American Airlines’ pilots support a merger with US Airways Group Inc. (LCC:US) to compete better against larger rivals while forcing the pilots to give up $130 million less in annual concessions, a union negotiator testified.
A combined company would be in a position to compete against Delta Air Lines Inc. (DAL:US) and United Continental Holdings Inc. (UAL:US) for corporate accounts, which American has lost to rivals, Neil Roghair, chairman of the pilots’ negotiating committee, said today in U.S. Bankruptcy Court in Manhattan.
“It presented a more viable exit from this process that we would support and pursue,” Roghair said of a US Airways merger.
The pilots and unions representing flight attendants and mechanics and airport ground workers are in court fighting efforts by American parent AMR Corp. (AAMRQ:US) to reject labor contracts as it restructures in bankruptcy. American says it needs $1.25 billion a year in labor savings to reorganize and become profitable.
US Airways, which reached agreement on contract terms with the three unions, is pursuing a deal as AMR and the committee that represents American’s unsecured creditors agreed to consider a potential merger. AMR and the creditors have “a binding protocol agreement to jointly explore strategic alternatives involving a potential business combination transaction,” the committee said in court papers.
American, based in Fort Worth, Texas, is seeking $370 million in annual concessions from the pilots, while the agreement with US Airways would require $240 million, according to a court filing by the union. In negotiations with American on a new contract, the pilots offered $270 million in concessions, Roghair said.
“We took this very seriously, and we put a proposal on the table that makes the pilots competitive in the industry,” he said.
Bruce Hicks, an AMR spokesman, said the pilots’ agreement with US Airways lacks detail for achieving the savings. The union also agreed to contract changes it has refused to provide American, he said in a statement.
“While American’s proposal is specific and detailed so that we know the real values, the so-called agreement with US Airways is based on a term sheet that does not include specifics of how the supposed $240 million in concessions would be achieved, nor does it address how the APA will fund the wage improvements and other protections contained in the agreement,” Hicks said.
AMR is overreaching with its proposal and is asking for more cuts than are necessary for its restructuring, Edgar James, an attorney for the pilots union, said at the start of today’s hearing.
“It’s basically I want what I want and I want it the way I want it,” he said of the company.
The case is In re AMR Corp., 11-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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