American Airlines Group Inc. AAL +0.56% distributed the last big chunk of its payout to
its bankrupt predecessor's shareholders, delivering them a windfall that was even more enormous than previously expected.
Tuesday's payout was based on a formula that awards shares in the new American to its predecessor's holders based in part on the new company's stock performance. As those shares have soared, some who bought stock in the predecessor eight months ago have earned a return of 13 times their investment. Anyone who held those shares from their low point in late 2011 has had their value grow 135 times.
The new American was formed by the December merger between US Airways Group Inc. and American's predecessor company, AMR Corp., which entered bankruptcy in November 2011. That month, its shares plunged as low as 20 cents each, valuing the company at around $90 million.
Even before the deal closed on Dec. 9, it appeared likely to be a bonanza for investors who gambled on AMR stock as bankruptcy-related cost cutting, merger synergies and an overall improvement in the airline industry boosted American's prospects. But the new company's stock has surged more than expected: It ended trading Tuesday at $35.98, up 46% since it opened.
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As a result, American said, one share in the former AMR has ended up having a value of almost $27 based on the current American stock price, and AMR shareholders now own about two-fifths of the new American Airlines, a total stake valued at nearly $11 billion.
Brett Kramer, chief investment officer at Pinnacle Investment Advisors of Tulsa, Okla., invested $50,000 in AMR in February 2013. That stake was valued at just over $400,000 in early December and has since risen to more than $1 million. "I'll take that any day," he said, adding that he still plans to hold his shares.
Creditors in AMR have also been repaid in full as part of the American merger, offering a solid payout as well to anyone who bought American's debt at a discount.
Kevin Starke, managing director at broker-dealer CRT Capital Group LLC, said that among distressed investments, AMR "was one of the best of all time, no doubt."
He added that while a few investors acquired AMR shares for less than $1 in the first year after the bankruptcy, many of the big winners bought more recently. After the Justice Department sued to block the merger on antitrust grounds in August, AMR's shares fell as low as $2.06 apiece, and they hovered below $7 for the next two months until shortly before the government settled with the airlines in November. Many investors took advantage of that opportunity, he said.
Mr. Starke credited the rich payout in part to the unusual equity-distribution model the airlines and AMR's creditors agreed on for the merger.
Under the model, US Airways shareholders received 28% of the combined company, while AMR shareholders were guaranteed at least 3.5%—with room for much more depending on the new company's stock price.
The more than $7 billion owed to AMR's creditors, labor unions and management was to be repaid in full if the new company's stock price held above $16 in the first 120 days after the merger's close. Under the $16 scenario, those AMR creditors would have owned almost two-thirds of the new company and AMR shareholders would have owned less than 7%.
But the surge in American's share price has given the former AMR shareholders nearly 40% of the company, diluting the AMR creditors' share to less than a third.
The big payday probably isn't over. American has about $750 million set aside for disputed creditor claims. The company said it expects to win more than $500 million of those claims and return that money to the AMR shareholders, boosting their share to about 42%, based on the current stock price.
Separately on Tuesday, American said it would adopt the policy of US Airways and start charging fliers to check a bag to many Latin American destinations, one of the biggest recent steps by a U.S. carrier to add bag fees for international travel.
American said it would charge fliers $25 for a first checked bag for flights to Mexico, the Caribbean and Central America. It previously allowed one free checked bag per passenger on those flights. Most U.S. airlines generally charge first-bag fees for travel within the U.S. and to Canada on their most basic economy tickets. But such fees have typically been less routine on longer international flights.
Write to Jack Nicas at jack.nicas@wsj.com
