The Joplin Globe, Joplin, MO


April 20, 2012

US Airways wins American Airlines unions’ support for merger

CHARLOTTE, N.C. — US Airways Group Inc. took a big step toward a merger with bankrupt American Airlines on Friday, as the carrier and American’s three largest unions announced they have signed agreements for contract terms.

The unions representing American’s pilots, flight attendants and mechanics and other aircraft service personnel threw their support behind a merger. The move cuts off a large segment of support for an independent American Airlines, as the three unions have seats on American’s nine-member creditors committee.

“This significant step represents our shared recognition that a merger between American Airlines and US Airways is the best strategy and fastest option to complete the restructuring of American Airlines,” said a joint statement from the Association of Professional Flight Attendants, the Allied Pilots Association and the Transport Workers Union. Together, they represent 55,000 employees of American.

The combined US Airways-American company would be known as American Airlines, union officials said, and would be based in Fort Worth, Texas — American’s current headquarters.

Hanging in the balance of any deal are thousands of jobs, the potential to end seven years of union strife within US Airways, and the future of Charlotte Douglas International as a major hub airport. US Airways operates the vast majority, nearly 90 percent, of daily flights at Charlotte Douglas.

US Airways has been circling AMR Corp, the parent of the nation’s third-largest carrier, since it declared bankruptcy in November. US Airways confirmed in January that it has hired advisers to explore a deal. The company is the nation’s fifth-largest carrier, and executives say putting the two together would help them compete with larger rivals United Continental and Delta Air Lines.

“Our intention would be to put our two complementary networks together, maintaining both airlines’ existing hubs and aircraft, and create an airline that could compete successfully with United, Delta and other carriers within our industry,” CEO Doug Parker said in a letter to employees Friday morning.

Capt. Dave Bates, president of the Allied Pilots Association, or APA, said in a letter to pilots on Friday that the union has been in direct talks with US Airways management since early March. US Airways has also been making presentations to the other American unions and Wall Street analysts and investors, drumming up support for a merger.

Bates said bluntly that the pilots have lost confidence American can pull out of its tailspin. “The APA leadership does not believe that AMR’s business plan will produce an airline that is viable long term,” he wrote. The pilots’ union represents 10,000 pilots

Parker cautioned that any formal merger agreement is still a ways off. “Today is one step in what will be a much longer process. For now, it remains business as usual,” he said in Friday’s letter.

US Airways still needs to get the support of American’s board of directors, other members of the creditors committee, the bankruptcy court, and regulators. And American executives, especially CEO Tom Horton, have publicly fended off merger overtures from US Airways, saying the best path for American is to emerge as a standalone company.

Aviation analyst Henry Harteveldt said Horton’s position ultimately might not matter, especially since his three main unions have now publicly said they support a merger. Unless Horton can win them back, quickly, his strategy of emerging as an independent company could be dead on arrival.

“Horton has very little say in this, if the creditors, investors and lenders, and the unions feel this deal with US Airways is better,” he said. “American’s management needs to view this as a wake-up call. I think American has a very short time frame to get to the negotiating table with its unions.”

American is scheduled to begin contentious labor hearings on Monday, in which it will seek to have a bankruptcy court judge throw out existing contracts. American’s bankruptcy plan would cut at least 13,000 jobs, freeze pensions and reduce benefits in a bid to save at least $1.25 billion a year.

Parker says if American merges with it, the combined airline could save 6,200 of those positions. He also said the combined carrier would provide “competitive, industry-standard compensation and benefits” for all employees. Parker’s letter didn’t detail how the airline would be able to offer such benefits while making American competitive again.

US Airways’ pilots union, the U.S. Airline Pilots Association, gave qualified support to a possible deal. “We look forward to working with our contemporaries at American Airlines; however, if a deal is made, it must include a solid and mutually beneficial commitment by our Management that recognizes the sacrifices the pilots have made,” Capt. Gary Hummel, the group’s president, said in a statement.

The two pilots unions will have their first face-to-face meeting next week to discuss the possible merger, Hummel said.

“A merger of US Airways and American Airlines provides the best path for all constituencies, including employees of both American Airlines and US Airways,” the American unions said.

Labor issues have been a thorn in US Airways’ side since 2005, when the then-bankrupt airline merged with America West. The airline and pilots were unable to agree on a combined contract or seniority list — which governs work conditions such as pilot pay and routes flown — and the negotiations descended into contentious infighting.

Seven years later, a lawsuit over seniority between rival groups of pilots is still in federal court in Phoenix. US Airways also recently won an injunction against its pilots over a work slowdown.

US Airways flight attendants last month also rejected a combined contract that would have united the US Airways and former America West workers for the first time. Both the pilots and the flight attendants from the two airlines still fly separate planes under separate contracts.

US Airways workers made significant concessions to keep the airline afloat through its two bankruptcies, and the pilots and flight attendants say they are still paid well below industry average. Management acknowledges a pay gap exists, but says the disparity is necessary to compete with larger rivals.

But higher revenue from a combined airline could provide the cash needed to finally negotiate combined contracts at an industry-standard rate, Harteveldt said. “With this new airline, with this new business entity, they have potentially a lot more flexibility,” he said.

American reported a $1.7 billion loss for its first quarter on Thursday, mostly related to charges from its bankruptcy and higher fuel cost. US Airways reports its earnings on Wednesday.

The notoriously volatile airline industry has already undergone waves of consolidation and bankruptcies since the Sept. 11, 2001, terror attacks and rising jet fuel prices shook legacy carriers. US Airways declared bankruptcy twice before merging with America West in 2005. Delta Air Lines and Northwest Airlines merged in 2008, United and Continental tied the knot in 2010, and Southwest acquired low cost rival AirTran last year.

American was the only remaining legacy carrier not to go through bankruptcy. But late last year, executives there said the company could no longer compete with low-cost carriers and rivals who had restructured their debt and labor costs in Chapter 11 bankruptcy protection.

A merger could have big consequences for Charlotte Douglas International Airport. US Airways and US Airways Express fly about 630 daily flights from the airport, which is US Airways’ busiest hub. The airport’s status as the sixth-busiest in the world, by takeoffs and landings, is mostly due to US Airways’ aggressive growth here in the past five years. US Airways which has increased flights at Charlotte Douglas 22 percent since 2006.

Although Parker has said the combined airline would keep its hubs, other hub airports have seen major drops in traffic following bankruptcies and mergers by their main carriers. Pittsburgh International Airport saw US Airways flights there plummet after the carrier emerged from bankruptcy combined with America West in 2005. And Lambert-St. Louis International lost hundreds of American Airlines flights after the airline merged with bankrupt TWA in 2001.


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