US Airways makes deals with 3 AMR unions

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by BYRON HARRIS and DAVID KOENIG

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WFAA & Associated Press reports

Posted on April 19, 2012 at 7:28 PM

Updated Friday, Apr 20 at 2:08 PM

Poll:
Would you like to see a US Airways-American merger?

DALLAS — US Airways has struck deals with unions at American Airlines to win their support for a possible merger of the two airlines.

The contracts would cover American Airlines workers if there's a merger with US Airways. However, US Airways says no deal on a merger has been made.

American is reorganizing under Chapter 11 bankruptcy protection. Its executives have said they want to emerge from bankruptcy as a stand-alone airline.

US Airways said the deals are with the Transport Workers Union, the Association of Professional Flight Attendants and the Allied Pilots Association. They represent 55,000 pilots, flight attendants and ground workers at American, the nation's third-largest airline.

The unions can't force a merger on their own, but they can work with other creditors of American's parent company, AMR Corp., to persuade the bankruptcy judge to open the door to a deal.

Doug Parker, the chairman and CEO of US Airways Group Inc., said Friday that to win a merger with American, his company still needs support of AMR's creditors, management and board of directors.

"But this is obviously an important first step along that path, and we are hopeful we can all work together to make this happen," Parker said in a note to US Airways employees.

The three unions shared their support of the potential merger, releasing a joint statement this morning. The unions believe that combining with US Airways would give American the best chance to grow and preserve jobs.

"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 joint statement read.

The key reason some unions haven't supported mergers in the past is seniority.

Think of US Airways as Pac-Man, and American Airlines as a dot. Historically, when one airline eats up an unwilling company, the workers for the "dot" airline are the losers.

In a US Airways- American merger, Americans flight attendents, ground workers and pilots would all be dots. Their jobs, pay, vacations and retirement are all determined by seniority. In past mergers, workers for an acquired airline have automatically lost their seniorty.

But in recent mergers, arbitrators have overseen the meshing of the two airlines' seniority lists. And backers of a merger say since US Airways and American only compete in 13 markets, Americans' workers might be able to keep their jobs in non-competing cities.

"There continues to be much takeover speculation in the press fueled by those who seek to serve their own agendas, including misleading information," said AMR CEO Tom Horton in a letter sent to employess on Thursday.

A spokesman for American said Thursday that the company is focused on its own plan to reorganize under bankruptcy protection, which he called the best option for the airline's 73,000 employees.

US Airways Group Inc., based in Tempe, Ariz., has previously confirmed hiring advisers to consider a bid for American's parent company, AMR Corp., based in Fort Worth, Texas.

AMR filed for bankruptcy protection in November and has since outlined plans to cut more than 14,000 jobs, including 13,000 held by union members. On Thursday, the company reported a $1.66 billion loss for the first quarter, mostly on bankruptcy-reorganization costs.

On Monday in New York, AMR is scheduled to begin presenting its case for throwing out union contracts and imposing new pay, benefits and work rules. A federal bankruptcy judge is expected to rule on the request in early June.

AMR's management has exclusive rights to present a reorganization proposal to the bankruptcy court until late September, and it could ask to extend that period.

Each of American's three major unions has a seat on the nine-member committee that represents AMR's unsecured creditors. The unions also hope to win support for the US Airways bid from other committee members, who include a federal pension agency and aircraft maker Boeing Co.

Creditors' committees can wield great influence in bankruptcy cases. In 2007, US Airways dropped a hostile bid for Delta Air Lines Inc., which was then in bankruptcy, after the committee backed Delta's plan to remain independent.

US Airways executives have said that one lesson they learned from the failed Delta bid was the need for support from labor at the target airline.

Reports have swirled for weeks that US Airways was meeting with AMR creditors. AMR CEO Thomas Horton referred to the situation in a letter to employees Thursday.

"There continues to be much takeover speculation in the press fueled by those who seek to serve their own agendas," Horton wrote. "I expect this to continue and to escalate."

AMR spokesman Bruce Hicks said the company is in the middle of a complex restructuring process to return to profitability and find "the very best path forward for all of its stakeholders."

Horton has opened the door to merger talks, but only after AMR emerges from bankruptcy protection.

The unions, however, have signaled their lack of confidence in Horton's reorganization plan, which includes short-term cuts but promises long-term growth. They question whether American can catch up to bigger rivals United and Delta without a merger.

Last week, the Allied Pilots Association, the Association of Professional Flight Attendants and the Transport Workers Union took the unusual step of criticizing elected officials who came to AMR's defense. Oklahoma Gov. Mary Fallin and U.S. Sen. Kay Bailey Hutchison, R-Texas, said that AMR should be left alone while it reorganizes.

But the presidents of the three unions said that in looking out for their members' interests, "we must exercise due diligence and examine every possibility."

Next week, a bankruptcy court in New York will start to consider whether Americans union contracts can be thrown out. And the flight attendents union plans to be outside with pickets.

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 AP Airlines Writer Joshua Freed in Minneapolis contributed to this report.

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