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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