News Column

Pilots Have Say in American, US Airways Merger

Jan. 16, 2013

Andrea Ahles

America or USAir

Pilots at American Airlines and US Airways will get an additional $522 million over the six-year term of a new contract if the two carriers merge.

The extra money, which will likely come in the form of pension, pay or per diem rates and translate to about $87 million per year, comes as part of a memorandum of understanding agreed to by both pilots unions and airlines. The pilots would receive the half billion dollars in exchange for giving up a profit-sharing plan.

The details were released on Tuesday as Wall Street and industry analysts increasingly predict that a merger between American and US Airways will occur within weeks.

"We recognize the prospect for substantial improvements this potential merger holds for both pilot groups," the Allied Pilots Association and the US Airline Pilots Association said in a joint message to pilots of both carriers on Tuesday. "Should this merger take place, we are looking forward to utilizing the best assets from both unions to work toward a [joint contract] that we can all be proud of -- a [joint contract] that propels the 'new American Airlines' to the top of the industry."

American Airlines spokesman Bruce Hicks said the memorandum gives the Fort Worth-based carrier a clearer picture on costs and pilot integration processes as it compares a merger to other strategic alternatives. A decision has not been made by American's board to move forward with a merger.

"The terms of the [memo] currently are not effective, and only become effective in the event a merger is approved and consummated," Hicks stressed.

J.P. Morgan analyst Jamie Baker said he believes a merger is imminent.

US Airways and AMR "may potentially merge and clarity is anticipated in the near term," Baker said in a research note to investors on Tuesday. "But the courtship -- far from amorous -- has hardly been secret, with even labor unions tweeting updates on its progress."

Previously, AMR chief executive Tom Horton has said that a merger decision could come within weeks although the carrier recently asked the bankruptcy court for another extension in filing its restructuring plan.

US Airways initially approached American about a potential merger as early as April, the Wall Street Journal reported Tuesday. It also said American is expected to report record revenues, close to $25 billion for 2012, when it releases its fourth quarter and annual earnings today. American spokesman Michael Trevino declined to comment on the report.

Pilots of US Airways will begin voting on the memorandum on Friday, with balloting to end Feb 8.

For these pilots, who have been unable to negotiate a new contract since US Airways and America West merged in 2005, the memo would result in pay increases of between 13 percent and 35 percent compared to what they earn today.

"Our pilot group has been without a reasonable contract for far too long," USAPA said in a statement on Tuesday. "We are confident that the resulting document offers our pilots substantial progress towards industry standard pay and working conditions that we have long deserved. We feel it benefits all pilots, no matter where you are on the seniority list."

The memo also provides for a combined seniority list to be developed within two years and established that pilots who have been with American would fly aircraft ordered by AMR but delivered after the merger.

The same holds true with US Airways pilots and planes bought by their carrier and arriving following the merger.

For American pilots, the memorandum of understanding also decreases the amount of domestic code-sharing with other airlines.

In the APA contract approved in December, the pilots agreed to allow American to have up to 50 percent of its domestic flying in code-share agreements. The memo caps such domestic code sharing at 15 percent.

American had asked pilots for expanded code sharing so it could increase its agreements with other carriers like JetBlue, to help it gain market share on the East Coast. Since US Airways already has a strong presence on the East Coast, it is likely that a merged carrier would not need expanded code sharing agreements, analysts say.

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