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. Source: Business Travel News