The Work

July 20, 2011 7:23 PM

Five Firms Take Wing on Massive American Airlines Plane Purchase

Posted by Brian Baxter

Dallas-based AMR Corporation, owner of American Airlines, has made the largest aircraft order in history by agreeing to acquire a total of 460 planes from Airbus and Boeing in a transaction worth more than $38 billion. Five Am Law 200 firms have landed key roles on the record-setting deal.

As the fourth-largest U.S. airline, American is also the only major carrier in the country that has never filed for bankruptcy. American's fleet, however, is among the industry's oldest--something that will change dramatically under the deal that will see the airline provided with new planes through 2025. In fact, according to news reports, American's fleet is now expected to become the industry's youngest within five years.

American turned to Gibson, Dunn & Crutcher corporate partner Robert Little in Dallas and Debevoise & Plimpton aviation practice chair John Curry III in New York as cocounsel on its negotiations with Airbus.

Debevoise is a longtime legal adviser to American, having represented the airline in 9/11-related property damage and personal injury claims and on the acquisition and subsequent restructuring of assets from TWA in 2001. The firm is serving as finance counsel to American on its plane purchases, and advising on a separate sale-leaseback agreement with independent aircraft leasing company AerCap.

Curry is leading a Debevoise team that includes aviation counsel Raymond Wells and Jaeyong So, tax partner Robert Staffaroni, and associates Iryna Nikolaieva, Le Lam, and Jonathan Macke.

American has also relied on Gibson Dunn in the past for litigation and regulatory work. But landing a major assignment for American on the corporate side is a departure for the firm.

"We reached out to them earlier this year and said we'd love a shot to work on a transactional deal," Little says. "And thankfully they realized they had some good folks in their own backyard, so we were able to get in there and seize the opportunity to prove ourselves, which I think we were able to do."

Little joined Gibson Dunn in January with four other partners from Vinson & Elkins. While he's never negotiated a large purchase of aircraft before--airlines rather infrequently seek to replace large portions of their fleet--he was part of a Vinson team that advised Southwest Airlines last fall on its $1.37 billion cash and stock acquisition of AirTran Holdings.

"The aircraft are really the lifeblood of an airline," Little says. "Most of these deals take six months to a year to negotiate, but we did this in about a month."

Little says lawyers and teams of other airline personnel--including designers and strategic fleet planners--camped out in Gibson Dunn's Dallas office over the past month to hammer out the dual accords with Airbus and Boeing. Lawyers and other executives from the two aircraft manufacturers stayed at The Ritz-Carlton in Dallas across from Gibson Dunn's offices.

Besides its sheer size, AMR's plane purchase is noteworthy because it effectively ends American's exclusive relationship with the world's largest aerospace company, Chicago-based Boeing. As the second-largest maker of large commercial jets in the world behind Airbus, Boeing had enjoyed its position as being American's sole provider of aircraft over the past two decades.

Little says American made the decision to bring Airbus into the negotiations over purchasing new planes in order to increase competition and extract some friendlier terms. Between them, Airbus and Boeing are providing some $13 billion in financing to help cover the cost of the deal. (Like many major carriers, American has been plagued by the rising cost of aviation fuel; its parent, AMR, reported a $286 million loss in the second quarter this week.)

The contract with Airbus calls for the Toulouse, France-based commercial aircraft manufacturer to provide American with 260 planes and gives the airline the option to acquire up to 360. All the planes ordered by American from Airbus are to be equipped with Sharklets, a fuel-saving wingtip device.

Assisting Little on the negotiations with Airbus was Gibson Dunn associate Travis Souza. American Airlines general counsel Gary Kennedy, associate general counsel Tim Skipworth and David Allen, and senior attorney Howard Rosenthal led an in-house team working on the transaction.

Husch Blackwell aviation practice chair David Agee and associates Amanda Dysart and Nicholas Hendon advised American on its negotiations with Boeing. The firm has advised American on previous transactions with Boeing. The plane maker turned to an in-house legal team to handle the latest round of negotiations with American. J. Michael Luttig serves as general counsel for Boeing.

Simpson Thacher & Bartlett corporate partner Alan Brenner and IP partner Lori Lesser are advising Airbus on the agreement with American. Dean Gerber, chair of the global transportation finance practice at Vedder Price in Chicago, also advised Airbus.

Vedder Price is known for its aviation practice, having counseled Australian financial services conglomerate Macquarie last year on its $1.99 billion purchase of 53 aircraft from AIG's aircraft leasing unit.

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