Bloomberg News

AMR Union Says Lack of Accord Threatens Merger in Bankruptcy

December 28, 2012

An American Airlines merger with US Airways Group Inc. (LCC:US) may not occur during the AMR Corp. (AAMRQ:US) unit’s bankruptcy unless pilot groups from the carriers agree on interim contract terms, American’s pilot union said.

If an accord isn’t reached “in the very near future, in all likelihood there will be no merger before American Airlines exits restructuring,” Keith Wilson, president of the Allied Pilots Association, said in a message on the union’s website.

The agreement would set wages, working conditions and terms to protect seniority until a joint contract for pilots at Fort Worth, Texas-based American and their counterparts at the US Airline Pilots Association is negotiated, he said.

The pilot groups, joined by executives from both carriers, began negotiating the accord earlier this month. American, which filed for bankruptcy on Nov. 29, 2011, has said it prefers to assess mergers after leaving court protection. US Airways, based in Tempe, Arizona, has been pushing for a tie-up since January.

“We don’t have the ability to stop the clock and make everyone else wait while we sort through all of the issues associated with an integrated seniority list,” Wilson told members, saying those details must wait until after a merger occurs.

Seniority is critical to pilots because it determines compensation, work schedule and the type of aircraft flown.

‘Ongoing Discussions’

“American is actively taking part in ongoing discussions with US Airways, APA and USAPA to appropriately evaluate the impact of pilot labor costs and operational and seniority integration issues on a potential merger,” Mike Trevino, a spokesman for the carrier, said in an e-mail.

Trevino said American and the company’s unsecured creditors committee “invited the unions to join the discussions in order to properly evaluate the labor issues that would be involved. Our objective review of strategic alternatives aims to deliver the most value for our financial stakeholders and the best outcome for our people and customers.”

A combination of American, the third-biggest U.S. carrier, and No. 5 US Airways would surpass United Continental Holdings Inc. as the world’s largest airline, based on passenger traffic.

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editor responsible for this story: James Langford at jlangford2@bloomberg.net


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