US Airways Wins Support of AMR Unions Over Possible Merger



US Airways (NYSE:LCC) inked a deal on Friday with three unions representing nearly 55,000 American Airlines employees, giving them collective bargaining rights if US Airways were to buy the bankrupt airline.

The Allied Pilots Association, the Association of Professional Flight Attendants and the Transport Workers Union pledged their support for a potential US Airways-American Airlines merger.

In a filing with the Securities and Exchange Commission, US Airways CEO Doug Parker said the news doesn’t mean the two airlines have agreed to merge, but instead represents an “important first step along that path.”

The unions’ involvement puts pressure on American to start merger talks.

“It only means we have reached agreements with these three unions on what their collective bargaining agreements would look like after a merger, and that they would like to work with us to make a merger a reality,” he said.

To actually move forward with a merger, US Airways would have to get the support of AMR’s creditors, its management team and board of directors. The airline filed for Chapter 11 bankruptcy protection at the end of November and has been shedding jobs in an effort to cut costs as it undergoes a court-supervised turnaround.

“After studying American Airlines’ current state and their future plans, we have concluded that a merger with American, while they are undergoing their bankruptcy restructuring, represents a unique opportunity that we should not ignore,” Parker said.

He said the labor unions also recognize the potential of a merger to “improve the current and future careers of both airlines’ employees.”

US Airways has long expressed its interest in acquiring American. It says the merger would create a “preeminent airline” with the scale and breadth required to compete more effectively and profitably.

American Airlines parent AMR Corp. narrowed its quarterly loss excluding items on Thursday to $248 million, compared with a year-earlier loss of $405 million. The company has yet to express interest in a US Airways merger.

US Airways would plan to maintain both airlines’ existing hubs and aircraft in such a way that they directly rival with United (NYSE:UAL) and Delta (NYSE:DAL), the two biggest U.S. airlines.

US Airways by itself is too small to compete on the same playing field as the leaders.

Parker also said a merger would help save some of the 13,000 jobs that American is looking to get rid of it remains a standalone company. US Airways’ merger contemplates saving at least 6,200 of those positions.  

The news comes two days before AMR is expected to make a case in bankruptcy court as to why it needs to break its union contracts. The job cuts are expected to save it some $1.25 billion in labor costs each year.

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