US Airways reaches pact with American unions

Agreement could pave the way for a smooth merger

Richard W. Rodriguez/Associated Press/File 2011
US Airways’ chief said a proposal to American Airlines’ unions could save at least 6,200 jobs American would eliminate.

In an unusual move that could prefigure a serious bid for its bankrupt rival, US Airways said Friday that it had reached an agreement with the three main labor unions at American Airlines to support a merger.

Doug Parker, the chief executive of US Airways, said in a statement that a combination with American Airlines “represents a unique opportunity we should not ignore.’’

Both airlines have trailed their bigger rivals Delta Air Lines and United Airlines, which have expanded through big mergers that followed their own bankruptcy reorganizations. By moving quickly now, Parker seemed to be seeking to put pressure on American’s management, inject himself in the bankruptcy proceedings, and set up a merger between the carriers as an alternative plan for American’s creditors.


Parker has long advocated the merits of airline consolidation. But after the mergers of Delta with Northwest and United with Continental, US Airways has few options left to bulk up.

Get Talking Points in your inbox:
An afternoon recap of the day’s most important business news, delivered weekdays.
Thank you for signing up! Sign up for more newsletters here

US Airways has been huddled with its bankers for months to consider its options and put together a merger plan. It lacks the international network needed to compete with the bigger carriers. American has a global network, though it has lost money, market share and business customers and it has struggled in a period of high fuel prices.

A combination, some analysts said, might make sense, though it could face heightened regulatory scrutiny. But it could also create a third powerful global rival to Delta and United that could spur more competition.

Parker’s move also set up US Airways as a kind of white knight for American’s unions, which have balked at the restructuring terms set by the AMR Corp., American Airlines’ parent company.

By agreeing to back a merger, the unions - the Allied Pilots Association, the Association of Professional Flight Attendants, and the Transport Workers Union - are betting that they will get a better deal from US Airways than from American’s current management.


American Airlines was scheduled to ask a federal bankruptcy court in New York on Monday to void its existing contracts with the unions representing its pilots, flight attendants, and mechanics. The airline has outlined plans to shed 13,000 jobs, freeze or terminate employee pensions, curb health benefits and cut costs to regain some competitiveness.

US Airways has not made a formal offer for American, nor has it disclosed the terms of its deal with the unions that represent about 50,000 workers at American. But Parker said his plan “contemplates saving at least’’ 6,200 jobs that AMR would terminate.

Dave Bates, who heads the Allied Pilots Association, which represents American’s pilots, said unions had been in talks with US Airways since early March. He indicated that a merged carrier would be called American Airlines and have its headquarters in Fort Worth, where American is based.

“Working with US Airways, APA was able to achieve in just over a week far more than we had been able to achieve in more than five years of trying to bargain with AMR management,’’ Bates said.

But the move, at this point, remains mostly symbolic. AMR’s management has until the end of September to present an exclusive restructuring plan to the bankruptcy court. Thomas Horton, the chief executive of AMR, has often stated he preferred that American Airlines remain an independent company. But he has also voiced support for a potential merger with another carrier once it emerges from bankruptcy.


Still, in a statement released hours after the US Airways announcement, AMR reacted with surprise and said its priority was still to change its labor contracts. The airline has long argued that its labor costs were much higher than its rivals and needed to be cut for the airline to compete profitably.

“These statements do not in any way alter the company’s commitment to pursue our business plan or our focus on moving steadily through the court-supervised restructuring process to create a profitable, growing industry leader,’’ the company said.