US Airways Group and private equity firm TPG Capital may team up to bid for American Airlines' parent, AMR Corp, according to people familiar with the discussions.

A partnership with TPG could boost a US Airways bid for its larger rival in several ways. It could give the carrier more financial flexibility, including the ability to pay some AMR creditors in cash. The addition of TPG, which has invested in several airlines before, could also serve as third-party validation of the proposed combination.

TPG's interest comes as US Airways, the fifth-largest U.S. airline, has secured support for a proposed deal with AMR, the third-largest, from some of the bankrupt airline's key creditors, including the largest labor unions.

The sources, however, cautioned that the discussions between US Airways and TPG are not exclusive and partnering with each other is one of many options each party is considering.

US Airways has received expressions of interest from several parties in financing a potential merger for AMR, while the private equity firm is keeping its options open and may also look at becoming AMR's financial partner under the airline's standalone restructuring plan, the sources said.

US Airways has also yet to determine if it would need to bring in a financial partner to fund a potential bid for AMR, they added.

Spokespeople for US Airways and TPG declined to comment. AMR also did not comment.

AMR'S MERGER ANALYSIS

AMR filed for bankruptcy in November, citing untenable labor costs. The company has said it needs to shed $1.25 billion in annual labor costs to become profitable.

AMR earlier shrugged off interest expressed by US Airways in a deal, saying it could consider a tie-up after it exits bankruptcy as a standalone company.

But earlier this month, under pressure from its labor unions and other creditors to consider a merger with US Airways, AMR agreed to work with its unsecured creditors committee on potential merger scenarios while it is still in bankruptcy.

People familiar with the matter have said previously that the airline wants to negotiate a merger on its own terms after emerging from bankruptcy and could set its sights on different targets, ranging from JetBlue Airways Corp to Alaska Air Group Inc to US Airways.

The company aims to focus on key routes for high-value business travelers under its business plan, including routes connecting New York's JFK airport and London's Heathrow and the JFK-San Francisco network.

JetBlue could be attractive to American because of its strong presence at JFK as well as its fleet of new planes, sources have said.

American said in a statement to Reuters on Thursday: "What's best for our company, our people and our financial stakeholders, will be determined by the facts in a disciplined manner and process. And this includes whether American will choose to pursue any combination down the road."

TPG'S FLIGHT WINGS

TPG's founders, Jim Coulter and David Bonderman, launched their firm with an airline deal in 1993 when they bought Continental Airlines out of bankruptcy and turned it around. Bonderman served as the airline's chairman for 10 years.

The buyout firm went on to make lucrative investments in America West Airlines Inc and Ryanair Holdings Plc. But its $450 million acquisition of Midwest Air Group together with Northwest Airlines Corp in 2008 went sour. TPG later had to sell its stake for $31 million.

TPG has worked with AMR in the past, having partnered with the airline on an unsuccessful $1.1 billion offer to rescue Japan Airlines from bankruptcy in 2009. Bonderman still has the pulse of the airline industry, having served as chairman of Ryanair for 15 years.

TPG also has ties to US Airways. Rick Schifter, an airline veteran and a managing partner at TPG for 18 years, sat on the airline's board for a year before he resigned in November 2006, on the same day US Airways made a hostile bid for Delta Air Lines Inc. He cited "ever-increasing demands on his time at TPG" and called consolidation in the airline industry "inevitable".

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