Stepping up its merger pursuit of bankrupt
American Airlines, US Airways on Friday revealed that it has reached collective
bargaining agreements with AA's Transport Workers Union, Association of
Professional Flight Attendants and Allied Pilots Association. When combined, those
three groups represent 55,000 AA employees, according to US Airways' filings
with the U.S. Securities and Exchange Commission.
Wolfe Trahan analyst Hunter
Keay in a research note Friday wrote the merger "makes
too much sense not to happen." He expected US Airways in "no more
than six weeks" to file its own reorganization plan as an alternative to AMR's standalone plan.
According to US Airways, "Shortly
after our disclosure, these three unions issued a public statement announcing
their support of a US Airways-American Airlines merger and that they have
agreed to terms that would govern collective bargaining agreements for their
members at the merged airline." The carrier noted that effecting those
agreements "is contingent upon a business combination involving the company
and AMR Corp., the parent of American Airlines," for which an agreement
has not been reached.
"To get to an actual merger, many more
things must happen including gaining the support of AMR’s creditors, its
management team and its board of directors," according to an employee memo
from US Airways CEO Doug Parker. "But this is obviously an important first
step along that path and we are hopeful we can all work together to make this
happen."
According
to Parker's vision, US Airways would seek to seal a merger with American prior
to AMR completing its ongoing court-supervised Chapter 11 restructuring.
Parker's memo indicated that "combining
American Airlines and US Airways would create a preeminent airline with the
enhanced scale and breadth required to compete more effectively and profitably.
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."
Parker noted that American's standalone
plan calls for the elimination of 13,000 positions. No doubt key to gaining the
buy-in from AA's unions, Parker wrote that "our merger contemplates saving
at least 6,200 of these positions. For the US Airways team, the agreements we
have reached with the unions representing employees at American would also
provide enhancements to the compensation and benefits currently in place here."
Parker told employees that, at least for
now, it will be "business as usual," and called union deals "one
step in what will be a much longer process."
"All of you have heard me talk about
the benefits consolidation has created for US Airways and our industry,"
according to Parker. "You have also heard me say that US Airways does not
need to merge with anyone, as evidenced by our team’s outstanding
results."
Committed to its standalone plan, American
Airlines CEO Tom Horton in a Thursday memo told employees, "I believe the best way for
us to achieve the best outcome for our company, our people and our stakeholders
is to proceed quickly with our restructuring to create a successful, growing
and profitable company."
As he referred to the ongoing "takeover
speculation," which he expected to "escalate,"
Horton noted that "our competitors have even been encouraged by a
few within our own ranks."
In a joint statement, the three AA union groups said they were
"pleased to confirm our support of a possible merger between our airline
and US Airways." Those unions called a merger the "best strategy and
fastest option to complete the restructuring of American Airlines."
APA president Dave Bates in a memo to pilots on Friday noted
that as part of the agreement, "the combined carrier will be branded
American Airlines, based in Fort Worth Texas."
This is not the first
overture US Airways has made for American. The carrier in January retained
Barclays Capital, Millstein & Co and Latham & Watkins "to help us
explore our options as they relate to AMR's bankruptcy," according to an earlier memo from Parker. The airline subsequently registered several domain
names, such as usairways-american.com,
that further highlighted its interest.