Tender Offer)  ¨

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a) of the Securities Act, may determine.

 

 

 


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The information in this proxy statement/prospectus is not complete and may be changed. AMR Corporation may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

PRELIMINARY—SUBJECT TO COMPLETION—DATED JUNE 10, 2013

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

 

LOGO

To Our Stockholders:

On behalf of the board of directors of US Airways Group, Inc., we invite you to attend the 2013 annual meeting of stockholders to be held at the offices of Latham & Watkins LLP, located at 885 Third Avenue, New York, New York 10022, on Friday, July 12, 2013 at 9:00 a.m., local time.

As previously announced, the board of directors of US Airways Group has unanimously approved the merger of US Airways Group with AMR Merger Sub, Inc., a wholly-owned subsidiary of AMR Corporation, pursuant to the terms and conditions of that certain Agreement and Plan of Merger, dated as of February 13, 2013, as amended, by and among AMR, US Airways Group, and AMR Merger Sub. The merger will create a premier global airline that our board believes will have the scale, breadth, and capabilities to compete more effectively and profitably in the global marketplace. AMR, as reorganized following emergence from its Chapter 11 proceedings currently pending in the U.S. Bankruptcy Court for the Southern District of New York, will be the ultimate parent of the combined airline and will be renamed American Airlines Group Inc., or AAG. The combined airline will present a single brand name to consumers—American Airlines®.

The merger cannot be completed unless US Airways Group stockholders vote in favor of the adoption of the merger agreement. The obligations of US Airways Group and AMR to complete the merger are also subject to the satisfaction or waiver of other conditions, including clearance from regulatory agencies. The merger is to be effected pursuant to a plan of reorganization of AMR and certain of its subsidiaries in connection with their Chapter 11 proceedings. The plan of reorganization is subject to confirmation and consummation in accordance with the requirements of the Bankruptcy Code.

If the merger is completed, holders of US Airways Group common stock will receive one share of newly issued common stock of AAG for each share of US Airways Group common stock they own, subject to the terms and conditions of the merger agreement. The aggregate number of shares of AAG common stock issuable to holders of US Airways Group equity instruments (including stockholders, holders of convertible notes, optionees, and holders of restricted stock units) will represent 28% of the diluted equity ownership of AAG. The remaining 72% diluted equity ownership in AAG will be distributable, pursuant to the plan of reorganization, to stakeholders, labor unions, and certain employees of AMR and its debtor subsidiaries.

US Airways Group common stock currently trades on the NYSE under the symbol “LCC.” It is a condition to the completion of the merger that the shares of AAG common stock to be issued to US Airways Group equity holders pursuant to the merger be authorized for listing on the NYSE or NASDAQ.

We intend for the merger to qualify as a reorganization for U.S. federal income tax purposes, and the completion of the merger is conditioned on the receipt by each of US Airways Group and AMR of an opinion from its outside counsel to the effect that the merger will qualify as such a reorganization. Assuming the merger qualifies as a reorganization, US Airways Group stockholders generally will not recognize any gain or loss for U.S. federal income tax purposes upon the exchange of shares of US Airways Group common stock for shares of newly issued common stock of AAG in connection with the merger.

The board of directors of US Airways Group has determined that the merger agreement and the merger are advisable and in the best interests of US Airways Group and its stockholders and has unanimously approved the merger agreement and the merger.

We are asking you to vote to adopt the merger agreement at the 2013 annual meeting of stockholders. At the 2013 annual meeting of stockholders, you will also be asked to vote on the election of US Airways Group directors and other matters.


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The accompanying proxy statement/prospectus is the proxy statement of US Airways Group for the 2013 annual meeting of stockholders and also the prospectus of AMR for the common stock of AAG that will be issued to US Airways Group equity holders in connection with the merger. More information about US Airways Group, AMR, AAG, the merger agreement, the merger, the plan of reorganization, the business to be conducted at the meeting, and the procedures to be followed at the meeting is contained in the accompanying proxy statement/prospectus. We encourage you to read the accompanying proxy statement/prospectus carefully before voting, including the section entitled “Risk Factors” beginning on page 44.

The board of directors of US Airways Group unanimously recommends that US Airways Group’s stockholders vote “FOR” the proposal to adopt the merger agreement, “FOR” the proposal to approve, on a non-binding, advisory basis, the merger-related compensation of US Airways Group’s named executive officers as disclosed in the attached proxy statement/prospectus, “FOR” the adjournment of the 2013 annual meeting of stockholders, if necessary, to solicit additional proxies in favor of the proposal to adopt the merger agreement if there are not sufficient votes at the time of such adjournment to adopt the merger agreement, and “FOR” each of the other proposals described in the accompanying proxy statement/prospectus.

We cannot complete the merger unless the stockholders of US Airways Group vote to adopt the merger agreement. Your vote is very important, regardless of the number of shares you own. Whether or not you plan to attend the 2013 annual meeting of stockholders in person, we request that you complete, date, sign, and return the enclosed proxy card (if you received US Airways Group’s proxy materials by mail), or, if your proxy card includes instructions for using these methods, vote by telephone or over the Internet as directed by the instructions provided on your proxy card. Of course, returning your proxy does not prevent you from attending the 2013 annual meeting of stockholders and voting your shares in person. If you choose to attend the 2013 annual meeting of stockholders in person, you may revoke your proxy and cast your vote at the meeting.

If you plan to attend the 2013 annual meeting of stockholders in person, are a stockholder of record and received US Airways Group’s proxy materials by mail, please mark your proxy card in the space provided for that purpose. An admission ticket is included with the proxy card for each stockholder of record. If your shares are not registered in your own name but rather held in street name and you would like to attend the 2013 annual meeting of stockholders in person, please ask the broker, bank, or other nominee that holds the shares to provide you with evidence of your share ownership. Please be sure to bring the admission ticket or evidence of your share ownership to the meeting.

Sincerely,

 

LOGO

W. Douglas Parker

Chairman of the Board and

Chief Executive Officer

The accompanying proxy statement/prospectus is dated June 10, 2013, and is first being mailed to stockholders of US Airways Group on or about June 11, 2013.


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US AIRWAYS GROUP, INC.

111 WEST RIO SALADO PARKWAY

TEMPE, ARIZONA 85281

NOTICE OF 2013 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON FRIDAY, JULY 12, 2013

June 10, 2013

NOTICE IS HEREBY GIVEN that the 2013 annual meeting of stockholders of US Airways Group, Inc., a Delaware corporation (“US Airways Group”), will be held at the offices of Latham & Watkins LLP, located at 885 Third Avenue, New York, New York 10022, on Friday, July 12, 2013 at 9:00 a.m., local time, for the purposes of considering and acting upon:

 

   

a proposal to adopt the Agreement and Plan of Merger, as amended (the “Merger Agreement”), dated as of February 13, 2013, by and among US Airways Group, AMR Corporation (“AMR”), and AMR Merger Sub, Inc., a wholly-owned subsidiary of AMR (“AMR Merger Sub”);

 

   

a proposal to consider and approve, on a non-binding, advisory basis, the merger-related compensation of US Airways Group’s named executive officers as disclosed in the attached proxy statement/prospectus;

 

   

a proposal to approve the adjournment of the 2013 annual meeting of stockholders, if necessary, to solicit additional proxies in favor of the proposal to adopt the Merger Agreement if there are not sufficient votes at the time of such adjournment to adopt the Merger Agreement;

 

   

a proposal to elect two directors in Class II to the board of directors of US Airways Group to serve until the 2016 annual meeting of stockholders of US Airways Group and until their respective successors have been duly elected and qualified;

 

   

a proposal to ratify the appointment of KPMG LLP as the independent registered public accounting firm of US Airways Group for the fiscal year ending December 31, 2013;

 

   

a proposal to consider and approve, on a non-binding, advisory basis, the compensation of US Airways Group’s named executive officers as disclosed in the attached proxy statement/prospectus; and

 

   

such other business as properly may come before the 2013 annual meeting of stockholders or any adjournments or postponement thereof—the board of directors of US Airways Group is not aware of any other business to be presented to a vote of the stockholders at the 2013 annual meeting of stockholders.

Information relating to the above matters is set forth in the attached proxy statement/prospectus, which is incorporated into this notice by reference. The board of directors of US Airways Group has fixed the close of business on May 30, 2013 as the record date for determination of US Airways Group stockholders entitled to receive notice of, and to vote at, the 2013 annual meeting of stockholders or any adjournments or postponement thereof. A list of the names of US Airways Group stockholders of record will be available for ten days prior to the 2013 annual meeting of stockholders for any purpose germane to the 2013 annual meeting of stockholders between the hours of 9:00 a.m. and 5:00 p.m., local time, at US Airways Group’s headquarters, 111 West Rio Salado Parkway, Tempe, Arizona 85281. The US Airways Group stockholder list will also be available at the 2013 annual meeting of stockholders for examination by any stockholder present at the 2013 annual meeting of stockholders.

If you do not expect to attend the 2013 annual meeting of stockholders in person, you are requested to vote by submitting a proxy for your shares using the toll-free number or the website provided on your proxy card, if your proxy card includes instructions for using these quick, cost-effective, and easy methods for submitting proxies or if you received US Airways Group’s proxy materials by mail, completing, signing, and dating the enclosed proxy card and returning it without delay in the enclosed envelope, which requires no postage stamp if mailed in the U.S.


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Voting by phone, Internet, or mail will not prevent you from later revoking your proxy and voting in person at the 2013 annual meeting of stockholders. If you want to vote at the 2013 annual meeting of stockholders, but your shares are held in street name by a broker, bank, or other nominee, you will need to obtain proof of ownership as of May 30, 2013 and a proxy to vote the shares from your broker, bank, or other nominee.

By Order of the Board of Directors of US Airways Group,

 

LOGO

Caroline B. Ray

Corporate Secretary

Tempe, Arizona

June 10, 2013

The accompanying proxy statement/prospectus provides a detailed description of the Merger Agreement, the merger, and the other matters to be considered at the 2013 annual meeting of stockholders. We urge you to read the accompanying proxy statement/prospectus, including any documents incorporated by reference into the accompanying proxy statement/prospectus, and its annexes carefully and in their entirety, including the section entitled “Risk Factors” beginning on page 44. If you have any questions concerning the Merger Agreement, the other proposals, or the accompanying proxy statement/prospectus, would like additional copies of the accompanying proxy statement/prospectus, or need help voting your shares, please contact US Airways Group’s proxy solicitor:

MacKenzie Partners, Inc.

105 Madison Avenue

New York, NY 10016

(800) 322-2885

Important notice regarding the Internet availability of proxy materials for the 2013 annual meeting of stockholders to be held on July 12, 2013: This notice of 2013 annual meeting of stockholders, the accompanying proxy statement/prospectus, and US Airways Group’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 are available at www.proxyvote.com.

PLEASE READ THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS CAREFULLY AND THEN PROMPTLY INDICATE YOUR VOTING INSTRUCTIONS BY: (i) SUBMITTING A PROXY FOR YOUR SHARES BY USING THE TOLL-FREE NUMBER OR WEBSITE INDICATED ON YOUR PROXY CARD, IF YOUR PROXY CARD INCLUDES INSTRUCTIONS FOR USING THESE METHODS, OR (ii) SUBMITTING A PROXY IN WRITING BY FILLING OUT, SIGNING, AND DATING YOUR PROXY CARD AND MAILING IT IN THE PREPAID ENVELOPE INCLUDED IN THESE PROXY MATERIALS.


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ABOUT THIS PROXY STATEMENT/PROSPECTUS

Glossary of Terms

For the convenience of the reader, certain capitalized terms used in this proxy statement/prospectus have been consolidated into a Glossary beginning on page 35.

General Content of this Proxy Statement/Prospectus

This proxy statement/prospectus is for the principal purpose of soliciting the approval of the stockholders of US Airways Group of the adoption of the Agreement and Plan of Merger, dated as of February 13, 2013, by and among AMR, AMR Merger Sub, and US Airways Group, as amended by the Amendment to Agreement and Plan of Merger (the “Amendment”), dated as of May 15, 2013, by and among AMR, AMR Merger Sub, and US Airways Group and the Second Amendment to Agreement and Plan of Merger (the “Second Amendment”), dated as of June 7, 2013, by and among AMR, AMR Merger Sub, and US Airways Group (as amended, the “Merger Agreement”). However, because US Airways Group would ordinarily hold its annual meeting of stockholders in mid-June, in order to avoid the expense and inconvenience of holding two stockholders meetings in a short period of time, a single stockholders meeting will be held to act on the matters customarily placed before stockholders at the annual meeting as well as the matters to be placed before stockholders in connection with the adoption of the Merger Agreement and the approval of certain related items. Accordingly, this proxy statement/prospectus includes information related to all such matters.

Registration Statement, Prospectus, and Proxy Statement under the Federal Securities Laws

This proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed with the U.S. Securities and Exchange Commission (the “SEC”) by AMR, constitutes a prospectus of AMR under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of AMR, which will be subsequently renamed American Airlines Group Inc. (“AAG”), to be issued to US Airways Group equity holders in connection with the merger of AMR Merger Sub with and into US Airways Group, with US Airways Group continuing as the surviving entity in such merger as a direct wholly-owned subsidiary of AMR pursuant to the Merger Agreement (the “Merger”). This proxy statement/prospectus also constitutes a proxy statement under Section 14(a) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and a notice of meeting with respect to the 2013 annual meeting of stockholders of US Airways Group (the “2013 Annual Meeting of Stockholders”) to consider and vote upon the proposal to adopt the Merger Agreement and the other matters specified herein.

 

 

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation. Information contained in this proxy statement/prospectus regarding US Airways Group and its subsidiaries has been provided by US Airways Group, information contained in this proxy statement/prospectus regarding AMR and its subsidiaries has been provided by AMR, and information contained in this proxy statement/prospectus regarding AAG has been provided by both US Airways Group and AMR.

Neither the SEC nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.

 

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THIS PROXY STATEMENT/PROSPECTUS INCORPORATES ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates by reference important business and financial information about US Airways Group from documents that are not included in or delivered with this proxy statement/prospectus. This information is available to you without charge upon request. For a more detailed description of the information incorporated by reference into this proxy statement/prospectus and how you may obtain it, see the section entitled “Additional Information” beginning on page 347.

You can obtain any of the documents of US Airways Group incorporated by reference into this proxy statement/prospectus from the SEC through the SEC’s website at www.sec.gov. Documents of US Airways Group that are incorporated by reference are also available from US Airways Group without charge, excluding any exhibits to those documents that are not specifically incorporated by reference as an exhibit in this proxy statement/prospectus. US Airways Group stockholders may request a copy of those documents in writing or by telephone by contacting:

US Airways Group, Inc.

111 West Rio Salado Parkway

Tempe, Arizona 85281

Telephone number: (480) 693-0800

Attn: Investor Relations

or

MacKenzie Partners, Inc.

105 Madison Avenue

New York, New York 10016

Telephone number: (800) 322-2885

In order for you to receive timely delivery of the documents in advance of the 2013 Annual Meeting of Stockholders, US Airways Group or MacKenzie should receive your request no later than July 9, 2013.

AMR is not currently eligible under the SEC’s rules to avail itself of the ability to incorporate by reference documents into this proxy statement/prospectus. Accordingly, much of the information that US Airways Group has incorporated by reference, such as the description of its business, management’s discussion and analysis of financial condition and results of operations, and its consolidated financial statements, is, with respect to AMR, fully set forth in this proxy statement/prospectus, principally in Part III beginning on page 206, the AMR 2012 consolidated financial statements beginning on page F-31, and the AMR unaudited interim condensed consolidated financial statements for the three months ended March 31, 2013 beginning on page F-2.

Investors may also consult US Airways Group’s or AMR’s respective websites for more information concerning the Merger. AMR’s website is www.aa.com. US Airways Group’s website is www.usairways.com. Information included on AMR’s website and on US Airways Group’s website is not incorporated by reference into this proxy statement/prospectus. In addition, for information regarding the voluntary cases commenced by AMR and certain of its direct and indirect subsidiaries under chapter 11 of the Bankruptcy Code (the “Chapter 11 Cases”), investors may access filings made in those proceedings, including the Plan and Disclosure Statement filed by AMR and certain of its direct and indirect subsidiaries that filed the Chapter 11 Cases (the “Debtors”), at www.amrcaseinfo.com. Information on the website identified in the preceding sentence is not incorporated by reference into this proxy statement/prospectus. As used herein, “Plan” means the plan of reorganization proposed by the Debtors under chapter 11 of the Bankruptcy Code and “Disclosure Statement” means a disclosure statement filed by the Debtors under Section 1125 of the Bankruptcy Code. As used herein, “Bankruptcy Code” means title 11 of the U.S. Code.

 

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TABLE OF CONTENTS

 

     Page  
PART I—SUMMARY AND GENERAL INFORMATION   

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE US AIRWAYS GROUP 2013 ANNUAL MEETING OF STOCKHOLDERS

     1   

SUMMARY

     12   

The Companies

     12   

The Merger

     13   

Effectiveness of the Merger Agreement

     14   

Termination of the Merger Agreement

     14   

The Combined Company after the Merger

     15   

Board of Directors and Management of AAG after the Merger

     16   

Recommendation of US Airways Group’s Board of Directors

     18   

US Airways Group Stockholders Entitled to Vote

     18   

Vote Required

     18   

Voting by US Airways Group Directors and Executive Officers

     18   

Opinion of US Airways Group’s Financial Adviser

     19   

Interests of US Airways Group’s Directors and Executive Officers in the Merger

     19   

Treatment of US Airways Group Equity Awards

     19   

Listing of AAG Common Stock and Delisting of US Airways Group Common Stock

     20   

No Dissenters’ Rights

     20   

Comparison of Stockholder Rights and Corporate Governance Matters

     20   

The Plan of Reorganization

     20   

Regulatory Approvals Required for the Merger

     21   

Conditions to the Merger

     21   

Expected Timing of the Merger

     24   

Non-Solicitation of Acquisition Proposals

     24   

Termination Fees and Expenses

     24   

Material U.S. Federal Income Tax Consequences of the Merger

     24   

Accounting Treatment

     25   

Risk Factors

     25   

Comparative Per Share Market Price Data

     25   

Selected Consolidated Financial Data

     27   

Supplementary Financial Data

     32   

Selected Unaudited Pro Forma Condensed Combined Financial Data of AMR and US Airways Group

     33   

GLOSSARY

     35   

RISK FACTORS

     44   

Risk Factors Relating to the Merger

     44   

 

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     Page  

Common Stock Risks

     49   

Liquidity Risks

     52   

Business Risks

     54   

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

     66   

THE US AIRWAYS GROUP ANNUAL MEETING

     68   

Purpose, Place, Date, and Time

     68   

Record Date; Outstanding Shares; Stockholders Entitled to Vote

     68   

Quorum; Broker Non-Votes

     68   

Vote Required for Proposal 1: The Merger

     69   

Vote Required for Proposal 2: Non-Binding Advisory Vote on the Merger-Related Compensation for Named Executive Officers

     69   

Vote Required for Proposal 3: Adjournment If Votes Are Insufficient to Adopt the Merger Agreement

     69   

Vote Required for Proposal 4: Election of Directors

     70   

Vote Required for Proposal 5: Ratification of Appointment of Independent Registered Public Accounting Firm

     71   

Vote Required for Proposal 6: Non-Binding Advisory Vote to Approve the Compensation of Named Executive Officers

     71   

Voting of Proxies

     71   

Revocation of Proxies

     72   

Solicitation of Proxies

     73   

Inspector of Election

     73   

Electronic Delivery of Proxy Materials

     73   

Householding of Proxy Materials

     73   

Voting by US Airways Group Directors and Executive Officers

     74   

Special Assistance with Attendance at the 2013 Annual Meeting of Stockholders

     74   

Recommendation of US Airways Group’s Board of Directors

     74   

PART II—THE MERGER AND THE COMBINED COMPANY

  

PROPOSAL 1: THE MERGER

     75   

THE MERGER

     76   

General

     76   

Background of the Merger

     76   

Recommendation of US Airways Group’s Board of Directors with Respect to the Merger Agreement and Its Reasons for the Merger

     87   

AMR’s Board of Directors’ Reasons for the Merger

     91   

Opinion of US Airways Group’s Financial Adviser

     93   

General Information regarding Forecasts and Expected Synergies

     100   

Regulatory Approvals Required for the Merger

     105   

Material U.S. Federal Income Tax Consequences

     106   

Accounting Treatment

     108   

 

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     Page  

Listing of AAG Common Stock and Delisting of US Airways Group Common Stock

     109   

No Dissenters’ Rights

     109   

Restrictions on Sales of Shares of AAG Common Stock Received by Affiliates in the Merger

     109   

Interests of US Airways Group’s Directors and Executive Officers in the Merger

     110   

Treatment of US Airways Group Equity Awards

     113   

Treatment of AMR Equity Awards

     114   

New AAG Compensation Plan and Certain Equity Awards

     114   

Horton Letter Agreement

     115   

Exchange of Shares

     115   

Litigation Related to the Merger

     115   

THE MERGER AGREEMENT

     117   

Structure of the Merger

     117   

Effectiveness of the Merger Agreement

     117   

Closing and Effective Time of the Merger

     117   

Post-Merger Governing Documents, Directors and Officers, Corporate Name, and Headquarters

     117   

The Merger Consideration and the Plan Shares

     119   

Representations and Warranties

     121   

Conduct of Business pending the Merger

     123   

Bankruptcy Matters

     126   

Acquisition Proposals

     128   

US Airways Group Stockholders Meeting

     132   

Publicity

     132   

Employee Matters

     132   

Conditions to the Merger

     135   

Termination of the Merger Agreement

     138   

Effect of Termination

     139   

Termination Fees and Expenses

     140   

Amendment and Waiver

     142   

SEC Filings

     142   

Reasonable Best Efforts and Regulatory Matters

     143   

Treatment of US Airways Group Convertible Debt

     143   

Fees and Expenses

     144   

Director Flight Benefits

     144   

Indemnification; Directors’ and Officers’ Insurance

     144   

Transition Committee

     145   

Specific Performance

     145   

US Airways Group Tax Plan

     146   

 

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COMPARATIVE PER SHARE MARKET PRICE DATA

     149   

THE COMBINED COMPANY AFTER THE MERGER

     150   

General

     150   

Board of Directors and Management of AAG after the Merger

     151   

THE PLAN OF REORGANIZATION

     155   

The Plan

     155   

Plan Approval Process

     156   

The Support and Settlement Agreement

     156   

AAG Convertible Preferred Stock

     157   

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     160   

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET MARCH 31, 2013

     162   

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2013

     163   

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2012

     164   

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

     165   

Acquisition Accounting Adjustments

     165   

Other Merger Adjustments

     166   

Items Excluded from the Unaudited Pro Forma Condensed Combined Financial Statements

     167   

DESCRIPTION OF CAPITAL STOCK OF AAG

     177   

Common Stock

     177   

Preferred Stock

     178   

AAG Convertible Preferred Stock

     178   

Certain Anti-takeover Provisions of AAG’s Certificate of Incorporation and Bylaws

     178   

Other Provisions Restricting Transfer and Ownership

     179   

COMPARISON OF STOCKHOLDER RIGHTS AND CORPORATE GOVERNANCE MATTERS

     180   

AAG EQUITY COMPENSATION PLAN

     196   

Administration; Eligibility

     196   

Limitation on Awards and Shares Available

     196   

Awards

     196   

Performance Awards

     197   

Certain Transactions

     198   

Transferability; Participant Payments

     198   

Plan Amendment and Termination

     199   

Certain Equity Awards

     199   

PROPOSAL 2: ADVISORY VOTE ON MERGER-RELATED COMPENSATION

     200   

Merger-Related Compensation

     200   

Narrative Disclosure to Merger-Related Compensation Table

     204   

PROPOSAL 3: ADJOURNMENT IF VOTES ARE INSUFFICIENT TO ADOPT MERGER AGREEMENT

     205   

 

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     Page  

PART III—AMR

  

DESCRIPTION OF AMR’S BUSINESS

     206   

Chapter 11 Proceedings

     206   

General Description

     206   

Competition

     207   

Regulation

     209   

Labor

     211   

Fuel

     212   

Frequent Flyer Program

     213   

Cargo

     213   

Other Revenues

     213   

Other Matters

     213   

Legal Proceedings

     214   

Description of Property

     216   

SUPPLEMENTARY FINANCIAL INFORMATION

     219   

Supplementary Financial Data

     219   

AMR MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     220   

Chapter 11 Progress

     220   

Other Recent Events

     221   

Contingencies

     223   

Financial Highlights

     223   

Liquidity and Capital Resources

     225   

Contractual Obligations

     229   

Results of Operations

     230   

Other Information

     238   

AMR’S QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     243   

Market Risk Sensitive Instruments and Positions

     243   

AMR BOARD OF DIRECTORS AND CORPORATE GOVERNANCE INFORMATION

     245   

Directors, Executive Officers, and Corporate Governance

     245   

AMR’S COMPENSATION DISCUSSION AND ANALYSIS

     251   

Executive Summary

     251   

AMR’s Compensation Objectives and Philosophy

     252   

The Process AMR Uses to Determine Compensation

     252   

The Primary Components of AMR’s Compensation Program

     252   

Compensation Committee Report

     258   

Executive Compensation

     260   

Change In Control

     272   

Director Compensation

     274   

Merger-Related Compensation

     277   

 

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     Page  

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

     278   

Director Independence and Transactions with Related Persons

     280   

Principal Accounting Fees and Services

     281   

AMR AUDIT COMMITTEE REPORT

     282   

PART IV—US AIRWAYS GROUP ANNUAL MEETING PROPOSALS

  

PROPOSAL 4: ELECTION OF DIRECTORS

     283   

Directors and Director Nominees

     283   

Director Nominees

     284   

Continuing Directors

     284   

INFORMATION ABOUT US AIRWAYS GROUP’S BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

     287   

Corporate Governance Guidelines

     287   

Director Independence

     287   

Board Meetings

     287   

Board Committees

     288   

Director Nominees

     290   

Board Leadership and Structure

     292   

Board Self-Evaluation

     293   

Code of Ethics

     293   

Board of Directors Role in Risk Oversight

     293   

Risk Assessment with Respect to Compensation Practices

     295   

Annual Meeting Attendance

     296   

Communications with the Board and Non-Management Directors

     296   

US AIRWAYS GROUP DIRECTOR COMPENSATION

     297   

Board of Directors Fees

     297   

Equity Compensation Awards

     298   

Flight Benefits

     298   

Stock Ownership Guidelines

     298   

Directors’ Charitable Contribution Program

     298   

SECURITY OWNERSHIP OF CERTAIN US AIRWAYS GROUP BENEFICIAL OWNERS AND MANAGEMENT

     300   

PROPOSAL 5: US AIRWAYS GROUP AUDITOR RATIFICATION

     305   

Independent Registered Public Accounting Firm Fees

     305   

Audit Committee Disclosure

     305   

Policy on Audit Committee Pre-Approval

     306   

US AIRWAYS GROUP AUDIT COMMITTEE REPORT

     307   

PROPOSAL 6: US AIRWAYS GROUP SAY-ON-PAY ADVISORY VOTE

     308   

US AIRWAYS GROUP COMPENSATION DISCUSSION AND ANALYSIS

     310   

General

     310   

Total Realized Compensation

     312   

Determination of Compensation

     313   

Compensation Policies and Objectives

     314   

 

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     Page  

Executive Compensation Mix with an Emphasis on Performance-Based Pay

     314   

Base Salary

     315   

Annual Incentive Program

     315   

Long-Term Incentive Performance Program

     316   

Stock-Based Compensation

     319   

Other Benefits and Perquisites

     320   

Continuing Focus on Leading Practices

     322   

US AIRWAYS GROUP COMPENSATION AND HUMAN RESOURCES COMMITTEE REPORT

     323   

US AIRWAYS GROUP EXECUTIVE OFFICERS

     324   

US AIRWAYS GROUP EXECUTIVE COMPENSATION

     326   

Summary Compensation Table

     326   

Grants of Plan-Based Awards in 2012

     327   

Outstanding Equity Awards at 2012 Fiscal Year-End

     328   

Option Exercises and Stock Vested

     329   

Pension Benefits and Nonqualified Deferred Compensation

     329   

Employment and Other Executive Agreements

     329   

Potential Payments upon Termination or Change in Control

     330   

US AIRWAYS GROUP RELATED PARTY TRANSACTIONS

     341   

Policies and Procedures for Review and Approval of Related Person Transactions

     341   

US AIRWAYS GROUP EQUITY COMPENSATION PLAN INFORMATION

     342   

US AIRWAYS GROUP SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     343   

OTHER MATTERS

     344   

Stockholder Proposals

     344   

PART V—OTHER INFORMATION

  

LEGAL MATTERS

     345   

EXPERTS

     346   

AMR

     346   

US Airways Group

     346   

ADDITIONAL INFORMATION

     347   

INDEX TO AMR CONSOLIDATED FINANCIAL STATEMENTS

     F-1   

 

Annexes

     

Annex A

   Agreement and Plan of Merger and the Amendment and the Second Amendment thereto   

Annex B

   Form of Amended and Restated Certificate of Incorporation of AMR   

Annex C

   Form of Certificate of Designations for Series A Convertible Preferred Stock   

Annex D

   Form of Amended and Restated Bylaws of AMR   

Annex E

   Opinion of Barclays Capital Inc.   

 

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PART I—SUMMARY AND GENERAL INFORMATION

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE US AIRWAYS GROUP 2013 ANNUAL MEETING OF STOCKHOLDERS

The following are some questions that you, as a stockholder of US Airways Group, may have regarding the Merger and other matters being considered at the 2013 Annual Meeting of Stockholders and brief answers to those questions. You should carefully read this proxy statement/prospectus, including its annexes and any documents incorporated by reference into this proxy statement/prospectus, because this proxy statement/prospectus and its annexes contain important information about the Merger, the Merger Agreement, and the other matters to be voted on at the 2013 Annual Meeting of Stockholders, and because the information in this section may not provide all the information that might be important to you.

 

Q: Why am I, as a US Airways Group stockholder, receiving this proxy statement/prospectus?

 

A: AMR and US Airways Group have agreed to a business combination of AMR and US Airways Group under the terms of the Merger Agreement that is described in this proxy statement/prospectus. A copy of the Merger Agreement is attached to this proxy statement/prospectus as Annex A. In addition, several other matters to be considered and acted on by the stockholders of US Airways Group at the 2013 Annual Meeting of Stockholders are set forth in the notice of the 2013 Annual Meeting of Stockholders and described in this proxy statement/prospectus.

The Merger cannot be completed unless US Airways Group stockholders vote to adopt the Merger Agreement. US Airways Group is asking its stockholders to vote on the adoption of the Merger Agreement at the 2013 Annual Meeting of Stockholders. The US Airways Group board of directors recommends that you vote “FOR” the adoption of the Merger Agreement at the 2013 Annual Meeting of Stockholders.

This proxy statement/prospectus is a proxy statement of US Airways Group and a prospectus of AMR. This proxy statement/prospectus is a proxy statement because the US Airways Group board of directors is soliciting proxies from its stockholders to vote at the 2013 Annual Meeting of Stockholders on the adoption of the Merger Agreement and the other matters set forth in the notice of the 2013 Annual Meeting of Stockholders and described in this proxy statement/prospectus to be considered and acted on by the stockholders of US Airways Group at the 2013 Annual Meeting of Stockholders. Your proxy will be used to vote your shares at the 2013 Annual Meeting of Stockholders or at any adjournment or postponement thereof. It is a prospectus because AAG will issue shares of AAG common stock to the stockholders of US Airways Group in the Merger.

A proxy is a legal designation of another person to vote your shares on your behalf. You may submit a proxy for your shares by using the toll-free number or the website provided on your proxy card, if your proxy card includes instructions for using these quick, cost-effective, and easy methods for submitting proxies. You also may submit a proxy in writing by simply filling out, signing, and dating your proxy card and mailing it in the prepaid envelope included with these proxy materials. If you submit a proxy by telephone or over the Internet, please do not return your proxy card by mail. You will need to follow the instructions when you submit a proxy using any of these methods to make sure your shares will be voted at the 2013 Annual Meeting of Stockholders. You also may vote by submitting a ballot in person if you attend the 2013 Annual Meeting of Stockholders. However, we encourage you to submit a proxy by mail by completing your proxy card, by telephone, or over the Internet, even if you plan to attend the 2013 Annual Meeting of Stockholders.

You must have been a stockholder of record at the close of business on May 30, 2013 to vote at the 2013 Annual Meeting of Stockholders.

Your vote is very important. You are encouraged to vote as soon as possible.

 

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Q: Why are AMR and US Airways Group proposing the Merger?

 

A: AMR and US Airways Group believe that the Merger will create a premier global airline. AMR and US Airways Group also believe that the combined global airline will have the scale, breadth, and capabilities to compete more effectively and profitably in the global marketplace. While there can be no assurance that it will be the case, the combined airline is expected to be a stronger airline than either American Airlines, Inc. (“American”) or US Airways, Inc. (“US Airways”), individually.

To review AMR’s and US Airways Group’s boards of directors’ reasons for the Merger in greater detail, including the potential adverse impact of the Merger, see the sections entitled “The Merger—Recommendation of US Airways Group’s Board of Directors with Respect to the Merger Agreement and Its Reasons for the Merger” beginning on page 87 and “The Merger—AMR’s Board of Directors’ Reasons for the Merger” beginning on page 91.

 

Q: How will the Merger be accomplished?

 

A: Under the terms of the Merger Agreement, AMR Merger Sub, a wholly-owned subsidiary of AMR, will merge with and into US Airways Group, with US Airways Group surviving as a wholly-owned subsidiary of AMR. Immediately following the Closing, AMR will change its name to American Airlines Group Inc., which will be the name of the combined company.

AAG will present a single brand name to consumers—American Airlines®—while it transitions to a unified route structure and frequent flyer program, while maintaining separate operating certificates for American and US Airways until operations and workforces are combined. AMR’s American Eagle Airlines, Inc. (“American Eagle”) and US Airways Group’s Piedmont Airlines, Inc. (“Piedmont”) and PSA Airlines, Inc. (“PSA”) will continue to operate as distinct entities following the Closing.

 

Q: What will holders of shares of US Airways Group common stock receive in the Merger?

 

A: Holders of US Airways Group common stock will receive one share of AAG common stock for each share of US Airways Group common stock they own, subject to the terms and conditions of the Merger Agreement. The aggregate number of shares of AAG common stock issuable in the Merger to holders of US Airways Group equity instruments (including stockholders, holders of convertible notes, optionees, and holders of restricted stock units (“RSUs”)) will represent 28% of the diluted equity ownership of AAG. The remaining 72% diluted equity ownership of AAG will be distributable, pursuant to the Plan, to stakeholders, labor unions, and certain employees of AMR and the other Debtors and such 72% of the diluted equity ownership of AAG includes all shares of AAG common stock that are or may become issuable upon conversion of shares of the series of preferred stock, par value $0.01per share, of AAG, designated as “Series A Convertible Preferred Stock” (the “AAG Convertible Preferred Stock”). As a result, the 28% diluted equity ownership of AAG that will be distributed to the holders of US Airways Group equity instruments will not be diluted by the conversion of the AAG Convertible Preferred Stock or by the issuance of shares of AAG common stock pursuant to the Plan. The determination of the 28% diluted equity ownership of AAG that will be distributed to the holders of US Airways Group equity instruments takes into account the outstanding options, stock-settled RSUs, stock-settled stock appreciation rights (“SARs”), US Airways Group’s 7% Senior Convertible Notes due 2020 (the “US Airways 7% Convertible Notes”), and US Airways Group’s 7.25% Convertible Notes due 2014 (the “US Airways 7.25% Convertible Notes”), though it does not take into account future issuances of common stock following the Closing, which would be dilutive to all holders of AAG common stock. As of the date of this proxy statement/prospectus, there are no current plans to issue additional shares of AAG common stock at or following the Closing, except as contemplated by the Plan or the Merger Agreement and except for shares of AAG common stock underlying equity awards granted for compensatory purposes in the ordinary course of business.

 

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Q: Will the shares of AAG common stock be publicly traded?

 

A: It is a condition to Closing that the shares of AAG common stock to be issued to US Airways Group equity holders pursuant to the Merger be authorized for listing on the New York Stock Exchange (“NYSE”) or the NASDAQ Stock Market (“NASDAQ”) prior to the date and time at which AMR and US Airways Group cause an executed and acknowledged certificate of merger to be filed with the Secretary of State of the State of Delaware (the “Effective Time”). AMR will use its reasonable best efforts to cause the shares of AAG common stock to be authorized for listing on the NYSE or NASDAQ upon official notice of issuance, prior to the date on which the Closing occurs (the “Closing Date”). Upon the Closing, shares of US Airways Group common stock currently listed on the NYSE will be delisted and will be deregistered under the Exchange Act.

 

Q: How much is a share of AAG common stock worth?

 

A: AAG common stock will be different from the US Airways Group common stock and AMR common stock currently outstanding. AAG common stock will be governed by the terms of the amended and restated certificate of incorporation of AMR to be effective immediately prior to the Effective Time (the “AAG Certificate of Incorporation”). For a description of the rights of holders of AAG common stock, see the sections entitled “Description of Capital Stock of AAG” beginning on page 177 and “Comparison of Stockholder Rights and Corporate Governance Matters” beginning on page 180.

The historical price information of US Airways Group common stock does not necessarily reflect, and the historical price information of AMR common stock does not reflect, the price at which AAG common stock will trade following the Closing. Further, all existing shares of AMR common stock will be cancelled pursuant to the Plan. Therefore, it is not meaningful to determine the value of the Merger consideration to be received by holders of US Airways Group common stock by reference to current trading values of US Airways Group common stock or AMR common stock. Neither AMR nor US Airways Group can anticipate the price at which AAG common stock will trade following the Closing.

 

Q: What is the AAG Convertible Preferred Stock and how will it affect holders of US Airways Group equity instruments who receive AAG common stock?

 

A: The Plan provides that all allowed prepetition general unsecured claims against the Debtors (other than intercompany claims), all equity interests in AMR, and all rights of labor groups of the Debtors to receive AAG common stock in connection with the Plan will be satisfied solely with Plan Shares, consisting of newly issued AAG common stock and AAG Convertible Preferred Stock. Holders of equity interests in AMR and labor-related claims will receive AAG common stock, and holders of allowed prepetition general unsecured claims against the Debtors will receive either AAG Convertible Preferred Stock or a combination of AAG Convertible Preferred Stock and AAG common stock, in each case, as set forth in the Plan. The AAG Convertible Preferred Stock will be a newly designated series of preferred stock of AAG that will be mandatorily convertible into AAG common stock in four installments on the 30th, 60th, 90th, and 120th days following the Effective Date. The issuance of the AAG Convertible Preferred Stock will provide a mechanism for holders of allowed prepetition general unsecured claims of the Debtors to receive a distribution based on the market value of AAG common stock. The aggregate number of shares of AAG common stock issuable under the Plan, whether directly or upon the conversion of AAG Convertible Preferred Stock, will not exceed 72% of the diluted equity ownership of AAG as of the time of the Merger. Accordingly, the 28% diluted equity ownership of AAG that will be distributed to the holders of US Airways Group equity instruments will not be diluted by the conversion of the AAG Convertible Preferred Stock or by the issuance of shares of AAG common stock pursuant to the Plan.

However, it is possible that the AAG common stock may experience significantly elevated volatility in price and trading volume until all shares of AAG Convertible Preferred Stock are converted and the underlying AAG common stock has been distributed. For further information, see the section entitled “The Plan of

 

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Reorganization” beginning on page 155, and the section entitled “Risk Factors—The shares of AAG Convertible Preferred Stock that are to be distributed pursuant to the Plan will be fully converted into AAG common stock over a period of 120 days following the Effective Date. The issuance of shares of AAG common stock under the Plan (including upon conversion of the AAG Convertible Preferred Stock) could contribute to significantly elevated volatility in the price of AAG common stock until all such shares of AAG Convertible Preferred Stock are converted and all of the shares of AAG common stock to be issued under the Plan have been distributed fully” beginning on page 51.

 

Q: When do AMR and US Airways Group expect the Merger to be completed?

 

A: AMR and US Airways Group plan to complete the Merger as soon as reasonably practicable and presently expect the Closing to occur in the third quarter of 2013. However, neither AMR nor US Airways Group can predict the exact timing of the Closing, because it is subject to approval of the U.S. Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) as part of the Plan, regulatory approvals, and other conditions. See the sections entitled “Summary—Conditions to the Merger” beginning on page 21 and “Summary—Regulatory Approvals Required for the Merger” beginning on page 21.

 

Q: What are the expected cash costs and capital expenditures associated with the Merger and AMR’s emergence from Chapter 11?

 

A: AMR and US Airways Group expect to incur transition costs of approximately $1.2 billion in connection with the Merger and the integration of the businesses of AMR and US Airways Group. In addition, AMR will pay approximately $1.4 billion in cash at emergence to settle certain obligations in connection with the Plan. The estimated planned aggregate capital expenditures for AAG on a consolidated basis for calendar years 2013-2017 are anticipated to be approximately $20 billion.

 

Q: Who will manage AAG after the Merger?

 

A: Following the Closing, the board of directors of AAG will consist of 12 members. Five of these directors have been designated by the Search Committee appointed by the Official Committee of Unsecured Creditors of AMR (the “UCC”) and a majority of those holders of certain prepetition claims against one or more of the Debtors that entered into the Support and Settlement Agreement with the Debtors (the “Consenting Creditors”) (and one of such directors will be the lead Independent Director); two of these directors have been designated by AMR and have been determined to be reasonably acceptable to the Search Committee; three of these directors have been designated by US Airways Group; and the two remaining directors will be Thomas W. Horton, the current chairman and chief executive officer of AMR, who will also serve as chairman of the board of directors of AAG, and W. Douglas Parker, the current chairman and chief executive officer of US Airways Group, who will also serve as chief executive officer of AAG.

The Search Committee has designated James F. Albaugh, Jeffrey D. Benjamin, John T. Cahill, Michael J. Embler, and Richard P. Schifter as members of the board of directors of AAG following the Closing, with Mr. Cahill to serve as lead independent director. For more information about these individuals, see the section entitled “The Combined Company After the Merger—Board of Directors and Management of AAG after the Merger—Board of Directors” beginning on page 151. AMR has designated Alberto Ibargüen and Ray M. Robinson, current members of the AMR board of directors, as members of the board of directors of AAG following the Closing. For more information about these individuals, see the section entitled “AMR Board of Directors and Corporate Governance Information—Directors, Executive Officers, and Corporate Governance” beginning on page 245 and “AMR’s Compensation Discussion and Analysis” beginning on page 257. US Airways Group has designated Matthew J. Hart, Richard C. Kraemer, and Denise M. O’Leary, current members of the US Airways Group board of directors, as members of the board of directors of AAG following the Closing. For more information about these individuals, see the section entitled “Proposal 4: Election of Directors” beginning on page 283 and “US Airways Group Director Compensation” beginning on page 297. If, prior to the Closing, any of these prospective directors becomes unavailable for any reason to serve as a

 

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member of the board of directors of AAG following the Closing (which is not anticipated), a substitute will be designated in accordance with the Merger Agreement.

Each of AMR and US Airways Group believes that these prospective directors are independent within the meaning of the relevant NYSE and NASDAQ rules. In accordance with stock exchange rules, a formal independence determination with respect to each such individual will be made following the Closing by the board of directors of AAG.

As of the date of this proxy statement/prospectus, the compensation to be paid to the non-employee directors of AAG has not yet been determined, nor has any determination been made as to committee memberships.

Mr. Horton will serve as chairman of the board of AAG until the earliest of:

 

   

the date that is the first anniversary of the Closing Date;

 

   

the day prior to the date of the first annual meeting of the stockholders of AAG following the Closing Date (provided it does not occur prior to May 1, 2014); and

 

   

the election of a new chairman by the affirmative vote of at least 75% of the members of the board of directors (rounded up to the next full director), which must include at least one director who was nominated as a director by AMR pursuant to the Merger Agreement.

Following the earliest of such dates, Mr. Parker will serve as chairman of the board of directors of AAG until the election of a new chairman by the affirmative vote of the board of directors of AAG, which, prior to the date that is the 18 month anniversary of the Closing Date, will require the affirmative vote of at least 75% of the members of the board of directors of AAG (rounded up to the next full director), which must include at least one director who was designated as a director by US Airways Group pursuant to the Merger Agreement.

On June 10, 2013, AMR and US Airways Group jointly announced their intention to retain the following individuals, subject to the approval of the board of directors of AAG, as the senior leadership team of AAG or its principal operating subsidiaries following the Closing (in addition to Mr. Parker):

 

   

J. Scott Kirby, as president (currently president of US Airways Group);

 

   

Elise R. Eberwein, as executive vice president – people and communications (currently executive vice president – people, communications and public affairs of US Airways Group);

 

   

Beverly K. Goulet, as chief integration officer (currently senior vice president and chief integration officer of AMR);

 

   

Robert D. Isom, Jr., as chief operating officer and as chief executive officer of US Airways (currently executive vice president and chief operating officer of US Airways Group);

 

   

Stephen L. Johnson, as executive vice president, corporate affairs (currently executive vice president – corporate and government affairs of US Airways Group);

 

   

Derek J. Kerr, as chief financial officer (currently chief financial officer of US Airways Group);

 

   

Maya Leibman, as chief information officer (currently senior vice president – technology and chief information officer of AMR); and

 

   

William K. Ris, Jr., as senior vice president, government affairs (currently senior vice president – government and regulatory affairs of AMR).

The designation of the executive officers of AAG will be determined by the board of directors of AAG after the Closing and is expected to be drawn from the executives identified above. As of the date of this proxy statement/prospectus, AAG had not entered into any new plan, contract, or arrangement with any of these

 

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individuals with respect to compensation and benefits following the Closing. The compensation programs and policies for AAG are expected to be established by the board of directors of AAG following the Closing. For more information with respect to the foregoing individuals who are current US Airways executive officers, see the sections entitled “US Airways Group Compensation Discussion and Analysis” beginning on page 310 and “US Airways Group Executive Officers” beginning on page 324.

As used herein, “Search Committee” means the committee established by the UCC, consisting of four designees from the UCC and four members designated by a majority of the initial Consenting Creditors under the Support and Settlement Agreement to select director designees for the board of directors of AAG; “Independent Director” means a person who satisfies the requirements for independence under Rule 303A of the NYSE as then in effect; and “Support and Settlement Agreement” means that certain Support and Settlement Agreement, dated as of February 13, 2013, by and among AMR and certain holders of prepetition unsecured claims against one or more of the Debtors, as amended.

 

Q: What are some of the U.S. federal income tax consequences of the Merger for US Airways Group stockholders?

 

A: The Merger in conjunction with the Plan is intended to qualify as a reorganization for U.S. federal income tax purposes, and the Closing is conditioned on the receipt by each of US Airways Group and AMR of an opinion from its outside counsel to the effect that the Merger so qualifies. Assuming the Merger in conjunction with the Plan qualifies as such a reorganization, US Airways Group stockholders generally will not recognize any gain or loss for U.S. federal income tax purposes upon the exchange of shares of US Airways Group common stock for shares of newly issued AAG common stock pursuant to the Merger. US Airways Group stockholders are urged to read the discussion in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences” beginning on page 106 of this proxy statement/prospectus and to consult their tax advisers as to the U.S. federal income tax consequences of the Merger, as well as the effects of other federal, state, local, and non-U.S. tax laws.

 

Q: How will US Airways 7.25% Convertible Notes and US Airways 7% Convertible Notes be treated in connection with the Merger?

 

A: If any such notes remain outstanding at the Effective Time, AMR and US Airways Group, and, if advisable, AMR Merger Sub, will enter into supplemental indentures regarding the US Airways 7.25% Convertible Notes and the US Airways 7% Convertible Notes. Such supplemental indentures are expected to (i) include certain provisions required by that certain Indenture, dated as of May 13, 2009, between US Airways Group and The Bank of New York Mellon Trust Company, N.A., as trustee, as supplemented by the First Supplemental Indenture, dated as of May 13, 2009, between US Airways Group and The Bank of New York Mellon Trust Company, N.A., as trustee (the “7.25% Convertible Note Indenture”) and that certain Indenture, dated as of September 30, 2005, between US Airways Group and U.S. Bank National Association, as trustee (the “7% Convertible Note Indenture”), respectively, as a result of the Merger, including a provision causing each outstanding US Airways 7.25% Convertible Note and US Airways 7% Convertible Note, respectively, to be convertible into the number of shares of AAG common stock that the holder would have received pursuant to the Merger if such holder had converted its US Airways 7.25% Convertible Notes and US Airways 7% Convertible Notes, respectively, into shares of US Airways Group common stock immediately prior to the Effective Time and (ii) provide for the guarantee by AAG of US Airways Group’s obligations under the 7.25% Convertible Note Indenture and the US Airways 7.25% Convertible Notes and the 7% Convertible Note Indenture and the US Airways 7% Convertible Notes, respectively, following the Effective Time. For more information, see the section entitled “Merger Agreement—Treatment of US Airways Group Convertible Debt” beginning on page 143.

 

Q: Am I entitled to appraisal rights?

 

A: No. Under the General Corporation Law of the State of Delaware, as amended (the “DGCL”), the stockholders of US Airways Group are not entitled to appraisal rights in connection with the Merger.

 

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Q: What am I being asked to vote on?

 

A: US Airways Group stockholders are being asked to vote on the following proposals at the 2013 Annual Meeting of Stockholders:

 

   

to adopt the Merger Agreement;

 

   

to approve, on a non-binding, advisory basis, certain compensation that may be paid or become payable to US Airways Group’s named executive officers in connection with the Closing;

 

   

to approve the adjournment of the 2013 Annual Meeting of Stockholders, if necessary, to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement;

 

   

to elect to the US Airways Group board of directors each of the nominees for director named in this proxy statement/prospectus;

 

   

to ratify the appointment of KPMG LLP as US Airways Group’s independent registered public accounting firm for 2013; and

 

   

to approve, on a non-binding, advisory basis, the compensation of US Airways Group’s named executive officers.

 

Q: Are there any other matters to be addressed at the 2013 Annual Meeting of Stockholders?

 

A: US Airways Group knows of no other matters to be brought before the 2013 Annual Meeting of Stockholders, but if other matters are properly brought before the 2013 Annual Meeting of Stockholders or at any adjournment or postponement thereof, the officers named in the proxy intend to take such action as in their judgment is in the best interests of US Airways Group and its stockholders.

 

Q: What vote of US Airways Group stockholders is required to approve each item?

 

A: Assuming a quorum is present, the vote requirements for the various proposals are as follows:

 

   

Adoption of the Merger Agreement: Approval of the proposal to adopt the Merger Agreement requires the affirmative vote of a majority of the outstanding shares of US Airways Group common stock that are entitled to vote at the 2013 Annual Meeting of Stockholders.

 

   

Election of Directors: Each director must be elected by the affirmative vote of a majority of the votes cast with respect to such director by the shares represented, in person or by proxy, and entitled to vote therefor at the 2013 Annual Meeting of Stockholders. A majority of the votes cast means that the number of votes cast “for” a nominee exceeds the number of votes cast “against” that nominee.

 

   

All Other Matters: All other matters on the agenda will be decided by the affirmative vote of a majority of the shares of US Airways Group common stock represented, in person or by proxy, and entitled to vote at the 2013 Annual Meeting of Stockholders (and provided that a quorum need not be present to approve the proposal to adjourn the stockholder meeting to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement).

 

Q: What constitutes a quorum for the 2013 Annual Meeting of Stockholders?

 

A: The presence, in person or by proxy, of a majority of the outstanding shares of US Airways Group’s capital stock entitled to vote at a meeting of stockholders is necessary to constitute a quorum at the 2013 Annual Meeting of Stockholders.

 

Q: How will abstentions be counted?

 

A: Abstentions are counted as present and entitled to vote for the purpose of determining a quorum.

 

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For the proposal to adopt the Merger Agreement, abstentions have the same effect as a vote against the Merger. For the proposal to approve the Merger-related compensation of US Airways Group’s named executive officers, the proposal to adjourn the 2013 Annual Meeting of Stockholders to solicit additional proxies, the proposal to ratify the independent registered public accounting firm, and the proposal to approve the compensation of US Airways Group’s named executive officers, abstentions are treated as present and entitled to vote at the 2013 Annual Meeting of Stockholders and, therefore, have the same effect as a vote against the matter.

If you abstain from voting in the election of directors, you will effectively not vote on that matter at the 2013 Annual Meeting of Stockholders. Abstentions are not considered to be votes cast under the US Airways Group bylaws or under the DGCL, US Airways Group’s state of incorporation, and will have no effect on the outcome of the vote for the election of directors.

 

Q: If the vote of US Airways Group stockholders required to adopt the Merger Agreement is obtained, but the vote of US Airways Group stockholders required to adopt the remaining proposals is not obtained, will the Merger still happen?

 

A: The approval of the proposal to adopt the Merger Agreement is the only approval of US Airways Group stockholders necessary to consummate the Merger. Even if US Airways Group stockholders do not approve the other proposals, including the approval, on a non-binding, advisory basis, of the Merger-related compensation of US Airways Group’s named executive officers, the Merger may still be consummated in accordance with the terms of the Merger Agreement.

 

Q: How does the board of directors of US Airways Group recommend that I vote?

 

A: The US Airways Group board of directors recommends that you vote:

 

   

“FOR” the adoption of the Merger Agreement;

 

   

“FOR” the approval, on a non-binding, advisory basis, of the Merger-related compensation of US Airways Group’s named executive officers;

 

   

“FOR” the approval of the adjournment of the 2013 Annual Meeting of Stockholders, if necessary, to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement;

 

   

“FOR” the election to the US Airways Group board of directors of each of the nominees for director named in this proxy statement/prospectus;

 

   

“FOR” the ratification of the appointment of KPMG LLP as US Airways Group’s independent registered public accounting firm for 2013; and

 

   

“FOR” the approval, on a non-binding, advisory basis, of the compensation of US Airways Group’s named executive officers.

The US Airways Group board of directors has determined that the Merger Agreement and the Merger are advisable and in the best interests of US Airways Group and its stockholders and has unanimously approved the Merger Agreement and the Merger. For a more complete description of the recommendation of the US Airways Group board of directors, see the section entitled “The Merger—Recommendation of US Airways Group’s Board of Directors with Respect to the Merger Agreement and Its Reasons for the Merger” beginning on page 87.

 

Q: How do US Airways Group’s directors’ and executive officers’ interests in the Merger differ from mine?

 

A: Certain members of the board of directors and executive officers of US Airways Group have interests in the Merger that are different from, or are in addition to, the interests of US Airways Group stockholders generally.

 

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US Airways Group’s executive officers are parties to agreements with US Airways Group and US Airways that provide for certain benefits upon a change in control of US Airways Group, including the Merger, and for severance benefits if their employment is terminated under certain circumstances in connection with a change in control of US Airways Group, including the Merger. In addition, the Merger Agreement provides that, as of the Effective Time, AAG will provide certain current and former US Airways Group non-employee directors flight privileges and, in certain cases, a related tax gross-up payment.

Furthermore, US Airways Group compensation and benefit plans and arrangements provide for accelerated vesting of certain equity awards held by US Airways Group executive officers and directors upon the closing of a change in control of US Airways Group, including the Merger. Each US Airways Group executive officer has agreed to waive his or her rights to accelerated vesting of US Airways Group stock options, US Airways Group RSUs, and/or US Airways Group SARs, in each case, solely as a result of the Closing. In lieu of such rights, the US Airways Group executive officers have been provided a right to “double trigger” accelerated vesting of such equity awards, meaning the vesting of such equity awards would instead accelerate only upon a qualifying termination of such executive officers in connection with the Closing.

In addition, the current executive officers of US Airways Group are expected to serve as senior officers of AAG or its principal operating subsidiaries following the Closing, and four members of US Airways Group’s current board of directors (including Mr. Parker) have been designated to serve as members of the board of directors of AAG following the Closing.

For more information, see the section entitled “The Merger—Interests of US Airways Group’s Directors and Executive Officers in the Merger” beginning on page 110.

 

Q: When and where will the 2013 Annual Meeting of Stockholders be held?

 

A: The 2013 Annual Meeting of Stockholders will take place at the offices of Latham & Watkins LLP, located at 885 Third Avenue, New York, New York 10022, on Friday, July 12, 2013 at 9:00 a.m., local time.

 

Q: Who can attend and vote at the 2013 Annual Meeting of Stockholders?

 

A: All US Airways Group stockholders of record as of the close of business on May 30, 2013, the Record Date for the 2013 Annual Meeting of Stockholders, are entitled to receive notice of and to vote at the 2013 Annual Meeting of Stockholders.

 

Q: How will my shares be represented at the 2013 Annual Meeting of Stockholders?

 

A: At the 2013 Annual Meeting of Stockholders, the officers named in your proxy card will vote your shares in the manner you requested if you correctly submitted your proxy. If you sign your proxy card and return it without indicating how you would like to vote your shares, your proxy will be voted as the US Airways Group board of directors recommends, which is set forth above in the answer to the question “How does the board of directors of US Airways Group recommend that I vote?”

 

Q: What happens if I sell my shares after the Record Date but before the 2013 Annual Meeting of Stockholders?

 

A: The Record Date of the 2013 Annual Meeting of Stockholders is earlier than the date of the 2013 Annual Meeting of Stockholders and the expected Closing Date. If you transfer your shares of US Airways Group common stock after the Record Date but before the date of the 2013 Annual Meeting of Stockholders, you will retain your right to vote at the 2013 Annual Meeting of Stockholders (provided that such shares remain outstanding on the date of the 2013 Annual Meeting of Stockholders), but you will not have the right to receive the Merger consideration to be received by US Airways Group’s stockholders in the Merger. In order to receive the Merger consideration, you must hold your shares through the Closing.

 

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Q: What should I do in order to vote?

 

A: A proxy is a legal designation of another person to vote your shares on your behalf. You may submit a proxy for your shares by using the toll-free number or the website provided on your proxy card, if your proxy card includes instructions for using these quick, cost-effective, and easy methods for submitting proxies. You also may submit a proxy in writing by simply filling out, signing, and dating your proxy card and mailing it in the prepaid envelope included with these proxy materials. If you submit a proxy by telephone or over the Internet, please do not return your proxy card by mail. You will need to follow the instructions provided on your proxy card when you submit a proxy using any of these methods to make sure your shares will be voted at the 2013 Annual Meeting of Stockholders. You also may vote by submitting a ballot in person if you attend the 2013 Annual Meeting of Stockholders. However, we encourage you to submit a proxy by mail by completing your proxy card, by telephone, or over the Internet, even if you plan to attend the 2013 Annual Meeting of Stockholders.

If you hold shares through a broker, bank, or other nominee, you may instruct your broker, bank, or other nominee to vote your shares by following the instructions that the broker, bank, or other nominee provides to you with these materials. Most brokers offer the ability for stockholders to submit voting instructions by mail by completing a voting instruction card, by telephone, and over the Internet. If you hold shares through a broker, bank, or other nominee and wish to vote your shares at the 2013 Annual Meeting of Stockholders, you must obtain a legal proxy from your broker, bank, or other nominee and present it to the inspector of election with your ballot when you vote at the 2013 Annual Meeting of Stockholders.

 

Q: Can I vote in person at the 2013 Annual Meeting of Stockholders?

 

A: You may vote in person by attending the 2013 Annual Meeting of Stockholders. If you plan to attend the 2013 Annual Meeting of Stockholders and wish to vote in person, you will be given a ballot at the 2013 Annual Meeting of Stockholders. Please note, however, that, if your shares are held in “street name” and you wish to vote at the 2013 Annual Meeting of Stockholders, you must bring a proxy from the record holder of the shares authorizing you to vote at the 2013 Annual Meeting of Stockholders. Whether or not you plan to attend the 2013 Annual Meeting of Stockholders, you should complete your proxy as described in this proxy statement/prospectus.

 

Q: If my shares are held in “street name” by a broker, bank, or other nominee, will my broker, bank, or other nominee vote my shares for me with respect to the adoption of the Merger Agreement?

 

A: If you do not provide your broker, bank, or other nominee with instructions on how to vote your shares held in “street name,” your broker, bank, or other nominee will not be permitted to vote your shares with respect to the adoption of the Merger Agreement. You should, therefore, provide your broker, bank, or other nominee with instructions as to how to vote your shares. If you fail to vote or, if your shares are held in “street name” and you fail to instruct your broker, bank, or other nominee to vote, it will have the same effect as a vote against the Merger.

 

Q: Can I change my vote after I have delivered my proxy?

 

A: Yes. If you are a holder of record, you can change your vote at any time before your proxy is voted at the 2013 Annual Meeting of Stockholders by:

 

   

giving notice of revocation to Caroline B. Ray, US Airways Group’s corporate secretary, at US Airways Group, Inc., 111 West Rio Salado Parkway, Tempe, Arizona 85281 (by mail or overnight delivery);

 

   

executing and delivering to US Airways Group’s corporate secretary a proxy card relating to the same shares bearing a later date;

 

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voting again prior to the time at which the Internet and telephone voting facilities close by following the procedures applicable to those methods of voting; or

 

   

voting in person at the 2013 Annual Meeting of Stockholders.

If your shares are held in “street name,” you must contact your broker, bank, or other nominee to change your vote. The change must be made by the broker, bank, or other nominee before your proxy is voted at the 2013 Annual Meeting of Stockholders.

 

Q: What should I do if I receive more than one set of voting materials for the 2013 Annual Meeting of Stockholders?

 

A: You may receive more than one set of voting materials for the 2013 Annual Meeting of Stockholders, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date, and return each proxy card and voting instruction card that you receive or, if your proxy card includes instructions for using these methods for submitting proxies, vote by telephone using the toll-free number provided on your proxy card or over the Internet using the website provided on your proxy card.

 

Q: Do I need to do anything with my shares of US Airways Group common stock other than voting for the proposals at the 2013 Annual Meeting of Stockholders?

 

A: If you are a US Airways Group stockholder, after the Closing, each share of US Airways Group common stock you hold will be converted automatically into the right to receive one share of AAG common stock. You will receive instructions following the Closing regarding exchanging your shares for shares of AAG common stock. You do not need to take any action at this time. Please do not send your US Airways Group stock certificates with your proxy card. The shares of AAG stock you receive in the Merger will be issued in book-entry form, unless otherwise required by law.

 

Q: Will a proxy solicitor be used?

 

A: Yes. US Airways Group has engaged MacKenzie Partners, Inc. to assist in the solicitation of proxies for the 2013 Annual Meeting of Stockholders and US Airways Group estimates it will pay MacKenzie Partners a fee of $50,000. US Airways Group has also agreed to reimburse MacKenzie Partners for reasonable out-of-pocket expenses and disbursements incurred in connection with the proxy solicitation and to indemnify MacKenzie Partners against certain losses, costs, and expenses. In addition to soliciting proxies through the mail, US Airways Group may solicit proxies through its directors, officers, and employees in person, by email, telephone, and facsimile.

 

Q: Who can help answer my questions?

 

A: If you have any questions about the Merger or how to submit your proxy, or if you need additional copies of this proxy statement/prospectus, the enclosed proxy card, or voting instructions, you should contact US Airways Group’s proxy solicitor:

MacKenzie Partners, Inc.

105 Madison Avenue

New York, NY 10016

Telephone number: (800) 322-2885

 

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SUMMARY

The following is a summary that highlights information contained in this proxy statement/prospectus. This summary might not contain all of the information that may be important to you. For a more complete description of the Merger Agreement and the Merger, as well as the Plan, US Airways Group and AMR encourage you to read carefully this entire proxy statement/prospectus, including the attached annexes. In addition, each of US Airways Group and AMR encourage you to read the documents incorporated by reference by US Airways Group into this proxy statement/prospectus, which have been filed with the SEC. These documents include important business and financial information about US Airways Group. You may obtain the information of US Airways Group incorporated by reference into this proxy statement/prospectus and documents of AMR filed with the SEC without charge by following the instructions in the section entitled “Additional Information” beginning on page 347. For the convenience of the reader, certain capitalized terms used in this proxy statement/prospectus have been consolidated into a Glossary beginning on page 35.

The Companies

US Airways Group, Inc.

US Airways Group, Inc., a Delaware corporation, is a holding company whose primary business activity is the operation of a major network airline through its wholly-owned subsidiaries US Airways, Inc., Piedmont Airlines, Inc., PSA Airlines, Inc., Material Services Company, Inc., and Airways Assurance Limited. Material Services Company, Inc. and Airways Assurance Limited operate in support of US Airways Group’s other subsidiaries in areas such as the procurement of aviation fuel and insurance. US Airways Group was formed in 1982, and its origins trace back to the formation of All American Aviation in 1939. US Airways, Inc., a Delaware corporation, was formed in 1982. Effective upon US Airways Group’s emergence from bankruptcy on September 27, 2005, US Airways Group merged with America West Holdings Corporation (“America West”), with US Airways Group as the surviving corporation. US Airways Group operates more than 3,100 flights per day and serves 198 communities in the U.S., Canada, Mexico, Europe, the Middle East, the Caribbean, and Central and South America.

US Airways Group’s principal executive offices are located at 111 West Rio Salado Parkway, Tempe, Arizona 85281. US Airways Group’s telephone number is (480) 693-0800, and its Internet address is www.usairways.com. Information contained on its website is not and should not be deemed a part of this proxy statement/prospectus or any filing filed with or furnished to the SEC.

AMR Corporation

AMR Corporation, a Delaware corporation, was incorporated in October 1982. Virtually all of AMR’s operations fall within the airline industry. AMR’s principal subsidiary, American Airlines, Inc., was founded in 1934. At the end of 2012, American provided scheduled jet service to approximately 160 destinations throughout North America, the Caribbean, Latin America, Europe, and Asia.

AMR Eagle Holding Corporation, a wholly-owned subsidiary of AMR (“AMR Eagle”), owns a regional airline which does business as American Eagle®. American also contracts with certain independently owned regional air carriers to provide it with regional feed under the American Eagle® and American Connection® names.

American, together with the regional airlines that provide regional feed to American—American Eagle, Chautauqua Airlines, Inc., SkyWest Airlines, Inc., Republic Airlines, Inc., and ExpressJet Airlines, Inc. (collectively, the “American Eagle Carriers”), American Eagle Carriers, serves more than 250 cities in approximately 50 countries with, on average, 3,400 daily flights. The combined network fleet numbers

 

 

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approximately 900 aircraft. American is also a founding member of the oneworld® alliance, which enables member airlines to offer their customers more services and benefits than any member airline can provide individually. These services include a broader route network, opportunities to earn and redeem frequent flyer miles across the combined oneworld® network, and access to more airport lounges. Together, oneworld® members serve more than 800 destinations in approximately 150 countries, with about 9,000 daily departures. American is also one of the largest scheduled air freight carriers in the world, providing a wide range of freight and mail services to shippers throughout its system onboard American’s passenger fleet.

AMR’s principal executive offices are located at 4333 Amon Carter Blvd., Fort Worth, Texas 76155. AMR’s telephone number is (817) 963-1234, and its Internet address is www.aa.com. Information contained on its website is not and should not be deemed a part of this proxy statement/prospectus or any filing filed with or furnished to the SEC.

AMR Merger Sub, Inc.

AMR Merger Sub, Inc., a Delaware corporation, is a wholly-owned subsidiary of AMR that was formed on February 11, 2013 for the sole purpose of effecting the Merger.

The Merger (see page 76)

Form of the Merger

Under the terms of the Merger Agreement, AMR Merger Sub, a wholly-owned subsidiary of AMR, will merge with and into US Airways Group, with US Airways Group surviving as a wholly-owned subsidiary of AMR. Immediately following the Closing, AMR will change its name to American Airlines Group Inc., which will be the name of the combined company following the Closing.

Merger Consideration and Plan Shares

As a consequence of the Merger, US Airways Group common stockholders will receive one share of common stock of AAG in exchange for each share of common stock of US Airways Group they hold. The value of the common stock of AAG that a US Airways Group common stockholder will receive in the Merger is not fixed and will depend upon the value of AAG common stock. Pursuant to the Plan, all outstanding equity securities of AMR at the time of the Merger will be cancelled. The shares of AAG common stock to be issued in connection with the Merger will be newly issued shares. Consequently, neither the trading price of US Airways Group common stock nor the trading price of AMR common stock reflect the price at which AAG common stock will trade following the Merger.

Pursuant to and in accordance with the Plan, all allowed prepetition general unsecured claims against the Debtors (other than intercompany claims), all equity interests in AMR, and all rights of labor groups of the Debtors to receive AAG common stock in connection with the Plan will be satisfied solely with Plan Shares, consisting of newly issued AAG common stock and AAG Convertible Preferred Stock. Holders of equity interests in AMR and labor-related claims will receive AAG common stock, and holders of allowed prepetition general unsecured claims against the Debtors will receive either AAG Convertible Preferred Stock or a combination of AAG Convertible Preferred Stock and AAG common stock, in each case, as set forth in the Plan. The aggregate number of shares of AAG common stock constituting Plan Shares, when taken together with all shares of AAG common stock that are or may become issuable upon conversion or exchange of shares of AAG Convertible Preferred Stock constituting Plan Shares, will not exceed a number of shares of AAG common stock equal to the aggregate number of shares of AAG common stock equal to (i)(a) the US Airways Fully Diluted Shares, multiplied by (b) the quotient (rounded to four decimals) of 72 divided by 28 (rounded to the nearest whole share) less (ii) the number of shares of AAG common stock represented by equity-based awards to be

 

 

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issued to employees of AMR and its subsidiaries as contemplated by the Merger Agreement and the Plan, subject to certain agreed upon exceptions (the “Maximum Plan Shares”). As used herein, “US Airways Fully Diluted Shares” means the number of shares of US Airways Group common stock that would be deemed to be outstanding for purposes of calculating “diluted earnings per share” under U.S. generally accepted accounting principles (“GAAP”) using the treasury stock method, as modified by the Merger Agreement, including that the average market price used in such calculation will be equal to the average of the daily closing prices for US Airways Group common stock on the NYSE for each of the 20 trading days ending on (and including) the sixth trading day prior to the Closing.

The aggregate number of shares of AAG common stock issuable in the Merger to holders of US Airways Group equity instruments (including stockholders, holders of convertible notes, optionees, and holders of RSUs) will represent 28% of the diluted equity ownership of AAG. The remaining 72% diluted equity ownership in AAG will be distributable, pursuant to the Plan, to stakeholders, labor unions, and certain employees of AMR and the other Debtors and such 72% of the diluted equity ownership of AAG includes all shares of AAG common stock that are or may become issuable upon conversion of shares of AAG Convertible Preferred Stock. The aggregate number of shares of AAG common stock issuable under the Plan, whether directly or upon the conversion of AAG Convertible Preferred Stock, will not exceed 72% of the diluted equity ownership of AAG as of the time of the Merger. Accordingly, the 28% diluted equity ownership of AAG that will be distributed to the holders of US Airways Group equity instruments will not be diluted by the conversion of the AAG Convertible Preferred Stock or by the issuance of shares of AAG common stock pursuant to the Plan. The determination of the 28% diluted equity ownership of AAG that will be distributed to the holders of US Airways Group equity instruments takes into account the outstanding options, stock-settled RSUs, stock-settled SARs, the US Airways 7% Convertible Notes, and the US Airways 7.25% Convertible Notes, though it does not take into account future issuances of common stock following the Closing, which would be dilutive to all holders of AAG common stock. As of the date of this proxy statement/prospectus, there are no current plans to issue additional shares of AAG common stock at or following the Closing, except as contemplated by the Plan or the Merger Agreement and except for shares of AAG common stock underlying equity awards granted for compensatory purposes in the ordinary course of business.

Effectiveness of the Merger Agreement (see page 117)

On May 10, 2013, the Bankruptcy Court entered an order entitled Order Authorizing and Approving (i) Merger Agreement Among AMR Corporation, AMR Merger Sub, Inc., and US Airways Group, Inc., (ii) Debtors’ Execution of and Performance Under Merger Agreement, (iii) Certain Employee Compensation and Benefit Arrangements, (iv) Termination Fees, and (v) Related Relief (ECF No. 8096) (the “Merger Support Order”). In accordance with the Merger Agreement, upon entry of the Merger Support Order and execution of the Amendment, the Merger Agreement became effective and binding on, and enforceable against, each of the parties thereto retroactive to February 13, 2013. See the section entitled “The Merger Agreement—Effectiveness of the Merger Agreement” beginning on page 117 for a discussion of the Merger Support Order and the effectiveness of the Merger Agreement.

Termination of the Merger Agreement (see page 138)

AMR and US Airways Group may mutually agree to terminate the Merger Agreement at any time prior to the Effective Time. Either company may also terminate the Merger Agreement if the Merger is not completed by October 14, 2013, subject to extension by either party in the event that certain regulatory clearances have not yet been obtained; provided that in no event will such extension be to a date that is later than December 13, 2013, unless a party delays its response to a request for additional information (a “Second Request”) from the U.S. Department of Justice (the “DOJ”), in which case the other party may extend the deadline beyond December 13, 2013 by the number of days so delayed. Further, the parties’ rights to terminate the Merger Agreement if the Merger is not completed by October 14, 2013 are subject to extension by either party in the event that certain

 

 

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conditions related to the Plan have not been satisfied or waived; provided that in no event will such extension be to a date that is later than December 13, 2013. The parties may also terminate the Merger Agreement in certain additional circumstances. See the section entitled “The Merger Agreement—Termination of the Merger Agreement” beginning on page 138 for a discussion of these and other rights of each of AMR and US Airways Group to terminate the Merger Agreement.

The Combined Company after the Merger (see page 150)

American Airlines Group Inc.

Following the Closing, AMR will change its name to American Airlines Group Inc., or AAG, and will operate its airlines under the American Airlines® brand, principally through its mainline operating subsidiaries, American and US Airways. AAG is expected to integrate American and US Airways into a single airline, under a single FAA operating certificate, within two years following the Closing, subject to receipt of FAA approval. Following the Closing, US Airways will withdraw from the Star Alliance and join the oneworld® alliance. After giving effect to the Merger, AAG is expected to offer more than 6,700 daily flights to 336 destinations in 56 countries around the world. AMR and US Airways Group expect that AAG will maintain all nine hubs currently served by American and US Airways, resulting in a significantly larger network and more travel options for customers. AMR and US Airways Group also expect that the American Eagle Carriers and the US Airways Group regional carriers will continue to operate as distinct entities, providing seamless service to customers of AAG. AAG will be headquartered in Dallas-Fort Worth and will maintain a significant corporate and operational presence in the Phoenix metropolitan area. AMR and US Airways Group expect AAG to employ approximately 100,000 people around the world. AAG will also provide customers with more choices and increased service across a larger worldwide network, including an enhanced oneworld® alliance, than either American or US Airways could offer independently. Upon integration of the American and US Airways frequent flyer programs, AMR and US Airways Group expect that AMR’s AAdvantage® frequent flyer program (the “AAdvantage® program”) will become the industry’s leading frequent flyer loyalty program based on AMR’s and US Airways Group’s anticipation that the AAdvantage® program will have the world’s largest passenger network, the most available award destinations, and largest number of participants.

Expansive Global Network

AAG is expected to create a competitive alternative to Delta Air Lines and United Airlines by offering a comprehensive domestic flight network as well as a world-class global flight network that will have the scale, breadth, and capabilities to compete with the world’s largest airlines. AAG will combine the flight networks of AMR and US Airways Group, which are highly complementary with few route overlaps. Out of the more than 680 domestic nonstop routes that American and US Airways fly, only 12 nonstop flights overlap. Systemwide, American serves 130 cities not served by US Airways, and US Airways serves 62 cities not served by American. By combining these complementary flight networks, AAG expects to fill gaps in the flight networks provided by each airline individually, improve traffic flows through the existing hubs of American and US Airways, and expand service from those hubs to offer increased connectivity to existing markets and service to new cities. The combination of the two networks will enhance connectivity within the oneworld® alliance—including joint businesses with British Airways and Iberia across the Atlantic, to which Finnair is expected to be added, and with Japan Airlines and Qantas across the Pacific—by creating more options for travel and benefits both domestically and internationally, with connecting service to 83 destinations in Latin America and the Caribbean, 21destinations in Europe and the Middle East, and five destinations in Asia.

Revitalized Fleet

Including aircraft delivered or scheduled to be delivered to AMR and US Airways Group in 2013, AAG is scheduled to take delivery of more than 600 new aircraft through 2022, including 517 narrowbody aircraft and 90 widebody international aircraft. AAG’s fleet is expected to feature fully lie-flat, all-aisle access premium seating

 

 

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on American’s new Boeing 777-300ER aircraft—similar to US Airways’ Airbus A330 international Envoy service. AAG will also retrofit some of its widebody fleet to include fully lie-flat premium seating in an effort to provide a consistent experience for customers. AMR and US Airways Group expect AAG to have one of the most modern and efficient fleets in the industry with features that will be particularly appealing to business customers.

Expected Synergies

In considering the Merger, management of AMR and US Airways Group analyzed the potential cost and revenue synergies that could be generated by combining the companies, taking into account the benefits already achieved by AMR’s restructuring. AMR and US Airways Group management have estimated that AAG will achieve more than $1 billion in annual net synergies in 2015, including cost synergies of approximately $150 million (after taking into account the improved compensation arrangements negotiated with employees of AAG) and revenue synergies of approximately $900 million (the “Expected Synergies”). AMR and US Airways Group expect to realize the cost synergies principally by reducing management and administrative overhead, consolidating information technology systems, and combining facilities. AMR and US Airways Group expect to realize the revenue synergies principally from providing significantly enhanced connectivity throughout the world to permit customers, particularly corporate clients, to use AAG for more of their travel needs and from optimizing the scheduling of the combined fleet to better match aircraft size with consumer demand. AMR and US Airways Group also expect to incur transition costs in connection with the Merger and the integration of the businesses of AMR and US Airways Group of approximately $1.2 billion. There can be no assurance that AAG will be able to achieve these cost and revenue synergies at all, or that, if achieved, they can be achieved in a timely manner. In addition to the transition costs expected to be incurred in connection with the Merger, AMR will pay approximately $1.4 billion in cash at emergence to settle certain obligations in connection with the Plan.

Board of Directors and Management of AAG after the Merger

Following the Merger, the board of directors of AAG will consist of 12 members. Five of these directors have been designated by the Search Committee appointed by the UCC and a majority of the Consenting Creditors (and one of such directors will be the lead Independent Director); two of these directors have been designated by AMR and have been determined to be reasonably acceptable to the Search Committee; three of these directors have been designated by US Airways Group; and the two remaining directors will be Mr. Horton, the current chairman and chief executive officer of AMR, who will also serve as chairman of the board of directors of AAG, and Mr. Parker, the current chairman and chief executive officer of US Airways Group, who will also serve as chief executive officer of AAG. The Search Committee has designated James F. Albaugh, Jeffrey D. Benjamin, John T. Cahill, Michael J. Embler, and Richard P. Schifter as members of the board of directors of AAG following the Closing, with Mr. Cahill to serve as lead independent director. For more information about these individuals, see the section entitled “The Combined Company After the Merger—Board of Directors and Management of AAG after the Merger—Board of Directors” beginning on page 151. AMR has designated Alberto Ibargüen and Ray M. Robinson, current members of the AMR board of directors, as members of the board of directors of AAG following the Closing. For more information about these individuals, see the sections entitled “AMR Board of Directors and Corporate Governance Information—Directors, Executive Officers, and Corporate Governance” beginning on page 245 and “AMR’s Compensation Discussion and Analysis” beginning on page 251. US Airways Group has designated Matthew J. Hart, Richard C. Kraemer, and Denise M. O’Leary, current members of the US Airways Group board of directors, as members of the board of directors of AAG following the Closing. For more information about these individuals, see the sections entitled “Proposal 4: Election of Directors” beginning on page 283 and “US Airways Group Director Compensation” beginning on page 297. If, prior to the Closing, any of these prospective directors becomes unavailable for any reason to serve as a member of the board of directors of AAG following the Closing (which is not anticipated), a substitute will be designated in accordance with the Merger Agreement.

 

 

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Each of AMR and US Airways Group believes that these prospective directors are independent within the meaning of the relevant NYSE and NASDAQ rules. In accordance with stock exchange rules, a formal independence determination with respect to each such individual will be made following the Closing by the board of directors of AAG.

As of the date of this proxy statement/prospectus, the compensation to be paid to the non-employee directors of AAG has not yet been determined, nor has any determination been made as to committee memberships.

Mr. Horton will serve as chairman of the board of AAG until the earliest of:

 

   

the date that is the first anniversary of the Closing Date;

 

   

the day prior to the date of the first annual meeting of the stockholders of AAG following the Closing Date (which will not occur prior to May 1, 2014); and

 

   

the election of a new chairman by the affirmative vote of at least 75% of the members of the board of directors (rounded up to the next full director), which must include at least one director who was nominated as a director by AMR pursuant to the Merger Agreement.

Following the earliest of such dates, Mr. Parker will serve as chairman of the board of directors of AAG until the election of a new chairman by the affirmative vote of the board of directors of AAG, which, prior to the date that is the 18 month anniversary of the Closing Date, will require the affirmative vote of at least 75% of the members of the board of directors of AAG (rounded up to the next full director), which must include at least one director who was designated as a director by US Airways Group pursuant to the Merger Agreement.

On June 10, 2013, AMR and US Airways Group jointly announced their intention to retain the following individuals, subject to the approval of the board of directors of AAG, as the senior leadership team of AAG or its principal operating subsidiaries following the Closing (in addition to Mr. Parker):

 

   

J. Scott Kirby, as president (currently president of US Airways Group);

 

   

Elise R. Eberwein, as executive vice president — people and communications (currently executive vice president – people, communications and public affairs of US Airways Group);

 

   

Beverly K. Goulet, as chief integration officer (currently senior vice president and chief integration officer of AMR);

 

   

Robert D. Isom, Jr., as chief operating officer and as chief executive officer of US Airways (currently executive vice president and chief operating officer of US Airways Group);

 

   

Stephen L. Johnson, as executive vice president, corporate affairs (currently executive vice president – corporate and government affairs of US Airways Group);

 

   

Derek J. Kerr, as chief financial officer (currently chief financial officer of US Airways Group);

 

   

Maya Leibman, as chief information officer (currently senior vice president — technology and chief information officer of AMR); and

 

   

William K. Ris, Jr., as senior vice president, government affairs (currently senior vice president — government and regulatory affairs of AMR).

The designation of the executive officers of AAG will be determined by the board of directors of AAG after the Closing and is expected to be drawn from the executives identified above. As of the date of this proxy statement/prospectus, AAG had not entered into any new plan, contract, or arrangement with any of these individuals with respect to compensation and benefits following the Closing. The compensation programs and

 

 

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policies for AAG are expected to be established by the board of directors of AAG following the Closing. For more information with respect to the foregoing individuals who are current US Airways executive officers, see the sections entitled “US Airways Group Compensation Discussion and Analysis” beginning on page 310 and “US Airways Group Executive Officers” beginning on page 324.

Recommendation of US Airways Group’s Board of Directors (see page 74)

The US Airways Group board of directors believes that the Merger Agreement and the Merger are advisable and in the best interests of US Airways Group and its stockholders and has unanimously approved the Merger Agreement and the Merger, and unanimously recommends that US Airways Group stockholders vote “FOR” adoption of the Merger Agreement and “FOR” the adoption of each of the other proposals described in this proxy statement/prospectus.

US Airways Group Stockholders Entitled to Vote (see page 68)

US Airways Group stockholders of record at the close of business on May 30, 2013, or the Record Date, are entitled to receive notice of and to vote at the 2013 Annual Meeting of Stockholders and at any adjournments or postponement thereof. On the Record Date, there were 180,577,075 shares of US Airways Group’s common stock outstanding and eligible to be voted at the 2013 Annual Meeting of Stockholders. Each share of US Airways Group’s common stock entitles its record holder to one vote on each matter submitted to the stockholders.

Vote Required

Assuming a quorum is present, the vote requirements for the various proposals are as follows:

 

   

Adoption of the Merger Agreement: Approval of the proposal to adopt the Merger Agreement requires the affirmative vote of a majority of the outstanding shares of US Airways Group common stock that are entitled to vote at the 2013 Annual Meeting of Stockholders;

 

   

Election of Directors: Each US Airways Group director nominee must be elected by the affirmative vote of a majority of the votes cast with respect to such nominee by the shares represented, in person or by proxy, and entitled to vote therefor at the 2013 Annual Meeting of Stockholders. A majority of the votes cast means that the number of votes cast “for” a nominee exceeds the number of votes cast “against” that nominee; and

 

   

All Other Matters: All other matters on the agenda will be decided by the affirmative vote of a majority of the shares of US Airways Group common stock represented, in person or by proxy, and entitled to vote at the 2013 Annual Meeting of Stockholders (and provided that a quorum need not be present to approve the proposal to adjourn the stockholder meeting to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement).

Voting by US Airways Group Directors and Executive Officers (see page 74)

As of the Record Date, directors and executive officers of US Airways Group were entitled to vote 1,225,347 shares of US Airways Group common stock or less than 1% of the shares of US Airways Group common stock outstanding on that date. The affirmative vote of a majority of the outstanding shares of US Airways Group common stock that are entitled to vote at the 2013 Annual Meeting of Stockholders is required to adopt the Merger Agreement. Each director and executive officer has indicated his or her present intention to vote, or cause to be voted, the shares of US Airways Group common stock owned by him or her “FOR” the adoption of the Merger Agreement.

 

 

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Opinion of US Airways Group’s Financial Adviser (see page 93)

On February 13, 2013, Barclays Capital Inc. (“Barclays”) rendered its opinion to US Airways Group’s board of directors that, as of such date and based upon and subject to the qualifications, limitations, and assumptions stated in its opinion, from a financial point of view, the consideration to be received by the stockholders of US Airways Group in the Merger is fair to the stockholders of US Airways Group.

The full text of Barclays’ written opinion, dated as of February 13, 2013, is attached as Annex E to this proxy statement/prospectus. Barclays’ written opinion sets forth, among other things, the assumptions made, procedures followed, factors considered, and limitations upon the review undertaken by Barclays in rendering its opinion. You are encouraged to read the opinion carefully in its entirety. Barclays’ opinion is (i) addressed to the board of directors of US Airways Group, (ii) addresses only the fairness, from a financial point of view, of the consideration to be offered to the stockholders of US Airways Group, and (iii) does not constitute a recommendation to any stockholder of US Airways Group as to how such stockholder should vote with respect to the proposed transaction or any other matter. Barclays was not requested to address, and its opinion does not in any manner address, US Airways Group’s underlying business decision to proceed with or effect the proposed transaction.

Interests of US Airways Group’s Directors and Executive Officers in the Merger (see page 110)

Certain members of the board of directors and executive officers of US Airways Group have interests in the Merger that are different from, or are in addition to, the interests of US Airways Group stockholders generally. These interests include those discussed below.

US Airways Group’s executive officers are parties to agreements with US Airways Group and US Airways that provide for certain benefits upon a change in control of US Airways Group, including the Merger, and for severance benefits if their employment is terminated under certain circumstances in connection with a change in control of US Airways Group, including the Merger. In addition, the Merger Agreement provides that, as of the Effective Time, AAG will provide certain current and former US Airways Group non-employee directors various flight privileges and, in certain cases, a related tax gross-up payment.

Furthermore, US Airways Group compensation and benefit plans and arrangements provide for accelerated vesting of certain equity awards held by US Airways Group executive officers and directors upon the closing of a change in control of US Airways Group, including the Merger. Each US Airways Group executive officer has agreed to waive his or her rights to accelerated vesting of US Airways Group stock options, US Airways Group RSUs, and/or US Airways Group SARs, in each case, solely as a result of the Closing. In lieu of such rights, the US Airways Group executive officers have been provided a right to “double trigger” accelerated vesting of such equity awards, meaning the vesting of such equity awards would instead accelerate only upon a qualifying termination of such executive officers in connection with the Closing.

In addition, the current executive officers of US Airways Group are expected to serve as senior officers of AAG or its principal operating subsidiaries following the Closing, and four members of US Airways Group’s current board of directors (including Mr. Parker) have been designated to serve as members of the board of directors of AAG following the Closing. For more information, see the section entitled “The Merger—Interests of US Airways Group’s Directors and Executive Officers in the Merger” beginning on page 110.

Treatment of US Airways Group Equity Awards (see page 113)

The Merger Agreement provides that, at the Effective Time, (i) each US Airways Group stock option that is outstanding immediately prior to the Effective Time, whether or not vested, will be converted into an option to purchase a number of shares of AAG common stock equal to the number of shares of US Airways Group

 

 

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common stock underlying the applicable US Airways Group stock option, and AAG will assume such stock option, (ii)(a) each US Airways Group stock-settled SAR that is outstanding immediately prior to the Effective Time, whether or not vested, will be converted into a stock-settled SAR covering a number of shares of AAG common stock equal to the number of shares of US Airways Group common stock underlying the applicable US Airways Group stock-settled SAR, and (b) each US Airways Group cash-settled SAR that is outstanding immediately prior to the Effective Time will be converted into a cash-settled SAR to acquire an amount of cash determined by reference to a number of shares of AAG common stock equal to the number of shares of US Airways Group common stock referenced by the applicable US Airways Group cash-settled SAR and, in each case, AAG will assume such SAR, and (iii)(a) each US Airways Group stock-settled RSU, each of which represents the right to receive one share of US Airways Group common stock, that is outstanding immediately prior to the Effective Time will be converted into a stock-settled RSU with respect to one share of AAG common stock, and (b) each US Airways Group cash-settled RSU, each of which represents the right to receive the value of one share of US Airways Group common stock, that is outstanding immediately prior to the Effective Time will be converted into the right to receive an amount in cash based on the value of one share of AAG common stock and, in each case, AAG will assume such RSU.

For more information, see the sections entitled “The Merger Agreement—The Merger Consideration and the Plan Shares—US Airways Group Stock Options and Other Stock Awards” beginning on page 120 and “The Merger Agreement—The Merger Consideration and the Plan Shares—US Airways Stock Options and Other Stock Awards—US Airways Group Restricted Stock Units” beginning on page 121.

Listing of AAG Common Stock and Delisting of US Airways Group Common Stock (see page 109)

It is a condition to Closing that the shares of AAG common stock to be issued to US Airways Group equity holders pursuant to the Merger Agreement be authorized for listing on the NYSE or NASDAQ prior to the Effective Time. AMR will use its reasonable best efforts to cause the shares of AAG common stock to be authorized for listing on the NYSE or NASDAQ upon official notice of issuance, prior to the Closing Date. Upon the Closing, shares of US Airways Group common stock currently listed on the NYSE will be delisted and will be deregistered under the Exchange Act.

No Dissenters’ Rights (see page 109)

Under the DGCL, holders of US Airways Group common stock are not entitled to appraisal rights in connection with the Merger.

Comparison of Stockholder Rights and Corporate Governance Matters (see page 180)

US Airways Group stockholders receiving shares of AAG common stock in connection with the Merger will have different rights once they become stockholders of AAG due to differences between the governing corporate documents of US Airways Group and the proposed governing corporate documents of AAG. These differences are described in detail in the sections entitled “Description of Capital Stock of AAG” beginning on page 177 and “Comparison of Stockholder Rights and Corporate Governance Matters” beginning on page 180.

The Plan of Reorganization (see page 155)

On April 15, 2013, AMR and the other Debtors filed the Plan and the Disclosure Statement with the Bankruptcy Court, each of which was subsequently amended. On June 7, 2013, the Bankruptcy Court entered an order approving the Disclosure Statement. The Plan incorporates and will implement the Merger pursuant to the Merger Agreement. In addition, the Plan contains provisions for the treatment of equity interests in and prepetition claims against AMR and the other Debtors. Upon the effectiveness of the Plan and the Merger, which are anticipated to occur substantially contemporaneously, all shares of existing AMR common stock and other

 

 

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equity interests in AMR will be cancelled and all rights with respect thereto will cease to exist. For more information, see the section entitled “The Plan of Reorganization” beginning on page 155.

Regulatory Approvals Required for the Merger (see page 105)

Several domestic and international regulatory filings and approvals are required before AMR and US Airways Group can effect the Closing. Under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), AMR and US Airways Group were required to file notifications with the Premerger Notification Office of the U.S. Federal Trade Commission (“FTC”) and the Antitrust Division of the DOJ and to observe a mandatory waiting period before completing the Merger. On March 4, 2013, AMR and US Airways Group received a Second Request from the DOJ in connection with the proposed Merger. The issuance of the Second Request extended the statutory HSR Act waiting period during which the parties cannot close the Merger. The DOJ is currently conducting its review of the Merger. Several state attorneys general also are reviewing the Merger and are coordinating their investigation with the DOJ. In addition, the Merger is subject to the pre-Closing approval of the European Commission under European Union (“EU”) merger control legislation. AMR and US Airways Group have also notified the Merger to the competition authorities in Canada, Brazil, and Mexico. These competition authorities have now all completed their review of the Merger without taking further action. The parties do not expect to file merger notifications in jurisdictions other than those described above. In addition to the antitrust related filings and clearances discussed above, AMR and US Airways Group must obtain approvals from various other U.S. regulatory agencies, including any required approvals from the U.S. Department of Transportation (“DOT”) and the U.S. Federal Aviation Administration (“FAA”), as well as certain other foreign regulatory authorities in connection with the Merger. However, obtaining such approvals (other than any approvals from the DOT or the FAA) is only a condition to the Closing if the failure to obtain such approvals would reasonably be expected to result in a material adverse effect on AMR, US Airways Group, or AAG or to provide a reasonable basis to conclude that AMR, US Airways Group, or any of their respective directors or officers would be subject to the risk of criminal liability. AMR and US Airways Group do not believe that the failure to receive any such regulatory approvals, other than any required approvals from the DOT or the FAA, would reasonably be expected to result in a material adverse effect on AMR, US Airways Group, or AAG, or provide a reasonable basis to conclude that AMR, US Airways Group, or any of their respective directors or officers would be subject to the risk of criminal liability. As of the date of this proxy statement/prospectus, American and US Airways have submitted filings to the DOT in order to obtain certain required approvals in connection with the Merger, but have not received those approvals from the DOT. AMR and US Airways Group do not believe that any FAA approvals are required prior to the Merger, although approvals of the FAA will be required in connection with the integration of American and US Airways after the Closing.

Conditions to the Merger (see page 135)

Conditions to Each Party’s Obligations to Effect the Merger

AMR’s, AMR Merger Sub’s, and US Airways Group’s obligations to complete the Merger are conditioned upon the satisfaction or waiver of each of the following conditions:

 

   

the Merger Agreement must have been duly adopted by holders of a majority of the outstanding shares of US Airways Group common stock;

 

   

the HSR Act waiting period applicable to the Closing must have expired or been earlier terminated;

 

   

any required EU Merger Regulation approvals or authorizations must have been obtained;

 

   

any required approval or authorization from the FAA and the DOT must have been obtained;

 

   

any approval or authorization required to be obtained from any other governmental entity for the Closing must have been obtained, except for those the failure of which to obtain would not,

 

 

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individually or in the aggregate, reasonably be expected to result in a material adverse effect on AMR, US Airways Group, or AAG or provide a reasonable basis to conclude that AMR, US Airways Group, or any of their respective directors or officers would be subject to the risk of criminal liability;

 

   

any approval or authorization required to be obtained under any other foreign antitrust, competition, or similar laws for the Closing must have been obtained, except for those the failure of which to obtain would not, individually or in the aggregate, reasonably be expected to result in a material adverse effect on AMR, US Airways Group, or AAG or provide a reasonable basis to conclude that AMR, US Airways Group, or any of their respective directors or officers would be subject to the risk of criminal liability;

 

   

no governmental entity of competent jurisdiction may have enacted, issued, promulgated, enforced, or entered any law (whether temporary, preliminary, or permanent) that is in effect and restrains, enjoins, makes illegal, or otherwise prohibits the Closing or the consummation of the other transactions contemplated by the Merger Agreement, and no governmental entity of competent jurisdiction may have proposed (and not withdrawn) an order that could have a material adverse effect on AAG or provide a reasonable basis to conclude that AMR, US Airways Group, or any of their respective directors or officers would be subject to the risk of criminal liability;

 

   

the shares of AAG common stock to be issued in the Merger and under the Plan must have been authorized for listing on the NYSE or NASDAQ upon official notice of issuance; and

 

   

the registration statement of which this proxy statement/prospectus forms a part must have become effective under the Securities Act, no stop order suspending its effectiveness may have been issued, and no proceedings for that purpose may have been initiated or be threatened by the SEC.

Conditions to Obligations of AMR and AMR Merger Sub

AMR’s and AMR Merger Sub’s obligations to effect the Merger are subject to the satisfaction or waiver of the following conditions:

 

   

each of the representations and warranties made by US Airways Group in the Merger Agreement (without giving effect to any materiality or material adverse effect qualifications contained therein) must be true and correct in all respects as of the date of the Merger Agreement and as of the Closing Date as though made on and as of the Closing Date (except to the extent any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty must be true and correct as of such earlier date) except (i) where the failure of such representations and warranties to be true and correct (other than with respect to specified representations and warranties relating to the capitalization of US Airways Group) would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on US Airways Group; and (ii) where the failure of such specified representations and warranties relating to the capitalization of US Airways Group to be true and correct is not material;

 

   

US Airways Group must have performed in all material respects all obligations required to be performed by it under the Merger Agreement at or prior to the Closing Date;

 

   

AMR must have received a certificate signed on behalf of US Airways Group by the chief executive officer or chief financial officer of US Airways Group to the effect that the conditions in the prior two bullets have been satisfied;

 

   

AMR must have received the opinion of Weil, Gotshal & Manges LLP, counsel to AMR, in form and substance reasonably satisfactory to AMR, dated the Closing Date, substantially to the effect that the Merger in conjunction with the Plan will be treated for U.S. federal income tax purposes as a

 

 

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reorganization within the meaning of Section 368(a) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”); and

 

   

any modifications, amendments, or supplements to the Plan, the Plan Related Documents, or the order of the Bankruptcy Court approving the restructuring of the Debtors pursuant to the Plan, including the approval of the Merger contemplated by the Merger Agreement, and the authorization of AMR to consummate the transactions contemplated by the Plan and the Merger Agreement (the “Confirmation Order”) not filed with the Bankruptcy Court by the Debtors must be reasonably acceptable to AMR; the Plan must have been confirmed by the Bankruptcy Court pursuant to the Confirmation Order, the Confirmation Order must be in full force and effect and must not have been stayed, modified, or vacated; and the effective date of the Plan (the “Effective Date”) must occur contemporaneously with the Closing Date. As used herein, “Plan Related Documents” means modifications, amendments, supplements, schedules, exhibits, and other similar documents related to the Plan or the Disclosure Statement or their terms and conditions.

Conditions to Obligations of US Airways Group

US Airways Group’s obligation to effect the Merger is also subject to the satisfaction or waiver of the following conditions:

 

   

each of the representations and warranties made by AMR and AMR Merger Sub in the Merger Agreement (without giving effect to any materiality or material adverse effect qualifications contained therein) must be true and correct in all respects as of the date of the Merger Agreement and as of the Closing Date as though made on and as of the Closing Date (except to the extent any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty must be true and correct as of that earlier date) except (i) where the failure of such representations and warranties to be true and correct (other than with respect to specified representations and warranties relating to the capitalization of AAG) would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on AMR; and (ii) where the failure of such specified representations and warranties relating to the capitalization of AAG to be true and correct is less than a certain threshold of shares of AAG common stock;

 

   

each of AMR and AMR Merger Sub must have performed in all material respects all obligations required to be performed by it under the Merger Agreement at or prior to the Closing Date;

 

   

US Airways Group must have received a certificate signed on behalf of AMR and AMR Merger Sub by the chief executive officer or chief financial officer of AMR to the effect that the conditions in the first, second, sixth, and seventh bullets under this heading “Conditions to Obligations of US Airways Group” have been satisfied;

 

   

US Airways Group must have received the opinion of Latham & Watkins LLP, counsel to US Airways Group, in form and substance reasonably satisfactory to US Airways Group, dated the Closing Date, substantially to the effect that the Merger in conjunction with the Plan will be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code;

 

   

the Plan, the Plan Related Documents, and the Confirmation Order must be in form and substance reasonably acceptable to US Airways Group (such acceptance not to be unreasonably delayed, conditioned, or withheld); the Plan must have been confirmed by the Bankruptcy Court pursuant to the Confirmation Order; the Confirmation Order must be in full force and effect and must not have been stayed, modified, or vacated; and the Effective Date must occur contemporaneously with the Closing Date;

 

   

the Plan must include each of the components of a conforming plan as set forth in the Merger Agreement under “The Merger Agreement—Bankruptcy Matters” beginning on page 126; and

 

 

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immediately prior to the effectiveness of the Plan:

 

  ¡    

secured indebtedness of the Debtors (other than secured indebtedness with respect to municipal bonds) must not exceed $6.8 billion in aggregate principal amount, subject to certain exceptions;

 

  ¡    

secured indebtedness of the Debtors with respect to municipal bonds must not exceed $1.7 billion in aggregate principal amount, subject to certain exceptions; and

 

  ¡    

certain unpaid administrative expense claims and unpaid claims entitled to priority status under the Bankruptcy Code (other than priority claims related to pensions) must not exceed $400 million in aggregate principal amount.

Expected Timing of the Merger

AMR and US Airways Group plan to complete the Merger as soon as is reasonably practicable and presently expect the Closing to occur in the third quarter of 2013. However, AMR and US Airways Group cannot predict the exact timing of the Closing because it is subject to approval of the Bankruptcy Court as part of the Plan, regulatory approvals, and other conditions.

Non-Solicitation of Acquisition Proposals (see page 128)

The Merger Agreement restricts US Airways Group and AMR from initiating, soliciting, knowingly encouraging, or facilitating certain proposals or offers with respect to a competing acquisition proposal, including the acquisition of a significant equity interest in US Airways Group or AMR (including AMR as reorganized pursuant to the Bankruptcy Code) or the acquisition of a significant portion of the assets of US Airways Group or AMR, or, in the case of AMR, the acquisition of claims against AMR that would entitle the purchaser to a significant equity interest in AMR (as reorganized pursuant to the Bankruptcy Code) or any plan of reorganization of AMR other than the Plan. However, each of US Airways Group or AMR may consider competing, unsolicited acquisition proposals and enter into discussions or negotiations regarding such acquisition proposals, if its board of directors determines that any such acquisition proposal constitutes, or is reasonably likely to lead to, a superior proposal and that the failure to take such action is reasonably likely to be inconsistent with its fiduciary duties under applicable law.

Termination Fees and Expenses (see page 140)

Subject to the specific exceptions discussed in this proxy statement/prospectus, in the event the Merger Agreement is terminated, US Airways Group may be required to pay a termination fee of $55 million or $195 million and AMR may be required to pay a termination fee of $135 million or $195 million (as the case may be). See the section entitled “The Merger Agreement—Termination Fees and Expenses” beginning on page 140 for a discussion of the circumstances under which such termination fees will be required to be paid.

Material U.S. Federal Income Tax Consequences of the Merger (see page 106)

The Merger in conjunction with the Plan is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code, and the Closing is conditioned upon the receipt by each of US Airways Group and AMR of an opinion from its outside counsel to the effect that the Merger so qualifies. If the Merger in conjunction with the Plan qualifies as such a reorganization, U.S. Holders generally will not recognize gain or loss as a result of the exchange of US Airways Group common stock for AAG common stock in the Merger, their aggregate tax basis in AAG common stock received in the Merger will be equal to the aggregate tax basis of the US Airways Group common stock surrendered in the Merger, and their holding period for AAG common stock received in the Merger will include their holding period for the US Airways Group common stock surrendered in

 

 

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the Merger. U.S. Holders who hold their US Airways Group common stock with differing bases or holding periods should consult their tax advisers with regard to identifying the bases or holding periods of the particular AAG common shares received in the Merger. As used herein, a “U.S. Holder” means a beneficial owner of US Airways Group common stock who is, for U.S. federal income tax purposes: (i) an individual who is a citizen or resident of the United States; (ii) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof, or the District of Columbia; (iii) an estate, the income of which is subject to U.S. federal income tax regardless of its source; or (iv) a trust that (a) is subject to the primary supervision of a U.S. court and the control of one or more U.S. persons (within the meaning of Section 7701(a)(30) of the Code), or (b) has made a valid election under applicable U.S. Treasury regulations to be treated as a U.S. person.

The tax consequences of the Merger to each stockholder will depend on such stockholder’s own situation. US Airways Group stockholders are urged to read the discussion in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences” beginning on page 103, and to consult their tax advisers as to the U.S. federal income tax consequences of the Merger, as well as the effects of other federal, state, local, and non-U.S. tax laws.

Accounting Treatment (see page 108)

AMR prepares its financial statements in accordance with GAAP. The Merger will be accounted for using the acquisition method of accounting. AMR will be treated as the acquirer for accounting purposes. Upon emergence from Chapter 11, AMR will finalize all appropriate accounting entries associated with the Plan and adopt “fresh start” accounting in accordance with the Financial Accounting Standards Board’s Accounting Standards Classification (“ASC”) 852, “Reorganizations.” Fresh start accounting requires resetting the historical net book value of assets and liabilities to fair value by assigning AMR’s reorganization value to the fair value of its assets and liabilities pursuant to ASC 805. See the section entitled “The Merger—Accounting Treatment” beginning on page 108 and Note 3 to the unaudited pro forma condensed combined financial statements beginning on page 170.

Risk Factors (see page 44)

In evaluating the Merger and the Merger Agreement, you should carefully read this proxy statement/prospectus and especially consider the factors discussed in the section entitled “Risk Factors” beginning on page  44.

Comparative Per Share Market Price Data

For a detailed description of comparative market prices, see the section entitled “Comparative Per Share Market Price Data” beginning on page 149.

US Airways Group common stock currently trades on the NYSE under the symbol “LCC.” Prior to the commencement of the Chapter 11 Cases and continuing through January 5, 2012, AMR’s common stock was traded on the NYSE under the symbol “AMR.” On December 29, 2011, the NYSE announced that it would suspend trading and move to delist AMR’s common stock. AMR’s common stock was delisted effective January 5, 2012. As a result, on January 5, 2012, AMR’s common stock began trading on the over-the-counter market under the symbol “AAMRQ.”

 

 

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The table below sets forth, for the periods indicated, the range of high and low per share sales prices for AMR common stock as reported on the NYSE and over-the-counter market, as applicable, and for US Airways Group common stock as reported on the NYSE. For current price information, you should consult publicly available sources. Neither AMR nor US Airways Group paid any dividends during these periods.

The historical price information of US Airways Group stock does not necessarily reflect, and the historical price information of AMR common stock does not reflect the price at which AAG common stock will trade following the Merger. The Plan contemplates the cancellation of all currently outstanding equity securities of AMR. Therefore, it is not meaningful to determine the value of the Merger consideration by reference to current trading values of AMR common stock. Neither AMR nor US Airways Group can anticipate the price at which AAG common stock will trade following the Closing. For information on the financial forecasts developed by AMR management (the “AMR Forecasts”), the financial forecasts developed by US Airways Group management (the “US Airways Group Forecasts”), and the financial forecasts developed by AMR management and US Airways Group management (the “AAG Disclosure Statement Forecasts,” and, together with the AMR Forecasts and the US Airways Group Forecasts, the “Forecasts”), see the section entitled “The Merger—General Information regarding Forecasts and Expected Synergies” beginning on page 100.

 

     US Airways Group      AMR  
     High      Low      High      Low  

Fiscal Year 2013

           

Second Quarter (through June 7, 2013)

   $ 19.70       $ 15.03       $ 6.85       $ 4.43   

First Quarter

     17.43         12.70         4.52         0.80   

Fiscal Year 2012

           

Fourth Quarter

   $ 13.75         10.32       $ 0.99         0.36   

Third Quarter

     14.51         9.74         0.56         0.36   

Second Quarter

     13.80         7.41         0.60         0.44   

First Quarter

     9.91         4.97         0.83         0.24   

Fiscal Year 2011

           

Fourth Quarter

   $ 6.48         3.96       $ 3.10         0.20   

Third Quarter

     9.15         4.68         5.54         2.94   

Second Quarter

     10.35         7.76         6.79         5.40   

First Quarter

     11.56         7.71         8.89         6.05   

The following table presents:

 

   

the last reported sale price of a share of AMR common stock, as reported on the over-the-counter market; and

 

   

the last reported sale price of a share of US Airways Group common stock, as reported on the NYSE;

in each case, on February 13, 2013, the last full trading day prior to the public announcement of the proposed Merger, and on June 7, 2013, the last practicable trading day prior to the date of this proxy statement/prospectus.

 

Date

   US Airways Group      AMR  

February 13, 2013

   $ 14.66       $ 1.30   

June 7, 2013

   $ 17.02       $ 4.85   

As noted above, because the Plan contemplates the cancellation of all currently outstanding securities of AMR, the historical price information of AMR common stock does not reflect the price at which AAG common stock will trade following the Closing.

 

 

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Selected Consolidated Financial Data

Selected Consolidated Financial Data of AMR

The selected consolidated financial data presented below under the captions “Consolidated statements of operations data” and “Consolidated balance sheet data” for the years ended December 31, 2012, 2011, and 2010 and as of December 31, 2012 and 2011 are derived from AMR’s audited consolidated financial statements included in this proxy statement/prospectus. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page 160. The selected consolidated financial data for the years ended December 31, 2009 and 2008 and as of December 31, 2010, 2009, and 2008 are derived from AMR’s audited consolidated financial statements for such years, which have not been included in, or incorporated by reference into, this proxy statement/prospectus. See the section entitled “Additional Information” beginning on page 347.

The consolidated statement of operations data for the three months ended March 31, 2013 and 2012, and the consolidated balance sheet data as of March 31, 2013 have been derived from the AMR unaudited interim condensed consolidated financial statements for the three months ended March 31, 2013, included in this proxy statement/prospectus. The balance sheet data as of March 31, 2012, has been derived from the AMR unaudited interim condensed consolidated financial statements for such periods, which have not been included in, or incorporated by reference into, this proxy statement/prospectus. These financial statements are unaudited, but, in the opinion of AMR’s management, contain all adjustments necessary to present fairly AMR’s consolidated financial position, results of operations, and cash flows for the periods indicated.

You should read this selected consolidated financial data together with the financial statements of AMR that are included in this proxy statement/prospectus and their accompanying notes and management’s discussion and analysis of financial condition and results of operations of AMR contained in this proxy statement/prospectus. See the AMR unaudited interim condensed consolidated financial statements for the three months ended March 31, 2013 beginning on page F-2 and the AMR 2012 consolidated financial statements beginning on page F-31.

 

    Three Months
Ended March 31,
    Year Ended December 31,  
    2013(a)     2012(a)     2012(a),(d)     2011(a)     2010(a)     2009(a),(d)     2008(a),(f)  
   

(In millions,

except share and

per share data)

    (In millions, except share and per share data)  

Consolidated statements of operations data:

             

Total operating revenues

  $ 6,098      $ 6,037      $ 24,855      $  23,979      $  22,170      $ 19,917      $  23,766   

Operating income (loss)

    52        (89     107        (1054     308        (1004     (1889

Reorganization items, net (b)

    (160     (1,401     (2,208     (118     —         —         —    

Net income (loss)

    (341     (1,660     (1,876     (1,979     (471     (1,468     (2,118

Net income (loss) per share:

             

Basic

    (1.02     (4.95     (5.60     (5.91     (1.41     (4.99     (8.16

Diluted

    (1.02     (4.95     (5.60     (5.91     (1.41     (4.99     (8.16

Consolidated balance sheet data (at end of period):

             

Total assets

    23,852        24,511        23,510        23,848        25,088        25,438        25,175   

Long-term debt, less current maturities

    6,646        6,575        6,735        6,702        8,756        9,984        8,423   

Obligations under capital leases, less current obligations

    375        316        381        —         497        599        582   

Obligation for pension and post-retirement benefits (c), (e)

    6,730        1,685        6,780        9,204        7,877        7,397        6,614   

Liabilities subject to compromise

    6,779        15,001        6,606        4,843        —         —         —    

Stockholders’ equity (deficit) (c), (e)

    (8,376     (8,686     (7,987     (7,111     (3,945     (3,489     (2,935

 

(a) Includes special charges and other items, as follows:

The 2013 first quarter special charges consisted of $16 million in Merger-related charges, $12 million of severance-related charges and write off of leasehold improvements at airport facilities that were rejected

 

 

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during the Chapter 11 Cases and a $45 million charge due to an increase in workers’ compensation claims in recent months as well as adverse development on older claims. The 2012 first quarter included special charges of $11 million related to the write off of leasehold improvements on aircraft.

In 2012, special charges consisted of $387 million of severance-related charges and write off of leasehold improvements on aircraft and at airport facilities that were rejected during the Chapter 11 Cases. AMR’s 2012 results also include a $280 million benefit from a settlement of a commercial dispute.

In 2011, special charges and other items consisted of $799 million, including $725 million related to the impairment of certain aircraft and gates, $31 million of non-recurring non-cash charges related to certain sale/leaseback transactions, and a $43 million revenue reduction as a result of a decrease in the breakage assumption related to the AAdvantage® program frequent flier liability.

In 2010, special items consisted of $81 million and include the impairment of certain route authorities in Latin America and losses on Venezuelan currency remeasurement.

In 2009, restructuring charges of $171 million primarily consisted of the grounding of the Airbus A300 fleet and the impairment of Embraer RJ-135 aircraft. Special items in 2009 consisted of $184 million and include the impairment of certain route and slot authorities, primarily in Latin America, and losses on certain sale-leaseback transactions. In 2008, restructuring charges consisted of $1.2 billion primarily related to aircraft and employee charges due to announced capacity reductions (for further discussion of these items, see Note 3 to the AMR 2012 consolidated financial statements).

(b) Reorganization items refer to revenues, expenses (including professional fees), realized gains and losses, and provisions for losses that are realized or incurred as a direct result of the Chapter 11 Cases. See Note 1 to the AMR 2012 consolidated financial statements and Note 1 to the AMR unaudited interim condensed consolidated financial statements for the three months ended March 31, 2013, included herein for further information on reorganization items.
(c) AMR’s defined benefit pension plans were frozen effective November 1, 2012, and the Pilot B Plan, a defined contribution plan, was terminated on November 30, 2012. Further, AMR significantly modified its retiree medical plans in 2012 resulting in the recognition of a negative plan amendment. See Note 11 to the AMR 2012 consolidated financial statements included herein for further information on retirement benefits, including the financial impact of these plan changes.
(d) Includes the impact of a $569 million and $248 million tax benefit related to the allocation of tax expense to other comprehensive income items recognized in 2012 and 2009, respectively.
(e) As a result of a significant decline in 2008 in the market value of AMR’s benefit plan assets, AMR recorded a $3.0 billion increase in pension and retiree medical and other benefits and a similar decrease in stockholders’ equity in 2008. In 2008, AMR incurred $103 million in expense due to a pension settlement. As a result of actuarial changes in the discount rate, AMR recorded a $1.3 billion increase in pension and retiree medical and other benefits obligations and a corresponding decrease in stockholders’ equity in 2011.
(f) Includes the impact of the $432 million gain on the sale of American Beacon Advisers.

No cash dividends were declared on AMR’s common shares during any of the periods above.

Selected Consolidated Financial Data of US Airways Group

The selected consolidated financial data presented below under the captions “Consolidated statements of operations data” and “Consolidated balance sheet data” for the years ended December 31, 2012, 2011, and 2010 and as of December 31, 2012 and 2011 are derived from US Airways Group’s audited consolidated financial statements contained in its Annual Report on Form 10-K for the year ended December 31, 2012, which is incorporated by reference in this proxy statement/prospectus. The selected consolidated financial data for the years ended December 31, 2009 and 2008 and as of December 31, 2010, 2009, and 2008 are derived from US Airways Group’s audited consolidated financial statements for such years, which have not been incorporated by

 

 

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reference into this proxy statement/prospectus. The selected consolidated financial data should be read in conjunction with US Airways Group’s consolidated financial statements for the respective periods, the related notes, and the related reports of KPMG LLP, an independent registered public accounting firm.

The consolidated statement of operations data for the three months ended March 31, 2013 and 2012, and the consolidated balance sheet data as of March 31, 2013 have been derived from US Airways Group’s unaudited condensed consolidated financial statements contained in its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013, which is incorporated by reference in this proxy statement/prospectus. The balance sheet data as of March 31, 2012 has been derived from US Airways Group’s unaudited condensed consolidated financial statements for such period, which have not been included in, or incorporated by reference into, this proxy statement/prospectus. These financial statements are unaudited, but, in the opinion of US Airways Group’s management, contain all adjustments necessary to present fairly US Airways Group’s consolidated financial position, results of operations, and cash flows for the periods indicated.

You should read this selected consolidated financial data together with the financial statements of US Airways Group and the accompanying notes and management’s discussion and analysis of financial condition and results of operations of US Airways Group contained in US Airways Group’s Annual Report on Form 10-K for the year ended December 31, 2012 and Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013, each of which is incorporated by reference in this proxy statement/prospectus. See the section entitled “Additional Information” beginning on page 347.

 

    Three Months
Ended
March 31,
    Year Ended December 31,  
    2013     2012     2012     2011     2010     2009     2008  
    (In millions, except share and per share data)  

Consolidated statements of operations data:

             

Operating revenues

  $ 3,380      $ 3,266      $ 13,831      $ 13,055      $ 11,908      $ 10,458      $ 12,118   

Operating expenses

    3,277        3,207        12,975        12,629        11,127        10,340        13,918   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

    103        59        856        426        781        118        (1,800

Net income (loss)

    44        48        637        71        502        (205     (2,215

Earnings (loss) per common share:

             

Basic

  $ 0.27      $ 0.30      $ 3.92      $ 0.44      $ 3.11      $ (1.54   $ (22.11

Diluted

    0.26        0.28        3.28        0.44        2.61        (1.54     (22.11

Shares used for computation (in thousands):

             

Basic

    162,902        162,130        162,331        162,028        161,412        133,000        100,168   

Diluted

    206,748        201,814        203,978        163,743        201,131        133,000        100,168   

Consolidated statements of operations data excluding special items (a):

             

Operating income (loss) excluding special items

  $ 144      $ 62      $ 893      $ 452      $ 785      $ (199   $ (606

Net income (loss) excluding special items

    55        (22     537        111        447        (499     (808

Earnings (loss) per common share excluding special items:

             

Basic

  $ 0.34      $ (0.13   $ 3.31      $ 0.69      $ 2.77      $ (3.75   $ (8.06

Diluted

    0.31        (0.13     2.79        0.68        2.34        (3.75     (8.06

Consolidated balance sheet data (at end of period):

             

Total assets

  $ 10,147      $ 8,848      $ 9,396      $ 8,335      $ 7,819      $ 7,454      $ 7,214   

Long-term obligations, less current maturities (b)

    3,923        4,582        5,013        4,718        4,559        4,643        4,281   

Total stockholders’ equity (deficit)

    841        200        790        150        84        (355     (494

 

(a) See reconciliation of GAAP to non-GAAP financial measures below.
(b) Includes debt, capital leases, post-retirement benefits other than pensions and employee benefit liabilities, and other.

 

 

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Reconciliation of GAAP to Non-GAAP Financial Measures

US Airways Group is providing disclosure of the reconciliation of reported non-GAAP financial measures to its comparable financial measures on a GAAP basis. US Airways Group believes that the non-GAAP financial measures provide investors the ability to measure financial performance excluding special items, which is more indicative of its ongoing performance and is more comparable to measures reported by other major airlines.

 

     Three Months Ended
March  31,
    Year Ended December 31,  
     2013     2012     2012     2011     2010     2009     2008  
     (In millions)  

Operating income (loss)—GAAP

   $ 103      $ 59      $ 856      $ 426      $ 781      $ 118      $ (1,800

Operating special items, net (a)

     41        3        37        26        4        (317     1,194   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss) excluding special items

     144        62        893        452        785        (199     (606

Net income (loss)—GAAP

     44        48        637        71        502        (205     (2,215

Operating special items, net (a)

     41        3        37        26        4        (317     1,194   

Nonoperating special items, net (b)

     (30     (73     (137     (7     (59     61        213   

Income tax special items (c)

     —          —          —         21        —         (38     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) excluding special items

   $ 55      $ (22   $ 537      $ 111      $ 447      $ (499   $ (808

 

(a) Includes the following operating special charges (credits):

The three months ended March 31, 2013 consisted primarily of Merger-related costs and charges related to the ratification of the US Airways flight attendant collective bargaining agreement (“CBA”).

The 2012 period included $34 million of charges primarily related to corporate transaction and auction rate securities arbitration costs as well as $3 million of express special charges related to ratification of a new Piedmont fleet and passenger services contract.

The 2011 period included $24 million of charges primarily related to corporate transaction and auction rate securities arbitration costs as well as $2 million in express other special charges.

The 2010 period included a $6 million non-cash charge related to the decline in value of certain spare parts, $5 million in aircraft costs related to capacity reductions, and other net special charges of $10 million, which included a settlement and corporate transaction costs. These costs were offset in part by a $16 million refund of Aviation and Security Infrastructure Fee (“ASIF”) and a $1 million refund of ASIF for US Airways Group’s express subsidiaries previously paid to the Transportation Security Administration (“TSA”) during the years 2005 to 2009.

The 2009 period included $375 million of net unrealized gains on fuel hedging instruments, offset in part by $22 million in aircraft costs as a result of capacity reductions, $16 million in non-cash impairment charges due to the decline in value of certain indefinite lived intangible assets associated with international routes, $11 million in severance and other charges, $6 million in costs incurred related to the 2009 liquidity improvement program, and $3 million in non-cash charges related to the decline in value of certain express spare parts.

The 2008 period included a $622 million non-cash charge to write-off all of the goodwill created by the merger of US Airways Group and America West in September 2005, as well as $496 million of net unrealized losses on fuel hedging instruments. In addition, the 2008 period included $35 million of merger-related transition expenses, $18 million in non-cash charges related to the decline in value of certain spare parts associated with US Airways Group’s Boeing 737 aircraft fleet, and, as a result of capacity reductions, $14 million in aircraft costs and $9 million in severance charges.

 

(b) Includes the following nonoperating special charges (credits):

The three months ended March 31, 2013 consisted of a $30 million credit in connection with an award received in an arbitration related to previous investments in auction rate securities.

 

 

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The three months ended March 31, 2012 consisted of a $73 million gain relating to the Slot transaction with Delta Air Lines.

The 2012 period primarily included a $142 million gain related to the Slot transaction with Delta Air Lines, offset in part by $3 million in debt prepayment penalties and non-cash write-offs of certain debt issuance costs related to the refinancing of two Airbus aircraft.

The 2011 period included a $15 million credit in connection with an award received in an arbitration involving investments in auction rate securities, offset in part by $6 million in debt prepayment penalties and non-cash write-offs of certain debt issuance costs related to the refinancing of five Airbus aircraft as well as $2 million of losses related to investments in auction rate securities.

The 2010 period included $53 million of net realized gains related to the sale of certain investments in auction rate securities as well as an $11 million settlement gain, offset in part by $5 million in non-cash charges related to the write-off of debt issuance costs.

The 2009 period included $49 million in non-cash charges associated with the sale of 10 Embraer 190 aircraft and write-off of related debt discount and issuance costs, $10 million in other-than-temporary non-cash impairment charges for investments in auction rate securities, and a $2 million non-cash asset impairment charge.

The 2008 period included $214 million in other-than-temporary non-cash impairment charges for investments in auction rate securities, as well as $7 million in write-offs of debt discount and debt issuance costs in connection with the refinancing of certain aircraft equipment notes and certain loan prepayments, offset in part by $8 million in gains on forgiveness of debt.

 

(c) Includes the following income tax special charges (credits):

The 2011 period included a non-cash tax charge of $21 million as a result of the sale of US Airways Group’s final remaining investment in auction rate securities in July 2011. This charge recognized in the statement of operations the tax provision that was recorded in other comprehensive income, a subset of stockholders’ equity, in the fourth quarter of 2009 as described below.

The 2009 period included a tax benefit of $38 million. Of this amount, $21 million was due to a non-cash income tax benefit related to gains recorded within other comprehensive income during 2009. In addition, US Airways Group recorded a $14 million tax benefit related to a legislation change allowing US Airways Group to carry back 100% of 2008 Alternative Minimum Tax liability net operating losses (“NOLs”), resulting in the recovery of such Alternative Minimum Tax liability amounts paid in prior years. US Airways Group also recognized a $3 million tax benefit related to the reversal of the deferred tax liability associated with the indefinite lived intangible assets that were impaired during 2009.

 

 

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Supplementary Financial Data

The table below sets forth certain unaudited supplementary quarterly financial data of AMR for 2013, 2012 and 2011:

 

     First
Quarter
     Second
Quarter
     Third
Quarter
     Fourth
Quarter
 
     (In millions, except per share amounts)  

2013

           

Operating revenues

   $ 6,098       $  —        $  —        $ —    

Operating income (loss)

     52         —          —          —    

Net earnings (loss)

     (341      —          —          —    

Earnings (loss) per share:

           

Basic

     (1.02      —          —          —    

Diluted

     (1.02      —          —          —    

2012

           

Operating revenues

   $ 6,037       $  6,452       $  6,429       $ 5,937   

Operating income (loss)

     (89      142         51         3   

Net earnings (loss)

     (1,660      (241      (238      263   

Earnings (loss) per share:

           

Basic

     (4.95      (0.72      (0.71      0.78   

Diluted

     (4.95      (0.72      (0.71      0.69   

2011

           

Operating revenues

   $ 5,533       $ 6,114       $ 6,376       $ 5,956   

Operating income (loss)

     (232      (78      39         (783

Net earnings (loss)

     (436      (286      (162      (1,095

Earnings (loss) per share:

           

Basic

     (1.31      (0.85      (0.48      (3.27

Diluted

     (1.31      (0.85      (0.48      (3.27

 

 

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Selected Unaudited Pro Forma Condensed Combined Financial Data of AMR and US Airways Group

The following table presents selected unaudited pro forma condensed combined financial data about AMR’s consolidated balance sheet and statements of operations, after giving effect to the Merger and “fresh start” accounting. The information under “Unaudited Pro Forma Condensed Combined Statement of Operations Data” in the table below reflects the impact of “fresh start” accounting for AMR as if implemented on January 1, 2012 and gives effect to the Merger as if it had been consummated on January 1, 2012, the beginning of the earliest period presented. The information under “Unaudited Pro Forma Condensed Combined Balance Sheet Data” in the table below assumes the Merger had been consummated on December 31, 2012. This unaudited pro forma condensed combined financial data was prepared using the acquisition method of accounting with AMR considered the acquirer of US Airways Group. See the section entitled “The Merger—Accounting Treatment” beginning on page 108.

In addition, the unaudited pro forma condensed combined financial data includes adjustments that are preliminary and may be revised. There can be no assurance that such revisions will not result in material changes. The unaudited pro forma condensed combined financial data is presented for illustrative purposes only and does not indicate the financial results of AMR or AAG.

Further, upon emergence from Chapter 11, AMR will finalize all appropriate accounting entries associated with the Plan and adopt “fresh start” accounting in accordance with ASC 852, “Reorganizations.” Fresh start accounting requires resetting the historical net book value of remaining assets and liabilities to fair value by assigning AMR’s reorganization value to the fair value of its assets and liabilities pursuant to ASC 805.

The information presented below should be read in conjunction with the historical consolidated financial statements of AMR and US Airways Group, including the related notes, in the case of AMR, included in this proxy statement/prospectus, and in the case of US Airways Group, incorporated by reference into this proxy statement/prospectus, and with the unaudited pro forma condensed combined financial statements of AMR and US Airways Group, including the related notes, appearing elsewhere in this proxy statement/prospectus. See the section entitled “Additional Information” beginning on page 347, the AMR unaudited interim condensed consolidated financial statements for the three months ended March 31, 2013 beginning on page F-2, the AMR 2012 consolidated financial statements beginning on page F-31, and the section entitled “Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page 160.

The unaudited pro forma condensed combined financial data is not necessarily indicative of results that actually would have occurred or that may occur in the future had the Merger been completed on the dates indicated.

Unaudited Pro Forma Condensed Combined Statements of Operations Data

 

     Three Months
Ended

March 31, 2013
    Year Ended
December 31, 2012
 
     (In millions, except
per share data)
    (In millions, except
per share data)
 

Operating revenues

   $ 9,501      $ 38,689   

Operating expenses

     9,314        37,465   

Operating income

     187        1,224   

Net income (loss)

     (112     599   

Earnings (loss) per share:

    

Basic

     (0.16     0.86   

Diluted

     (0.16     0.85   

 

 

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Unaudited Pro Forma Condensed Combined Balance Sheet Data

 

     As of
March 31, 2013
 
     (In millions)  

Unrestricted cash, cash equivalents, and short-term investments

   $ 6,772   

Total assets

     55,363   

Long-term debt and capital lease obligations, excluding current portion

     11,002   

Stockholders’ equity

     12,478   

Unaudited Comparative Per Share Data

Presented below are AMR’s and US Airways Group’s historical per share data for the three months ended March 31, 2013 and the year ended December 31, 2012 and unaudited pro forma combined per share data for the three months ended March 31, 2013 and the year ended December 31, 2012. This information should be read together with the historical consolidated financial statements and related notes of US Airways Group that are incorporated by reference into this proxy statement/prospectus, the consolidated financial statements and related notes of AMR that are included in this proxy statement/prospectus, and with the unaudited pro forma condensed combined financial data included in the section entitled “Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page 160. The unaudited pro forma condensed combined financial data is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Merger had been completed as of the beginning of the periods presented, nor is it necessarily indicative of the future operating results or financial position of AMR or AAG. The historical book value per share is computed by dividing total stockholders’ equity (deficit) by the number of shares of common stock outstanding at the end of the period. The pro forma loss per share of AAG is computed by dividing the pro forma loss by the pro forma weighted average number of shares outstanding. The pro forma book value per share of AAG is computed by dividing total pro forma stockholders’ equity by the pro forma number of shares of common stock outstanding at the end of the period.

 

AMR—Historical

   Three Months Ended
March 31, 2013
    Year Ended
December 31, 2012
 

Loss per share

    

Basic

   $ (1.02   $ (5.60

Diluted

   $ (1.02   $ (5.60

Book value per share of common stock

   $ (24.99   $ (23.82

 

US Airways Group—Historical

   Three Months Ended
March 31, 2013
     Year Ended
December 31, 2012
 

Earnings per share

     

Basic

   $ 0.27       $ 3.92   

Diluted

   $ 0.26       $ 3.28   

Book value per share of common stock

   $ 5.15       $ 4.86   

 

AMR unaudited pro forma combined amounts

   Three Months Ended
March 31, 2013
    Year Ended
December 31, 2012
 

Earnings (loss) per share

    

Basic

   $ (0.16   $ 0.86   

Diluted

   $ (0.16   $ 0.85   

Book value per share of common stock

   $ 17.85      $ 17.13   

 

 

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GLOSSARY

Set forth below is a Glossary of defined terms used in this proxy statement/prospectus:

“2002 Plan” means the America West 2002 Incentive Equity Plan.

“2005 Plan” means the US Airways Group, Inc. 2005 Equity Incentive Plan.

“2008 Plan” means the US Airways Group, Inc. 2008 Equity Incentive Plan.

“2011 Plan” means the US Airways Group, Inc. 2011 Incentive Award Plan.

“2013 Annual Meeting of Stockholders” means the 2013 annual meeting of stockholders of US Airways Group.

“2013 Equity Awards” means AMR’s long-term incentive awards to be granted by AMR under the AAG 2013 IAP in the form of stock-settled RSUs or, to the extent permitted by the Merger Agreement, cash or cash-settled awards, to certain AMR employees to be effective upon the Closing.

“7% Convertible Note Indenture” means the Indenture, dated as of September 30, 2005, between US Airways Group and U.S. Bank National Association, as trustee.

“7.25% Convertible Note Indenture” means the Indenture, dated as of May 13, 2009, between US Airways Group and The Bank of New York Mellon Trust Company, N.A., as trustee, as supplemented by the First Supplemental Indenture, dated as of May 13, 2009, between US Airways Group and The Bank of New York Mellon Trust Company, N.A., as trustee.

“AAdvantage® program” means AMR’s AAdvantage® frequent flyer program.

“AAG” means AMR following the Closing, as renamed American Airlines Group Inc., and, as the context requires, its subsidiaries (including US Airways Group and its subsidiaries).

“AAG 2013 IAP” means the new American Airlines Group Inc. 2013 Incentive Award Plan to be effected pursuant to the Plan.

“AAG Bylaws” means the amended and restated bylaws of AMR to be effective at the Effective Time, which are expected to be substantially in the form included as Annex D to this proxy statement/prospectus.

“AAG Certificate of Incorporation” means the amended and restated certificate of incorporation of AMR to be effective immediately prior to the Effective Time, which is expected to be substantially in the form included as Annex B to this proxy statement/prospectus.

“AAG Convertible Preferred Stock” means the series of preferred stock, par value $0.01 per share, of AAG, designated as “Series A Convertible Preferred Stock.”

“AAG Disclosure Statement Forecasts” means the financial forecasts developed by AMR management and US Airways Group management solely in connection with the Disclosure Statement being delivered to stakeholders of the Debtors in the Chapter 11 Cases.

“AAG Securities” means, collectively, AAG common stock, preferred stock, warrants, rights, or options to purchase AAG common stock and certain other equity-type interests of AAG.

“Acquiring Person” means a person or group of affiliated or associated persons who has acquired, or obtained the right to acquire, beneficial ownership of 4.9% or more of the common stock of US Airways Group.

 

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“Ad Hoc Committee” means the Ad Hoc Group of AMR Corporation Creditors, consisting of substantial prepetition unsecured creditors of the Debtors.

“AFA” means the Association of Flight Attendants-CWA.

“Airbus” means Airbus S.A.S.

“ALPA” means the Air Line Pilots Association.

“Amendment” means the Amendment to Agreement and Plan of Merger, dated as of May 15, 2013, by and among AMR, AMR Merger Sub, and US Airways Group.

“America West” means America West Holdings Corporation.

“American” means American Airlines, Inc., a wholly-owned subsidiary of AMR.

“American Debtors” means, for purposes of the Plan, American and certain of its subsidiaries, as substantively consolidated into one of three nodes pursuant to which the Plan will classify creditor claims.

“American Eagle” means American Eagle Airlines, Inc., an indirectly wholly-owned subsidiary of AMR.

“American Eagle Carriers” means the regional airlines that provide regional feed to American—American Eagle, Chautauqua Airlines, Inc., SkyWest Airlines, Inc., Republic Airlines, Inc., and ExpressJet Airlines, Inc.

“AMR” means AMR Corporation, or AMR Corporation and its subsidiaries, as the context requires.

“AMR 2012 AIP” means AMR’s 2012 Annual Incentive Plan.

“AMR Alignment Awards” means the long-term incentive awards to be granted by AMR under the AAG 2013 IAP in the form of stock-settled RSUs or, to the extent permitted by the Merger Agreement, cash or cash-settled awards, to certain AMR employees to be effective upon the Closing.

“AMR Debtors” means, for purposes of the Plan, AMR and certain of its subsidiaries, as substantively consolidated into one of three nodes pursuant to which the Plan will classify creditor claims.

“AMR Disclosure Letter” means the disclosure letter delivered to US Airways Group by AMR concurrently with the execution and delivery of the Merger Agreement.

“AMR Eagle” means AMR Eagle Holding Corporation, a wholly-owned subsidiary of AMR.

“AMR Existing Severance Agreements” means those executive termination benefit agreements entered into between AMR and certain of its executive officers prior to the commencement of the Chapter 11 Cases.

“AMR Forecasts” means the financial forecasts of AMR developed by management of AMR and used by US Airways Group’s financial adviser and the US Airways Group board of directors in connection with the evaluation of the Merger and the other transactions contemplated by the Merger Agreement, which are summarized under the section entitled “The Merger—General Information regarding Forecasts and Expected Synergies—Certain AMR Forecasted Financial Information” beginning on page 102.

“AMR Merger Severance Agreements” means those severance agreements that will be entered into between AMR and its named executive officers, to be effective upon the Closing.

“AMR Merger Sub” means AMR Merger Sub, Inc., a wholly-owned subsidiary of AMR.

 

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“AMR Non-Qualified Plan” means AMR’s Supplemental Executive Retirement Plan.

“AMR Retirement Benefit Plan” means the AMR Retirement Benefit Plan of American Airlines, Inc. for Agents, Management, Specialists, Support Personnel, and Officers.

“AMR STI” means AMR’s 2013 short-term incentive plan.

“AMR SuperSaver Plan” means the $uper $aver 401(k) Capital Accumulation Plan for Employees of Participating AMR Corporation Subsidiaries.

“ANCA” means the Airport Noise and Capacity Act of 1990.

“APA” means the Allied Pilots Association.

“APFA” means the Association of Professional Flight Attendants.

“ASC” means the Financial Accounting Standards Board’s Accounting Standards Codification.

“ASIF” means the Aviation and Security Infrastructure Fee paid by airlines to the TSA.

“ASM” means available seat mile, a measure of capacity. ASMs equal the total number of seats available for transporting passengers on an aircraft during a reporting period multiplied by the total number of miles flown by that aircraft during that period.

“ATC” means air traffic control, which is operated by the FAA.

“ATSA” means the Aviation and Transportation Security Act.

“AWA” means America West Airlines, Inc.

“Bankruptcy Code” means title 11 of the U.S. Code, 11 U.S.C. sections 101, et seq, as amended.

“Bankruptcy Court” means the U.S. Bankruptcy Court for the Southern District of New York.

“Bar Date” means July 16, 2012 at 5:00 p.m. (Eastern Time), the deadline to file proofs of claim against any Debtor.

“Barclays” means Barclays Capital Inc.

“Boeing” means The Boeing Company.

“Broker Non-Vote” means the return of a proxy card by a broker without voting on a non-discretionary proposal because the broker received no instruction from the stockholder. Broker Non-Votes are considered for the purposes of determining quorum.

“CBA” means a collective bargaining agreement.

“Chapter 11” means chapter 11 of the Bankruptcy Code.

“Chapter 11 Cases” means the voluntary cases commenced by the Debtors under Chapter 11 being jointly administered as Case No. 11-15463 (SHL) in the Bankruptcy Court.

“CLA” means a conditional labor agreement.

 

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“Closing” means the consummation of the Merger.

“Closing Date” means the date on which the Closing occurs.

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

“Confirmation Order” means an order of the Bankruptcy Court approving the restructuring of the Debtors pursuant to the Plan, including the approval of the Merger contemplated by the Merger Agreement, and the authorization of AMR to consummate the transactions contemplated by the Plan and the Merger Agreement.

“Consenting Creditors” means the holders of certain prepetition claims against one or more of the Debtors that entered into the Support and Settlement Agreement with the Debtors.

“Debtors” means AMR and certain of its direct and indirect domestic subsidiaries that filed the Chapter 11 Cases.

“DFW” means the Dallas-Fort Worth International Airport.

“DGCL” means the General Corporation Law of the State of Delaware, as amended.

“DHS” means the U.S. Department of Homeland Security.

“Disclosure Statement” means a disclosure statement filed by AMR and the other Debtors under Section 1125 of the Bankruptcy Code.

“Distribution Date” means the date on which US Airways Group makes a public announcement that a person or group of affiliated or associated persons has acquired, or obtained the right to acquire, beneficial ownership of 4.9% or more of the common stock of US Airways Group, or such earlier date that a majority of the board of directors of US Airways Group becomes aware of the existence of an Acquiring Person.

“DOJ” means the U.S. Department of Justice.

“DOT” means the U.S. Department of Transportation.

“Double-Dip Unsecured Claims” means, collectively, general unsecured claims against American that are guaranteed by AMR and general unsecured claims against AMR that are guaranteed by American.

“Eagle Debtors” means, for purposes of the Plan, AMR Eagle and certain of its subsidiaries, as substantively consolidated into one of three nodes pursuant to which the Plan will classify creditor claims.

“EBIT” means earnings before interest and taxes.

“EBITDA” means earnings before interest, taxes, depreciation, and amortization.

“EBITDAR” means earnings before interest, taxes, depreciation, amortization, and mainline aircraft rent expense.

“EETC” means an enhanced equipment trust certificate.

“Effective Date” means the effective date of the Plan.

 

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“Effective Time” means the date and time at which AMR and US Airways Group cause an executed and acknowledged certificate of merger to be filed with the Secretary of State of the State of Delaware or such later date and time as AMR and US Airways Group may agree in writing and specify in the certificate of merger for the Merger to become effective.

“EPA” means the U.S. Environmental Protection Agency.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Ernst & Young” means Ernst & Young LLP.

“ETS” means the EU emissions trading scheme.

“EU” means the European Union.

“EU Merger Regulation” means the European Community Council Regulation No. 139/2004.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Existing Holder” means any person who beneficially owned shares of common stock of US Airways Group equal to or exceeding 4.9% of the outstanding common stock of US Airways Group immediately prior to the first public announcement of the adoption of the Tax Plan.

“Expected Synergies” means the more than $1 billion in annual net synergies in 2015 projected to be realized by AAG, including cost synergies of more than $150 million (after taking into account the improved compensation arrangements negotiated with employees of AAG) and revenue synergies of approximately $900 million.

“FAA” means the U.S. Federal Aviation Administration.

“Federal Aviation Act” means Subtitle VII of Title 49 of the United States Code, as amended.

“Forecasts” means, collectively, the AMR Forecasts, the US Airways Group Forecasts, and the AAG Disclosure Statement Forecasts.

“FTC” means the U.S. Federal Trade Commission.

“GAAP” means U.S. generally accepted accounting principles.

“GDS” means global distribution system.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“IBES” means the Institutional Brokers’ Estimate System.

“ICAO” means the United Nations’ International Civil Aviation Organization.

“Independent Director” means a person who satisfies the requirements for independence under Rule 303A of the NYSE as then in effect.

“IRS” means the U.S. Internal Revenue Service.

“ISO” means an incentive stock option.

“JBA” means a joint business agreement.

 

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“LIBOR” means the London interbank offered rate for deposits of U.S. Dollars.

“Load Factor” means Passenger Load Factor.

“LTIPP” means a US Airways Group Long-Term Incentive Performance Program.

“Maximum Plan Shares” means an aggregate number of shares of AAG common stock equal to (i)(a) the US Airways Fully Diluted Shares, multiplied by (b) the quotient (rounded to four decimals) of 72 divided by 28 (rounded to the nearest whole share) less (ii) the number of shares of AAG common stock represented by equity-based awards to be issued to employees of AMR and its subsidiaries as contemplated by the Merger Agreement and the Plan, subject to certain agreed upon exceptions.

“Merger” means the merger of AMR Merger Sub with and into US Airways Group, with US Airways Group continuing as the surviving entity in such merger as a direct wholly-owned subsidiary of AMR pursuant to the Merger Agreement.

“Merger Agreement” means the Agreement and Plan of Merger, dated as of February 13, 2013, by and among AMR, and its successors (including, as the context may require, on or after the Effective Date, as reorganized pursuant to the Bankruptcy Code), US Airways Group, and AMR Merger Sub, as amended by the Amendment and the Second Amendment.

“Merger Support Order” means that certain order entered by the Bankruptcy Court on May 10, 2013 entitled Order Authorizing and Approving (i) Merger Agreement Among AMR Corporation, AMR Merger Sub, Inc., and US Airways Group, Inc., (ii) Debtors’ Execution of and Performance under Merger Agreement, (iii) Certain Employee Compensation and Benefit Arrangements, (iv) Termination Fees, and (v) Related Relief (ECF No. 8096).

“Meridian” means Meridian Compensation Partners.

“MOU” means a memorandum of understanding.

“NASDAQ” means the NASDAQ Stock Market.

“NMB” means the National Mediation Board.

“NOLs” means the net operating losses of a company.

“NOL Carryforwards” means the deductions in any taxable year for NOLs carried over from prior taxable years.

“Non-Citizen” means person who is not citizens of the U.S. a defined by Section 40102(a)(15) of the Federal Aviation Act and administrative interpretations issued by the DOT.

“NSO” means a non-qualified stock option.

“NYSE” means the New York Stock Exchange.

“Orbitz” means Orbitz Worldwide LLC.

“OSHA” means the U.S. Occupational Safety and Health Administration.

“Parker Agreement” means the Amended and Restated Employment Agreement, by and among US Airways Group, US Airways, and W. Douglas Parker, dated November 28, 2007.

“Passenger Load Factor” means the measure of utilized available seating capacity calculated by dividing RPMs by ASMs for a reporting period.

 

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“Passenger Yield” means the amount of passenger revenue earned per RPM during a reporting period.

“PEB” means a Presidential Emergency Board.

“Piedmont” means Piedmont Airlines, Inc., a wholly-owned subsidiary of US Airways Group.

“Plan” means the plan of reorganization proposed by the Debtors under Chapter 11 pursuant to which, among other things, the Debtors will emerge from the Chapter 11 Cases and the Merger will be consummated.

“Plan Related Documents” means modifications, amendments, supplements, schedules, exhibits, and other similar documents related to the Plan or the Disclosure Statement or their terms and conditions.

“Plan Shares” means shares of AAG common stock and AAG Convertible Preferred Stock issued pursuant to the Plan, and shares of AAG common stock that are or may become issuable upon conversion or exchange of shares of AAG Convertible Preferred Stock.

“PSA” means PSA Airlines, Inc., a wholly-owned subsidiary of US Airways Group.

“Purchase Price” means, in connection with the Tax Plan, a price of $3.00 per one tenth of a share of common stock of US Airways Group.

“PSA” means PSA Airlines, Inc., a wholly-owned subsidiary of US Airways Group.

“QPBC” means qualified performance-based compensation.

“RASM” means the amount of passenger revenue earned per ASM during a reporting period.

“Record Date” means May 30, 2013.

“Redemption Price” means, in connection with the redemption of Rights, a price of $0.0001 per Right.

“Right” means a dividend declared by US Airways Group in connection with the adoption of the Tax Plan of one common stock purchase right for each share of common stock of US Airways Group outstanding at the close of business on February 27, 2013.

“RLA” means the Railway Labor Act.

“RPM” means revenue passenger mile and is equivalent to one revenue-paying passenger transported one mile. RPMs equal the number of revenue passengers during a reporting period multiplied by the number of miles flown by those passengers during that period. RPMs are also referred to as “traffic.”

“RSU” means restricted stock unit.

“SAR” means stock appreciation right.

“Search Committee” means the committee established by the UCC, consisting of four designees from the UCC and four members designated by a majority of the initial Consenting Creditors under the Support and Settlement Agreement to select director designees for the board of directors of AAG.

“SEC” means the U.S. Securities and Exchange Commission.

“Second Amendment” means the Second Amendment to Agreement and Plan of Merger, dated as of June 7, 2013, by and among AMR, AMR Merger Sub, and US Airways Group.

“Second Request” means a request from the DOJ for additional information.

 

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“Section 16(a)” means Section 16(a) of the Exchange Act.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Significant Creditors” means certain members of the Ad Hoc Committee and other significant holders of publicly traded bonds and other claims against AMR and other Debtors in the Chapter 11 Cases.

“Single-Dip Unsecured Claims” means the general unsecured claims against the Debtors that are not guaranteed by any other Debtor, other than the claims of the Debtors’ labor unions.

“Slots” means landing and take-off authorizations.

“SOX” means the Sarbanes-Oxley Act of 2002, as amended.

“Stabilization Act” means the Air Transportation Safety and System Stabilization Act.

“Standards of Business Conduct” means AMR’s code of ethics.

“Substantial Stockholder” means a person or entity with a percentage ownership of 4.75% or more of AAG Securities.

“Support and Settlement Agreement” means that certain Support and Settlement Agreement, dated as of February 13, 2013, by and among AMR and certain holders of prepetition unsecured claims against one or more of the Debtors, as amended.

“Surviving Corporation” means, with respect to time periods after the Effective Time, US Airways Group.

“Tax Benefits” means, for purposes of the Tax Plan, certain deferred tax benefits, including those generated by NOLs and certain other tax attributes of US Airways Group and of AAG to be created upon the Closing.

“Tax Plan” means that certain Tax Benefit Preservation Plan between US Airways Group and American Stock Transfer & Trust Company, LLC, dated as of February 13, 2013.

“Term Sheet” means that certain term sheet attached to the Support and Settlement Agreement.

“Travelport” means, collectively, Travelport Limited and Travelport, L.P.

“TSA” means the Transportation Security Administration.

“TSR” means Total Stockholder Return.

“TWU” means the Transport Workers Union of America.

“UCC” means the Official Committee of Unsecured Creditors of AMR.

“UCC’s Advisers” means the legal and financial advisers retained by the UCC.

“UCC’s Legal Adviser” means Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the UCC regarding the Chapter 11 Cases.

“Unit Revenue” means passenger RASM.

 

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“US Airways” means US Airways, Inc., a wholly-owned subsidiary of US Airways Group.

“US Airways 7% Convertible Notes” means US Airways Group’s 7% Senior Convertible Notes due 2020.

“US Airways 7.25% Convertible Notes” means US Airways Group’s 7.25% Convertible Notes due 2014.

“US Airways Disclosure Letter” means the disclosure letter delivered to AMR by US Airways Group concurrently with the execution and delivery of the Merger Agreement.

“US Airways Fully Diluted Shares” means the number of shares of US Airways Group common stock that would be deemed to be outstanding for purposes of calculating “diluted earnings per share” under GAAP using the treasury stock method, as modified by the Merger Agreement, including that the average market price used in such calculation will be equal to the average of the daily closing prices for US Airways Group common stock on the NYSE for each of the 20 trading days ending on (and including) the sixth trading day prior to the Closing.

“US Airways Group” means US Airways Group, Inc., or US Airways Group, Inc. and its subsidiaries, as the context requires.

“US Airways Group 2012 AIP” means US Airways Group’s 2012 Annual Incentive Program.

“US Airways Group Executive CIC Agreements” means the US Airways Group and US Airways form of executive change in control agreement.

“US Airways Group Forecasts” means the financial forecasts of US Airways Group developed by management of US Airways Group and used by US Airways Group’s financial advisor and the US Airways Group board of directors in connection with the evaluation of the Merger and the other transactions contemplated by the Merger Agreement, which are summarized under the section entitled “The Merger—General Information regarding Forecasts and Expected Synergies—Certain US Airways Group Forecasted Financial Information” beginning on page 103.

“U.S. Holder” means a beneficial owner of US Airways Group common stock who is, for U.S. federal income tax purposes: (i) an individual who is a citizen or resident of the United States; (ii) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof, or the District of Columbia; (iii) an estate, the income of which is subject to U.S. federal income tax regardless of its source; or (iv) a trust that (a) is subject to the primary supervision of a U.S. court and the control of one or more U.S. persons (within the meaning of Section 7701(a)(30) of the Code), or (b) has made a valid election under applicable U.S. Treasury regulations to be treated as a U.S. person.

“USAPA” means the US Airline Pilots Association.

“Yield” means Passenger Yield.

 

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RISK FACTORS

Risk Factors Relating to the Merger

In addition to the other information included or incorporated by reference in this proxy statement/prospectus, you should carefully consider the risk factors described below in evaluating whether to vote to adopt the Merger Agreement. In addition, you should read and consider the risks associated with the businesses of each of AMR and US Airways Group because these risks will also affect AAG. For US Airways Group, a description of these risks can be found in US Airways Group’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, as updated by subsequent Quarterly Reports of US Airways Group on Form 10-Q, each of which is filed with the SEC and incorporated by reference into this proxy statement/prospectus. You should also read and consider the other information in this proxy statement/prospectus and the other documents incorporated by reference into this proxy statement/prospectus. See the section entitled “Additional Information” beginning on page 347.

The Merger is subject to a number of conditions to the obligations of both AMR and US Airways Group, which, if not fulfilled, may result in termination of the Merger Agreement.

The Merger Agreement contains a number of customary conditions to Closing, including that certain representations and warranties be accurate, that certain covenants be fulfilled, that certain consents and regulatory approvals have been obtained, that there are no legal prohibitions against Closing, that US Airways Group stockholders have adopted the Merger Agreement, that an order from the Bankruptcy Court confirming the Plan is in effect, that the Plan conforms to the requirements of the Merger Agreement, that secured indebtedness of the Debtors and certain other claims against the Debtors not exceed specified levels, and certain other conditions. Many of the conditions to Closing are not within either AMR’s or US Airways Group’s control and neither company can predict when or if these conditions will be satisfied. If any of these conditions are not satisfied or waived prior to October 14, 2013, which date may be extended to December 13, 2013 under certain circumstances, it is possible that the Merger will not be consummated in the expected time frame or that the Merger Agreement may be terminated. See the sections entitled “The Merger Agreement—Termination of the Merger Agreement” beginning on page 138 for a discussion of the rights of each of AMR and US Airways Group to terminate the Merger Agreement, and “The Merger Agreement—Conditions to the Merger” beginning on page 135 for a discussion of the conditions to Closing.

The Merger is subject to the receipt of consents and clearances from certain domestic and foreign regulatory authorities that may impose conditions that could have a material and adverse effect on AAG, or that could delay or, if not obtained, prevent the Closing.

Before the Merger can be completed, applicable waiting periods must expire or terminate under antitrust laws and various approvals, consents, or clearances must be obtained from certain domestic and foreign regulatory entities, including those regulating the provision of commercial aviation services. In deciding whether to grant antitrust or regulatory clearances, the relevant antitrust authorities will consider the effect of the Merger on competition within their relevant jurisdictions. The terms and conditions of approvals that are granted may impose requirements, limitations, costs, or restrictions on the conduct of AAG’s business following the Closing. There can be no assurance that regulators will not impose terms, conditions, requirements, limitations, costs, or restrictions that would delay the Closing, impose additional material costs on or limit the revenues of AAG, or limit some of the synergies and other benefits US Airways Group and AMR anticipate following the Closing. In addition, neither US Airways Group nor AMR can provide any assurance that any such terms, conditions, requirements, limitations, costs, or restrictions will not result in a material delay in, or the abandonment of, the Merger.

 

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The Merger is subject to the receipt of numerous approvals, including approvals from US Airways Group’s stockholders and confirmation of the Plan by the Bankruptcy Court. Failure to obtain any of these approvals would prevent the Closing.

Before the Merger can be completed, US Airways Group’s stockholders must adopt the Merger Agreement and the Bankruptcy Court must enter an order confirming the Plan. There can be no assurance that these approvals will be obtained. Failure to obtain required approvals within the expected time frame, or having to make significant changes to the structure, terms, or conditions of the Merger to obtain such approvals, may result in a material delay in, or the abandonment of, the Merger.

Uncertainties associated with the Merger may cause a loss of AMR’s and/or US Airways Group’s management personnel and other key employees, which could materially and adversely affect AAG’s future business, financial condition, and results of operations following the Closing.

AAG will be dependent on the experience and industry knowledge of its officers and other key employees to execute its business plan; therefore, AAG’s success after the Merger will depend in part upon its ability to retain key management personnel and other key employees. AMR’s and US Airways Group’s respective current and prospective employees may experience uncertainty about their roles within AAG, which may have a material and adverse effect on AAG’s ability to retain key management and other key personnel. There can be no assurance that such officers and key employees can be retained either prior to or following the Closing.

A lawsuit has been filed against US Airways Group challenging the Merger and an adverse ruling may prevent the Merger from being completed.

US Airways Group, as well as the members of US Airways Group’s board of directors, were named as defendants in a lawsuit brought by a purported class of US Airways Group stockholders challenging the proposed Merger and seeking a declaration that the Merger Agreement is unenforceable, an injunction against the proposed Merger (or rescission in the event it has been consummated), imposition of a constructive trust, an award of fees and costs, including attorneys’ and experts’ fees, and other relief. See the section entitled “The Merger—Litigation Related to the Merger” beginning on page 115 for more information about the lawsuit that has been filed related to the Merger.

Additional lawsuits may be filed against US Airways Group, AMR, and/or the directors of either company in connection with the Merger. One of the conditions to Closing is that no order, writ, injunction, decree, or any other legal rules, regulations, directives, or policies will be in effect that prevent completion of the Merger. Consequently, if a settlement or other resolution is not reached in the lawsuit referenced above and the plaintiffs secure injunctive or other relief prohibiting, delaying, or otherwise adversely affecting the defendants’ ability to complete the Merger, then such injunctive or other relief may prevent the Merger from becoming effective within the expected time frame or at all.

Any delay in completing the Merger could delay the benefits expected to be achieved thereunder.

The need to satisfy conditions and obtain consents, clearances, and approvals for the Merger, as well as any lawsuits related to the Merger, and other events, could delay the Closing for a significant period of time or prevent it from occurring. Any delay in Closing could cause AAG to be delayed in realizing some of the synergies and other benefits that the parties anticipate if the Merger is successfully completed within its expected time frame.

AAG may be unable to integrate AMR’s and US Airways Group’s businesses successfully and realize the anticipated benefits of the Merger.

The Merger involves the combination of two companies that currently operate as independent public companies, each of which operates its own international network airline. Historically, the integration of separate airlines has often proven to be more time consuming and to require more resources than initially estimated. AAG

 

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will be required to devote significant management attention and resources to integrating AMR’s and US Airways Group’s business practices, cultures, and operations. Potential difficulties AAG may encounter as part of the integration process include the following:

 

   

the inability to successfully combine AMR’s business with that of US Airways Group in a manner that permits AAG to achieve the synergies and other benefits anticipated to result from the Merger;

 

   

the challenge of integrating complex systems, operating procedures, regulatory compliance programs, technology, aircraft fleets, networks, and other assets of the two companies in a manner that minimizes any adverse impact on customers, suppliers, employees, and other constituencies;

 

   

diversion of the attention of AAG’s management and other key employees;

 

   

the challenge of integrating the workforces of the two companies while maintaining focus on providing consistent, high quality customer service and running an efficient operation;

 

   

disruption of, or the loss of momentum in, AAG’s ongoing business; and

 

   

potential unknown liabilities, liabilities that are significantly larger than AMR and US Airways Group currently anticipate, and unforeseen increased expenses or delays associated with the Merger, including transition costs to integrate the two businesses that may exceed the approximately $1.2 billion of cash transition costs that AMR and US Airways Group currently anticipate.

Accordingly, even if the Merger is consummated, the contemplated benefits may not be realized fully, or at all, or may take longer to realize than expected.

If the Merger in conjunction with the Plan does not qualify as a reorganization under Section 368(a) of the Code, the stockholders of US Airways Group may be required to pay substantial U.S. federal income taxes.

The Closing is conditioned on the receipt by each of US Airways Group and AMR of an opinion from its respective outside counsel to the effect that the Merger in conjunction with the Plan will qualify as a reorganization within the meaning of Section 368(a) of the Code for U.S. federal income tax purposes. These opinions will be based on certain assumptions and representations as to factual matters from US Airways Group and AMR, as well as certain covenants and undertakings by US Airways Group and AMR. If any of the assumptions, representations, covenants, or undertakings is incorrect, incomplete, inaccurate, or is violated in any material respect, the validity of the conclusions reached by counsel in their opinions would be jeopardized. Additionally, an opinion of counsel represents counsel’s best legal judgment but is not binding on the U.S. Internal Revenue Service (“IRS”) or any court, so there can be no certainty that the IRS will not challenge the conclusions reflected in the opinions or that a court will not sustain such a challenge. If the IRS or a court determines that the Merger in conjunction with the Plan should not be treated as a “reorganization,” a holder of US Airways Group common stock would recognize taxable gain or loss upon the exchange of US Airways Group common stock for AAG common stock pursuant to the Merger. See the section entitled “The Merger—Material U.S. Federal Income Tax Consequences” beginning on page 106.

The fairness opinion obtained by the board of directors of US Airways Group from its financial adviser will not reflect changes in circumstances between the signing of the Merger Agreement and the Closing.

The US Airways Group board of directors has not obtained and does not intend to obtain an updated fairness opinion from its financial adviser. Changes in the operations and prospects of US Airways Group and/or AMR, general market and economic conditions, and other factors that may be beyond the control of US Airways Group and/or AMR, and on which the fairness opinion was based, may alter the value of US Airways Group or the price of shares of US Airways Group common stock or shares of AAG common stock to be issued in the Merger by the time of the Closing. The opinion does not speak as of the time of the Closing or as of any date other than the date of such opinion. Because US Airways Group does not anticipate asking its financial adviser to update its opinion, the opinion does not address the fairness of the Merger consideration, from a financial point of view, at

 

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the time of the Closing. This opinion is included as Annex E to this proxy statement/prospectus. For a description of the opinion that the US Airways Group board of directors received from its financial adviser and a summary of the material financial analyses such financial adviser provided to the US Airways Group board of directors in connection with rendering such opinion, see the section entitled “The Merger—Opinion of US Airways Group’s Financial Adviser” beginning on page 93. For a description of the other factors considered by the board of directors of US Airways Group in determining whether to approve the Merger Agreement and the Merger, see the section entitled “The Merger—Recommendation of US Airways Group’s Board of Directors with Respect to the Merger Agreement and Its Reasons for the Merger” beginning on page 87.

US Airways Group’s officers and directors have interests in the Merger that may be different from, or in addition to, the interests of US Airways Group stockholders generally.

US Airways Group’s executive officers and directors have interests in the Merger that may be different from, or in addition to, the interests of US Airways Group stockholders generally. US Airways Group’s executive officers negotiated the terms of the Merger Agreement. The executive officers of US Airways Group have arrangements with US Airways Group that provide for severance benefits if their employment is terminated under certain circumstances in connection with the Closing. In addition, certain of US Airways Group’s compensation and benefit plans and arrangements provide for payment or accelerated vesting or distribution of certain rights or benefits upon the Closing. Executive officers and directors of US Airways Group also have rights to indemnification and directors’ and officers’ liability insurance that will survive the Closing. Under the terms of the Merger Agreement, AAG has agreed to provide, or continue to provide, certain flight benefits to non-employee directors of US Airways Group following the Closing.

The US Airways Group board of directors was aware of these interests at the time they approved the Merger and the transactions contemplated by the Merger Agreement. These interests may cause US Airways Group’s directors and executive officers to view the Merger proposal differently and more favorably than others may view it. See the section entitled “The Merger—Interests of US Airways Group’s Directors and Executive Officers in the Merger” beginning on page 110 for more information.

The unaudited pro forma condensed combined financial statements and the Forecasts included in this proxy statement/prospectus are presented for illustrative purposes only and may not be an indication of AAG’s financial condition or results of operations after the Merger.

The unaudited pro forma condensed combined financial statements and the Forecasts contained in this proxy statement/prospectus are presented for illustrative purposes only and are based on various adjustments, assumptions, and preliminary estimates (including the elimination of certain expenses (including professional fees), realized gains and losses, and provisions for losses that were realized or incurred by AMR in connection with the Chapter 11 Cases) or are projected to be realized by AAG after the Closing. Consequently, the unaudited pro forma condensed combined financial statements and the Forecasts contained in this proxy statement/prospectus may not be an indication of AAG’s financial condition or results of operations following the Closing for a number of reasons. The actual financial condition and results of operations of AAG following the Closing may not be consistent with, or evident from, these unaudited pro forma condensed combined financial statements and the Forecasts. In addition, the assumptions used in preparing the unaudited pro forma condensed combined financial statements and the Forecasts may not prove to be accurate, and other factors, some of which are not known at the present time, may affect AAG’s financial condition or results of operations following the Closing. Any potential deterioration in AAG’s financial condition or results of operations may cause significant variation in the price of AAG common stock following the Closing. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page 160 and the section entitled “The Merger—General Information regarding Forecasts and Expected Synergies” beginning on page 100.

 

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Failure to complete the Merger could negatively impact the stock price and the future business and financial results of US Airways Group.

If the Merger is not completed, US Airways Group’s ongoing business may be adversely affected, and it will be subject to several risks, including the following:

 

   

US Airways Group may be required to pay termination fees of $55 million or $195 million under certain circumstances provided in the Merger Agreement;

 

   

unless and until it is terminated, US Airways Group will be prohibited by the Merger Agreement from seeking certain strategic alternatives, such as transactions with third parties other than AMR, and could therefore miss attractive alternatives to the Merger;

 

   

prior to any termination of the Merger Agreement, US Airways Group’s operations will be restricted by the terms of the Merger Agreement, which may cause it to forego otherwise attractive business opportunities;

 

   

US Airways Group will be required to pay certain costs relating to the Merger, whether or not it is consummated, such as legal, accounting, financial adviser, and printing fees, which costs could be substantial; and

 

   

US Airways Group’s management will have focused its attention on negotiating and preparing for the Merger instead of on pursuing other opportunities that could have been beneficial to US Airways Group.

If the Merger is not completed, US Airways Group cannot assure its stockholders that these risks will not materialize and will not materially and adversely affect the business, financial results, and stock price of US Airways Group.

The use of AMR’s and US Airways Group’s respective pre-Merger NOL Carryforwards and certain other tax attributes may be limited following the Closing.

Under the Code, a corporation is generally allowed a deduction in any taxable year for NOLs carried over from prior taxable years (“NOL Carryforwards”). As of December 31, 2012, AMR had available NOL Carryforwards of approximately $6.6 billion for regular U.S. federal income tax purposes, which will expire, if unused, beginning in 2022, and for state income tax purposes of $3.6 billion, which will expire, if unused, in 2013 through 2027. The amount of AMR’s NOL Carryforwards for state income tax purposes that will expire, if unused, in 2013 is $105 million. AMR’s NOL Carryforwards could be subject to limitation as a result of the Chapter 11 Cases and certain related transactions. As of December 31, 2012, US Airways Group had available NOL Carryforwards of approximately $1.5 billion for regular U.S. federal income tax purposes, which will expire, if unused, beginning in 2025, and for state income tax purposes of approximately $722 million, which will expire, if unused, in 2013 through 2031. The amount of US Airways Group’s NOL Carryforwards for state income tax purposes that will expire, if unused, in 2013 is $13 million. US Airways Group’s NOL Carryforwards may also be subject to limitation as a result of the Merger. In addition, both AMR’s and US Airways Group’s NOL Carryforwards are subject to adjustment on audit by the IRS.

A corporation’s ability to deduct its federal NOL Carryforwards and to utilize certain other available tax attributes can be substantially constrained under the general annual limitation rules of Section 382 of the Code if it undergoes an “ownership change” as defined in Section 382 of the Code (generally where cumulative stock ownership changes among certain shareholders exceed 50 percentage points during a rolling three-year period). Each of AMR and US Airways Group expects to undergo an “ownership change” in connection with AMR’s emergence from the Chapter 11 Cases and the Merger, respectively. The general limitation rules for a debtor in a bankruptcy case, such as AMR, are liberalized where the ownership change occurs upon emergence from bankruptcy. In addition, under certain circumstances, special rules may apply to allow AMR to utilize substantially all of its pre-emergence NOL Carryforwards without regard to the general limitations of Section 382 of the Code and similar rules also may apply to state NOL Carryforwards. However, there can be no assurance that these special rules under Section 382 of the Code (or any similar rules under applicable state law)

 

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will apply to AMR’s ownership change. Accordingly, the utilization of each of AMR’s and US Airways Group’s respective NOL Carryforwards and certain other tax attributes could be significantly constrained following AMR’s emergence from the Chapter 11 Cases and the Merger. Moreover, an ownership change subsequent to the Closing could further limit or effectively eliminate AAG’s ability to utilize such NOL Carryforwards and other tax attributes. See the sections entitled “The Merger Agreement—US Airways Group Tax Plan” beginning on page 146 and “Description of Capital Stock of AAG—Other Provisions Restricting Transfer and Ownership” beginning on page 179.

AAG’s ability to use NOL Carryforwards will also depend on the amount of taxable income generated in future periods. The NOL Carryforwards may expire before AAG can generate sufficient taxable income to use the NOL Carryforwards.

The Merger Agreement contains customary restrictions on US Airways Group’s ability to seek other strategic alternatives.

The Merger Agreement contains “no shop” provisions that restrict US Airways Group’s ability to initiate, solicit, or knowingly encourage or facilitate competing third-party proposals for any business combination transaction involving a Merger of US Airways Group with another entity or the acquisition of a significant portion of US Airways Group’s stock or assets, although US Airways Group may consider competing, unsolicited proposals and enter into discussions or negotiations regarding such proposals if its board of directors determines that any such acquisition proposal constitutes, or is reasonably likely to lead to, a superior proposal and that the failure to take such action is reasonably likely to be inconsistent with the fiduciary duties of the board of directors to US Airways Group and its stockholders under applicable law. In addition, AMR generally has an opportunity to offer to modify the terms of the Merger in response to any competing acquisition proposal. If US Airways Group were to terminate the Merger Agreement to accept a superior proposal, it would be required to pay a termination fee of $55 million to AMR.

These provisions, although customary for these types of transactions, could discourage a potential third-party acquirer that might have an interest in acquiring all or a significant portion of US Airways Group from proposing any such acquisition, even if the potential third-party acquirer were prepared to pay consideration with a higher cash or market value than the market value proposed to be received or realized in the Merger or might result in a potential third-party acquirer proposing to pay a lower consideration to US Airways Group stockholders than it might otherwise have proposed to pay because of the added expense of the $55 million termination fee that would become payable in connection with the termination of the Merger Agreement by US Airways Group.

If the Merger Agreement is terminated and US Airways Group decides to seek another business combination, it may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the Merger.

Common Stock Risks

The currently outstanding common stock of AMR will be cancelled in the Plan and should not be used to value the common stock of AAG.

Trading in AMR’s common stock and certain debt securities on the NYSE was suspended on January 5, 2012, and AMR’s common stock and such debt securities were delisted from the NYSE on January 30, 2012. On January 5, 2012, AMR’s common stock began trading under the symbol “AAMRQ” on the OTCQB marketplace, operated by OTC Markets Group.

The current trading price of AMR’s common stock does not reflect the price at which the AAG common stock will trade following the Closing. The Plan contemplates the cancellation of all outstanding common stock and other equity securities of AMR and the issuance of AAG common stock following the confirmation and effectiveness of the Plan. Therefore, it is not meaningful to determine the value of the Merger consideration by

 

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reference to current trading values of AMR common stock. The price at which the AAG common stock will trade following the Closing cannot be anticipated.

The market value of the AAG common stock issued to US Airways Group stockholders may be less than the present value of their shares of US Airways Group common stock.

Upon the Closing, US Airways Group stockholders will receive one share of AAG common stock for each share of US Airways Group common stock they own. The market value of US Airways Group common stock at the time of the Merger may vary significantly from its price on the date the Merger Agreement was announced, the date of this proxy statement/prospectus, or the date on which US Airways Group stockholders vote on the Merger. Because the exchange ratio is fixed and therefore will not be adjusted to reflect any changes in the market value of US Airways Group common stock, the market value of the AAG common stock issued in the Merger and the US Airways Group stock surrendered in the Merger may be higher or lower than the values of US Airways Group stock on those earlier dates. Stock price changes may result from a variety of factors, some of which are beyond the control of AMR and US Airways Group, including changes in their businesses, operations, and prospects, regulatory considerations, and general and industry specific market and economic conditions. Neither AMR nor US Airways Group is permitted to terminate the Merger Agreement solely because of changes in the market price of either party’s common stock.

The market price of the AAG common stock may be volatile.

The AAG common stock will be a new issue of securities, which issue is expected to be approved for listing on the NYSE or NASDAQ to be effective upon issuance of the AAG common stock. However, an active public market for the AAG common stock may not develop or be sustained after the Closing, and no assurance can be given that there will be any liquidity in any such market. If a market for the AAG common stock develops, the price at which a holder of AAG common stock could sell its shares may be higher or lower than the implied valuation for the AAG common stock provided in this proxy statement/prospectus. The market price of the AAG common stock may fluctuate significantly in response to a number of factors, some of which are beyond AMR’s and US Airways Group’s control, including:

 

   

variations in operating results;

 

   

changes in financial estimates by securities analysts;

 

   

changes in market values of airline companies;

 

   

announcements by AAG’s competitors of significant acquisitions, strategic partnerships, changes in routes, or capital commitments;

 

   

the success or failure in managing AAG, including the integration of the separate operations of US Airways Group and AMR;

 

   

increases or decreases in reported holdings by insiders or other significant stockholders;

 

   

additions or departures of key personnel;

 

   

future sales of AAG common stock or issuance of AAG common stock upon the exercise or conversion of convertible securities, options, warrants, RSUs, SARs, or similar rights; and

 

   

fluctuations in trading volume.

Future Issuances of AAG Common Stock May Be Dilutive to AAG Common Stockholders.

In the future, AAG may issue additional shares of AAG common stock or securities convertible into shares of AAG common stock to raise capital, fund acquisitions, or for other purposes. AAG may also issue equity-based awards under its employee incentive programs, including programs that may be adopted in the future. Any future sales of AAG common stock or issuance of AAG common stock upon the exercise or conversion of convertible securities, options, warrants, RSUs, SARs, or similar rights could result in dilution of the interests of holders of AAG common stock.

 

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The shares of AAG Convertible Preferred Stock that are to be distributed pursuant to the Plan will be fully converted into AAG common stock over a period of 120 days following the Effective Date. The issuance of shares of AAG common stock under the Plan (including upon conversion of the AAG Convertible Preferred Stock) could contribute to significantly elevated volatility in the price of AAG common stock until all such shares of AAG Convertible Preferred Stock are converted and all of the shares of AAG common stock to be issued under the Plan have been distributed fully.

The shares of AAG Convertible Preferred Stock that are to be distributed pursuant to the Plan will be mandatorily convertible into AAG common stock in four installments on the 30th, 60th, 90th, and 120th days following the Effective Date. In addition, up to $250 million of the AAG Convertible Preferred Stock can also be optionally converted during each 30-day period following the Effective Date. On the 120th day after the Effective Date, all remaining shares of AAG Convertible Preferred Stock will be mandatorily converted into shares of AAG common stock. The Plan also provides holders of existing AMR equity securities with a guaranteed initial distribution of AAG common stock and the potential to receive additional distributions of AAG common stock after all prepetition unsecured claims are paid in full, based on the market value of AAG common stock at specific times during such 120 day period. The AAG Convertible Preferred Stock is not expected to be registered under the Securities Act or listed for trading on any national securities exchange. It is possible that the AAG common stock may experience significantly elevated volatility in price and trading volume until all shares of AAG Convertible Preferred Stock are converted and the resulting AAG common stock has been distributed fully. For further information, see the section entitled “The Plan of Reorganization” beginning on page 155.

By operation of the Plan, 72% of the diluted equity of AAG (including the shares of AAG common stock issuable upon conversion of the AAG Convertible Preferred Stock) will be issued to stakeholders, labor unions, and certain employees of AMR and the other Debtors, who in many instances may not intend to hold the Plan Shares issued to them. Any such shares issued to labor unions or employees will impose an income tax burden and related withholding obligation on the recipient that must be funded in cash. As a result, it is possible that many such persons will sell some or all of the shares of AAG common stock issued to them, thereby placing downward pressure on the trading price of AAG common stock.

The market price of AAG common stock after the Merger may be affected by factors different from those currently affecting the shares of US Airways Group.

Upon the Closing, holders of US Airways Group common stock will become holders of AAG common stock. US Airways Group’s businesses prior to the Merger differ from those of AAG, and accordingly the results of operations of AAG may be affected by factors different from those currently affecting the results of operations of US Airways Group, including the uncertainty of the market’s ability to value AMR as it emerges from the Chapter 11 Cases. For additional information on the business of US Airways Group and a discussion of certain factors to consider in connection with its business, see the documents relating to US Airways Group that are incorporated by reference by US Airways Group into this proxy statement/prospectus.

In connection with AMR’s emergence from the Chapter 11 Cases, AAG will establish certain limitations on acquisitions, dispositions, and voting of its common stock which may serve to limit the post-emergence liquidity of its common stock.

To reduce the risk of a potential adverse effect of an “ownership change” as defined in Section 382 of the Code on AAG’s ability to use its NOL Carryforwards and certain other tax attributes and to avoid violation of federal statutory limitations on equity ownership of U.S. commercial airlines by foreign nationals, the AAG Certificate of Incorporation and AAG Bylaws will contain certain restrictions on the acquisition, disposition, and voting of AAG’s common stock. These restrictions may adversely affect the ability of certain holders of AAG’s common stock to dispose of, acquire, or vote shares of AAG’s common stock. No assurance can be given that an ownership change will not occur even with tax-related and other restrictions in place or that these provisions will assure compliance with the applicable restrictions on foreign ownership.

 

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The percentage ownership interests of US Airways Group stockholders will be reduced as a result of the Merger and, accordingly, US Airways Group stockholders will have less influence on the management and policies of AAG than they now have on the management and policies of US Airways Group.

The aggregate number of shares of AAG common stock issuable to holders of US Airways Group equity instruments (including stockholders, holders of convertible notes, optionees, and holders of stock-settled SARs and RSUs) in the Merger will represent 28% of the diluted equity ownership of AAG. The remaining 72% diluted equity ownership of AAG will be distributable, pursuant to the Plan, to stakeholders, labor unions, and certain employees of AMR and the other Debtors. Therefore, each US Airways Group stockholder will have a percentage ownership of AAG that is smaller than the stockholder’s prior percentage ownership of US Airways Group. As a result, US Airways Group stockholders will have less influence on the management and policies of AAG than they now have on the management and policies of US Airways Group. For more information, see the section entitled “The Merger—Exchange of Shares” beginning on page 115.

The shares of AAG common stock to be received by US Airways Group stockholders as a result of the Merger will have different rights from the shares of US Airways Group common stock.

Upon the Closing, US Airways Group stockholders will become holders of AAG common stock and their rights as stockholders will be governed by the AAG Certificate of Incorporation and the amended and restated bylaws of AMR (the “AAG Bylaws”). The rights associated with US Airways Group common stock are different from the rights associated with AAG common stock. See the sections entitled “Description of Capital Stock of AAG” beginning on page 177 and “Comparison of Stockholder Rights and Corporate Governance Matters” beginning on page 180 for a discussion of the different rights associated with AAG common stock.

Neither AMR’s nor US Airways Group’s historical consolidated financial information will be directly comparable to the financial information of AAG for future periods.

During the course of the Chapter 11 Cases, AMR’s financial results have been and may continue to be volatile as asset impairments, asset dispositions, bankruptcy professional fees, contract terminations and rejections, and claims assessments, among other things, have and will continue to significantly impact AMR’s consolidated financial statements. After the Closing, the amounts reported in AAG’s consolidated financial statements are likely to materially change relative to historical consolidated financial statements of AMR. For example, AAG will be required to apply “fresh start” accounting in accordance with GAAP. As a result, the book values of AAG’s long-lived assets and the related depreciation and amortization schedules, among other things, are expected to change relative to those of AMR.

Liquidity Risks

AAG will require significant liquidity to fund its emergence from Chapter 11 and to achieve successful integration and achieve targeted synergies post-Closing.

At emergence from Chapter 11, AMR will pay approximately $1.4 billion in cash to settle certain obligations in connection with the Plan. In addition, the transition costs to integrate the two businesses may exceed the approximately $1.2 billion of cash transition costs that AMR and US Airways Group currently anticipate. An inability to obtain necessary funding on acceptable terms would have a material adverse impact on AAG and on its ability to sustain its operations.

Each of AMR’s and US Airways Group’s indebtedness and other obligations are, and AAG’s indebtedness and other obligations following the Closing will continue to be, substantial and could adversely affect AAG’s business and liquidity.

Each of AMR and US Airways Group have, and AAG will continue to have, significant amounts of indebtedness and other obligations, including pension obligations, obligations to make future payments on

 

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aircraft equipment and property leases, and obligations under aircraft purchase agreements. Moreover, currently all but a very limited quantity of AMR’s and US Airways Group’s assets are pledged to secure their respective indebtedness. On a pro forma basis, as of March 31, 2013, AAG’s consolidated balance sheet reflected aggregate debt of $13.9 billion, an amount which may increase materially between March 31, 2013 and Closing due to, among other things, the financial performance of AMR and US Airways Group in the interim, the need to finance the substantial payments required by AMR to emerge from the Chapter 11 Cases, the financing strategy elected on upcoming aircraft deliveries, treasury decisions made by each company, and market conditions in the relevant markets for debt instruments. AAG’s substantial indebtedness and other obligations could have important consequences. For example, they may:

 

   

limit AAG’s ability to obtain additional funding for working capital, to withstand operating risks that are customary in the industry, capital expenditures, acquisitions, investments, integration costs, and general corporate purposes, and adversely affect the terms on which such funding can be obtained;

 

   

require AAG to dedicate a substantial portion of its cash flow from operations to payments on its indebtedness and other obligations, thereby reducing the funds available for other purposes;

 

   

make AAG more vulnerable to economic downturns and catastrophic external events;

 

   

contain restrictive covenants that could:

 

  ¡    

limit AAG’s ability to merge, consolidate, sell assets, incur additional indebtedness, issue preferred stock, make investments, and pay dividends; and

 

  ¡    

significantly constrain AAG’s ability to respond, or respond quickly, to unexpected disruptions in its own operations, the U.S. or global economy, or the businesses in which it operates, or to take advantage of opportunities that would improve its business, operations, or competitive position versus other airlines; and

 

   

limit AAG’s ability to withstand competitive pressures and reduce its flexibility in responding to changing business and economic conditions.

In addition, increases in the cost of financing could adversely affect AAG’s liquidity, business, financial condition, and results of operations.

AMR has not yet secured financing for all of its scheduled aircraft deliveries, which will be utilized in the AAG fleet after the Merger.

AMR has not yet secured financing commitments for some of the aircraft that it has on order, commencing with certain deliveries scheduled for 2013, and AMR cannot be assured of the availability or the cost of that financing. If AMR is unable to arrange financing for such aircraft at customary advance rates and on terms and conditions acceptable to it, AMR, prior to the Merger, and AAG thereafter, may need to use cash from operations to purchase such aircraft or may seek to negotiate deferrals for such aircraft with the aircraft manufacturers.

AAG will have significant pension and other post-employment benefit funding obligations, which may adversely affect its liquidity, financial condition, and results of operations.

AAG will have significant pension funding obligations, the amount of which will be dependent on the performance of investments held in trust by the pension plans, interest rates for determining liabilities, and actuarial experience. Currently, AAG’s minimum funding obligation for its pension plans is subject to temporary, favorable rules that are scheduled to expire at the end of 2017. Upon the expiration of those rules, AAG’s funding obligations are likely to increase materially. In addition, AAG may have significant obligations for other post-employment benefits depending on the outcome of the adversary proceeding related to the retiree medical and life insurance obligations filed in the Chapter 11 Cases. The foregoing post-employment benefit obligations could materially adversely affect AAG’s liquidity, financial condition, and results of operations.

 

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AAG could be required to maintain reserves under its credit card processing agreements, which could materially adversely impact its liquidity.

Both AMR and US Airways Group have agreements with a number of credit card companies and processors to accept credit cards for the sale of air travel and other services. Under certain of these agreements, the related credit card processor may hold back a reserve from the applicable company’s credit card receivables following the occurrence of certain events, including the failure of the applicable company to maintain certain levels of liquidity (as specified in each agreement). In certain circumstances, such reserve could reach 100% of the applicable receivables due to the applicable company.

Under such agreements, the amount of the reserve that may be required generally is based on the processor’s exposure to the company under the credit card processor agreement and, in case a reserve is required because of the company’s failure to maintain a certain level of liquidity, the amount of such liquidity. If circumstances were to occur that would allow one or more credit card processors to require AAG to maintain a reserve, AAG’s liquidity could be materially and adversely impacted. US Airways Group is already subject to reserve requirements pursuant to certain of its credit processing agreements.

Fluctuations in interest rates could adversely affect AAG’s liquidity.

A substantial portion of AAG’s indebtedness is expected to bear interest at fluctuating interest rates based primarily on the London interbank offered rate for deposits of U.S. Dollars (“LIBOR”). LIBOR tends to fluctuate based on general economic conditions, general interest rates, federal reserve rates, and the supply of and demand for credit in the London interbank market. To the extent these interest rates increase, AAG’s interest expense will increase, in which event AAG may have difficulties making interest payments and funding other fixed costs and available cash flow for general corporate requirements may be adversely affected.

AAG will need to obtain sufficient financing or other capital to operate successfully.

AMR and US Airways Group currently plan to increase AAG’s revenue in part by investing heavily in renewing and optimizing AAG’s fleet and integrating the companies. Significant capital resources will be required to achieve these goals and, as a result, AMR and US Airways Group estimate that AAG’s planned aggregate capital expenditures on a consolidated basis for calendar years 2013-2017 would be approximately $20 billion. Accordingly, AAG will need substantial financing or other capital resources, some of which may be obtained prior to AMR’s emergence from the Chapter 11 Cases and thus may be subject to Bankruptcy Court approval. Depending on numerous factors, many of which are out of AMR’s and US Airways Group’s, and will be out of AAG’s, control, such as the state of the domestic and global economy, the credit market’s view of AAG’s prospects and the airline industry in general, and the general availability of debt and equity capital at the time AAG seeks capital, the financing and other capital that AAG will need may not be available it, or may only be available on onerous terms and conditions. There can be no assurance that AAG will be successful in obtaining financing or other needed sources of capital to operate successfully.

Business Risks

Following the Closing, AAG will be bound by all of the obligations and liabilities of both companies.

Following the Closing, AAG will become bound by all of the obligations and liabilities of AMR and US Airways Group. Neither AMR nor US Airways Group can predict the financial condition of AAG at the time of that combination or the ability of AAG to satisfy its obligations and liabilities.

AAG could experience significant operating losses in the future.

For a number of reasons, including those addressed in these risk factors, AAG might fail to achieve profitability and might experience significant losses. In particular, the condition of the economy and the high

 

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volatility of fuel prices have had, and continue to have, an impact on each of AMR’s and US Airways Group’s business, financial condition, and results of operations, and increase the risk that AAG will experience losses in the future.

Downturns in economic conditions could adversely affect AAG’s revenues, liquidity, business, financial condition, and results of operations.

Due to the discretionary nature of business and leisure travel spending, airline industry revenues are heavily influenced by the condition of the U.S. economy and economies in other regions of the world. Unfavorable conditions in these broader economies have resulted, and may result in the future, in decreased passenger demand for air travel and changes in booking practices, both of which in turn have had, and may have in the future, a strong negative effect on revenues. Stagnant or worsening global economic conditions either in the U.S. or in other geographic regions and continued volatility in U.S. and global financial and credit markets may have a material adverse effect on AAG’s revenues, liquidity, business, financial condition, and results of operations. If such economic conditions were to disrupt capital markets in the future, AAG may be unable to obtain any necessary financing on acceptable terms, or at all, to satisfy future capital commitments and otherwise sustain operations.

In the past, both AMR and US Airways Group have adjusted capacity in response to trends in demand. No assurance can be given that capacity adjustments or other steps AAG may take in response to changes in demand will be successful. Capacity reductions or other steps might result in special charges in the future. Further, other airlines may make capacity adjustments or take other actions which may reduce the expected benefits of any steps AAG may take to respond to changes in demand. Industry-wide capacity may increase to the extent the economy continues to recover from the global recession. If industry capacity increases, and if consumer demand does not continue to keep pace with those increases, AAG, and the airline industry as a whole, could be negatively impacted.

AAG’s initiatives to generate additional revenues and to reduce its costs may not be adequate or successful.

AAG must take steps to generate additional revenues and to achieve a competitive cost structure after the Merger. The adequacy and ultimate success of initiatives to generate additional revenues and/or reduce costs cannot be assured. Moreover, whether AAG’s initiatives will be adequate or successful depends in large measure on factors beyond its control. For example, the overall industry environment, including customer demand, yield, and industry capacity growth, actions of AAG’s competitors, and fuel prices could negatively impact the success of these initiatives. It could be very difficult for AAG to continue to fund its obligations on an ongoing basis, and to be profitable, if the overall industry revenue environment were to deteriorate or if fuel prices were to increase and persist for an extended period at high levels.

AAG may be adversely affected by increases in fuel prices and would be adversely affected by disruptions in the supply of fuel.

Aircraft fuel has been AMR’s and US Airways Group’s largest single operating expense in recent years, and their respective results are very significantly affected by the cost, price volatility, and availability of jet fuel, which are in turn affected by a number of factors beyond their control. Although fuel prices have abated from the record high prices of 2008, they remain high and extremely volatile. Due to the competitive nature of the airline industry, AMR and US Airways Group have not always been able to pass on increased fuel prices to customers by increasing fares, and AAG may not be able to do so in the future.

Dependence on foreign imports of crude oil, limited refining capacity, and the possibility of changes in government policy on jet fuel production, transportation, and marketing make it impossible to predict the future availability of jet fuel. If there are additional outbreaks of hostilities or other conflicts in oil producing areas or

 

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elsewhere, or a reduction in refining capacity (due to natural disasters or weather events, for example), or governmental limits on the production or sale of jet fuel (including as a consequence of increased environmental regulation), there could be a reduction in the supply of jet fuel and significant increases in the cost of jet fuel. Major reductions in the availability of jet fuel or significant increases in its cost would have a material adverse impact on AAG.

AAG will have a large number of older aircraft in its fleet, and these aircraft are not as fuel efficient as more recent models of aircraft. AMR and US Airways Group believe it is imperative that AAG execute its fleet renewal plans. AAG will be dependent on The Boeing Company (“Boeing”) and Airbus S.A.S. (“Airbus”) to deliver aircraft on schedule. If AAG experiences delays in delivery of, or is unable to obtain, more fuel efficient aircraft, it will be adversely affected. After the Closing, AMR and US Airways Group expect that AAG’s existing fuel purchase contracts will not provide meaningful price protection against increases in fuel costs.

AAG’s business will be affected by many changing economic and other conditions beyond its control, and its results of operations could be volatile and fluctuate due to seasonality.

AAG’s business, financial condition, and results of operations will be affected by many changing economic and other conditions beyond its control, including, among others:

 

   

actual or potential changes in international, national, regional, and local economic, business and financial conditions, including recession, inflation, higher interest rates, wars, terrorist attacks, or political instability;

 

   

changes in consumer preferences, perceptions, spending patterns, or demographic trends;

 

   

changes in the competitive environment due to industry consolidation, changes in airline alliance affiliations, and other factors;

 

   

actual or potential disruptions to the air traffic control (“ATC”) systems, including as a result of “sequestration” or any other interruption in government funding;

 

   

increases in costs of safety, security, and environmental measures;

 

   

outbreaks of diseases that affect travel behavior; and

 

   

weather and natural disasters.

Thus, AAG’s results of operations could be volatile and subject to rapid and unexpected change. In addition, due to generally weaker demand for air travel during the winter, AAG’s revenues in the first and fourth quarters of the year could be weaker than revenues in the second and third quarters of the year.

The airline industry is fiercely competitive, and AAG will be subject to increasing competition.

Service over almost all of AAG’s routes will be highly competitive. Revenues will be sensitive to the actions of other airlines in many areas including pricing, scheduling, capacity, and promotions, which may have a substantial adverse impact not only on AAG’s revenues, but on overall industry revenues. These factors may become even more significant in periods when the industry experiences large losses, as airlines under financial stress, or in bankruptcy, may institute pricing structures intended to achieve near-term survival rather than long-term viability. AAG’s ability to compete effectively will depend in large part on its ability to maintain a competitive cost structure. If AAG cannot do so, then its business, financial condition, and results of operations would be adversely affected.

AAG will face vigorous and, in some cases, increasing, competition from major domestic airlines, national, regional, all-cargo, and charter airlines, foreign airlines, low-cost airlines, and, particularly on shorter segments, ground and rail transportation. AAG will also face significant and increasing competition from expanded

 

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marketing/operational alliances formed by its competitors, some of which are larger than the oneworld® alliance. Competition with foreign airlines and with such marketing/operational alliances has been increasing in recent years in part due to the adoption of liberalized open skies aviation agreements between the U.S. and an increasing number of countries around the world.

Certain airline alliances have been, or may in the future be, granted immunity from antitrust regulations by governmental authorities for specific areas of cooperation, such as joint pricing decisions. To the extent alliances formed by AAG’s competitors can undertake activities that are not available to AAG, AAG’s ability to effectively compete may be hindered.

AMR has implemented a joint business agreement (“JBA”) with British Airways and Iberia, to which Finnair is expected to be added, and antitrust-immunized cooperation with British Airways, Iberia, Finnair, and Royal Jordanian. In addition, American has implemented an antitrust-immunized JBA with Japan Airlines and a JBA with Qantas. AAG is expected to continue these arrangements. No assurances can be given as to any other arrangements that may ultimately be implemented or any benefits that AAG may derive from such arrangements.

The airline industry may undergo further consolidation or changes in industry alliances, which may strengthen the competitive position of some of AAG’s competitors.

In recent years, there have been numerous mergers and acquisitions within the U.S. and international airline industries and numerous changes in industry alliances, which have generally had an adverse effect on AMR and US Airways Group. The merger of United Airlines with Continental Airlines and the merger of Delta Air Lines with Northwest Airlines have resulted in the formation of large competitors with significant financial resources and extensive networks. More recently, Southwest Airlines strengthened its competitive position through its acquisition of AirTran Airways. The Merger is intended to address some of the competitive impacts of these actions by other airlines. AAG will seek to address these competitive challenges with its market and alliance strategies, which are expected to include growing the oneworld® alliance. There can be no assurances as to the level of success of these strategies.

In the future, there may be additional mergers and acquisitions, and changes in airline alliances, including those in which AAG may participate and those that may be undertaken by others. Any airline industry consolidation or changes in airline alliances, including changes to the oneworld® alliance, could substantially alter the competitive landscape and result in changes in AAG’s corporate or business strategy. Consolidation involving other participants in the industry could result in the formation of one or more airlines with greater financial resources, more extensive networks, and/or lower cost structures than exist currently, which could have a material adverse effect on AAG’s competitive position and adversely affect the business, financial condition, and results of operations of AAG. For similar reasons, changes in airline alliances could have a similar adverse impact on AAG.

Delays in scheduled aircraft deliveries or failure of new aircraft to perform as expected may adversely impact AAG’s business, financial condition, and results of operations.

AAG’s fleet renewal plans are intended to enhance its ability to operate optimum numbers of specific types of aircraft. In many cases, the aircraft AAG intends to operate are not yet in either US Airways Group’s or AMR’s fleet, but US Airways Group and/or AMR have contractual commitments to purchase or lease them. AMR and US Airways Group expect that AAG will continue those contractual commitments. If for any reason AAG is unable to take delivery of particular types of new aircraft on contractually scheduled delivery dates, it may be adversely affected. In addition, if the aircraft it receives do not meet the expected performance or quality standards, including with regard to fuel efficiency, AAG’s business will be adversely affected.

 

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AAG will be dependent on a limited number of suppliers for aircraft, aircraft engines, and parts.

AAG will be dependent on a limited number of suppliers for aircraft, aircraft engines, and many aircraft and engine parts. As a result, AAG will be vulnerable to any problems associated with the supply of those aircraft, engines, and parts, including insufficient supply, design defects, mechanical problems, inadequate performance by suppliers, or adverse perception by the public that could result in customer avoidance or in actions by the FAA resulting in an inability to operate its aircraft.

AAG’s business will be subject to extensive government regulation, which may result in increases in its costs, disruptions to its operations, limits on its operating flexibility, reductions in the demand for air travel, and competitive disadvantages.

Airlines are subject to extensive domestic and international regulatory requirements. In the last several years, Congress has passed laws, and the DOT, the FAA, the TSA, and the U.S. Department of Homeland Security (“DHS”) have issued a number of directives and other regulations that affect the airline industry. These requirements will impose substantial costs on AAG and will restrict the ways AAG may conduct its business.

For example, the FAA from time to time issues directives and other regulations relating to the maintenance and operation of aircraft that require significant expenditures or operational restrictions. AMR’s and US Airways Group’s failure to timely comply with these requirements in the past has, and AAG’s failure to timely comply with these requirements could in the future, result in fines and other enforcement actions by the FAA or other regulators. In addition, the FAA recently issued its final regulations governing pilot rest periods and work hours for all airlines certificated under Part 121 of the Federal Aviation Regulations. The rule, which is effective January 14, 2014, impacts the required amount and timing of rest periods for pilots between work assignments and modifies duty and rest requirements based on the time of day, number of scheduled segments, flight types, time zones, and other factors. These regulations could have a material adverse impact on AAG and the industry upon implementation.

Subsequent to the Closing, AAG intends to submit to the FAA a transition plan for merging the day-to-day operations of its two mainline airlines, American and US Airways, under a single operating certificate. The issuance of a single operating certificate will occur when the FAA agrees that AAG has achieved a level of integration that can be safely managed under one certificate. While the parties currently believe that such approval can be obtained within two years from the Closing, the actual time required and cost incurred to receive this approval cannot be predicted. Any delay in the grant of such approval or increase in costs beyond those presently expected could have a material adverse effect on the completion date of AAG’s integration plan and receipt of the benefits expected from that plan.

Recent DOT consumer rules require new procedures for customer handling during long onboard delays, further regulate airline interactions with passengers through the reservations process, at the airport, and on board the aircraft, and require new disclosures concerning airline fares and ancillary fees such as baggage fees. The DOT has been aggressively investigating alleged violations of these new rules. Other DOT rules apply to post-ticket purchase price increases and an expansion of tarmac delay regulations to international airlines.

The Aviation and Transportation Security Act (“ATSA”) mandates the federalization of certain airport security procedures and imposes additional security requirements on airports and airlines, most of which are funded by a per-ticket tax on passengers and a tax on airlines.

The results of AAG’s operations, demand for air travel, and the manner in which it conducts business each may be affected by changes in law and future actions taken by governmental agencies, including:

 

   

changes in law which affect the services that can be offered by airlines in particular markets and at particular airports, or the types of fees that can be charged to passengers;

 

   

the granting and timing of certain governmental approvals (including antitrust or foreign government approvals) needed for codesharing alliances and other arrangements with other airlines;

 

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restrictions on competitive practices (for example, court orders, or agency regulations or orders, that would curtail an airline’s ability to respond to a competitor);

 

   

the adoption of new passenger security standards or regulations that impact customer service standards (for example, a “passenger bill of rights”);

 

   

restrictions on airport operations, such as restrictions on the use of takeoff and landing authorizations (“Slots”) at airports or the auction or reallocation of Slot rights currently held by AMR and/or US Airways Group; and

 

   

the adoption of more restrictive locally-imposed noise restrictions.

Each additional regulation or other form of regulatory oversight increases costs and adds greater complexity to airline operations and, in some cases, may reduce the demand for air travel. There can be no assurance that AAG’s compliance with new rules, anticipated rules or other forms of regulatory oversight will not have a material adverse effect on it. In April 2013, the FAA announced the imposition of furloughs that resulted in reduced staffing, including among air traffic controllers, in connection with its implementation of budget reductions related to the federal government’s response to the so-called “sequester” of government funding. These furloughs have been suspended as a result of Congressional legislation. However, neither AMR nor US Airways Group can predict whether there will be further furloughs or the impact of any such furloughs on AAG’s business. Any significant reduction in air traffic capacity at key airports in the U.S. could have a material adverse effect on AAG’s operations and financial results.

In addition, the ATC system is not successfully managing the growing demand for U.S. air travel. Air traffic controllers rely on outdated technologies that routinely overwhelm the system and compel airlines to fly inefficient, indirect routes. On February 14, 2012, the FAA Modernization and Reform Act of 2012 was signed. The law provides funding for the FAA to rebuild its ATC system, including switching from radar to a GPS-based system. It is uncertain when any improvements to the ATC system will take effect. Failure to update the ATC system in a timely manner and the substantial funding requirements that may be imposed on airlines of a modernized ATC system may have a material adverse effect on AAG.

The ability of U.S. airlines to operate international routes is subject to change because the applicable arrangements between the U.S. and foreign governments may be amended from time to time and appropriate Slots or facilities may not be made available. American and US Airways currently operate on a number of international routes under government arrangements that limit the number of airlines permitted to operate on the route, the capacity of the airlines providing services on the route, or the number of airlines allowed access to particular airports. If an open skies policy were to be adopted for any of these routes, such an event could have a material adverse impact on AAG and could result in the impairment of material amounts of its related tangible and intangible assets. In addition, competition from revenue-sharing joint ventures, joint business agreements, and other alliance arrangements by and among other airlines could impair the value of AAG’s business and assets on the open skies routes. For example, the open skies air services agreement between the U.S. and the EU, which took effect in March 2008, provides airlines from the U.S. and EU member states open access to each other’s markets, with freedom of pricing and unlimited rights to fly from the U.S. to any airport in the EU, including London’s Heathrow Airport. The agreement has resulted in AMR and US Airways Group facing increased competition in these markets, including Heathrow Airport. In addition, the open skies agreement between the U.S. and Brazil, which was signed in 2010 and takes full effect in 2015, has resulted in increased competition in the U.S./Brazil market.

AAG will be subject to increasingly stringent environmental regulations.

Many aspects of AAG’s operations will be subject to increasingly stringent environmental regulations, including those relating to emissions to the air, discharges to surface and subsurface waters, safe drinking water, and the management of hazardous substances, oils, and waste materials. Compliance with environmental laws and regulations can require significant expenditures, and violations can lead to significant fines and penalties.

 

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Concerns about climate change and greenhouse gas emissions, in particular, may result in the imposition of additional legislation or regulation. The EU has adopted a directive under which each EU member state is required to extend the existing European Union emissions trading scheme (“ETS”) to aviation. This would require airlines to annually submit emission allowances in order to operate flights to and from EU member states in January 2012 and thereafter, including flights between the U.S. and EU member states. In November 2012, the European Commission proposed to suspend for one year the ETS’ application to flights entering and departing Europe, to allow the United Nations’ International Civil Aviation Organization (“ICAO”) to propose an alternate global emissions reduction scheme. Under the terms of the proposal, with the exception of intra-Europe flights, the monitoring and reporting of emissions, which became effective in 2012, and the submission of emission allowances, scheduled to occur before the end of April 2013, will be suspended and the EU will not collect allowances from airlines in 2013. The proposal is expected to be approved by the European Parliament and EU member states represented in the European Council in the second quarter of 2013. The ETS may be reactivated if ICAO does not make progress towards an alternate global scheme within the next year. The U.S. enacted legislation in November 2012 that will allow the Secretary of Transportation to prohibit U.S. airlines from participating in the ETS. While these measures create some uncertainty as to the extent to which AAG will be required to participate in the ETS going forward, it is nevertheless increasingly likely that in the future it will be required to participate in some form of international arrangement governing aircraft emissions. Although the cost of compliance with the ETS or any alternate global scheme is difficult to predict because certain key parameters, such as the number and price of emission allowances AAG may be required to purchase, are unknown, such costs could be significant.

Other legislative or regulatory actions addressing climate change and emissions from aviation that may be taken in the future by the U.S., state, or foreign governments or through international treaties may adversely affect AAG’s business and financial results.

Climate change legislation was previously introduced in Congress; such legislation could be reintroduced in the future in Congress or state legislatures and could contain provisions affecting the aviation industry. In addition, the U.S. Environmental Protection Agency (“EPA”) could seek to regulate greenhouse gas emissions from aircraft. It is currently unknown how climate change legislation or regulation, if enacted, would specifically apply to the aviation industry. However, the impact on AAG of any climate change legislation or regulation is likely to be adverse, and related costs of compliance could be significant. Such legislation or regulation could result in, among other things, increased fuel costs, carbon taxes, or fees, the imposition of requirements to purchase emission offsets or credits, increased aircraft and equipment costs, and restrictions on the growth of airline operations. AAG is expected to evaluate ongoing climate change developments at the international, federal, and state levels and to assess the potential associated impacts on its business and operations.

Ongoing data security compliance requirements could increase AAG’s costs, and any significant data breach could harm its business, financial condition, or results of operations.

AAG’s business will require the appropriate and secure utilization of customer and other sensitive information. AAG will not be able to be certain that advances in criminal capabilities (including cyber-attacks or cyber-intrusions over the Internet, malware, computer viruses, and the like), discovery of new vulnerabilities or attempts to exploit existing vulnerabilities in systems, other data thefts, physical system or network break-ins or inappropriate access, or other developments will not compromise or breach the technology protecting the networks that access and store sensitive information, whether such technology is controlled by AAG or by other parties critical to its business, such as credit card companies. The risk of a security breach or disruption, particularly through cyber-attack or cyber-intrusion, including by computer hackers, foreign governments, and cyber-terrorists, has increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased. Furthermore, there has been heightened legislative and regulatory focus on data security in the U.S. and abroad (particularly in the EU), including requirements for varying levels of customer notification in the event of a data breach.

 

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In addition, many of the businesses with which AAG will deal, including credit card companies, impose data security standards that it will be required to meet. In particular, AAG will be required by the Payment Card Industry Security Standards Council, founded by the credit card companies, to continue to comply with their highest level of data security standards. In addition, new and revised standards may be imposed that may be difficult for AAG to meet and that could increase its costs.

Failure to comply with the Payment Card Industry Standards discussed above or other privacy and data use and security requirements of business partners or related laws, rules, and regulations to which AAG becomes subject may harm its reputation with its customers and expose it to claims for contract breach, fines, sanctions, or other penalties, which could materially and adversely affect its business, financial condition, and results of operations. In addition, failure to address appropriately these issues could also give rise to additional legal risks, which, in turn, could increase the size and number of litigation claims and damages asserted or subject AAG to enforcement actions, fines, and penalties and cause AAG to incur further related costs and expenses.

AAG could be adversely affected by conflicts overseas or terrorist attacks.

Actual or threatened U.S. military involvement in overseas operations has, on occasion, had an adverse impact on AMR’s and US Airways Group’s business, financial condition (including access to capital markets), and results of operations, and on the airline industry in general. The continuing conflict in Afghanistan, or other conflicts or events in the Middle East or elsewhere, may result in similar adverse impacts.

The terrorist attacks of September 11, 2001 had a material adverse impact on both AMR and US Airways Group. The occurrence of another terrorist attack could have a material adverse impact on AAG.

AAG’s ability to operate and grow its route network in the future is dependent on the availability of adequate facilities and infrastructure throughout its system and, at some airports, adequate Slots.

In order to operate AAG’s proposed flight schedule and, where appropriate, add service along new or existing routes, it must be able to obtain adequate gates, ticketing facilities, operations areas, Slots (where applicable), and office space. Also, as airports around the world become more congested, AAG will not always be sure that its plans for new service can be implemented in a commercially viable manner, given operating constraints at airports throughout its network. Further, its operating costs at airports at which it operates, including its hubs, may increase significantly because of capital improvements at such airports that AAG may be required to fund, directly or indirectly. In some circumstances, such costs could be imposed by the relevant airport authority without AAG’s approval.

Access to Slots at several major U.S. airports and many foreign airports to be served by AAG are subject to government regulation. Certain of AAG’s hubs in the U.S. and its most important international destinations, including London’s Heathrow Airport, are among the most congested airports in the world and have been or could be the subject of regulatory action that might limit the number of flights and/or increase costs of operations at certain times or throughout the day. There is no assurance that AAG will be able to retain or acquire the necessary rights to operate its desired schedules and change schedules in the future because, among other reasons, such allocations are subject to changes in government policy. For example, the FAA is planning a new rulemaking in 2013 to modify the current rules limiting flight operations at New York City’s JFK and LaGuardia airports, where AAG will have major operations. Any limitation on AAG’s ability to acquire or maintain adequate gates, ticketing facilities, operations areas, Slots (where applicable), or office space could severely constrain its operations and have a material adverse effect on it. In addition, in connection with obtaining regulatory approval or clearance with respect to the Merger, the applicable regulatory bodies may have the authority to condition approval or clearance on AMR and US Airways Group divesting Slots at foreign or U.S. airports. AMR and US Airways Group do not expect that any required divestitures will have a material adverse effect on AAG.

 

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AAG’s international operations will be subject to economic and political instability and could be adversely affected by numerous events, circumstances, or government actions beyond its control.

AAG will operate a global business from which AMR’s international operations derived approximately 40% of its total operating revenues in 2012 and US Airways Group’s international operations derived approximately 25% of its total operating revenues in 2012, as measured and reported to the DOT. AAG’s international activities could be adversely affected by factors such as reversals or delays in the opening of foreign markets, exchange controls, currency, and political risks (including changes in exchange rates and currency devaluations, which are more likely in countries with exchange controls such as Venezuela, which recently devalued its currency, and Argentina), environmental regulation, increases in taxes and fees, and changes in international government regulation of its operations, including the inability to obtain or retain needed route authorities and/or Slots. Fluctuations in foreign currencies could significantly affect AAG’s operating performance, as well as the value of its assets and liabilities located outside the U.S.

AAG could be adversely affected by an outbreak of a disease that affects travel behavior.

An outbreak of a disease that affects travel demand or travel behavior, such as Severe Acute Respiratory Syndrome, avian flu, H1N1 virus, or other illness, or travel restrictions or reductions in the demand for air travel caused by similar public health threats in the future, could have a material adverse impact on AAG. In addition, such events could result in quarantines of AAG’s personnel or an inability to access facilities or aircraft, which could materially adversely affect AAG.

AAG could be adversely affected if AAG is unable to have satisfactory relations with any unionized or other labor work group, or if it suffers employee strikes, slowdowns, or other labor-related disruptions.

The airline business is labor intensive. To the extent that AAG is unable to have satisfactory relations with any labor work group (unionized or independent), its operations and its ability to execute its strategic plans could be adversely affected. The majority of AAG’s employees will be represented by labor unions and covered by CBAs. Relations with such labor organizations are governed by the Railway Labor Act (“RLA”). Under the RLA, the CBAs among AAG’s operating subsidiaries and these organizations generally do not expire but instead become amendable as of a stated date. If either party wishes to modify the terms of any such agreement, it must notify the other party in the manner prescribed under the RLA and as agreed to by the parties. Under the RLA, after receipt of such notice, the parties must meet for direct negotiations, and, if no agreement is reached, either party may request the National Mediation Board (“NMB”) to appoint a federal mediator. The RLA prescribes no set timetable for the direct negotiation and mediation process. It is not unusual for those processes to last for many months, and even for several years. If no agreement is reached in mediation, the NMB in its discretion may declare at some time that an impasse exists, and if an impasse is declared, the NMB proffers binding arbitration to the parties. Either party may decline to submit to arbitration. If arbitration is rejected by either party, a 30-day “cooling off” period commences. Throughout the bargaining process, and during this “cooling off” period, the parties are precluded from engaging in any “self-help,” such as strikes or work slowdowns by employees or a lockout by the employer. During the “cooling off” period (or after), a Presidential Emergency Board (“PEB”) may be established to examine the parties’ positions and recommend a solution. The PEB process lasts for 30 days and is followed by another “cooling off” period of 30 days, which extends the prohibition against “self-help” until the PEB process is concluded. At the end of the “cooling off” period or PEB process (whichever lasts longer), unless an agreement is reached or action is taken by Congress to legislate a solution to the bargaining dispute, the labor organization may exercise “self-help,” such as a strike or other job action, and the airline may resort to its own “self-help,” including the imposition of any or all of its proposed amendments to the CBA and the hiring of new people to replace any striking workers.

Any disruption by a labor work group (e.g., sick-out, slowdown, full or partial strike, or other job action) may materially and adversely affect AAG’s business, financial condition, and results of operations. There is a risk that employees may engage in such disruptions, with or without union involvement, even if such disruptions are not permitted by the RLA. In the third quarter of 2012, AMR experienced a labor-related operational

 

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disruption, which led to substantial flight cancellations and delays. There can be no assurance that such operational disruptions will not recur in the future.

A higher than normal number of pilot retirements and a potential shortage of pilots could adversely affect AAG.

AMR and US Airways Group currently have a higher than normal number of pilots eligible for retirement. Among other things, the extension of pilot careers facilitated by the FAA’s 2007 modification of the mandatory retirement age from age 60 to age 65 has now been fully implemented resulting in large numbers of pilots in the industry approaching the revised mandatory retirement age. If pilot retirements were to exceed normal levels in the future, it may adversely affect AAG. The FAA also recently issued regulations that increase the flight experience required for pilots working for airlines, such as American and US Airways, certificated under Part 121 of the Federal Aviation Regulations. These and other factors could contribute to a shortage of qualified pilots, which could adversely affect AAG.

Increases in insurance costs or reductions in coverage could have an adverse impact on AAG.

AMR and US Airways Group each carry insurance for public liability, passenger liability, property damage, and all-risk coverage for damage to their aircraft. As a result of the terrorist attacks of September 11, 2001, aviation insurers significantly reduced the amount of liability insurance coverage available to commercial airlines for claims resulting from acts of terrorism, war, or similar events. At the same time, these insurers significantly increased the premiums for aviation insurance in general. While the price of commercial insurance has declined since the period immediately after the terrorist attacks of September 11, 2001, in the event commercial insurance carriers further reduce the amount of insurance coverage available to AAG, or significantly increase its cost, AAG would be adversely affected. In addition, the failure or insolvency of one of the insurers could result in a lack of coverage.

The U.S. government has agreed to provide commercial war-risk insurance for U.S.-based airlines through September 30, 2013, covering losses to employees, passengers, third parties, and aircraft. If the U.S. government were to cease providing such insurance in whole or in part, it is likely that AAG could obtain comparable coverage in the commercial market, but it could incur substantially higher premiums and more restrictive terms, if such coverage were to be available at all. If AAG is unable to obtain adequate liability insurance for claims resulting from acts of terrorism, war, or similar events at commercially reasonable rates, it would be materially adversely affected.

AAG will be increasingly dependent on technology and could be adversely affected by a failure or disruption of its computer, communications, or other technology systems, and may face challenges in integrating those systems.

AAG will be heavily and increasingly dependent on technology and automated systems to operate its business, reduce costs, and enhance customer service. These technologies and systems include the computerized airline reservation system, flight operations system, financial planning, management, and accounting systems, telecommunications systems, website, maintenance systems, and check-in kiosks. In order for AAG’s operations to work efficiently, its website and automated systems must be able to accommodate a high volume of traffic, maintain secure information, and deliver important flight and schedule information, as well as issue electronic tickets and process critical financial transactions, in a timely manner. The computer and communications systems on which AAG will rely could be disrupted due to various events, some of which are beyond AAG’s control, including natural disasters, power failures, terrorist attacks, equipment failures, system implementation failures, software failures and computer viruses, hackers, and other cyber-attacks. For example, on April 16, 2013, AMR experienced a software issue that resulted in significant operational impact, including hundreds of cancelled flights. AMR has taken, and AAG will take, steps to help reduce the risk of some (but not all) of these potential disruptions. There can be no assurance, however, that the measures taken will be adequate to prevent or remedy disruptions or failures of these systems. Any substantial or repeated failure of these systems could impact AAG’s operations and customer service, result in the theft or loss of important data, including private or sensitive

 

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information concerning AAG’s passengers and other customers, loss of revenues, and increased costs, and generally harm AAG’s business, financial condition, and results of operations. Moreover, a failure or disruption of certain of AAG’s vital systems could limit its ability to operate flights for an extended period of time, which would have a material adverse impact on AAG. In addition, AAG will need to continue to make significant investments in technology to pursue initiatives to reduce costs and enhance customer service. If AAG is unable to make these investments, its business, financial condition, and results of operations could be negatively impacted.

Among the principal risks of integrating the business and operations of AMR and US Airways Group are the risks of integrating various computer, communications, and other technology systems, including designing and implementing an integrated customer reservations system, that will be necessary to operate American and US Airways as a single airline and to achieve cost synergies by eliminating redundancies in the two companies’ businesses. The integration of these systems in a number of prior airline mergers has taken longer, been more disruptive, and cost more than originally forecast. The implementation process by AAG to integrate these various systems will involve a number of risks that may hinder AAG’s business operations and/or affect its financial condition and results of operations if the implementation is delayed or otherwise is not successful. New systems will replace multiple legacy systems and the related implementation will be a complex and time-consuming project involving substantial expenditures for implementation consultants, system hardware, software, and implementation activities, as well as the transformation of business and financial processes.

As with any large project, there will be many factors that may materially affect the schedule, cost, and execution of the integration of AAG’s computer, communications, and other technology systems. These factors include, among others: problems during the design, implementation, and testing phases; system delays and/or malfunctions; the risk that suppliers and contractors will not perform as required under their contracts; the diversion of management attention from daily operations to the project; reworks due to unanticipated changes in business processes; challenges in simultaneously activating new systems throughout AAG’s global network; difficulty in training employees in the operation of new systems, and other unexpected events beyond AAG’s control.

AAG will be at risk of losses and adverse publicity which might result from an accident involving any of its aircraft.

If one of AAG’s aircraft, an aircraft that is operated under its brand by one of its regional operators, or an aircraft that is operated by an airline that is one of AAG’s codeshare partners were to be involved in an accident, AAG could be exposed to significant tort liability. The insurance AAG carries to cover damages arising from any future accident may be inadequate. If its insurance is not adequate, it may be forced to bear substantial losses from an accident. In addition, any accident involving any such aircraft could materially and adversely affect the public’s perception of AAG. Such public perception could in turn cause harm to AAG’s brand and reduce travel demand on its flights, or the flights of AAG’s codeshare partners or regional airlines.

Interruptions or disruptions in service at one or more of AAG’s primary market airports could have an adverse impact on its business, financial condition, and results of operations.

AAG’s business will be heavily dependent on operations at its primary market airports in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York City, Philadelphia, Phoenix, and Washington, D.C. Each of these operations includes flights that gather and distribute traffic from markets in the geographic region around the primary market to other major cities. A significant interruption or disruption in service at one or more of AAG’s primary markets could adversely impact its business, financial conditions, and results of operations.

The airline industry is heavily taxed.

The airline industry is subject to extensive government fees and taxation that will negatively impact AAG’s revenue. The U.S. airline industry is one of the most heavily taxed of all industries. These fees and taxes have grown significantly in the past decade for domestic flights, and various U.S. fees and taxes also are assessed on

 

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international flights. For example, as permitted by federal legislation, most major U.S. airports impose a passenger facility charge per passenger on American and US Airways. In addition, the governments of foreign countries in which AAG will operate impose on U.S. airlines, including American and US Airways, various fees and taxes, and these assessments have been increasing in number and amount in recent years. Moreover, AAG will be obligated to collect a federal excise tax, commonly referred to as the “ticket tax,” on domestic and international air transportation. It will collect the excise tax, along with certain other U.S. and foreign taxes and user fees on air transportation (such as a per-ticket tax on passengers to fund the TSA), and pass along the collected amounts to the appropriate governmental agencies. Although these taxes are not operating expenses, they represent an additional cost to AAG’s customers. There are continuing efforts in Congress and in other countries to raise different portions of the various taxes, fees, and charges imposed on airlines and their passengers. Increases in such taxes, fees, and charges could negatively impact AAG’s business, financial condition, and results of operations.

Under recent DOT regulations, all governmental taxes and fees must be included in the fares AAG quotes or advertises to its customers. Due to the competitive revenue environment, many increases in these fees and taxes have been absorbed by the airline industry rather than being passed on to the customer. Further increases in fees and taxes may reduce demand for air travel, and thus AAG’s revenues.

AAG may never realize the full value of its intangible assets or its long-lived assets, causing it to record material impairment charges.

In accordance with applicable accounting standards, upon the Closing and the Debtors’ emergence from the Chapter 11 Cases, “fresh start” accounting will be applied to AMR’s financial statements and the acquisition method of accounting will be applied to US Airways Group’s financial statements. The adjustments mandated by these methods of accounting will likely result in the recording of significant intangible assets by AAG. Also in accordance with applicable accounting standards, AAG will be required to test its indefinite-lived intangible assets for impairment on an annual basis, or more frequently if conditions indicate that an impairment may have occurred. In addition, AAG will be required to test certain of its other assets for impairment if conditions indicate that an impairment may have occurred.

AAG may be required to recognize additional impairments in the future due to, among other factors, extreme fuel price volatility, tight credit markets, a decline in the fair value of certain tangible or intangible assets, unfavorable trends in historical or forecasted results of operations and cash flows, and an uncertain economic environment, as well as other uncertainties. Neither AMR nor US Airways Group can provide assurance that a material impairment charge of tangible or intangible assets will be avoided. The value of AAG’s aircraft could be impacted in future periods by changes in supply and demand for these aircraft. Such changes in supply and demand for certain aircraft types could result from grounding of aircraft by AAG or other airlines. An impairment charge could have a material adverse effect on its business, financial condition, and results of operations.

Interruptions or disruptions in AAG’s relationships with third-party regional airlines or other third-party service providers could have an adverse impact on it.

AMR and US Airways Group have engaged an increasing number of third-party service providers to perform a large number of functions that are integral to their businesses, including distribution and sale of airline seat inventory, provision of information technology infrastructure and services, provision of aircraft maintenance and repairs, provision of certain customer and aircraft related functions, provision of various utilities, and performance of aircraft fueling operations, among other vital functions and services. AAG will also rely on third-party regional airlines to operate flights. If AAG experiences problems with any of its third-party regional airlines, or other third-party service providers, or unexpected interruptions in their provision of services, the public’s perception of AAG could be materially and adversely affected. Significant problems, disruptions, or interruptions could materially and adversely affect AAG’s business, financial condition, and results of operations.

 

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “could,” “should,” “would,” “continue,” “seek,” “target,” “guidance,” “outlook,” “forecast,” and other similar words. In particular, statements, express or implied, concerning future actions, conditions, or events, future operating results, the ability to generate sales, income, or cash flow and to realize cost savings and other synergies or other benefits associated with the transaction are forward-looking statements. Although AMR and US Airways Group believe that these forward-looking statements are based on reasonable assumptions, they are subject to risks and uncertainties and are made in light of information currently available. Many factors, in addition to the factors described in this proxy statement/prospectus, may adversely affect results as indicated in forward-looking statements. AMR and US Airways Group urge you to carefully read this entire proxy statement/prospectus, the documents incorporated by reference into this proxy statement/prospectus, and the documents that are attached as annexes and filed as exhibits hereto, with the understanding that actual future results may be materially different from what AMR and US Airways Group expect. Many of the factors that will determine these results are beyond AMR’s and US Airways Group’s ability to control or predict. Specific factors that could cause actual results to differ from those in the forward-looking statements include, among others:

 

   

the challenges and costs of the Merger, integrating American’s operations with those of US Airways, and achieving anticipated synergies, including the ability to achieve targeted cost savings, or revenue growth;

 

   

the price of, market for, and potential market price volatility of, AAG common stock;

 

   

the significant liquidity requirements of AAG at and following the Closing;

 

   

substantial levels of indebtedness, which could make AAG vulnerable to general adverse economic and industry conditions, limit its ability to borrow additional funds, and/or place it at competitive disadvantages compared to its competitors that have less debt;

 

   

potential limitations on the use of NOL Carryforwards and certain other tax attributes following the Closing;

 

   

failure of conditions to Closing to be satisfied and failure of the Merger to be completed, including failure of the Plan to be confirmed, failure of US Airways Group stockholders to adopt the Merger Agreement, or failure to receive required regulatory approvals;

 

   

market conditions, including commodity prices for oil, and access to, and cost of obtaining, additional capital;

 

   

vulnerability to changes in economic conditions, laws or regulations, and third-party relations, and to approvals and decisions of courts, regulators, and governmental bodies;

 

   

interruptions in business and/or damage to property or reputation or injuries or loss of human life due to natural disasters, terrorism, war, cyber-attacks, failure of technology systems, or other causes;

 

   

potential labor unrest, strikes, slow downs, or other labor related disruptions;

 

   

changes in tax laws;

 

   

availability of aircraft, availability of adequate facilities and infrastructure, delays in aircraft deliveries, and performance of new aircraft;

 

   

competition, consolidation, and alliances in the airline industry;

 

   

other economic, business, competitive, and/or regulatory factors affecting the business of AAG, generally; and

 

   

the other factors discussed in the section entitled “Risk Factors” beginning on page 44.

 

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Forward-looking statements speak only as of the date hereof or as of the dates indicated in the statements. Neither AMR nor US Airways Group assumes any obligation to publicly update or supplement any forward-looking statement to reflect actual results, changes in assumptions, or changes in other factors affecting these forward-looking statements. There is no assurance that any of the risks described under the caption “Risk Factors” or that any of the uncertainties associated with the forward-looking statements discussed in this proxy statement/prospectus will occur, or, if any of them do, when they will occur or what impact they will have on AMR’s, US Airways Group’s, or AAG’s operations or financial condition. Future results and performance may differ materially from those expressed in forward-looking statements due to, but not limited to, the factors mentioned above. Because of these uncertainties, you should not place undue reliance on forward-looking statements.

Stockholders should understand that the foregoing important factors, in addition to those discussed elsewhere in this proxy statement/prospectus or in the documents that are incorporated by reference by US Airways Group into this proxy statement/prospectus or attached hereto as annexes or filed as exhibits, could affect AMR’s, US Airways Group’s, or AAG’s future results and could cause results to differ materially from those expressed in the forward-looking statements.

 

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THE US AIRWAYS GROUP ANNUAL MEETING

Purpose, Place, Date, and Time

US Airways Group is furnishing this proxy statement/prospectus to the stockholders of US Airways Group in connection with the solicitation by its board of directors of proxies to be voted at the 2013 Annual Meeting of Stockholders, and any adjournments or postponements of that meeting. The 2013 Annual Meeting of Stockholders will be held at the offices of Latham & Watkins LLP, located at 885 Third Avenue, New York, New York 10022, on Friday, July 12, 2013 at 9:00 a.m., local time, for the purposes set forth in the accompanying notice of the 2013 Annual Meeting of Stockholders.

The approximate date on which US Airways Group is first sending the notice of the 2013 Annual Meeting of Stockholders, this proxy statement/prospectus, and the accompanying proxy card to stockholders is June 11, 2013.

The 2013 Annual Meeting of Stockholders is being held to consider and vote on the following proposals:

 

   

Proposal 1: to adopt the Merger Agreement;

 

   

Proposal 2: to approve, on a non-binding, advisory basis, the Merger-related compensation of US Airways Group’s named executive officers;

 

   

Proposal 3: to approve the adjournment of the 2013 Annual Meeting of Stockholders, if necessary, to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement;

 

   

Proposal 4: to elect to the US Airways Group board of directors each of the nominees for director named in this proxy statement/prospectus;

 

   

Proposal 5: to ratify the appointment of KPMG LLP as US Airways Group’s independent registered public accounting firm for 2013; and

 

   

Proposal 6: to approve, on a non-binding, advisory basis, the compensation of US Airways Group’s named executive officers.

Record Date; Outstanding Shares; Stockholders Entitled to Vote

Stockholders of record at the close of business on the Record Date are entitled to receive notice of and to vote at the 2013 Annual Meeting of Stockholders and at any adjournments or postponement thereof. On the Record Date, there were 180,577,075 shares of US Airways Group’s common stock outstanding and eligible to be voted at the 2013 Annual Meeting of Stockholders. Each share of US Airways Group’s common stock entitles its owner to one vote on each matter submitted to the stockholders.

Quorum; Broker Non-Votes

The presence, in person or by proxy, of a majority of the outstanding shares of US Airways Group’s common stock is necessary to constitute a quorum at the 2013 Annual Meeting of Stockholders.

Under the rules of the NYSE, member firms that hold shares in “street name” for beneficial owners may, to the extent that those beneficial owners do not furnish voting instructions with respect to any or all proposals submitted for stockholder action, vote in their discretion upon proposals that are considered routine proposals under the NYSE rules. US Airways Group believes that Proposals 3 and 5 are routine, and Proposals 1, 2, 4, and 6 are non-discretionary. Member brokerage firms that do not receive instructions from their clients as to non-discretionary proposals cannot vote on the non-discretionary proposals. The return of a proxy card by a broker without voting on a non-discretionary proposal because the broker received no instruction from the stockholder is referred to herein as a “Broker Non-Vote.” Broker Non-Votes are considered in determining whether a quorum exists at the 2013 Annual Meeting of Stockholders.

 

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Vote Required for Proposal 1: The Merger

The proposal to adopt the Merger Agreement requires the affirmative vote of holders of a majority of the outstanding shares of US Airways Group common stock that are entitled to vote at the 2013 Annual Meeting of Stockholders, provided a quorum is present.

Abstentions are considered in determining the number of votes required to obtain the necessary majority vote for the proposal and, therefore, will have the same legal effect as voting against the proposal. Brokers do not have discretionary authority to vote on this proposal. Broker Non-Votes will have the same legal effect as a vote against the proposal.

In the vote to adopt the Merger Agreement, stockholders may:

 

   

vote for the adoption of the Merger Agreement;

 

   

vote against the adoption of the Merger Agreement; or

 

   

abstain from voting on the proposal.

The US Airways Group board of directors recommends that US Airways Group stockholders vote “FOR” the adoption of the Merger Agreement.

Vote Required for Proposal 2: Non-Binding Advisory Vote on the Merger-Related Compensation for Named Executive Officers

The proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable to the named executive officers of US Airways Group in connection with the Merger requires the affirmative vote of holders of a majority of the shares of US Airways Group’s common stock represented, in person or by proxy, and entitled to vote at the 2013 Annual Meeting of Stockholders, provided a quorum is present.

Abstentions are considered in determining the number of votes required to obtain the necessary majority vote for the proposal and, therefore, will have the same legal effect as voting against the proposal. Brokers do not have discretionary authority to vote on this proposal. Broker Non-Votes will have no legal effect on the outcome of this proposal.

In the vote to approve, on a non-binding, advisory basis, the Merger-related compensation of US Airways Group’s named executive officers, stockholders may:

 

   

vote for the approval of the Merger-related compensation of US Airways Group’s named executive officers;

 

   

vote against approval of the Merger-related compensation of US Airways Group’s named executive officers; or

 

   

abstain from voting on the proposal.

The US Airways Group board of directors recommends that US Airways Group stockholders vote “FOR” the proposal to approve the Merger-related compensation of the US Airways Group named executive officers.

Vote Required for Proposal 3: Adjournment If Votes Are Insufficient to Adopt the Merger Agreement

The proposal to approve the adjournment of the 2013 Annual Meeting of Stockholders, if necessary, to solicit additional proxies, if there are not sufficient votes to adopt the Merger Agreement, requires the affirmative vote of holders of a majority of the shares of US Airways Group’s common stock represented, in person or by proxy, and entitled to vote at the 2013 Annual Meeting of Stockholders, whether or not a quorum is present.

 

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Abstentions are considered in determining the number of votes required to obtain the necessary majority vote for the proposal and, therefore, will have the same legal effect as voting against the proposal. Brokers have discretionary authority to vote on this proposal; therefore, US Airways Group expects no Broker Non-Votes on this proposal.

In the vote to approve the adjournment of the 2013 Annual Meeting of Stockholders, if necessary, to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement, stockholders may:

 

   

vote for the approval of the adjournment of the 2013 Annual Meeting of Stockholders, if necessary, to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement;

 

   

vote against approval of the adjournment of the 2013 Annual Meeting of Stockholders, if necessary, to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement; or

 

   

abstain from voting on the proposal.

The US Airways Group board of directors recommends that US Airways Group stockholders vote “FOR” the proposal to adjourn the 2013 Annual Meeting of Stockholders, if necessary, to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement.

Vote Required for Proposal 4: Election of Directors

US Airways Group’s amended and restated bylaws provide for a majority voting standard for the election of directors in uncontested elections, which are generally defined as elections in which the number of nominees does not exceed the number of directors to be elected at the meeting. Under the majority voting standard, in uncontested elections of directors, such as this election, each director must be elected by the affirmative vote of a majority of the votes cast with respect to such director by the shares represented in person or by proxy, and entitled to vote therefor at the 2013 Annual Meeting of Stockholders, provided a quorum is present.

A majority of the votes cast means that the number of votes cast “for” a nominee exceeds the number of votes cast “against” that nominee. Brokers do not have discretionary authority to vote on this proposal. Abstentions and Broker Non-Votes are not considered votes cast “for” or “against” a nominee’s election and therefore will have no legal effect in determining whether a nominee has received a majority of the votes cast.

In this election, an incumbent director nominee who does not receive the required number of votes for re-election is expected to tender his resignation to the board of directors in accordance with the policy adopted by the board of directors. The corporate governance and nominating committee of the board of directors (or other committee as directed by the board) will then make a determination as to whether to accept or reject the tendered resignation, generally within 90 days after certification of the election results of the stockholder vote. Following such determination, US Airways Group will publicly disclose the decision regarding any tendered resignation in a Current Report on Form 8-K filed with the SEC.

In the vote to elect two directors of US Airways Group in Class II to serve until the 2016 annual meeting of stockholders and until their respective successors have been duly elected and qualified, stockholders may, with respect to each nominee:

 

   

vote for the election of the nominee;

 

   

vote against the election of the nominee; or

 

   

abstain from voting on the election.

The US Airways Group board of directors recommends that US Airways Group stockholders vote “FOR” each of the nominees.

 

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Vote Required for Proposal 5: Ratification of Appointment of Independent Registered Public Accounting Firm

The proposal to ratify the appointment of KPMG LLP as US Airways Group’s independent registered public accounting firm will require the affirmative vote of holders of a majority of the shares represented, in person or by proxy, and entitled to vote at the 2013 Annual Meeting of Stockholders, provided a quorum is present.

Abstentions are considered in determining the number of votes required to obtain the necessary majority vote for the proposal and, therefore, will have the same legal effect as voting against the proposal. Brokers have discretionary authority to vote on this proposal; therefore, US Airways Group expects no Broker Non-Votes on this proposal.

In the vote to ratify the appointment of KPMG LLP as US Airways Group’s independent registered public accounting firm, stockholders may:

 

   

vote for the ratification;

 

   

vote against the ratification; or

 

   

abstain from voting on the ratification.

The US Airways Group board of directors recommends that US Airways Group stockholders vote “FOR” the ratification of the appointment of US Airways Group’s independent registered public accounting firm.

Vote Required for Proposal 6: Non-Binding Advisory Vote to Approve the Compensation of Named Executive Officers

The proposal to approve, on a non-binding, advisory basis, the compensation of the named executive officers of US Airways Group as disclosed in this proxy statement/prospectus pursuant to the compensation disclosure rules of the SEC requires the affirmative vote of holders of a majority of the shares of US Airways Group’s common stock represented, in person or by proxy, and entitled to vote at the 2013 Annual Meeting of Stockholders, provided a quorum is present.

Abstentions are considered in determining the number of votes required to obtain the necessary majority vote for the proposal and, therefore, will have the same legal effect as voting against the proposal. Brokers do not have discretionary authority to vote on this proposal. Broker Non-Votes will have no legal effect on the outcome of this proposal.

In the vote to approve, on a non-binding, advisory basis, the compensation of US Airways Group’s named executive officers, stockholders may:

 

   

vote for the approval of the compensation of US Airways Group’s named executive officers;

 

   

vote against approval of the compensation of US Airways Group’s named executive officers; or

 

   

abstain from voting on the proposal.

The US Airways Group board of directors recommends that US Airways Group stockholders vote “FOR” the proposal to approve the compensation of the US Airways Group named executive officers.

Voting of Proxies

You should specify your choices with regard to each of the proposals by submitting a proxy for your shares by using the toll-free number or the website provided on your proxy card, if your proxy card includes instructions for using these quick, cost-effective, and easy methods for submitting proxies, or submitting a proxy in writing by filling out, signing, and dating your proxy card and mailing it in the prepaid envelope included with these

 

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proxy materials. If you submit a proxy by telephone or the website provided on your proxy card, please do not return your proxy card by mail. You will need to follow the instructions provided on your proxy card when you submit a proxy using any of these methods to make sure your shares will be voted at the 2013 Annual Meeting of Stockholders. You also may vote by submitting a ballot in person if you attend the 2013 Annual Meeting of Stockholders. However, we encourage you to submit a proxy by mail by completing your proxy card, by telephone, or over the Internet even if you plan to attend the 2013 Annual Meeting of Stockholders.

If you hold shares through a broker, bank, or other nominee, you may instruct your broker, bank, or other nominee to vote your shares by following the instructions that the broker, bank, or other nominee provides to you with these materials. Most brokers offer the ability for stockholders to submit voting instructions by mail by completing a voting instruction card, by telephone, and over the Internet. If you hold shares through a broker, bank, or other nominee and wish to vote your shares at the 2013 Annual Meeting of Stockholders, you must obtain a legal proxy from your broker, banker, or nominee and present it to the inspector of election with your ballot when you vote at the 2013 Annual Meeting of Stockholders.

All properly executed proxies received by US Airways Group in time to be voted at the 2013 Annual Meeting of Stockholders and not revoked will be voted at the 2013 Annual Meeting of Stockholders in accordance with the directions noted therein. In the absence of such instructions, the shares represented by a signed and dated proxy card will be voted:

 

   

“FOR” the adoption of the Merger Agreement;

 

   

“FOR” the approval, on a non-binding, advisory basis, of the Merger-related compensation of US Airways Group’s named executive officers;

 

   

“FOR” the election to the US Airways Group board of directors of each of the nominees for director named in this proxy statement/prospectus;

 

   

“FOR” the ratification of the appointment of KPMG LLP as US Airways Group’s independent registered public accounting firm for 2013; and

 

   

“FOR” the approval, on a non-binding, advisory basis, of the compensation of US Airways Group’s named executive officers.

If you return your signed and dated proxy card and indicate that you wish to vote “FOR” the proposal to adopt the Merger Agreement but do not indicate a choice on the proposal to authorize adjournment of the 2013 Annual Meeting of Stockholders, your shares will be voted “FOR” the proposal to authorize adjournment. However, if you indicate that you wish to vote “AGAINST” the proposal to adopt the Merger Agreement, your shares will only be voted “FOR” the proposal to authorize adjournment if you indicate that you wish to vote in favor of that proposal.

If any other matters properly come before the 2013 Annual Meeting of Stockholders, the persons named as proxies will vote upon those matters according to their judgment. The board of directors of US Airways Group knows of no other items of business that will be presented for consideration at the 2013 Annual Meeting of Stockholders other than those described in this proxy statement/prospectus. No stockholder proposals or nominations were received on a timely basis, pursuant to SEC Rule 14a-8 or US Airways Group’s amended and restated bylaws, that were not subsequently withdrawn. Accordingly, no such matters may be brought to a vote at the 2013 Annual Meeting of Stockholders.

Revocation of Proxies

Any stockholder delivering a proxy has the power to revoke it at any time before it is voted by:

 

   

giving notice of revocation to Caroline B. Ray, US Airways Group’s Corporate Secretary, at US Airways Group, Inc., 111 West Rio Salado Parkway, Tempe, Arizona 85281 (by mail or overnight delivery);

 

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executing and delivering to US Airways Group’s Corporate Secretary a proxy card relating to the same shares bearing a later date;

 

   

voting again prior to the time at which the Internet and telephone voting facilities close by following the procedures applicable to those methods of voting; or

 

   

voting in person at the 2013 Annual Meeting of Stockholders.

Please note, however, that under the NYSE rules, any beneficial owner of US Airways Group’s common stock whose shares are held in “street name” by a member brokerage firm may only revoke his or her proxy and vote his or her shares in person at the 2013 Annual Meeting of Stockholders in accordance with applicable NYSE rules and procedures, as employed by the beneficial owner’s brokerage firm. If you want to vote at the 2013 Annual Meeting of Stockholders, but your shares are held in “street name” by a broker, bank, or other nominee, you will need to obtain proof of ownership as of May 30, 2013 and a proxy to vote the shares from such broker, bank, or other nominee.

Solicitation of Proxies

In addition to soliciting proxies through the mail, US Airways Group may solicit proxies through its directors, officers, and employees in person and by email, telephone, or facsimile. US Airways Group may also request broker, bank, or other nominees to forward proxy materials to the beneficial owners of shares held of record by them. US Airways Group will pay all expenses incurred in connection with the solicitation of proxies. In addition, US Airways Group has retained MacKenzie Partners to assist in the solicitation for an estimated fee of $50,000. US Airways Group also agreed to reimburse MacKenzie Partners for reasonable out-of-pocket expenses and disbursements incurred in connection with the proxy solicitation and to indemnify MacKenzie against certain losses, costs, and expenses.

Inspector of Election

All votes at the 2013 Annual Meeting of Stockholders will be counted by Broadridge Investor Communication Solutions, Inc., the inspector of election. The inspector of election will separately tabulate affirmative and negative votes, abstentions, and Broker Non-Votes.

Electronic Delivery of Proxy Materials

All stockholders now have the option to register for and receive copies of US Airways Group’s future proxy statements, annual reports, and other stockholder materials electronically. All stockholders (record and “street name”) can save US Airways Group (and the environment) the cost of printing and mailing these documents by visiting US Airways Group’s website at www.usairways.com under “Company info”—“About US”—“Investor relations”—“Shareholder resources” and following the instructions on how to sign up for electronic delivery of future stockholder materials.

Householding of Proxy Materials

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy materials, including annual reports, with respect to two or more stockholders sharing the same address by delivering a single copy of the documents addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies. In accordance with these rules, only one set of documents will be delivered to multiple stockholders sharing an address unless US Airways Group has received contrary instructions from one or more of the stockholders.

If, at any time, you no longer wish to participate in “householding” and would prefer to receive separate copies of the proxy materials, including annual reports, please notify your broker, direct your written request to Caroline B. Ray, Corporate Secretary, US Airways Group, Inc., 111 West Rio Salado Parkway, Tempe, Arizona 85281, or contact Caroline B. Ray at (480) 693-0800. Stockholders who currently receive multiple copies of such documents and would like to request “householding” of their communications should contact their brokers.

 

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Voting by US Airways Group Directors and Executive Officers

As of the Record Date for the 2013 Annual Meeting of Stockholders, the directors and executive officers of US Airways Group, as a group, were entitled to vote 1,225,347 shares of US Airways Group common stock or less than 1% of the outstanding shares of US Airways Group common stock on that date. The affirmative vote of a majority of the aggregate voting power of the outstanding shares of US Airways Group common stock that are entitled to vote at the 2013 Annual Meeting of Stockholders is required to adopt the Merger Agreement. Each director and executive officer has indicated his or her present intention to vote, or cause to be voted, the shares of US Airways Group common stock owned by him or her “FOR” the adoption of the Merger Agreement.

Special Assistance with Attendance at the 2013 Annual Meeting of Stockholders

If you plan to attend the 2013 Annual Meeting of Stockholders and require special assistance, please contact Caroline Ray at (202) 326-5165 to request any listening or visual aid devices by June 28, 2013.

Recommendation of US Airways Group’s Board of Directors

The US Airways Group board of directors recommends that you vote:

 

   

“FOR” the adoption of the Merger Agreement;

 

   

“FOR” the approval, on a non-binding, advisory basis, of the Merger-related compensation of US Airways Group’s named executive officers;

 

   

“FOR” the approval of the adjournment of the 2013 Annual Meeting of Stockholders, if necessary, to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement;

 

   

“FOR” the election to the US Airways Group board of directors of each of the nominees for director named in this proxy statement/prospectus;

 

   

“FOR” the ratification of the appointment of KPMG LLP as US Airways Group’s independent registered public accounting firm for 2013; and

 

   

“FOR” the approval, on a non-binding, advisory basis, of the compensation of US Airways Group’s named executive officers.

The US Airways Group board of directors has determined that the Merger Agreement and the Merger are advisable and in the best interests of US Airways Group and its stockholders and has unanimously approved the Merger Agreement and the Merger.

 

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PART II—THE MERGER AND THE COMBINED COMPANY

PROPOSAL 1: THE MERGER

US Airways Group and AMR have agreed to the business combination of US Airways Group and AMR pursuant to the Merger Agreement that is described in this proxy statement/prospectus. In the Merger, AMR Merger Sub, a wholly-owned subsidiary of AMR, will merge with and into US Airways Group, with US Airways Group surviving as a direct wholly-owned subsidiary of AMR. The Merger Agreement is attached as Annex A to this proxy statement/prospectus. US Airways Group encourages you to read carefully the Merger Agreement in its entirety, because it is the legal document that governs the Merger.

For a detailed discussion of the terms and conditions of the Merger, see the section entitled “The Merger Agreement” beginning on page 117. As discussed in the section entitled “The Merger—Recommendation of US Airways Group’s Board of Directors with Respect to the Merger Agreement and Its Reasons for the Merger” beginning on page 87, the US Airways Group board of directors has determined that the Merger and the Merger Agreement are advisable and in the best interests of US Airways Group and its stockholders and approved the Merger Agreement and the Merger. US Airways Group is asking its stockholders to adopt the Merger Agreement. The adoption of the Merger Agreement by US Airways Group stockholders is required to effect the Closing.

The US Airways Group board of directors recommends that US Airways Group stockholders vote “FOR” the adoption of the Merger Agreement.

 

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THE MERGER

General

Each of the US Airways Group and AMR boards of directors has unanimously approved and declared advisable the Merger Agreement and the Merger.

Under the terms of the Merger Agreement, AMR Merger Sub, a wholly-owned subsidiary of AMR, will merge with and into US Airways Group, with US Airways Group surviving as a direct wholly-owned subsidiary of AMR. Immediately following the Closing, AMR will change its name to American Airlines Group Inc., which will be the name of the combined company following the Closing. At the Effective Time and as a result of the Merger, each share of US Airways Group common stock will be converted into the right to receive one share of common stock of AAG, on the terms provided in the Merger Agreement and as further described below under the section entitled “The Merger Agreement—The Merger Consideration and the Plan Shares” beginning on page 119.

Background of the Merger

On November 29, 2011, AMR and certain of its direct and indirect domestic subsidiaries, including American, filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. AMR’s filing was the culmination of more than a decade of upheaval in the airline industry, from the terrible events of September 11, 2001 to the global financial crisis of 2008-2009.

The last decade has seen numerous U.S. airlines reorganize under Chapter 11 in order to reduce costs and restructure their balance sheets and operations. That period has also seen significant consolidation in the airline industry, including the mergers of US Airways and America West, Delta and Northwest, United and Continental, and Southwest and AirTran. The confluence of restructuring and consolidation has rapidly transformed the airline industry.

For a number of years prior to AMR’s Chapter 11 filing, the boards of directors and senior management teams of both AMR and US Airways Group have held the view that a combination with another airline would be beneficial to their respective businesses. In furtherance of this long-held view, periodically, each company’s senior management internally reviewed and evaluated potential strategic alternatives and possible business combination transactions, including a combination of AMR and US Airways Group, and discussed their views with their respective boards, and over the last several years, both AMR and US Airways Group have pursued merger opportunities. During this time, AMR and US Airways Group each engaged separately in discussions with several airlines concerning a possible combination, but none of these discussions resulted in a transaction.

To that end, on April 14, 2011, at the regularly scheduled meeting of the US Airways Group board, senior management of US Airways Group presented an analysis of a potential combination with AMR. Following a discussion, the US Airways Group board instructed management to continue its evaluation of that potential combination, which management did throughout the remainder of 2011.

On September 7, 2011, Thomas W. Horton, then president of AMR, approached W. Douglas Parker, US Airways Group’s chairman and CEO, at an industry event. Mr. Horton explained that AMR had recently completed the then-largest ever order of new aircraft and that, upon entering into new labor agreements, AMR might soon be positioned to engage in discussions about strategic alternatives, including a combination with US Airways Group. Mr. Parker agreed that a combination of the two airlines could be beneficial to both parties, and that the two should speak again after AMR had secured new labor agreements.

In an October 2011 telephone conversation, Mr. Gerard J. Arpey, then AMR’s chairman and CEO, told Mr. Parker that he was aware of the earlier discussion between Mr. Horton and Mr. Parker. Mr. Arpey said that once AMR had achieved new labor contracts, he would be open to discussing potential strategic transactions.

 

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However, he encouraged Mr. Parker to consider the possibility of US Airways departing the Star Alliance and becoming a member of the oneworld® alliance as an initial step, but one that might result in a larger transaction sometime in the future.

On November 29, 2011, and after exhaustive attempts to reach consensual agreements with its labor unions and otherwise bring its labor costs in line with those of its competitors, AMR and certain of its domestic subsidiaries filed for relief under Chapter 11. That day, Mr. Horton, who had been elected chairman and CEO of AMR on the eve of AMR’s Chapter 11 filing, reached out to other senior airline executives, including Mr. Parker, to alert them to AMR’s filing.

On December 21, 2011, Mr. Parker called Mr. Horton and asked if he and members of his management team could meet with Mr. Horton to discuss a potential combination. Mr. Horton said to Mr. Parker that while he believed a combination could be beneficial to both companies and that he was always willing to talk, AMR and its board of directors were completely focused on completing the company’s restructuring.

On January 12, 2012, Mr. Parker called Mr. Horton to inform him that US Airways Group had engaged Millstein & Co. (a financial advisory firm with restructuring expertise), Barclays, and Latham & Watkins LLP to assist it in connection with an evaluation of options related to AMR’s Chapter 11 filing. Mr. Horton thanked Mr. Parker for the call but reaffirmed that AMR was completely focused on completing its restructuring.

On January 19, 2012, at a regularly scheduled meeting of the US Airways Group board, Mr. Parker made a presentation on the impact of consolidation in the airline industry and provided additional background on a potential combination transaction with AMR.

In early February 2012, Mr. Horton called Mr. Parker. Mr. Horton said he understood that representatives of US Airways Group had begun reaching out to AMR’s stakeholders regarding a potential transaction. Mr. Horton said that such discussions were best left until after AMR had completed its restructuring.

On February 14, 2012, Mr. Parker provided an update to the US Airways Group board with respect to the evaluation of a potential combination transaction with AMR, including his recent conversation with Mr. Horton.

On March 9, 2012, representatives of US Airways Group and its advisers met with the legal and financial advisers retained by the UCC (the “UCC’s Advisers”) to discuss the benefits of a combination of AMR and US Airways Group, and to present preliminary estimates of revenue and cost synergies and one-time transition costs associated with a potential transaction.

On March 30, 2012, the US Airways Group board again met to discuss a potential merger with AMR. At the meeting, senior management reviewed recent developments, including the meeting with the UCC’s Advisers. Senior management also presented the strategic rationale for a combination with AMR, and discussed their assessment of AMR’s other strategic alternatives. In addition, preliminary estimates of revenue and cost synergies and one-time transition costs were reviewed. Advisers to US Airways Group also reviewed the status of the Chapter 11 Cases, including the filing of Section 1113 motions by AMR to reject its CBAs, and likely next steps in the Chapter 11 Cases. Senior management discussed potential next steps, which included engaging in discussions with representatives for AMR’s principal labor unions and continuing discussions with the UCC’s Advisers.

In early April 2012, US Airways Group commenced discussions with the Allied Pilots Association (“APA”), the Association of Professional Flight Attendants (“APFA”), and the Transport Workers Union of America (“TWU”) on the terms of a conditional labor agreement (“CLA”), which would become effective only upon a business combination of US Airways Group and AMR while AMR was in Chapter 11.

On April 6, 2012, the US Airways Group board met and received updates on the discussions with representatives of AMR’s principal labor unions and of upcoming discussions with the UCC’s Advisers. In addition, US Airways Group’s financial advisers presented a preliminary financial analysis of a potential combination transaction, including preliminary relative valuations of AMR and US Airways Group.

 

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On April 9, 2012, the financial advisers to US Airways Group met with the UCC’s Advisers to discuss a potential merger between AMR and US Airways Group, review preliminary relative valuation analyses, and review the status of discussions between US Airways Group and representatives of AMR’s principal labor unions.

At a regularly scheduled meeting on April 12, 2012, the US Airways Group board received an update on the status of discussions relating to a potential merger. US Airways Group’s legal counsel reviewed with the directors their fiduciary duties and other legal matters in connection with considering a potential combination transaction with AMR. Senior management reviewed with the directors the status of discussions with the representatives of AMR’s principal labor unions, the terms of potential CLAs with each of those unions, and the effects of the CLAs on revenue and cost synergies and labor cost estimates in connection with a potential combination. Following the presentation and discussion, US Airways Group’s board authorized management to enter into the CLAs. Advisers to US Airways Group then reviewed with the board (i) their prior discussions with the UCC’s Advisers, (ii) revised preliminary valuation analysis materials, and (iii) the terms of a potential merger proposal to AMR.

On April 16, 2012, representatives of AMR and the UCC Advisors met to further discuss whether to explore strategic alternatives. Thereafter, the parties began discussions regarding the terms of the Protocol (as described below).

On April 20, 2012, Mr. Parker called Mr. Horton to advise him that US Airways Group would be sending AMR a non-binding indication of interest containing the terms of a proposed merger (the “April 20 Indication of Interest”). The April 20 Indication of Interest contemplated AMR’s unsecured creditors receiving 49.9% of the common stock of the combined company and $1.5 billion of new senior unsecured debt obligations of the combined company and that US Airways Group equity holders would retain 50.1% of the common stock of the combined company. US Airways Group’s management and advisers estimated, based on then available information, that the consideration offered to AMR’s unsecured creditors represented 67% of the value of the combined company but US Airways did not provide that estimate in the April 20 Indication of Interest and had no discussions with AMR or its advisers on the April 20 Indication of Interest. The April 20 Indication of Interest also proposed that the combined company would fly under the American Airlines® brand and would be headquartered in Fort Worth, Texas. Mr. Parker also advised Mr. Horton that US Airways Group had signed the CLAs with APA, APFA, and TWU. Mr. Horton reiterated AMR’s focus on its restructuring, but stated that AMR would review the April 20 Indication of Interest. APA, APFA, TWU, and US Airways Group publicly announced these CLAs the same day, and US Airways Group provided the April 20 Indication of Interest to the UCC’s Advisers. Later that day, Mr. Horton discussed with the AMR board the April 20 Indication of Interest and the substance of his conversation with Mr. Parker.

Effective May 1, 2012, AMR and the UCC entered into a Joint Exploration and Protocol Agreement with respect to exploring consolidation opportunities on a collaborative basis through December 28, 2012 (the “Protocol”). The Protocol also provided that prior to December 1, 2012, AMR would not file a plan of reorganization without the support of the UCC. AMR and the UCC’s Advisers agreed that it was important that AMR continue to develop an independent plan of emergence against which other alternatives could be evaluated.

On May 15 and 16, 2012, AMR’s board, together with management and AMR’s legal counsel and financial advisers, Weil, Gotshal & Manges LLP and Rothschild Inc., respectively, further considered the April 20 Indication of Interest. AMR’s management noted that AMR’s creditors would only receive the benefit of 49.9% of any synergies produced by a combination based on the April 20 Indication of Interest, and that the proposal valued AMR at less than the value indicated by AMR’s independent emergence plan as then formulated. Accordingly, AMR’s board determined that the April 20 Indication of Interest did not merit further discussion. However, Mr. Horton explained that at a significantly different equity split a combination with US Airways Group could be attractive to AMR and its stakeholders.

 

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On June 14, 2012, at a regularly scheduled meeting, the US Airways Group board received an update on a potential transaction with AMR from management and US Airways Group’s advisers. The update included a review of the Chapter 11 Cases, including efforts by AMR to reach consensual CBAs with its principal labor unions, and a discussion of the view that the Section 1113 process would need to be completed and consensual CBAs reached before progress could be made on a merger. US Airways Group’s financial advisers also presented an updated valuation analysis to the board.

On July 10, 2012, AMR announced that, in cooperation with the UCC, it would begin a review of strategic alternatives, including a potential merger.

Also on July 10, 2012, Mr. Horton and other senior members of AMR’s management team made a presentation to the UCC regarding AMR’s independent emergence plan, its process to consider strategic alternatives, and the relative merits of a potential combination with various airlines, including US Airways Group. Mr. Horton explained to the UCC that both he and AMR had long been a proponent of industry consolidation, and that AMR had been evaluating strategic alternatives, including possible combination transactions with a number of airlines. Mr. Horton reiterated that the April 20 Indication of Interest was insufficient and that the economics of a potential transaction must reflect the relative size, value, and prospects of each company, and that any potential transaction would need to be measured against AMR’s independent plan of emergence and/or other strategic alternatives. AMR’s board received an update of this meeting later the same day.

On July 16, 2012, after AMR had announced publicly that it would begin a review of strategic alternatives, including a potential merger, US Airways Group purchased in an open market transaction $1 million principal amount of AMR’s 6.25% senior convertible notes in order to assure that US Airways Group had legal standing in the Chapter 11 Cases.

On July 17, 2012, AMR’s board received a further update on the July 10, 2012 UCC meeting. Mr. Horton reviewed the various options available to AMR, including a potential transaction with US Airways Group, and discussed the risks attendant to any potential transaction. Mr. Horton also advised that he believed the time had come to begin negotiating non-disclosure agreements with interested strategic partners so that alternatives could be properly pursued.

On July 19, 2012, at Mr. Horton’s request, Mr. Horton and Mr. Parker met to discuss matters regarding AMR’s Chapter 11 emergence process, including the prospect of a potential combination with US Airways Group. Mr. Horton informed Mr. Parker that on his recommendation the AMR board had authorized the establishment of a process to consider AMR’s strategic alternatives, including exploring a possible combination with a number of airlines, among them US Airways Group, and that the alternatives would be measured against AMR’s independent emergence plan. Mr. Horton also advised that a form of non-disclosure agreement would soon be made available to US Airways Group.

Effective July 19, 2012, AMR and the UCC entered into a Joint Protocol Side Letter Agreement, which modified and amended the Protocol and provided (i) the form of non-disclosure agreement to be provided by AMR to potential counterparties, including US Airways Group, and (ii) additional details regarding the participation by the UCC in AMR’s process to identify and pursue strategic alternatives (the “Side Letter”). The Side Letter was thereafter amended from time to time, among other things, to extend the joint collaboration period and the date prior to which AMR would not file a plan of reorganization without the support of the UCC.

Throughout July and August 2012, in addition to discussions with US Airways Group, AMR and its financial advisers approached several other airlines to gauge their interest in a strategic combination. As a result of such conversations, in addition to US Airways Group, one other airline signed a non-disclosure agreement with AMR. Following review of these two alternatives, AMR elected to enter into negotiations with US Airways Group. AMR also had discussions with potential financial investors with experience in the airline industry to gauge their interest in financially supporting an independent plan of emergence or other investment. AMR’s board was periodically apprised of the status of these potential alternatives.

 

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On July 24, 2012, US Airways Group’s board met and received an update on the potential merger, including AMR’s recent announcement of its process to review strategic alternatives, and the likely terms of a non-disclosure agreement US Airways Group would be asked to enter into.

On July 27, 2012, AMR provided drafts of proposed mutual non-disclosure agreements to US Airways Group. During August 2012, AMR and US Airways Group engaged in negotiations regarding the terms of these agreements, and the US Airways Group board met on each of August 2, 2012 and August 30, 2012 to discuss the terms of the proposed mutual non-disclosure agreements and related matters.

On August 30, 2012, AMR and US Airways Group publicly announced that they had executed mutual non-disclosure agreements in order to share information and explore a potential transaction (the “NDAs”). The NDAs were thereafter amended from time to time to permit certain disclosure to additional third parties and to extend the termination date contained therein.

Throughout September and October of 2012, senior management from AMR and US Airways Group and their respective advisers engaged in substantial due diligence, both in person and telephonically, including analysis of the companies’ respective internal business plans and financial forecasts, and the potential revenue and cost synergies, one-time transition costs, operational and integration risks, including labor costs, and legal structuring. The parties spent significant time and effort attempting to understand and reconcile material differences in their respective assumptions and projection methodologies for potential revenue and cost synergies, one-time transition costs, and labor costs in connection with a proposed merger. The companies and their advisers also considered the operation of the CLAs and other labor integration issues. The UCC’s Advisers actively participated in these meetings, which they continued to do throughout the exploration and negotiation of a potential transaction.

On September 13, 2012, US Airways Group’s board received updates from management and US Airways Group’s advisers on the due diligence efforts taking place in connection with a potential merger.

On September 18 and 19, 2012, AMR’s board met to review the status of discussions with US Airways Group and AMR’s progress in its restructuring, including the development of AMR’s independent emergence plan. Mr. Horton discussed the opportunities and challenges attendant to a potential merger, and advised that while he could not recommend a transaction based on the terms contained in the April 20 Indication of Interest, a merger based on more favorable economic terms, and with an arrangement that mitigated potential labor costs and risks, could create meaningful value for AMR’s stakeholders.

On October 11, 2012, AMR’s board convened telephonically to receive updates on the status of discussions with US Airways Group.

On October 15, 2012, US Airways Group’s board received further updates on the due diligence efforts in connection with a potential merger.

On October 17, 2012, AMR’s board again convened telephonically to receive updates on the status of discussions with US Airways Group.

On October 22, 2012, AMR provided a draft merger agreement to US Airways Group to serve as a basis for any merger proposal to be made by them.

On each of October 24, 2012 and November 1, 2012, the board of directors of US Airways Group met to consider the terms and conditions of a merger proposal to be made to AMR. During the course of these meetings, the advisers to US Airways Group made presentations on the terms and conditions of the proposal, including the merger agreement, the fiduciary duties of the board in connection with a potential combination transaction, a financial analysis with respect to relative valuation of AMR and US Airways Group and other matters related to

 

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the proposal, including the significant improvement in macro-economic factors affecting the airline industry, since the the April 2012 Indication of Interest. At the conclusion of the November 1, 2012 meeting, the board of directors authorized management to make a proposal. While AMR had invited a proposal based on the draft merger agreement it had provided (which draft did not suggest any equity split), the determination to make a proposal and the terms thereof were formulated by US Airways Group. The proposal formulated by US Airways Group (the “November Proposal”) contemplated, among other things, an allocation of equity in the combined company (the “Equity Split”) whereby AMR’s stakeholders would receive 70% of the equity of the combined company, but no senior unsecured debt as contemplated by the April 20 Indication of Interest, and US Airways Group’s stockholders would own the remaining 30% of the combined company’s equity. This Equity Split was subject to a number of conditions, including a limitation on AMR’s secured debt at emergence and the elimination in the Chapter 11 Cases of AMR’s liability for other post-employment benefits (“OPEB”). The November Proposal also provided that the combined company would retain the American Airlines® brand and would have its headquarters in Fort Worth, Texas. The November Proposal provided that Mr. Parker would be chairman of the board and CEO of the combined company, which would have an 11 member board, of which US Airways Group would designate 5 of the directors.

On November 2, 2012, Mr. Parker contacted Mr. Horton to present the November Proposal.

AMR’s board reviewed the November Proposal later that day. Notwithstanding its conclusion that the terms of the November Proposal were still insufficient and that the attendant labor uncertainty created unacceptable risk, at Mr. Horton’s urging the AMR board decided it was prudent to continue pursuing a potential transaction with US Airways Group, but to set aside any discussions about management or board composition until other aspects of a transaction were resolved.

On November 9, 2012, Mr. Horton and other senior members of AMR’s management team met with the advisers to the Ad Hoc Group of AMR Corporation Creditors, consisting of substantial prepetition unsecured creditors of the Debtors (the “Ad Hoc Committee”) to discuss a potential merger with US Airways Group. Consistent with his recommendation to the AMR board, Mr. Horton told this group that on the right terms a merger with US Airways Group could create meaningful value for AMR’s stakeholders.

On November 10, 2012, AMR’s board received presentations from AMR’s senior management, financial advisers, and legal counsel regarding the November Proposal. Mr. Horton provided AMR’s board with a report on the status of discussions and negotiations between AMR and US Airways Group. AMR’s board also received updates on preliminary estimates of potential revenue and cost synergies, one-time transition costs, and potential labor costs. At the conclusion of this meeting, and on Mr. Horton’s recommendation, AMR’s board expressed its general support for a potential transaction, but instructed Mr. Horton to inform Mr. Parker that uncertainty surrounding the combined company’s labor costs rendered it difficult to determine the right Equity Split, which AMR’s board believed needed to be in excess of 80%, and that these matters had to be addressed if discussions were to continue.

On November 12, 2012, representatives from AMR and US Airways Group met to discuss the potential merger and related labor matters. At the conclusion of these meetings, AMR’s advisers communicated that AMR believed that a merger with US Airways Group could create meaningful value and should be pursued, but that agreement needed to be reached on the Equity Split and that efforts should be made to reduce the uncertainty of labor costs for the combined company. The parties agreed to form the labor transition working group composed of representatives of AMR, US Airways Group, and the UCC’s Advisers to better understand the operation of the CLAs and to provide greater certainty regarding the labor costs of a combined company. The parties also discussed extending the term of the NDAs to allow those efforts to take place.

On November 13, 2012, senior executives of US Airways Group and its advisers met with advisers to the Ad Hoc Committee and gave presentations and engaged in discussions on the strategic rationale for a merger

 

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with AMR, the network advantages of the proposed combination, preliminary estimates of synergies and one-time transition costs, US Airways Group’s assessment of AMR’s independent emergence plan, valuation metrics, the terms of the November Proposal, and other matters.

Later that day, senior executives of US Airways Group and its advisers met with the UCC. Mr. Parker and Scott Kirby, the President of US Airways Group, and certain of US Airways Group’s advisers gave presentations on the strategic rationale for a merger with AMR, the network advantages of the proposed combination, preliminary estimates of synergies and one-time transition costs, US Airways Group’s assessment of AMR’s independent emergence plan, valuation metrics, the terms of the November Proposal, and other matters.

On November 14, 2012, Mr. Horton met with the UCC and advised that the proposed Equity Split for AMR’s stakeholders was insufficient and did not reflect the relative value contribution of each company, and that labor risks, including the magnitude of potential labor costs, needed to be adequately addressed. Mr. Horton also restated his position that, on the right terms, and subject to a satisfactory mitigation of labor risks, including the magnitude of labor costs, a merger with US Airways Group could create meaningful value for AMR’s stakeholders.

Later on November 14, 2012, Mr. Horton called Mr. Parker to indicate that the AMR board had expressed its general support for the transaction. He explained, however, that AMR’s share of the Equity Split likely needed to be above 80%, and that the uncertainty surrounding the combined company’s labor costs needed to be mitigated.

On November 15, 2012, at a regularly scheduled meeting, the US Airways Group board reviewed the status of discussions between US Airways Group and AMR, and AMR’s response to the November Proposal. The board also discussed management’s concerns regarding AMR’s proposal to extend the NDAs beyond the then scheduled November 30 expiry. After updates by senior executives of US Airways Group and its advisers, and discussion, the board informed senior management that given AMR’s views of an appropriate Equity Split, as expressed in Mr. Horton’s November 14, 2012 call to Mr. Parker, the board did not support amending the NDAs as proposed by AMR and the UCC’s Advisers. In addition, the board instructed management to inform AMR’s advisers that if the AMR board’s view of an appropriate Equity Split was as communicated by Mr. Horton, then it was not productive to continue discussions.

At a meeting on November 16, 2012, Mr. Horton communicated to AMR’s board the substance of the November 14, 2012 UCC meeting and his subsequent call with Mr. Parker.

Between November 16, 2012 and November 25, 2012, a series of conversations between advisers to AMR, US Airways Group, and the UCC occurred, which focused primarily on AMR’s views of an appropriate Equity Split and whether there was a basis upon which discussions between AMR and US Airways Group could continue.

On November 25, 2012, Mr. Horton phoned Mr. Parker and suggested that further discussions between the companies’ advisers regarding the proposed Equity Split should be deferred. Mr. Horton further advised that while he believed there was likely a solution somewhere between the two parties’ respective positions on the Equity Split, it was not possible for AMR to reach a final conclusion on the Equity Split without first mitigating the potential labor costs and risks attendant to a potential merger. Mr. Parker agreed that the two parties should address the labor issues and make progress on negotiating the merger agreement prior to revisiting the Equity Split.

On November 27, 2012, AMR’s board received presentations and engaged in discussions on various topics, including an update on the status of the discussions and negotiations between AMR and US Airways Group and Mr. Horton’s November 25, 2012 conversation with Mr. Parker. In addition, AMR’s advisers explained that, dependent on AMR’s share of the Equity Split and subject to satisfactory mitigation of labor costs and risks, the proposed merger could likely result in a recovery for AMR’s equity holders.

 

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On November 28, 2012, US Airways Group’s board met and received a summary of events since its last meeting. Senior management and advisers to US Airways Group described a series of conversations that had taken place since the last board meeting, including the November 25, 2012 conversation between Messrs. Horton and Parker. Following a discussion of those conversations and other matters, senior management recommended that US Airways Group amend the NDAs and undertake efforts to provide greater certainty regarding the labor costs of a combined company. The board concurred, and AMR and US Airways Group signed the NDA extensions on November 29.

On December 4, 2012, Mr. Horton met with the UCC regarding the status of the merger.

Commencing on December 4, 2012 and continuing through January 2013, the labor transition working group engaged in negotiations with the APA and the US Airline Pilots Association (“USAPA”) aimed at reconciling the terms of the pilot CLA and the new American CBA, and minimizing the potential labor risks and costs typically associated with airline mergers and the integration of employee work groups. As a result of those discussions, on December 29, 2012, American and US Airways announced a four-party memorandum of understanding (“MOU”) with APA and USAPA that includes support for the Merger.

The labor transition working group also engaged in discussions with the TWU and APFA during December 2012 and January 2013 in an effort to further mitigate potential labor risks and costs associated with a merger as to the work groups represented by those unions. Those discussions resulted in a tri-party MOU among American, US Airways, and TWU, along with a related letter agreement between US Airways and APFA, both of which include support for the Merger. Separately, US Airways entered into a new CBA with the Association of Flight Attendants-CWA (the “AFA”) that includes support for the Merger. Additional discussions with work groups of each company are underway in the ordinary course of business or in connection with planning for integration of the unionized workforces of American and US Airways following the Merger. However, the Closing is not contingent upon reaching any agreement with any of the work groups of American or US Airways.

On December 19, 2012, AMR provided US Airways Group with an update to its internal business plan and financial forecast, which the companies used to refine their financial projections.

On December 31, 2012, the US Airways Group board met to receive an update on the potential merger, including the progress in discussions regarding labor matters. The board also discussed a potential meeting with members of the Ad Hoc Committee and the expected changes to the negotiation process assuming that the Ad Hoc Committee became directly involved in the process.

On January 8, 2013, Mr. Horton met with certain members of the Ad Hoc Committee to discuss AMR’s restructuring and a summary of its review of a potential merger with US Airways Group. Mr. Horton explained AMR’s process, and advised that he continued to believe that a merger with US Airways Group could create significant value for AMR’s stakeholders.

On January 9, 2013, AMR’s board received further updates on the status of discussions regarding the proposed merger with US Airways Group, including an updated comparison of the value proposition for AMR’s stakeholders of an independent emergence plan versus the proposed merger, and a review of the material terms of the draft merger agreement.

On January 10, 2013, representatives of US Airways Group’s senior management and its financial advisers made a presentation to certain members of the Ad Hoc Committee, which included the strategic rationale for a merger with AMR, preliminary estimates of revenue and cost synergies, one-time transition costs, labor integration plans, and the terms of the November Proposal.

On January 15, 2013, Mr. Horton and AMR’s financial advisers made another presentation to certain members of the Ad Hoc Committee regarding the economic terms of the proposed transaction. The assembled

 

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group expressed their support for a merger with US Airways Group, indicating that they did not want disagreement over US Airways Group’s proposed 70/30 Equity Split to impede reaching agreement on a transaction but that they supported Mr. Horton’s efforts to improve the economics for AMR and its stakeholders.

Also on January 15, 2013, Mr. Parker and counsel to the UCC regarding the Chapter 11 Cases, Skadden, Arps, Slate, Meagher & Flom LLP (the “UCC’s Legal Adviser”), engaged in discussions regarding the terms of the merger, including the merger consideration and governance arrangements.

On January 16, 2013, Mr. Horton communicated the substance of his January 15 meeting with the Ad Hoc Committee to the AMR board, where he again indicated his belief that a merger with US Airways Group would be beneficial to AMR’s stakeholders at the appropriate Equity Split.

On January 17, 2013, at a regularly scheduled meeting, the US Airways Group board received an update on the potential merger. US Airways Group senior management reviewed the status of discussions, potential financing alternatives with respect to US Airways Group’s existing debt, the development of retention plans for non-union employees who did not have existing change of control agreements, and considerations for a communications plan to be implemented upon announcement of a merger with AMR. Also at this meeting, advisers to US Airways Group provided a financial analysis of elements of a potential transaction, a summary of antitrust and regulatory considerations, a review of the merger agreement and the status of negotiations, an outline of the likely Chapter 11 process if a transaction were to be entered into, a review of the due diligence process with respect to AMR, and a discussion of a potential shareholder rights plan designed to protect the net operating loss position for federal income tax purposes of the combined company in the event of a transaction.

On January 23, 2013, Mr. Horton and AMR’s financial advisers again met with a group of Ad Hoc Creditors to review the proposed terms of the merger.

On January 24, 2013, Mr. Horton and Mr. Parker again met. Mr. Horton and Mr. Parker discussed the proposed Equity Split and governance arrangements for a combined company. At this meeting, Mr. Parker reiterated the key terms of the November Proposal, including a 70/30 Equity Split. Mr. Horton again expressed AMR’s view that this proposed Equity Split was insufficient. Mr. Horton also informed Mr. Parker that, assuming a transaction, while he would support Mr. Parker as CEO of the combined company, the AMR board believed that the continued involvement of senior AMR executives and managers, including Mr. Horton as chairman of the combined company’s board, was important.

Mr. Horton and Mr. Parker also discussed the synergies and one-time transition costs that were likely to result from a transaction and concluded that it was reasonable to expect the proposed merger would generate more than $1 billion in annual net synergies by 2015, and that a combined company would likely incur approximately $1.2 billion in one-time transition costs.

On January 25, 2013, the US Airways Group board met to receive an update on the status of discussions. In the course of this meeting, senior management and the advisers to US Airways Group provided an overview of the status of the negotiations, including Mr. Parker’s January 24 meeting with Mr. Horton. Following the overview, the board discussed the status of negotiations and provided guidance to senior management as to future negotiations.

On January 27, 2013, by arrangement of Mr. Horton, Mr. Armando Codina, AMR’s lead independent director, and Mr. Parker met to discuss the potential merger. Mr. Codina repeated the AMR board’s belief that consolidation could benefit AMR and US Airways Group, subject to the resolution of three matters. First, Mr. Codina informed Mr. Parker that US Airways Group would need to improve upon the 70/30 Equity Split in order to receive the support of the AMR board for the merger. Second, Mr. Codina advised that it was of paramount importance to AMR’s board that the AMR’s existing equity receive a recovery in the Chapter 11 Cases. Mr. Codina acknowledged that AMR would need to resolve this matter with its creditors, but noted that an

 

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improved Equity Split would facilitate that resolution. Finally, Mr. Codina explained that the combined company needed a management structure that maximized the likelihood of full realization of the Expected Synergies and a board composition that more closely reflected the relative ownerships of AMR’s stakeholders and US Airways Group’s stockholders.

On January 28, 2013, Mr. Horton and Mr. Parker had discussions on the merger’s proposed Equity Split and governance arrangements. At the end of those discussions, Mr. Parker informed Mr. Horton that US Airways Group was prepared to increase the Equity Split to 72/28, subject to all the other terms of the November Proposal, including that AMR’s OPEB liability would be extinguished as part of the Chapter 11 Cases, and that US Airways Group was prepared to consider board composition of the combined company that more closely reflected the relative ownership of AMR’s stakeholders and US Airways Group’s stockholders. The parties ultimately agreed that directors on the board of the combined company be allocated so that AMR would designate three members (including Mr. Horton), the UCC would designate five members, and US Airways Group’s would designate four members (including Mr. Parker).

AMR’s board also met on January 28, 2013 to review the status of the discussions and negotiations, including Mr. Horton’s and Mr. Codina’s meetings with Mr. Parker, the new proposed Equity Split and potential governance arrangements.

On January 29 and 30, 2013, AMR and US Airways Group, along with their respective financial advisers and legal counsel, together with UCC’s Advisers, met to further discuss and negotiate the merger agreement and conduct due diligence on AMR’s OPEB liability and its treatment in the Chapter 11 Cases. Thereafter, and through February 13, 2013, legal counsel for AMR and US Airways Group continued to exchange drafts of the merger agreement and engage in periodic telephonic discussions and negotiations.

On January 31, 2013, Mr. Parker and the UCC’s Legal Adviser discussed the proposed governance structure of the combined company, and these parties then met in person on February 5, 2013 to continue these discussions.

On February 4, 2013, Mr. Parker called Mr. Codina and discussed the economic and governance terms of the potential merger. Mr. Parker informed Mr. Codina that US Airways Group was prepared to eliminate the requirement that AMR’s OPEB liabilities be extinguished as part of the Chapter 11 Cases, subject to reaching agreement on the Equity Split. Mr. Codina responded that under these circumstances, and while he was not speaking for AMR or the AMR board, he was prepared to support the merger if the Equity Split remained at 72/28. Mr. Parker and Mr. Codina also discussed Mr. Horton being chairman of the board of the combined company for limited period of time following the closing of the merger.

On February 5, 2013, Mr. Parker called Mr. Horton to communicate the terms upon which US Airways Group was prepared to proceed with the transaction, and advised that US Airways Group’s January 28, 2013 proposed 72/28 Equity Split would no longer be subject to AMR’s elimination of the OPEB liabilities in Chapter 11. Later that day, Mr. Parker emailed Mr. Horton to confirm these proposed economics. Mr. Parker also proposed that Mr. Horton be chairman of the board of the combined company, and that he serve in such role until the first annual meeting, at which point Mr. Parker would be elected chairman and continue as CEO.

Mr. Horton responded to Mr. Parker’s February 5 communications in an email sent on February 6, 2013. Mr. Horton explained that AMR had moved from its initial proposed 80/20 Equity Split to a 75/25 Equity Split, but nevertheless he would convey Mr. Parker’s new proposal to AMR’s board. With respect to governance, Mr. Horton expressed his general agreement with Mr. Parker’s proposal but reiterated that AMR board’s primary concern was a governance structure that was most likely to ensure a successful integration and a full realization of the Expected Synergies. Mr. Horton reminded Mr. Parker that AMR’s board still wanted assurance that the combined company’s management would be drawn from the “best of the best” of each company, and that he and Mr. Parker would be jointly involved in selecting senior executives for the combined company.

 

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On February 7, 2013, Mr. Parker responded to Mr. Horton’s February 6 email, informing Mr. Horton that he would consult with him in the selection of the management team for the combined company.

On February 11, 2013, Mr. Horton together with members of the AMR management team, and Messrs. Parker and Kirby, met with the UCC as part of the UCC’s deliberation of the potential transaction, which the UCC voted to support on February 13.

On February 12, 2013, Mr. Horton and Mr. Parker met to finalize the proposed governance arrangements, and agreed that Mr. Parker would serve as CEO of the combined company and would select the management team of the combined company, consulting with Mr. Horton, and Mr. Horton would serve as chairman until the earlier of (i) one year from the Closing and (ii) the combined company’s first annual meeting, at which time Mr. Parker would become chairman.

On the afternoon of February 13, 2013, AMR’s management, financial advisers, and legal counsel made presentations to AMR’s board regarding the Merger, including that AMR’s stakeholders would be entitled to 72% of the diluted equity of the combined company and thus receive the benefit of 72% of the Expected Synergies.

At this meeting, after Mr. Horton recommended that the AMR board support the Merger, Mr. Parker was asked to address AMR’s board. Mr. Parker expressed his excitement and enthusiasm for the Merger, praised AMR’s brand, heritage, and people, and affirmed his belief that consolidation would position the combined company to compete effectively with United and Delta. In response to questions, Mr. Parker also briefly reviewed his preliminary views on integration of AMR and US Airways Group, including his intention to select a management team for the combined company from the “best of the best” personnel from each of AMR and US Airways Group. Mr. Parker acknowledged that he and Mr. Horton would collaborate on this process.

After Mr. Parker departed the meeting, AMR’s board discussed extensively Mr. Parker’s presentation and the proposed transaction. AMR’s board then voted unanimously to approve the Merger Agreement.

Later that afternoon, the US Airways Group board met to consider the Merger. The board received an update from senior management and US Airways Group’s financial and legal advisers regarding the status of the potential merger. US Airways Group’s legal advisers also reviewed with the directors their fiduciary duties in connection with approving the proposed transaction, and reviewed the terms of the Merger Agreement and a shareholder rights plan contemplated by the Merger Agreement. In addition, senior management reviewed with the board the communications plans for investors, employees, regulators, government officials, and key commercial partners, and the terms of certain retention plans to be adopted by the board covering non-union employees who did not have existing change of control agreements. At the meeting, Barclays, US Airways Group’s financial adviser, presented its financial analyses and rendered its oral opinion to the US Airways Group’s board to the effect that, as of February 13, 2013, and based upon, and subject to the qualifications, limitations, and assumptions stated in its opinion, from a financial point of view, the consideration to be received by the stockholders of US Airways Group in the Merger was fair to the stockholders of US Airways Group. At the meeting, Barclays also delivered its written opinion, dated February 13, 2013, which stated the same. See the section entitled “The Merger—Opinion of US Airways Group’s Financial Adviser” beginning on page 93. Following the presentation from US Airways Group’s financial advisers, and after discussion and consultation with its financial advisers and counsel, the US Airways Group board determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, were advisable and in the best interests of, US Airways Group and its stockholders, approved and adopted the Merger Agreement, and recommended that the US Airways Group stockholders vote to adopt the Merger Agreement. In addition, the board approved certain employee retention plans and other matters related to the transaction.

Later that evening, AMR and US Airways Group entered into the Merger Agreement and AMR entered into the Support and Settlement Agreement with certain members of the Ad Hoc Committee holding, in the aggregate, approximately $1.2 billion in unsecured claims. The execution of the Support and Settlement

 

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Agreement (including the finalization of a Plan term sheet, of which the Merger constitutes a principal component) followed a period of negotiations that occurred simultaneously with that of the Merger Agreement and, among other things, resulted in the allocation of at least 3.5% of the combined company’s diluted equity ownership to AMR’s existing equity holders. Pursuant to the Support and Settlement Agreement, which is more fully discussed in the section entitled “The Plan of Reorganization—The Support and Settlement Agreement” beginning on page 156, the members of the Ad Hoc Committee party thereto agreed (among other things), subject to the approval of the Disclosure Statement by the Bankruptcy Court, to support and vote in favor of a plan of reorganization conforming to the terms of the term sheet attached thereto.

AMR and US Airways Group announced the execution of the Merger Agreement prior to the opening of trading on the NYSE on February 14, 2013. Mr. Horton and Mr. Parker held a press conference at the Dallas-Fort Worth International Airport (“DFW”) that morning and then met with employees of AMR. Later that day, Mr. Parker held a meeting with US Airways’ employees in Phoenix.

On February 22, 2013, the Debtors filed a motion in the Bankruptcy Court seeking approval of the Merger Agreement.

On May 10, 2013, the Bankruptcy Court entered the Merger Support Order. In accordance with the Merger Agreement, upon entry of the Merger Support Order and execution of the Amendment, the Merger Agreement became effective and binding on, and enforceable against, each of the parties thereto retroactive to February 13, 2013.

Recommendation of US Airways Group’s Board of Directors with Respect to the Merger Agreement and Its Reasons for the Merger

In reaching its decision to approve the Merger Agreement and recommend its adoption by US Airways Group stockholders, the US Airways Group board of directors consulted with US Airways Group’s management as well as US Airways Group’s financial and legal advisers, and also considered a variety of factors that the US Airways Group board of directors viewed as supporting its decision, including, without limitation, the following:

 

   

the opportunity for US Airways Group stockholders to participate in the benefits that are expected to result from the Merger, including the expectation that AAG will be a stronger airline than either American or US Airways individually, will have the scale, breadth, and capabilities to compete more effectively and profitably in the global marketplace, and will have the financial strength to invest in improved technology products and services and to be better able to respond to the competitive challenges and cyclical business conditions of the airline industry;

 

   

the opportunity created by combining the profitable US Airways business with the benefits achieved in AMR’s restructuring and the potential cost and revenue synergies expected to be generated by combining AMR and US Airways Group. Management of US Airways Group and AMR believe that the combination of the two airlines will achieve more than $1 billion in annual net synergies in 2015, including (i) cost synergies of approximately $150 million (after taking into account the improved compensation arrangements negotiated with employees of AAG), which US Airways Group and AMR expect to realize principally by reducing management and administrative overhead, consolidating information technology systems, and combining facilities, and (ii) revenue synergies of approximately $900 million, which US Airways Group and AMR expect to realize principally from providing significantly enhanced connectivity throughout the world to permit customers, particularly corporate clients, to use AAG for more of their travel needs and from optimizing the scheduling of the combined fleet to better match aircraft size with consumer demand;

 

   

the expectation that the Merger will address some of the competitive impacts resulting from the numerous mergers and acquisitions within the U.S. and international airline industries, including the merger of United Airlines with Continental Airlines, the merger of Delta Air Lines with Northwest Airlines, and the merger of Southwest Airlines and AirTran Airways, which have resulted in the formation of large competitors with significant financial resources and extensive networks;

 

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an assessment of alternatives to the Merger, (principally consisting of stand-alone development opportunities), and the expectation that the Merger will create a more competitive and financially successful airline than US Airways Group would be able to create on a standalone basis, primarily because the combined company would be one of the world’s largest airlines with a significantly expanded global network;

 

   

management’s assessment that the proposed business combination between US Airways Group and AMR presented attributes necessary for a successful airline merger, including strategic fit, limited overlap of route networks, acceptable execution risk, and financial benefits to US Airways Group’s stockholders;

 

   

the anticipated market capitalization, liquidity, and capital structure of AAG and the fact that the aggregate number of shares of AAG common stock issuable to holders of US Airways Group equity instruments (including stockholders, holders of convertible notes, optionees, and holders of restricted stock units) in the Merger will represent 28% of the diluted equity ownership of AAG;

 

   

the fact that the Merger will provide AAG employees with improved job security, better opportunities for advancement, better pay, and a path to compensation and benefits comparable to those enjoyed by their counterparts at Delta and United;

 

   

the fact that the Merger has the support of US Airways Group’s and AMR’s employees and labor groups, providing for mitigation against future labor uncertainty, including that:

 

  ¡    

American’s pilot, flight attendant, and ground employee unions and US Airways’ pilot union have agreed to terms for collective bargaining agreements that will address financial and operational issues, effective upon the Closing;

 

  ¡    

the union representing US Airways’ flight attendants has reached a tentative agreement that includes support for the Merger; and

 

  ¡    

the American unions representing pilots and flight attendants are working with their US Airways counterparts to determine representation and single agreement protocols;

 

   

the fact that Mr. Parker, the current chairman and chief executive officer of US Airways Group, will serve as chief executive officer and a member of the board of directors of AAG and will become chairman of the board of directors of AAG, and the fact that AAG will benefit from an experienced, highly motivated combined management team;

 

   

the corporate governance arrangements established for AAG, including the board composition, manner for designation of officer positions, and AAG Certificate of Incorporation and AAG Bylaws;

 

   

historical information concerning US Airways Group’s and AMR’s respective businesses, financial performance and condition, operations, management, competitive positions, and stock performance, which comparisons generally informed the US Airways Group board of directors’ determination as to the relative values of US Airways Group, AMR, and AAG;

 

   

the AMR Forecasts and the US Airways Group Forecasts;

 

   

the results of US Airways Group’s due diligence review of AMR’s businesses and operations;

 

   

the financial analyses presented by Barclays, US Airways Group’s financial adviser, to the US Airways Group board of directors and the opinion of Barclays rendered to the US Airways Group board of directors on February 13, 2013, that, as of such date and based upon and subject to the qualifications, limitations, and assumptions stated in its opinion, from a financial point of view, the consideration to be received by the stockholders of US Airways Group in the Merger is fair to the stockholders of US Airways Group, each as further described in detail below under the section entitled “The Merger—Opinion of US Airways Group’s Financial Adviser” beginning on page 93;

 

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the terms and conditions of the Merger Agreement, which the US Airways Group board of directors reviewed with its legal and financial advisers, including:

 

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US Airways Group’s ability to engage in negotiations with third parties regarding potential alternative acquisition proposals under certain circumstances;

 

  ¡    

the treatment of the exchange of US Airways Group common stock for AAG common stock as a reorganization for federal income tax purposes; and

 

  ¡    

the nature of the closing conditions included in the Merger Agreement, as well as the likelihood of completion of the Merger in the third quarter of 2013; and

 

   

the belief that regulatory approvals and clearances necessary to complete the Merger are likely to be obtained without any material cost or burden to AAG.

US Airways Group’s board of directors also considered the potential adverse impact of other factors weighing against its decision to approve the Merger Agreement and recommend its adoption by US Airways Group stockholders, including, without limitation, the following:

 

   

the risk that AAG will not be able to successfully combine AMR’s business with that of US Airways Group in a manner that permits AAG to achieve the synergies and other benefits anticipated to result from the Merger;

 

   

the challenge of integrating complex systems, operating procedures, regulatory compliance programs, technology, aircraft fleets, networks, and other assets of AMR and US Airways Group in a manner that minimizes any adverse impact on customers, suppliers, employees, and other constituencies;

 

   

diversion of the attention of AAG’s management and other key employees by the integration process;

 

   

the potential disruption of, or the loss of momentum in, AAG’s ongoing business as part of the integration process;

 

   

the substantial charges to be incurred in connection with the Merger, including the costs of integrating the businesses of US Airways Group and AMR, and the transaction related expenses arising from the Merger and the Chapter 11 Cases;

 

   

the challenge of integrating the workforces of AMR and US Airways Group while maintaining focus on providing consistent, high quality customer service and running an efficient operation;

 

   

the risk that despite US Airways Group’s and AMR’s efforts and the efforts of AAG after the Merger, US Airways Group, AMR, and AAG may not be able to retain key personnel;

 

   

the fact that designees from the US Airways Group board of directors (including Mr. Parker) will represent only one third of the members of AAG’s initial board of directors;

 

   

the fact that US Airways has significant debt that will mature in the near future and that AMR may incur substantial additional indebtedness in order to fund its emergence from the Chapter 11 Cases in connection with the Merger, the potential availability of any related refinancings and debt incurrence, and the potential impact of any related refinancings and debt incurrence on AAG’s liquidity;

 

   

the fact that AAG will have significant obligations for pension benefits and other post-employment benefits when compared to US Airways Group;

 

   

potential unknown liabilities, liabilities that are significantly larger than AMR and US Airways Group currently anticipate, and unforeseen increased expenses or delays associated with the Merger, including transition costs to integrate the two businesses that may exceed the approximately $1.2 billion of cash transition costs that AMR and US Airways Group currently anticipate;

 

   

the restrictions on the conduct of US Airways Group’s business during the period between the signing of the Merger Agreement and the completion of the Merger;

 

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the risk that the terms of the Merger Agreement, including provisions relating to the payment of a termination fee under specified circumstances, and the restrictions on the ability of US Airways Group to solicit, pursue, or engage in any negotiations with third parties regarding potential alternative acquisition proposals, could have the effect of discouraging other parties that would otherwise be interested in a transaction with US Airways Group from proposing such a transaction;

 

   

the fact that litigation may occur in connection with the Merger and that such litigation could prevent the Merger or increase costs related to the Merger;

 

   

the possibility that the Merger might not be completed, or that completion might be unduly delayed, for reasons beyond US Airways Group’s control;

 

   

the possibility that AMR’s stakeholders, the Bankruptcy Court, or US Airways Group’s stockholders might not approve the Merger;

 

   

the risk that governmental entities may not approve or permit the Merger or may require US Airways Group and/or AMR to divest properties or routes in order to gain approval for the Merger;

 

   

the other risks described above in the section entitled “Risk Factors” beginning on page 44; and

 

   

the interests that certain executive officers and directors of US Airways Group may have with respect to the Merger, as described in the section entitled “The Merger—Interests of US Airways Group’s Directors and Executive Officers in the Merger” beginning on page 110, which the US Airways Group board of directors was aware of in connection with its evaluation of the proposed transaction.

This discussion of the information and factors considered by the US Airways Group board of directors in approving the Merger and recommending the adoption of the Merger Agreement includes the material factors considered by the US Airways Group board of directors, but it is not intended to be exhaustive and does not include all of the factors considered by the US Airways Group board of directors. In view of the wide variety of factors considered by the US Airways Group board of directors in connection with its evaluation of the Merger and the Merger Agreement and the complexity of these matters, the US Airways Group board of directors did not find it useful, and did not attempt, to quantify, rank, or otherwise assign relative weights to these factors. Rather, the US Airways Group board of directors viewed its determination to approve the Merger Agreement and recommend the adoption of the Merger Agreement by the US Airways Group stockholders as being based on an overall analysis and on the totality of the information presented to, and factors considered by, the US Airways Group board of directors, including the directors’ knowledge of US Airways Group’s business, financial condition, and prospects. In addition, in considering the factors described above, individual members of the US Airways Group board of directors may have given different weight to different factors and may have applied different analyses to each of the material factors considered.

After considering the information and factors described above, the members of the US Airways Group board of directors unanimously determined that the Merger Agreement and the Merger are advisable and in the best interests of US Airways Group and its stockholders, unanimously approved the Merger Agreement and the Merger, and unanimously recommended that US Airways Group stockholders vote “FOR” adoption of the Merger Agreement.

The foregoing information presented in this section is forward-looking in nature and should be read in light of the factors discussed in the sections entitled “Risk Factors” beginning on page 44 and “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 66.

 

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AMR’s Board of Directors’ Reasons for the Merger

After due consideration and consultation with AMR’s management and legal and financial advisers, AMR’s board of directors determined that the Merger Agreement and the transactions contemplated thereby were advisable and in the best interests of AMR and its stakeholders, and unanimously approved the Merger Agreement. In doing so, AMR’s board of directors considered a number of factors including, but not limited to, the following:

 

   

the fact that the stakeholders of AMR will have the right to receive 72% of AAG diluted equity ownership as a result of the Merger and the consummation of the Plan;

 

   

the fact that the increased value expected to be created by the Merger would enable the filing of a proposed plan of reorganization by the Debtors providing the potential for a full recovery by creditors of the Debtors and a distribution to holders of AMR equity interests of 3.5% of the aggregate diluted common stock of AAG, with the potential for such equity interest holders to receive additional shares of common stock of AAG;

 

   

the fact that the transaction is expected to generate more than $1 billion in net cost and revenue synergies in 2015;

 

   

the fact that the UCC and the Ad Hoc Creditors Committee preferred a plan of reorganization that provided for a business combination with US Airways Group, therefore improving the likelihood of plan confirmation;

 

   

the fact that AMR stakeholders (including current holders of AMR equity interests), as stockholders of AAG, will have the opportunity to participate in the benefits that are expected to result from the Merger, including the expected enhanced competitive and financial position, effects of the Expected Synergies, increased size and scale, and greater diversity of geographic scope of AAG;

 

   

the nature of the closing conditions included in the Merger Agreement, as well as the likelihood of satisfaction of all conditions to the completion of the Merger;

 

   

AMR’s right to engage in negotiations with, and provide information to, a third party that makes an unsolicited written acquisition proposal, if AMR’s board of directors determines in good faith, after consultation with outside legal counsel, that a failure to engage in negotiations is reasonably likely to be inconsistent with its fiduciary duties to the stakeholders of the Debtors;

 

   

the fact that potential future labor uncertainty would be mitigated in connection with the Merger, in that it has support from both airlines’ labor groups, including the fact that (i) American’s pilot, flight attendant, and ground employee unions and US Airways’ pilot union have agreed to terms for CBAs that will address financial and operational issues, effective upon the closing of the Merger, (ii) the union representing US Airways’ flight attendants has reached a tentative agreement that includes support for the Merger, and (iii) the American unions representing pilots and flight attendants are working with their US Airways counterparts to determine representation and single agreement protocols;

 

   

the belief that regulatory approvals and clearances necessary to complete the Merger will likely be obtained on a timely basis without any material cost or burden to AAG;

 

   

the belief that, after careful consideration of potential alternatives to the Merger (including the alternative of continuing in business and emerging from Chapter 11 as an independent company and discussions with other potential counterparties), the Merger with US Airways Group is expected to yield greater benefits to AMR’s stakeholders;

 

   

the fact that the expected operational and financial strength of AAG should enable continued investment in new products and technologies and new opportunities for its employees;

 

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