US Airways rejected before, pushes hard for American

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by JONATHAN BETZ and Associated Press reports

WFAA and Associated Press reports

Posted on April 20, 2012 at 10:56 PM

Updated Saturday, Apr 21 at 6:19 PM

DALLAS –  More than a month ago, US Airways began meeting with American’s unions to plan a serious bid to take over the bankrupt rival.

American’s three largest unions, representing 55,000 employees, announced on Friday support for the merger.

“We believe this is a win-win for our pilots, for our fellow employees, and for our corporation,” said Tom Hoban of the Allied Pilots Association, which represents American’s pilots.

The unions repeatedly praised Tempe, Arizona-based US Airways, and were quick to jab American’s management, angry at their plan to cut jobs and break contracts.

“For ten years, American Airlines has essentially stood still while the competition has passed us by,” Hoban told News 8. "We’ve gone from first to worst in every respect."

Unlike American, US Airways is profitable, earning $21 million in the last three months of 2011.

In a letter to US Airways employees on Friday, CEO Doug Parker said his airline would cut 6,800 jobs, compared to American’s plans to cut 13,000 positions. Parker wrote his company has "a unique opportunity" to merge with American and create a carrier big enough to compete effectively and profitably.

The carrier has also promised to keep American’s name and its headquarters in Fort Worth.

American is the country’s third-largest carrier behind United and Delta. A merger could make it the largest airline in the country.

Parker is a longtime advocate of consolidation in the airline business. His company has been spurned as a partner three times in the past dozen years, including by both Delta and United.

“The main thing US Air has learned, is it has to grow,” said SMU economics professor Mike Davis. “The reason why US Air is desperate to merge is they realize you can’t succeed in the airline business if you’re number six or number five.”

But the airline’s efforts to grow have been rejected repeatedly. United turned down US Airways for Continental in 2010. At the time, Continental’s CEO called US Airways “the ugly girl.”

In 2007, the carrier waited too long to make a move for Delta, and it didn’t get the support of its employees. Delta joined with Northwest Airlines the next year.

Analysts say US Airways has now learned from its failed pursuits, by deciding to first win the support of American’s employees.

AMR CEO Thomas Horton has indicated he would prefer his company remain independent. Although, he also has supported the idea of a possible merger, once American emerges from bankruptcy.

Still, the airline released a statement Friday saying the unions’ comments “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 certainly has its own problems.

In 2005, America West took over the carrier. The pilots and flight attendants from the two carriers have never since merged, however. The company’s pilots have been fighting for years with the company over issues like seniority and pay. Meaning, the company has separate operations for pilots, depending on whether they came from America West or US Airways.

“We still have not put the two pilots’ groups together,” conceded Capt. James Ray, a 28-year US Airways pilot, and member of the US Airlines Pilots’ Association. “But that’s not an obstacle for a merger. It certainly is a hurdle we’re going to have to clear.”

He’s confident an agreement can be reached soon.

“I don’t know that it will slow the process down,” he said. “It will certainly impede the progress of the synergies that can be realized.”

On their own, the unions can’t force a combination. However, they hold three of the nine seats on the committee of unsecured creditors in AMR’s bankruptcy case.

That committee can ask the judge to review AMR’s current exclusive right to present a reorganization plan to the bankruptcy court, and if the judge agreed, it could open the door to a merger bid.

The outcome of this high-stakes fight could reshape the U.S. airline industry. A merger would produce an airline roughly equal to United Continental Holdings and slightly larger than No. 2, Delta Air Lines, Inc.

E-mail jbetz@wfaa.com

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