Merger Support Growing Among AMR Unions

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Published: April 20, 2012

At least two unions at bankrupt American Airlines would support a potential merger with US Airways and could issue a joint communication soon pressuring airline management to consider a deal, two sources said on Thursday.

The sources said unions representing flight attendants and ground workers were open to talks between the two airlines. It was unclear if the union representing pilots also would support merger talks, they said.

American Airlines parent AMR filed for Chapter 11 bankruptcy in November citing high labour costs. The company on Thursday posted a net loss of USD$ 1.7 billion for the first quarter.

AMR has said repeatedly it wants to exit Chapter 11 as a stand-alone company.

“As you know, there continues to be much takeover speculation in the press fuelled by those who seek to serve their own agendas, including the circulation of misleading information. I expect this to continue and to escalate,” AMR chief executive Tom Horton said in a statement accompanying the airlines earnings report on Thursday.

An AMR spokesman declined to comment beyond that statement.

Sources have said US Airways, formed in 2005 from a merger with America West Airlines, has pitched merger proposals to members of AMR’s creditors committee, which includes unions, in hopes of attracting support for a deal.

For now, AMR has the right to reorganise without intrusion from outside parties.

“Although we put a high probability that an eventual merger will happen, we believe that this could be aggressive timing since AMR management has the exclusive right to reorganise through the summer,” said Ray Neidl, an airline analyst at Maxim.

In March, US Airways gave a presentation to representatives of AMR’s unsecured creditors and told them that a combination of the two airlines would create about USD$ 1.5 billion in synergies, according to people familiar with the matter.

The briefing, which included US Airway’s analysis as to how a proposed merger would reduce costs while boosting combined revenues, received positive response from the AMR creditors, they said.

American has said it plans to eliminate 13,000 union jobs, or roughly 15 percent of its work force, as part of an overall drive to save roughly USD$ 1.25 billion in annual staff costs.

The company has asked the bankruptcy court for permission to void the contracts. A hearing on the matter is set for next week.

The company said on Wednesday it intended to cut another 1,200 non-unions jobs to reach that goal.

Spokesmen for the Transport Workers Union, which represents ground workers, and the Association of Professional Flight Attendants declined to comment. A spokesman for the Allied Pilots Association was not reachable for comment.

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