News Column

US Airways, American Pilots Merger Details

Jan 15, 2013

Ely Portillo

airline Merger

Details of a potential merger agreement between pilots at US Airways and American Airlines were released Tuesday, as speculation continued about when the carriers are likely to announce a tie-up.

The memorandum of understanding between the Charlotte-based US Airline Pilots Association and the Fort Worth, Tex.-based Allied Pilots Association was approved by union leaders over the past three weeks. US Airways pilots will begin voting on the memorandum this Friday, a spokesman for the union said. The voting is expected to wrap up by Feb. 8.

American Airlines is also expected to report its financial results on Wednesday, and will likely reveal more details about the machinations and negotiations behind the potential merger. The company has been in Chapter 11 bankruptcy protection since November 2011.

Details of the memorandum of understanding had been withheld from pilots before Tuesday, due to non-disclosure agreements the unions signed as part of negotiations. The terms of the agreements are crucial, because they will set the work rules and groundwork for integrating the 16,000 or so pilots from the two companies.

"The US Airline Pilots Association (USAPA) and Allied Pilots Association (APA) share the goal of achieving the best possible contract for our memberships, and the increasing possibility of a US Airways-American Airlines merger has brought us together to work for that common cause," the unions said in a joint message to pilots Tuesday.

US Airways pilots offer a glimpse of what can happen when a merger doesn't go smoothly. Though represented by the same union, the pilots are effectively split into two groups stemming from the 2005 merger between US Airways and America West. The groups were never able to reach agreement on a combined seniority list or a single contract, and still work under separate contracts with different work rules and pay rates.

The memorandum details released Tuesday show:

-- In the event of a merger, all pilots would start with the APA's current collective bargaining agreement as their base, and the pilots will see a total of $522 million in contractual improvements such as raises over the next six years.

-- American pilots will continue flying current American planes and those on order, and US Airways pilots will continue flying US Airways planes. American pilots will keep flying all of their lucrative trans-Pacific routes, and US Airways pilots will fly all Boston-LaGuardia-D.C. shuttle routes, as well as existing Philadelphia to Hawaii routes.

-- Pilots' pay and current flying time (known as block hours) are protected to prevent the merged airline from "drawing down either operation at the expense of the other."

-- Seniority integration between the pilot groups will proceed according to the terms of the McCaskill-Bond Amendment, a process for integrating work groups instituted in 2008. Seniority has been the major bone of contention between former America West and US Airways pilots, and is a vital issue to pilots because it typically determines what planes and routes a pilot flies.

The memorandum still requires the approval of both companies' boards and the bankruptcy court.

A merger could already be a done deal by the time the US Airways' pilot voting wraps up in February. In a note to clients Tuesday morning, J.P. Morgan analyst Jamie Baker said a merger "may be imminent," and that "clarity (on the merger situation) is anticipated in the near term."

Tom Horton, chief executive of American's parent company AMR Corp., said earlier this year that he anticipates a merger decision in a matter of weeks. The FortWorth Star-Telegram contributed.

Source: (c)2013 The Charlotte Observer (Charlotte, N.C.). Distributed by MCT Information Services.

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