AMR Executive Says Pilots Doubt Idea of US Airways Merger
By Mary Schlangenstein - Apr 10, 2012
An American Airlines executive said the carrier’s pilots, a pivotal group in a merger, are questioning the ability of potential suitor US Airways Group Inc. to orchestrate a successful takeover.
Pilots expect a hostile bid from US Airways and “have very serious concerns” about such a tie-up, Vice President for Flight John Hale wrote in a memo today to American Chief Executive Officer Tom Horton and other leaders at the third- largest U.S. airline.
“I’m confident pilots will continue to be very skeptical about US Airways’ ability to integrate separate workforces or grow the combined company,” he wrote. “The phrase ‘all hat and no cattle’ comes to mind. There’s little indication from anyone I’ve spoken to that a takeover by US would produce greater opportunity for our pilots than American’s business plan.”
Hale’s comments are a departure for American, which has generally declined to discuss any interest from outside parties while saying the AMR Corp. (AAMRQ) unit is focused on leaving bankruptcy as a stand-alone carrier. Horton said in a Feb. 3 interview that US Airways, No. 5 in the U.S. by traffic, was a “subscale” airline.
US Airways has confirmed hiring advisers to study a merger with Fort Worth, Texas-based American while saying the airline learned the value of courting stakeholders such as unions after its hostile bid to buy Delta Air Lines Inc. (DAL) collapsed in 2007. Delta’s pilots, the airline’s only major unionized work group, helped derail US Airways’ plans.
Pilots Union
The Allied Pilots Association, which represents more than 8,000 pilots at American, declined to comment because the union hasn’t received an official copy of the memo, said Howie Schack, a spokesman. US Airways’ John McDonald declined to comment.
American itself is at odds with pilots and other work groups after asking the bankruptcy court to let it reject current union contracts and replace them with new agreements that would cut labor spending by $1.25 billion a year.
Hale said American should expect continued comments from pilots “supportive of exploring a merger. There has been chatter among pilots that they will use US Air’s overtures in an attempt to exert bargaining leverage” during the legal process to reject existing union contracts.
American currently holds the exclusive right to propose a bankruptcy-reorganization plan and has said it wants to remain independent at least until it emerges from court protection.
Potential suitors can hold discussions with members of its unsecured creditors committee, who have a voice in major decisions made while the airline is in Chapter 11. The APA has a seat on the nine-member panel, as do the unions representing flight attendants, mechanics and baggage handlers.
The current US Airways is the product of a 2005 merger of a predecessor company of the same name, which was then in bankruptcy, with America West Holdings Corp. (AWA)
Pilots and flight attendants at Tempe, Arizona-based US Airways operate under separate contracts more than six years after the combination. Pilots have been unable to agree on a plan to merge their seniority lists, and flight attendants last month rejected a proposed contract.
To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc at Bloomberg. net
Godspeed!
The OYSter
