By Mitchell Schnurman
mschnurman@star-telegram.com
Some people, including politicians, are worried about disruptions at American Airlines. Sounds almost quaint, with the company in Chapter 11, shedding jobs and debt.
How about this scenario instead? Fort Worth becomes home to the world's biggest airline once more, and for the first time in a decade, American and its unions strike a deal.
Does that sound like a hostile notion?
This alternative vision gained traction Friday after American's union leaders said they support a merger with US Airways and agreed to a framework for a future contract.
Stop the presses: American's unions signed term sheets for the first time in nearly a decade, and they're saying great things about management -- just not American's management.
Turns out that they have more faith in US Airways, led by CEO Doug Parker. The company simply made a better offer, with fewer job cuts and higher pay, then sold the prospect of a much stronger airline network.
US Airways reportedly told creditors that a combination with American would generate an extra $1.5 billion in annual synergies, an estimate that analysts projected last year. Parker's plan would share some of that gain with employees and lock up union support at a crucial time -- while American is in bankruptcy and effectively in play.
The unions control three of nine votes on the unsecured-creditors committee. Add the greater cash flow of a merged company, which could mean better returns, and US Airways may be able to sway the others, too.
American has been steadily losing money and high-paying customers in choice markets. A combined airline would vault to the top of the heap on the East Coast and in the Midwest and would get much stronger in Chicago, US Airways told the pilots union.
"Their vision was compelling," David Bates, president of the Allied Pilots Association, wrote in a letter to members.
The question is whether US Airways can pull it off. The Arizona company would have to win over American's current managers, navigate bankruptcy, and persuade its shareholders and employees to support the deal. Most important, the larger airline would have to integrate a huge workforce and generate profitable growth in a cutthroat industry.
That's no gimme. But it's not much more of a stretch than banking on American's current plan, built around five cornerstone, highly competitive cities.
American used to be the world's largest carrier, too. Then it was outmaneuvered by rivals, overwhelmed by economic forces and doomed by terrible labor relations.
When Parker says that a merger may be a better option -- and that the headquarters would stay in Fort Worth and at least 6,200 jobs would be saved -- you'd think we'd throw out the welcome mat.
This guy also managed to connect with American's labor leaders in a couple of weeks, something that evaded Tom Horton and his team for five years.
But the local establishment has decided that this is no time for outsiders, as if American didn't need a breath of fresh air. First, it was Sen. Kay Bailey Hutchison, R-Texas, raising concerns about airlines contacting American's creditors and unions. Then, Fort Worth Mayor Betsy Price weighed in on the distractions from merger talk.
Finally, the chambers of commerce in Dallas and Fort Worth issued a joint statement that opposed any mergers before American comes out of bankruptcy.
"While it may seem to some that [a merger] is an option, it's actually a damaging distraction that will disrupt American's thoughtful process," the chambers said.
Except that it could pay off. If US Airways fails, the efforts might indeed delay the reorganization and sap energy and money. But what if a merger worked and created a stronger company with better prospects -- like Delta-Northwest, United-Continental and US Airways-America West?
Opponents say they want bankruptcy to play out and then have American pursue consolidation. That's a convenient path for American's executives, because they get to play the consolidator.
But that doesn't sound like a better deal for the unions and their 55,000 members, at least according to the judgment of union leadership.
Combining the companies after bankruptcy would require a billion-dollar premium to gain control, said Vaughn Cordle, an analyst at Airline Forecasts in Washington. That extra gain would go to shareholders and investment bankers.
"If they merge in bankruptcy, they can keep the extra value inside," Cordle said. "The airline could invest in the company and in making labor happy."
Parker previously pursued mergers with Delta and United (twice), and couldn't pull them off. Delta workers even protested publicly. In a recent interview, Parker was asked what lessons he learned.
"You need to have allies, particularly the employees," Parker told
The Wall Street Journal. "You need labor to be excited about the transactions."
If that's a dealmaker, his airline is on its way. And if thousands of employees are pumped up, local folks should take a closer look, too.
Mitchell Schnurman's column appears Sundays and Thursdays. 817-390-7821; Twitter: @mitchschnurman
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