http://www.businessweek.com/news/2012-10-26/us-airways-ceo-reaps-union-criticism-amid-bid-for-amr

Bloomberg News

US Airways CEO Reaps Union Criticism Amid Bid for AMR

October 26, 2012

US Airways Group Inc. (LCC:US) pilots and flight attendants joined other unions in urging Chief Executive Officer Doug Parker to end the carrier’s labor disputes before trying to merge with AMR Corp.’s bankrupt American Airlines. (AAMRQ:US)

Employees are frustrated that Parker reached conditional agreements with American workers in a matter of weeks yet hasn’t combined the two biggest labor groups from the 2005 merger between America West Holdings Corp. and US Airways, US Airline Pilots Association President Gary Hummel said.

“Our patience is coming to an end,” Hummel said he told Parker and other executives (LCC:US) yesterday in a regular quarterly meeting at the airline’s Tempe, Arizona, headquarters. “We are not opposed to a merger. However, we do not have confidence in management’s ability to integrate the employees because of your track record.”

Discord at US Airways runs counter to the image of union- management unity that Parker has sought to project. He moved in April to win support of American labor groups, which failed to agree on cost-saving contract concessions in talks starting as long as five years before AMR’s Nov. 29 Chapter 11 filing.

“Employees are a foundational issue,” said Deborah Volpe, president of the Association of Flight Attendants-CWA at the former America West. “If you don’t take care of the foundation, then everything else tends to crumble eventually.”

Airline’s View

John McDonald, a US Airways spokesman, said a nondisclosure agreement signed with AMR to review financial data prevents the company from discussing a potential merger with its own unions. US Airways has reached labor accords with eight work groups since the combination with America West, he said.

“The idea that management is unable to come to agreements with unions is a fallacy,” McDonald said in an interview.

US Airways, the fifth-biggest U.S. airline, hasn’t made a formal bid for No. 3 American because that carrier holds the exclusive right to file a reorganization plan. A combined airline would be the world’s largest by traffic.

US Airways has said its strategy would require fewer job reductions than American’s plan, which at one point called for eliminating as many as 13,000 positions. AMR CEO Tom Horton has told employees his stand-alone strategy would create a stronger airline and is paring the cuts in negotiations.

Hummel said AMR creditors and bondholders (AAMRQ:US) already concerned with labor strife at that airline would have to weigh the prospects for a merger that would combine three workforces, counting Fort Worth, Texas-based American’s and US Airways’ still-separate union groups.

‘Can’t Believe’

“I can’t believe anyone would be interested in investing in a company knowing that 30,000-plus employees of US Airways and 80,000 employees of American combined would be in disarray,” said Hummel, who like Volpe spoke in an interview after the meeting with management. Volpe wasn’t at that session.

US Airways has more than doubled this year on speculation that an AMR merger would succeed. The shares fell 3.2 percent to $11.97 yesterday at the close in New York, for only the second decline in the past 10 trading days.

AMR had about 77,900 employees as of Sept. 30, according to an airline statement, while US Airways’ workforce totaled 30,845. Pilots and flight attendants at the smaller carrier continue working under separate contracts from counterparts at America West seven years after the merger that brought US Airways out of bankruptcy.

Bargaining with pilots has been mired in a union legal battle over how seniority lists at US Airways and America West would be combined. US Airways has maintained that the pilots must resolve that issue before a contract can be negotiated.

The Association of Flight Attendants rejected a tentative contract agreement with US Airways last month for a second time, by a vote of 51 percent to 49 percent. The 6,700-member union plans to hold a strike authorization vote starting Oct. 31.

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

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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