A US Airways takeover bid for American Airlines became much more likely Friday as American's three largest unions threw their weight behind a merger with the Phoenix-based carrier.
The Allied Pilots Association, the Association of Professional Flight Attendants and the Transport Workers Union said they had agreed on terms for collective bargaining agreements with US Airways that would govern American employees in the event of a merger.Union leaders said in a statement that they believe that a merger with US Airways offers a better chance of success than an independent American, and they called the company's current business plan, which proposes more than 14,000 layoffs, "not viable.""As envisioned, 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 unions said. "The contemplated merger would be based on growth, preserve at least 6,200 American Airlines jobs that would be furloughed under the company's standalone strategy, and provide employees of both American and US Airways with competitive, industry-standard compensation and benefits."The unions' announcement presents a major challenge to American executives as they head to Bankruptcy Court in New York on Monday to begin a lengthy Section 1113 hearing. The airline is seeking to have a judge throw out existing labor contracts so it can impose rigid cost-cutting actions it says are necessary for restructuring.The unions have been in talks since February with American executives over $1.25 billion in proposed employee-related cuts, which include more than 14,000 layoffs, mostly of union members. American's plans also include closing its Alliance maintenance base in Fort Worth and outsourcing cabin cleaning and maintenance."We believe statements of non-binding support from union leaders for alternative proposals are no coincidence given the timing of the 1113 process," American spokesman Bruce Hicks said. "These statements do not in any way alter the company's commitment to pursue our business plan or our focus on moving steadily through the court supervised restructuring process to create a profitable, growing industry leader."US Airways CEO Doug Parker stressed that the company has not made a formal bid for American but called the union backing "an important first step" toward a merger."Combining American Airlines and US Airways would create a pre-eminent airline with the enhanced scale and breadth required to compete more effectively and profitability," Parker wrote in a letter to his employees. "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."The merged carrier would be called American Airlines and be based in Fort Worth south of Dallas/Fort Worth Airport where American's parent company, AMR Corp., has its headquarters, union documents said.Union leaders said they were approached by US Airways executives in recent months.In a letter to American's union pilots, union President Dave Bates said that he found US Airways management's vision "compelling." Meetings between the pilots union and US Airways took place in Phoenix, and final language on a collective bargaining agreement between the two could be completed within 60 days."Working with US Airways, APA was able to achieve in just over a week far more than we had been able to achieve in more than five years of trying to bargain with AMR management," Bates said.While the pilots talked up the potential contract terms with US Airways, the mechanics and fleet clerks union said it was still bargaining with American.Transport Workers International President Jim Little told members that the union is negotiating final language on a tentative agreement with American even as it voiced support to US Airways. Given the bankruptcy process, he said, it's important for the union to pursue "multiple options.""As I write this letter, we are close to hammering out changes which will result in a 'last, best offer' from AMR that is significantly different from the company's original demands," Little said. "Nothing is certain in bankruptcy. We will continue on all fronts, because our bargaining teams will not rest until we have explored every possible option to protect our members and our families."Laura Glading, president of the flight attendants union, said all three unions met with US Airways executives to discuss details of how a merger might affect American workers."Each of us - individually - came to the conclusion that a merger would be the best plan for our membership and the most successful option for the reorganization of our company," Glading told flight attendants Friday. "This agreement puts flight attendants in a far better position than any proposal American Airlines management has made."Wall Street analysts have been pondering a US Airways-American Airlines merger since the day AMR filed for bankruptcy, and several responded favorably to the news that US Airways had union backing.Hunter Keay of Wolfe Trahan said US Airways learned from its failed bid to acquire Delta Air Lines when the Atlanta-based carrier was in bankruptcy. Offering to keep American's headquarters in Fort Worth will help appease local politicians, he said."We continue to believe that [US Airways] is no more than six weeks away from filing its own alternative reorganization plan for AMR, and [Friday's] disclosures shows us that there is certain support within AMR's unsecured creditors' committee to terminate exclusivity in the very near term," Keay said.American management has the exclusive right to submit a reorganization plan with the bankruptcy court until late September. The court could consider ending that exclusivity period early if the unsecured creditors' committee offers a better proposal.American's unions hold three of the nine seats on the committee. The other seats are held by the Pension Benefit Guaranty Corp., Boeing Capital, Hewlett-Packard, Manufacturers and Traders Trust, Wilmington Trust and Bank of New York Mellon.J.P. Morgan analyst Jamie Baker expressed less certainty that all members of the committee are on board with a US Airways bid."While labor was eager to embrace [US Airways] this early in the process (especially given the onerous, looming section 1113 process), we're almost positive other committee members would have preferred a scenario in which US Airways waited until later in the process to make a formal bid as an alternative to the stand-alone plan."Local leaders expressed concern that merger talks are premature. Leaders of the Fort Worth and Dallas chambers of commerce said they oppose any merger before American comes out of bankruptcy, calling it a "damaging distraction" that would disrupt American's process to preserve the most jobs in Dallas-Fort Worth.Fort Worth Mayor Betsy Price said, "American Airlines is in the midst of a very delicate bankruptcy, and it's crucial that this process is allowed to continue in a timely manner without unnecessary distractions from those who want to talk of mergers or takeovers."US Airways' unions were less enthusiastic about the announcement, particularly since there are still outstanding labor issues stemming from the 2005 merger of US Airways and America West. The flight attendants recently voted down a tentative agreement with US Airways that would have been the first unified contract for that work group. The pilots have been in an extended legal battle, unable to agree on seniority integration or on a new contract with US Airways.The US Airline Pilots Association, which represents US Airways pilots, said its leaders plan to meet with their American counterparts next week."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 to keep these two airlines flying," Gary Hummel, president of the US Airways pilots union, said Friday.Andrea Ahles, 817-390-7631Twitter: @Sky_Talk
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