American Airlines’ three largest unions have agreed to support a possible takeover offer from US Airways Group Inc. (LCC:US) rather than remain independent, three people familiar with the matter said.
The groups plan to say that they believe they can reach better terms with US Airways than what they expect if American parent AMR Corp. (AAMRQ:US) exits bankruptcy by itself, according to the people, who asked not to be identified because the talks are private.
The labor consensus is taking shape as Fort Worth, Texas- based American prepares to ask a federal bankruptcy court on April 23 for permission to void existing union contracts and impose new terms in its quest to cut 13,000 union jobs. A ruling on the request may not occur until early June.
“To emerge successfully, American’s management and unions have to be on the same page,” said George Hamlin, president of Hamlin Transportation Consulting in Fairfax, Virginia. “It’s possible the unions have concluded there is safety in numbers and their members would be better off as part of a larger combined carrier.”
US Airways rose 16 percent to $9.51 at the close in New York, the most since Jan. 25. That pushed this year’s gain to 88 percent.
Support from the unions would be a boost for US Airways, which has confirmed hiring advisers to assess a bid for American, the third-largest U.S. airline. Executives at Tempe, Arizona-based US Airways have discussed a takeover plan with some AMR creditors and their advisers, people familiar with the matter said in March.
Collectively, the Allied Pilots Association, Association of Professional Flight Attendants and Transport Workers Union represent about 48,000 employees at American, and they each hold a seat on the nine-member committee representing unsecured creditors in the airline’s bankruptcy.
“We’re keeping all our options open and moving on multiple fronts,” TWU International President Jim Little said today in an e-mailed statement that didn’t explain whether the union was backing US Airways.
Tom Hoban, a spokesman for the APA, declined to comment, and calls to the flight attendants weren’t immediately returned.
Todd Lehmacher, a US Airways spokesman, declined to comment. American’s Bruce Hicks said the company wasn’t elaborating on a letter to employees earlier today in which Chief Executive Officer Tom Horton said “misleading information” may be circulating about the airline’s future.
“There continues to be much takeover speculation in the press fueled by those who seek to serve their own agendas,” Horton said. “I expect this to continue and to escalate. Naturally, there are many who do not want American to succeed.”
While American holds the exclusive right to file a plan of reorganization through Sept. 29, the creditors committee can ask the court to end that privilege if the panel concludes there is another viable option. Unsecured creditors at Delta Air Lines Inc. (DAL:US) flexed their muscle during that carrier’s bankruptcy in 2007 when they helped foil a hostile takeover bid by US Airways.
Group action by American’s unions would create “a greater sense of urgency,” said Robert Mann, president of aviation consultant R.W. Mann & Co. in Port Washington, New York. “It could conceivably result in a loss of exclusivity. That in and of itself would create immediate urgency.”
The unions may be trying to gain leverage in negotiations with American, and also may believe they’ll win better contract terms with US Airways, Mann and Hamlin said.
American’s workforce numbered about 73,800 when the carrier disclosed plans in February for the job cuts that would chop $1.25 billion in labor spending. That push aggravated labor tensions predating its Nov. 29 bankruptcy filing, after talks that began in September 2006 failed to produce the cost-saving accords that American said it needed to avert Chapter 11.
Discussions continue with the TWU to reach a consensual agreement on bankruptcy concessions even as American seeks court approval to reject existing contracts. American also has been meeting with the APA, while discussions with the flight attendants have been suspended.
The three unions said in an April 13 statement that they “must exercise due diligence and examine every possibility” to protect the jobs and retirement plans of members.
The groups urged elected officials who spoke out against a possible merger bid to “withhold judgment about any industry consolidation that could involve our airline until all of the facts become known.”
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