Wednesday, February 20, 2013

US Airways promises employees to keep hubs, but not livery

US Airways' latest employee update on its merger plans is out, and the company has some interesting things to say about maintaining its hubs and whether or not it will keep American Airlines' new livery.

American and US Airways announced their merger last week, and plan to close on the deal in the third quarter. The new American livery has been a source of much derision, and people have wondered whether the merged airline will keep the tail design.

US Airways CEO Doug Parker will lead the merged airline, and it seems like the US Airways team could be open to a change. American adopted its new branding and livery while the carrier was in Chapter 11 bankruptcy protection.

Here's the company's response from a Q & A in the employee update:

Q. What will happen to the American Airlines and US Airways branding and livery? 
A. American Airlines is one of the most iconic brands in the world, and we are excited to operate under that globally recognized brand name. More specific branding and livery decisions will be made in due course as we move forward in the integration-planning process 

The company also reiterated its promises not to do major cutbacks - a crucial issue for both travelers and employees.

Q. Will you be downsizing any hubs, reservation centers or facilities?
A. This is a merger premised on growth . Our synergies are derived primarily from the revenue benefits of American Airlines’ and US Airways’ complementary networks . Importantly, we expect to maintain all hubs and service to all our current destinations.

Monday, February 18, 2013

Merger roundup: It started with a phone call

There's still plenty of news emerging about the just-announced merger of US Airways and American Airlines. Here are the best pieces to catch up with the latest developments.

Andrea Ahles in Fort Worth has a story in the Star-Telegram about how the deal came together: "It started with a phone call on Nov. 29, 2011, the day that AMR Corp. filed for bankruptcy
US Airways Chief Executive Doug Parker called his former cubicle mate at American Airlines, Tom Horton, to congratulate him on his promotion to CEO of the Fort Worth-based carrier.
Parker believed that a union with American Airlines was the next logical step in industry consolidation. But a merger was the furthest thing from Horton's mind."

The Arizona Republic has an article about how the split leadership between US Airways CEO Doug Parker and AMR Corp. chief executive Tom Horton will work. Parker will be CEO of the new company and Horton will be non-executive chairman for about a year, with largely ceremonial duties. But don't feel too sad for Horton: He'll be eased out with almost $20 million in severance and lifetime flying benefits.

The Los Angeles Times has a generally pessimistic take on how the merger will affect frequent fliers and business travelers. "These guys didn't merge to make our lives better," a travel analyst in the story said. "They merged for their own purposes."

And Jon Talton, a former Observer business editor and columnist, is not happy about Parker's plan to headquarter the new American Airlines in Fort Worth, Texas and move out of Tempe, Arizona. "Parker was never a Phoenix business leader in the mold of Walter Bimson, Gene Pulliam, Dick Snell or even Del Webb. Flawed as they were, they were deeply committed to the city and its progress. Parker is one of the stateless imperial chief executives; Paradise Valley is just one of the places where he hung his hat.

Bonus observation: A transcript of Doug Parker's employee meeting is posted on the Securities & Exchange Commission website. Companies generally don't have to disclose those things, but since it's a merger, there are a lot more documents they have to file with the SEC now. You can read it here. Can you find Parker's Pulp Fiction reference?

Read more here:

Friday, February 15, 2013

Parker non-committal about new American livery

US Airways CEO Doug Parker was non-committal when asked about American Airline's new livery at an employee meeting Thursday regarding the merger, a transcript shows.

"I just don’t know. I think that’s the kind of thing you want to go spend some time on, talk about what’s the right branding for the combined airline," Parker told employees Thursday.
The new American Airlines brand, unveiled just weeks before the merger, has drawn a lot of derision. So far, Parker and AMR Corp. chief executive Tom Horton have suggested in public that the new livery would stay with the new merged airline.

Horton was pretty firm on Thursday with my colleague Andrea Ahles in Fort Worth. Here's what he said about keeping the livery:

"Horton: It looks like something you would design if you were going to put American and US Airways together. But it is a new look. We are rolling it out very quickly. In fact, we have 60 new airplanes coming this year that will be delivered with the new livery. ... And I think it's a great presentation of the new American going forward.

But with US Airways employees Thursday, a securities filing shows Parker isn't so sure. Here's what he told employees: 

John McDonald:
Doug, lots of questions about that tail and that design right behind you.

Doug Parker:
That is the American Airlines livery and that’s the US Airways livery. I got a lot of questions on this today and I don’t have a great answer, mainly because this is the kind of – kind of a detail we just don’t have answers to yet. I’m not suggesting by any means that we won’t be able to [inaudible]. I just don’t know. I think that’s the kind of thing you want to go spend some time on, talk about what’s the right branding for the combined airline. I haven’t seen the work they’ve done to come up with the branding they have, but I know they spent a lot of time on it and they’re proud of it, so I don’t want to prejudge one way or another. I just want to – that’s a detail that still needs to be worked out and one that we’ll work out together.

Read more here:

Wednesday, February 13, 2013

Fitch: US Airways-American merger could affect hubs

Analysts Fitch Ratings, which rates revenue bonds issued by Charlotte Douglas International Airport and the city, now say they're concerned that an impending US Airways - American Airlines merger could affect traffic at the combined company's hubs.

Charlotte Douglas would be the combined company's second-largest hub. Most analysts have said they believe the hub is safe, even though US Airways operates 90 percent of the daily flights and US Airways connecting traffic accounts for more than 75 percent of the airport's passengers.

Fitch writes: "As seen in recent mergers, some hub airports will likely be strengthened through industry consolidation while others are weakened.

To the extent a merger consummates between American and US Airways, the combined carrier would effectively maintain six hub airports in Dallas-Ft. Worth, Miami, Chicago, Philadelphia, Charlotte and Phoenix. Separately, the combined carrier would maintain a sizable presence in markets like New York, Los Angeles and San Francisco. 

While geographic location and separation helps support a rationale for hubs, it is still fair to ask whether maintaining as many as six hub airports at the same level of operations will be necessary to maintain an efficient single network."

Here's why that matters. The airport issues revenue bonds, backed by money it makes from the airlines who use its facilities, to fund expansion project. Those bonds are rated by Fitch and other agencies, which helps determine the interest rate the airport gets, and how cheaply (or expensively) it can borrow money. Fitch bases its ratings, in large part, on how healthy the airport is likely to be in the future. If its future flight levels are uncertain, ratings could go down, and the cost of borrowing money and expanding the airport will rise.

Five things to know about the US Airways-American merger

The boards of directors of US Airways and American Airlines are reportedly meeting today to vote on a merger deal. Assuming they approve the deal, the merger announcements would formally roll out Thursday - on Valentine's Day.

Of course, a deal could fall apart right up until the last minute. But as aviation reporter Terry Maxon writes in Dallas: "Okay, there’s going to be a merger between American Airlines and US Airways. I know it, they know it, you know it. The only question is when. It’s like a pregnancy: Show us the baby, already."

So here are five things to keep in mind, assuming the merger goes through:

  1. Charlotte Douglas International Airport will be the second-largest hub for the nation's biggest airline. The airport will be behind only Dallas/Fort Worth for the number of daily takeoffs and landings by the new American Airline, and would be one of the largest single airline-dominated hubs in the entire world.
  2. The combined company will retain the American Airlines name and brand, and will be based in American's current headquarters in Fort Worth, Texas. The company would stay in American's oneworld global alliance, meaning US Airways would leave the Star Alliance. Frequent flier programs would be merged after a few months.
  3. US Airways CEO Doug Parker and his management team are likely to lead the merged airline, with AMR Corp. chief executive Tom Horton getting a ceremonial role as a non-executive chairman for a year at two. Since Parker and his team are usually very pro-Charlotte, that's viewed as a big positive for the city's future in the new company.
  4. Speaking of Charlotte's future, most analysts believe that the city's place as a hub airport is safe in the combined company. Charlotte Douglas is the only southeast alternative to Delta's megahub in Atlanta, and Charlotte has the lowest operating costs for airlines of any major hub. But with 90 percent of flights at Charlotte Douglas operated by US Airways, and more than 75 percent of the passengers at Charlotte Douglas connecting to other flights, the airport is uniquely dependent on one airline. Any changes here could be very bad news for Charlotte.
  5. Employees are waiting to see how they'll be affected. The combined company will have more than 100,000 workers. More than 7,100 are based in Charlotte. Parker has said the combination is about growing the airline, not cutting flights, but some cutbacks are inevitable - otherwise, there wouldn't be any cost savings. This story in the Winston-Salem Journal about 850 US Airways call center workers waiting to see if their jobs are safe gives a flavor of what's to come.

Monday, February 11, 2013

Monday news roundup: Merger coming soon (probably)

Monday, Tuesday, Thursday, maybe next week: Rumored merger dates for American Airlines and US Airways are flying around in the media echo chamber. But enough details of the proposed deal have leaked to make it appear a certainty at this point, and most reports are saying it's likely to be announced this week.

After reports last week that the boards of directors of both companies would meet Monday to take a final vote on a merger, Reuters came out Sunday with a news story that both companies had delayed their meetings until mid-week. An announcement is likely in the later part of the week, anonymous sources say.

The New York Times said the boards are meeting sometime this week, and a deal "could be struck this week or possibly next week."

Bloomberg agrees that "any announcement would come no earlier than midweek. And Terry Maxon of the Dallas Morning News reports that there could be an announcement later this week.

As Maxon wrote: "Again, this all assumes the boards of AMR and US Airways Group approve a deal. And until there’s a deal, there’s no deal."

But The Wall Street Journal has already leaped ahead and reported that antitrust regulators are likely to approve the deal.  The Journal is also reporting a deal is likely to come following a Wednesday board meeting. The federal government is trying to block other mergers for competitive reasons, such as the marriage of brewers InBev and Grupo Modelo.

US Airways and American have little direct overlap, and every other mega-merger in the aviation industry has been approved this decade, so a deal probably won't face a legal challenge. Antitrust approval would likely take several months.

Wednesday, February 6, 2013

Reports: US Airways-American merger could come next week

A local television news station in Dallas is reporting that a US Airways-American Airlines merger could be announced as early as Monday. The Wall Street Journal is hedging a bit more, and writes that a merger is in the final stages and could be completed "within the next week or two."

Jason Whitely of WFAA-TV says the announcement could come after the board of directors at AMR Corp., the parent company of American Airlines, meets to consider the deal again on Monday.

The Journal, on the other hand, cautions that, "the merger negotiations remained fluid and could fall apart...Significant points of the deal, including how to split ownership of the airline and how to arrange board seats and management ranks, remain unresolved."

The combined company would still be called American Airlines and be headquartered in Fort Worth, but would likely be led by US Airways CEO Doug Parker and his management team.

But, as aviation analyst Henry Harteveldt told me recently: "I'll believe it when I see it." The second week in February has been the rumored merger date for some time. However, at least four other rumored merger dates have slipped past with no news, so until it's public, travelers and employees will remain in a holding pattern.

Twitter lit up with reaction to the news Wednesday evening:

I really really hope the US Airways / American Airlines mergercreates a company called U.S. Americans Air. Miss South Carolina is a prophet

Soon only one airline:"Delta United American US Airways"

US Airways and American Airlines merger happening soon. Can't wait to sit back and watch this one. 

Monday, February 4, 2013

Analyst has harsh words for American management

At least one analyst isn't impressed with American Airlines' latest request for more time to file a bankruptcy exit plan and possibly delay a merger with US Airways.

US Airways has been seeking to pull off this merger for more than a year now. The latest request from AMR Corp, American Airline's parent company, seeks to extend the company's bankruptcy exit plan deadline until April 15. 

While most industry watchers still see the merger as a foregone conclusion, some say that AMR might still try to exit bankruptcy on its own.

New American livery
Vicki Bryan, an analyst at independent bond research service Gimme Credit, wasn't happy to hear about the extension request. In a note to clients late Friday, she wrote: "AMR management has been coming off as more arrogant than confident, in our view, with destructive diversions and posturing that almost has boarded (sic) on the ridiculous. From CEO Tom Horton's "revelation" back in July that the merger with US Airways actually was his idea in the first place (oh really? If so, he apparently couldn't pull it off. See our note on 7/25/12) to the unveiling last week of expensive (and unappealing) corporate rebranding and garish new livery on planes that most likely will be owned by somebody else soon."

Bryan still thinks the merger is likely, and that US Airways CEO Doug Parker will head the combined company. 

Friday, February 1, 2013

American asks for another extension from bankruptcy judge

American Airlines is looking a bit like a college student asking for more time on a final exam, as it seeks its fifth extension for a deadline to present a bankruptcy exit plan.

The airline filed late Thursday in bankruptcy court to request the extension until April 15, the Fort Worth Star-Telegram reports. Currently, AMR Corp., American's parent company, has until March 11 to present its exit plan, which may or may not involve a merger with US Airways. The new request would supersede American's pending extension request, which was seeking an extension until April 1.

The bankruptcy court judge will have the final say on the extension request, but it's supported by American's unsecured creditors committee.

As noted in my story today on the potential merger, rumored merger dates have already slipped past with no news. The end of 2012, the first week in January, mid-January, and the beginning of this week were all whispered to be the time a merger would be announced. Now, the current rumors are that a merger will come by mid-February, when a major group of bondholders' confidentiality agreement expires. It's unclear how this latest extension request would fit with that timeline.

But as analysts have noted, as long as American remains in bankruptcy, the company's current management stays in control. They've stated before that they think American's standalone plan is viable, and AMR chief executive Tom Horton made no secret last year that he didn't want to pursue a merger while in bankruptcy. So, even though many people think a merger is a foregone conclusion at this point, don't be surprised if American continues running the clock.

Wednesday, January 30, 2013

US Airways/AA combination inching closer

With a long-sought merger of US Airways and American Airlines seemingly coming closer to reality and the companies in talks over the nitty-gritty details, it's time for a quick round up of the latest news.

More leaks are starting to seep out from the confidential merger talks, and some of them come with concrete dates and data points attached. That could be a sign that the process is getting closer to wrapping up, even as another rumored merger announcement date - Jan. 29 - slips by without a peep.

The Wall Street Journal reports that Tom Horton, the CEO of American Airlines, is in talks to determine his role in a post-merger company. Many analysts think Doug Parker, US Airways CEO, would lead a merged company. That would be the same thing that happened in 2005, when America West combined with US Airways, and Parker, then head of America West, brought his team on board. In a US Airways/AA merger, Horton could wind up as chairman of the combined firm for a few years. That's what Glenn Tilton, the head of United, did when his airline combined with Continental.

The Associated Press says the final sticking points in a deal are how to divide up the combined company's equity, and which management team would lead the airline. And Tuesday, a group of major bondholders was reported to be supporting the proposed merger, with a targeted completion date of before Feb. 15. That's when a confidentiality agreement the bondholders are operating under runs out.

Of course, as all the reports note, a deal could still fall apart. But that seems to be less and less of a possibility as the drumbeat of leaks grows louder.

And any merger of US Airways and American could, of course, have big implications for Charlotte. US Airways operates about 90 percent of the local airport's daily flights, and more than 7,100 US Airways employees are based here.

Friday, January 25, 2013

Reuters: Merger may come within the next two weeks

Reuters is reporting that negotiations for a US Airways-American Airlines merger are in the final stages, and a final decision could come within two weeks.

Citing four people familiar with the matter, Reuters said that a management structure and valuation are the major outstanding points left to resolve.

The article stresses that negotiations could still fail to produce a merger, but that an independent exit from Chapter 11 bankruptcy is looking less likely for American. Interestingly, Reuters notes that AMR's board of directors still considers an independent exit to be a viable option for the airline.

The board will meet Monday and Tuesday to discuss the possible merger, Reuters said. Read the full article here.

Merger or not, American getting new unifiorms

Whether or not a merger with US Airways pans out, American Airlines is partnering with a pair of designers to redo all of its uniforms and update their look.

American is teaming up with design team Ken Kaufman and Isaac Franco of KAUFMANFRANCO to create the new uniforms for pilots, flight attendants and other airline workers.

AA flight attendant uniform
1934-1937. From
"These uniforms represent one more step toward building the new American,” said Denise Lynn, American senior vice president - people. “We’re committed to creating the best work environment for our people so that they can, in turn, deliver the best travel experience for our customers."

“We plan to mix the elegance of American’s rich fashion heritage and incredible style with today’s cutting-edge technology. It’s about creating a wardrobe inspired by our fashion runway for American’s runway,” said Kaufman, in a statement.

American said the process will take about 18 months, and will use input from workers to help design the uniforms. The effort is part of American's larger re-branding, which included the unveiling of its new logo and airplane livery last week.

So far, the new logo has received mixed reviews. The designer of American's old and iconic logo hated it, while others said it was a bold new look and some commentators compared it to a Pepsi logo. US Airways CEO Doug Parker wouldn't comment on what he thinks of the new livery during his airline's earnings conference call earlier this week.
Airline analyst Mike Boyd called the re-branding irresponsible, with the company still in Chapter 11 bankruptcy. "A completely unnecessary re-branding and re-packaging of airplanes, gates, airports, backwalls, and all the rest will cost tens – maybe hundreds – of millions. At a time when retirees aren’t sure of healthcare, employees are losing jobs, and the competition is ready to pounce, to do what Horton is doing is not only an ego trip, but completely professionally irresponsible," said Boyd, according to Terry Maxon of the Dallas Morning News.

In any case, investors, employees, passengers, and the media are all waiting to see what happens with the merger. AMR chief executive Tom Horton said the decision would be made in a matter of weeks a few weeks ago, and rumored decision dates have come and gone. If and when a merger is announced, and US Airways' management team takes the helm of a combined airline, we'll have to see how much of the new branding sticks.

Tuesday, January 22, 2013

Analyst: US Airways-AA merger could cost flights for Charlotte Douglas

A columnist in the Dallas Morning News this week says that a merged US Airways-American Airline would be a boon to the airline's biggest hub, Dallas/Fort Worth.

But how much of the gains there would come at the expense of Charlotte Douglas International Airport, currently US Airways' busiest hub?

Here's the most important passage for Charlotteans from Mitchell Schnurman's column: "A portion of connecting traffic is going to shift to D/FW, with more feed coming from domestic and international,” said the chairman of Boyd Group International in Evergreen, Colo. “A merger would strengthen D/FW in the long run."...He believes that some US Air flights connecting through Phoenix and Charlotte would be more profitable going through D/FW."

That could mean a loss of flights connecting through Charlotte Douglas - a hub that is extremely dependent on connecting US Airways traffic. Connecting passengers make up about three quarters of the airport's 39 million annual passengers, and US Airways accounts for about 90 percent of the airport's daily flights.

So far, Charlotte Douglas officials and US Airways executives have said that the proposed merger would be good for Charlotte, with more flights to and from the city resulting from the combined airline.

But the airline business predicted to grow slowly in the coming years, probably at just around the rate of the economy's growth. So it's possible that the redistribution of flights in a merged US Airways-American would be a zero-sum game, with each hub's game coming as another hub's loss.

In any case, assuming a merger happens, realigning hubs would likely be a multi-year process. Some hubs have lost big in previous mergers (such as Pittsburgh and Cincinnati), while others have prospered (like Charlotte and Houston). Since airlines' largest piece of infrastructure flies, and airlines squeezed by razor-thin margins will shift traffic wherever it's profitable, it's likely hub cities won't know the true impact of a merger for quite some time.

Thursday, January 17, 2013

American unveils new logo, merger or not

Whatever happens in the prospective merger with US Airways, American Airlines is preparing to unveil a new logo and look Thursday morning - its first in 45 years - as part of its rebranding.

You can see the company's announcement and new logo here.

"While we complete the evaluation of whether a merger can build on American’s strengths,
we remain steadfast in each step we take to renew our airline, a step we take with great
respect for our name American. Today marks important progress in that journey," said AMR chief executive Tom Horton, in a statement.

Here's how American describes its new logo:

"Inspired by our proud past, our new look symbolizes our passion for progress by incorporating the colors and symbols you've come to associate with American.

Reflecting the soaring spirit that is uniquely American, our new logo — the Flight Symbol — contains the eagle, the star, the "A," and refreshed shades of red, white and blue. Together, they represent a clean and modern update to the core icons of our company.

No matter where we are, have been or plan to go, the sky will always be a part of our journey. As we unveil our new look, you'll see that our logo and the refreshed look and feel of our planes is light, vibrant and modern, reflecting the travel experience we aim to bring you."

(Sidenote: It is reassuring that American plans for "the sky" to always be part of their journey, considering it's an airline.)

The airline industry is pretty much the only industry to still use the word "livery," and any logo switch-up for American, which was the nation's No. 1 carrier just a few years ago, would draw some interest. With a merger announcement expected soon, interest and media coverage will be higher than normal. Horton said it was "a matter of weeks" before a merger decision was made, and that was two weeks ago.

A new look, combined with better financial results after a year in bankruptcy, could help American emerge as a standalone company and spurn US Airways. But American has also been in the process of rebranding itself for more than a year, since before the merger consideration process formally began, and analysts have been saying for months now that a merger is increasingly likely.

Let's just hope for the branding consultants' airplane painters' sake that the combined company, should a merger occur, doesn't decide it needs a new logo next month.

People don't seem to like it on Twitter:
New American Airlines logo reminds me of old 3D glasses.

Is it a magical logo? Will it make me forget all past late & cancelled flights?

Immediate thought was can/bottle opener

Tuesday, January 15, 2013

Union to pilots: Deal is the best way to better contract

The U.S. Airline Pilots Association, the union representing US Airways pilots, is telling its membership that the preliminary agreement its reached on merger terms represents the best path towards a contract with better pay and work rules.

Here's the letter USAPA sent to its members on Tuesday:

As you know, your union reached agreement on a new proposed Memorandum of Understanding (MOU) that would apply if there is a merger of US Airways and American Airlines in bankruptcy. On January 4, your Board of Pilot Representatives voted unanimously to recommend the proposed MOU to you, the pilots of USAPA, for your review and ratification. Click hereto read the joint BPR/Officer message.
Today, under the terms of the Non-Disclosure Agreement, which remains in place, the parties have agreed that the MOU can be presented to the pilots of USAPA and APA.  As a result, details of the proposed MOU and an accompanying side-letter are being mailed to you via first class U.S. Mail this week. Please review the documents prior to making a decision on how you will vote. In addition, the Negotiating Advisory Committee will visit each domicile on the following dates to talk to you about the contents of the attached MOU and the associated APA 2012 Contract, and answer any questions you might have. The NAC will give presentations 2-3 times each day and will also be available for questions at other times during the day.

These sessions are open to all members. Keep in mind; you will not be affected by the MOU unless it is approved by a USAPA membership ratification vote. Balloting will begin on January 18 and end on February 8.
What follows is an outline of the major points of the MOU and the accompanying side-letter. This is only a short summary; you will need to read the entire document and attend one of the Road Shows to become fully informed on these documents.
Summary of Major MOU and Side Letter Elements
  • Pay rates
    • US Airways pilots will be paid the same as American pilots starting on the Effective Date (of approved Plan of Reorganization).
    • After the Effective Date, US Airways pilots will receive a retrospective payment based on the new pay rates back to the date of pilot ratification.
    • These new rates will result in pay increases ranging from 13% to 35% over today’s rates for this year, plus substantial annual increases for the life of the contract.
  • Retirement Contribution Rates
    • 14% as of Effective Date
  • Joint Collective Bargaining Agreement (JCBA)
    • The recent APA 2012 collective bargaining agreement will serve as the baseline for a new contract, as modified during the JCBA process.
    • USAPA and APA will jointly bargain with management to develop the MOU & Merger Transition Agreement (MTA) into a joint agreement that will apply to all pilots for the life of the agreement (Dec 31, 2018)
  • MOU establishes interim flying protections
    • All existing AA aircraft, including orders and options, will be flown by current APA pilots.
    • All existing US aircraft, including orders and options, will be flown by current USAPA pilots.
    • Shuttle operations (BOS-LGA-DCA) will be flown by current USAPA pilots.
    • Existing PHX-Hawaii flying will be flown by current USAPA pilots.
    • All transpacific (Asia) flying will be performed by current APA pilots.
    • Minimum block hour floors are established at US and AA to prevent the new company from disproportionally drawing down either operation at the expense of the other.
    • Minimum widebody Captain and First Officer positions are established for US Airways pilots.
  • Pay protection is provided for pilots subject to displacements
  • If either US Airways or American Airlines is hiring, furloughed pilots on either side may volunteer to fly for the other operation
  • Provisions and procedures are established for a Seniority List Integration process in accordance with McCaskill-Bond (click here).
  • Current West short term disability plan is extended for 3 years.
  • East pilots with sick leave balances in excess of 1000 hours will be able to retain the amount above 1000, but will not accrue additional sick bank hours
  • The $40 million payment from the original MOU will be paid to pilots as of the Effective Date.
  • The current East life insurance and survivor benefit plans are extended for 5 years.
  • The current West life insurance plan is extended for 5 years
Our pilot group has been without a reasonable contract for far too long. We are confident that the resulting document offers our pilots substantial progress towards industry standard pay and working conditions that we have long deserved. We feel it benefits all pilots, no matter where you are on the seniority list. Those with not much time left prior to retirement will be able to increase their retirement savings with higher DC contributions accompanied by higher pay rates. Those with more time left will see substantial pay increases throughout the life of the contract, to better provide for themselves and their families.
If this merger transpires, we believe this MOU is the quickest and surest path to a better lifestyle for us all. We ask you to consider this MOU and associated contract in light of the alternatives. Study the materials you have available, attend the Road Shows and get answers to your questions – then make your decision based on what you believe to be the best choice for you, your family and your career.
We once again thank you for your support and understanding during this long process. We hope that you will join us in believing that it was worth it.

Pilots merger details start to come into focus

The unions representing American Airlines and US Airways pilots released some new materials on Tuesday detailing more of the memorandum of understanding that would govern the groups should a merger happen.

The Allied Pilots Association released some details on their website about what the agreement looks like between the companies. The US Airline Pilots Association also sent a joint letter to pilots. The key points include:

  • The MOU starts with the APA 2012 Collective Bargaining Agreement (CBA) as the baseline contract for all pilots, and allows APA to make $522 million in contractual improvements ($87 million per year over six years).
  • USAPA pilots will be covered under the modified APA 2012 CBA on the Effective Date, which will be the date the Plan of Reorganization is approved by the bankruptcy court.
  • All existing AA aircraft, including orders and options, will be flown by current APA pilots.
  • All existing US aircraft, including orders and options, will be flown by current USAPA pilots.
  • US Airways pilots will fly the first thirty E190 aircraft and starting with the 31st E190, APA will receive two E190 aircraft for every additional E190 above thirty flown by US Airways pilots.
  • Shuttle operations (BOS-LGA-DCA) will be flown by current USAPA pilots, along with existing PHX-Hawaii flying. 
  • All transpacific (Asia) flying will be performed by current APA pilots. 
  • Minimum block hour floors are established at US and AA to prevent the new company from drawing down either operation at the expense of the other. Pay protection is provided for pilots subject to displacements (subject to contract modification and valuation phase).
  • The agreement also apparently provides for seniority integration, a major sticking point that can derail a merger.
The full joint message is below: 

Fellow Pilots,­­­
The US Airline Pilots Association (USAPA) and Allied Pilots Association (APA) share the goal of achieving the best possible contract for our memberships, and the increasing possibility of a US Airways-American Airlines merger has brought us together to work for that common cause. While this is the first joint communication you are receiving, your respective negotiating committees have been working well together since shortly after the announcement of the possible merger last April. Additionally, USAPA and APA have enjoyed a good working relationship for years though our mutual involvement with the Coalition of Airline Pilots Associations (CAPA), advancing common interests that affect our profession.
One of the results of these cooperative efforts has been the memorandum of understanding (MOU) that was approved by the USAPA Board of Pilot Representatives on Jan. 4, 2013 for a membership vote and by the APA Board of Directors on Dec. 29, 2012. This MOU was the product of extensive discussions during the last month with our unions and representatives from US Airways, American Airlines and the AMR Unsecured Creditors’ Committee. Due to restrictions imposed by a confidentiality agreement, we have been unable to share any details of this MOU with you until now.
In addition to this joint update, you will be receiving information today from your respective negotiating committees outlining what the MOU means to you. If the merger is eventually approved, this MOU along with the APA-American Airlines 2012 Collective Bargaining Agreement will serve as the foundation for the joint collective bargaining agreement (JCBA) for the combined pilot force. Your negotiating committees will continue working together as we develop this contract, jointly pursuing the best possible outcome for our memberships and striving to expeditiously join other pilot groups that are already enjoying substantially improved contracts.
We recognize the prospect for substantial improvements this potential merger holds for both pilot groups. We will continue our partnership in this effort and will update you as conditions warrant. Should this merger take place, we are looking forward to utilizing the best assets from both unions to work toward a JCBA that we can all be proud of—a JCBA that propels the “New American Airlines” to the top of the industry.

Gary Hummel                                                              Keith Wilson
President, USAPA                                                      President, APA

Wednesday, January 9, 2013

Merger clue in American's new china pattern?

The information vacuum surrounding a possible US Airways-American Airlines merger is starting to generate all kinds of theories, the latest being that the merger is foretold in American's new china pattern.

The Chicago Business Journal reports that American's new china, cutlery, and stemware for its premium cabin has no logo emblazoned on it. As the report says: "This is believed to be the first time that AA has introduced on-board service items in its premium cabins that didn't feature the familiar AA logo or some other specific AA branding."

The new designs will be introduced later this month.

US Airways CEO Doug Parker has said that in the event of a merger, the merged airline would keep the American name, as well as its Texas headquarters. So it could well be that the new American china is simply cheaper logo-free (remember, American is restructuring in bankruptcy and presumably not looking to shell out a ton of money for new dishes).

But the report highlights the lack of concrete information available about the proposed merger. American's board is considering the merger today, according to leaked reports. But no decision or announcement is expected, and the CEO of American has only said the question will be decided in a "matter of weeks." Meanwhile, some analysts are now speculating that a merger decision might not come for months.

The pilot unions of both carriers have agreed to a merger framework, but the memorandum of understanding outlining the terms hasn't been shared with members. And with everyone tightly bound by legal non-disclosure agreements until at least the end of the month, get ready for more of the wait-and-see game.

Tuesday, January 8, 2013

Analysis: US Airways merger would harm competition

A white paper from the American Antitrust Institute and the Business Travel Coalition suggests that a tie-up of American Airlines and US Airways could face Department of Justice antitrust issues and would likely be a major blow to competition.

You can read the PDF of the 28-page report here. The report paints a picture of an airline industry that is already very consolidated, and would become even more so if the merger, which is under consideration now, goes through.

Three huge legacy carriers would be left after a merger: American-US Airways, Delta-Northwestern, and United-Continental. Southwest-AirTran, a combination of two low-cost carriers that behaves increasingly more like a hub-and-spoke, legacy carrier, is losing its competitive power to establish pricing discipline. And the remaining low-cost carriers, such as JetBlue, are tiny by comparison, and play on the fringes of the air transportation network.

And the hub airports are increasingly devoted to one legacy carrier, such as Charlotte Douglas International Airport. Here, US Airways operates about 90 percent of the daily flights, a trend of consolidation that's likely to continue.

"The merger could therefore  hasten a troubling metamorphosis of the domestic airline industry from one in which hub airports were designed to  accommodate  multiple, competing airlines to a few large, closed
systems that are virtually impermeable to competition and create a hostile environment in which LCCs and regional airlines have difficulty thriving and expanding," the report says.

Looking at the effects of past mergers, the report concludes they've reduced competition, especially on hub-to-hub routes, and driven up fares on the airlines that remain. Larger hubs see more traffic, and smaller hubs, such as TWA-American's St. Louis hub or US Airways' Las Vegas operations, experience cuts.

"Over 50 percent of the overlap routes potentially affected by the proposed merger of US Airways and American would be monopolized or nearly monopolized," the report concludes.

All of this is, of course, somewhat the point of a merger. US Airways CEO Doug Parker and his executive team have long been advocates of greater industry consolidation, as a means to reduce price wars and rationalize capacity. And airlines, which eke out razor-thin profit margins even in good years, are desperate for more pricing power after a decade that's seen almost every major carrier go through bankruptcy.

The silver lining for Charlotte in all this might be that the authors conclude a merger would likely result in more traffic at the combined airline's largest hubs - including Charlotte Douglas. How much a price consumers would pay for such increased service, however, remains an open question.

Monday, January 7, 2013

Report: American not likely to decide on merger Wednesday

A report from Reuters says the board of American Airlines isn't likely to decide one way or another on a merger with US Airways at its scheduled meeting Wednesday.

AMR Corp., American's parent company, has been restructuring in bankruptcy since Nov. 2011. The company has been inching closer (sometimes being dragged) to a merger with US Airways since the latter carrier started pushing for a combination at the beginning of last year.

Now, the carriers are in confidential talks, hammering out memorandums of understanding with unions representing pilots and flight attendants, and the board of directors at Fort Worth-based American is set to discuss a merger on Wednesday.

However, as Reuters saidBut the people close to the talks told Reuters they do not expect the AMR board to formally choose one option over the other next week, as detailed terms of a deal, such as price and the new management team, have yet to be hammered out. There are currently no plans for an announcement after the meeting.

So, it looks like we could be in a holding pattern for weeks to come. Remember, AMR chief executive Tom Horton sent a letter to employees last week saying he expects the merger review process to wrap up in a "matter of weeks."

And to recap the "Why should we care in Charlotte?" question: US Airways operates about 90 percent of daily flights at Charlotte Douglas International Airport, its busiest hub, and has more than 7,100 employees based here.

Friday, January 4, 2013

American flight attendants approve merger framework

The Association of Professional Flight Attendants said late Thursday that they've signed a memorandum of understanding, a framework outlining terms for a merger with US Airways.

The move follows American's pilots, who signed their own MOU last weekend. Both the American flight attendants and pilots are part of confidential talks trying to hammer out merger terms with airline management and their counterparts at US Airways.

So far, US Airways pilots and flight attendants have yet to approve their own MOUs, and are presumably still negotiating. The MOUs also must be approved by management at American and US Airways.

Every MOU that's approved helps push the merger, which US Airways has been pushing for more than a year now, closer to fruition. American remains in bankruptcy protection, and some analysts expect a decision on whether to merge with US Airways or emerge as a standalone company as early as next week. The more defined merger terms are in place, the clearer any advantages of a merger over a standalone company would be.

Here's the message from APFA,  which ends with an exhortation:

APFA has agreed to a Memorandum of Understanding (MOU), clarifying several points contained within the Bridge Agreement the union signed with US Airways last Spring. This MOU further illuminates the financial benefits of a merger to AMR’s creditors. APFA is currently operating under a judicially-enforceable non-disclosure agreement (NDA) with regards to merger discussions, which means that as long as this restriction is in place, we are not able to divulge specific details of the MOU.
AmericanAirlines US Airways 
"Our Future Depends On It"

Thursday, January 3, 2013

Orr: Merger would be good for Charlotte Douglas

A combination of US Airways and American Airlines would be a positive development for Charlotte's airport, aviation director Jerry Orr said Thursday.

As he's said before, Orr thinks that a merger of US Airways with larger American Airlines would create a bigger route network and the possibility of opening new routes from Charlotte more easily.

Speaking after the airport's monthly advisory committee meeting, Orr said a combined US Airways/American would have the heft to ensure long-term viability. "That's always comforting when one tenant has that much of the business," said Orr. US Airways accounts for about 90 percent of Charlotte Douglas International Airport's daily flights.

Many analysts say Charlotte's hub status would likely be safe in a merger. Other airports haven't had such luck. Pittsburgh, in particular, suffered when US Airways ended its run as a major hub airport following bankruptcy and its merger with America West.

As for ticket prices, many analysts have said they will increase if a merger goes through, since there will be fewer and larger companies competing. Orr isn't so sure. "You can argue that either way," he said. If a merger results in a healthier airline industry, then competition will ultimately be enhanced.

"You can have fierce competition with two or three airlines," said Orr. "To gain the competition, you have to have healthy competitors."

But Orr said he doesn't know when a merger will happen, if it goes through. "Everybody says 'soon,' and they've been saying that for quite some time," said Orr. And if he were a betting man, when would he bet a merger will be announced? "I'm not allowed to bet on city time," said Orr.

Wednesday, January 2, 2013

Report: American flight attendants to approve merger deal

According to a report out of Fort Worth, flight attendants at American Airlines are likely to soon approve an agreement outlining how a merger with US Airways would look.

The memorandum of understanding under discussion would govern how flight attendant work groups are integrated if the two airlines merge. Having such agreements in place is essential for creditors of American, which is in bankruptcy protection, to judge how much improvement a merger could offer over a standalone business plan.

From NBC-DFW"A merger is the best thing for the company, the unions and the passengers,” Association of Professional Flight Attendants president Laura Glading said late Tuesday. “It has to happen." Glading said she would probably recommend that her union approve a “memorandum of understanding” soon."

The move follows the Allied Pilots Association's approval of their own memorandum of understanding for American pilots on Saturday. The two US Airways unions involved in merger talks, the U.S. Airline Pilots Association and the Association of Flight Attendants, also have to approve any MOUs, as do management teams for both companies.

A message from the US Airways pilots union to pilots on Sunday said negotiations are ongoing: 

"Yesterday, the APA Board of Directors voted 11-5 to approve a proposed Memorandum of Understanding (MOU) for consideration by AMR, AMR’s Unsecured Creditors Committee, and US Airways. Please understand the MOU they voted on contains the latest APA positions and IS NOT a final agreement. Your NAC continues to work with all parties involved to insure we have a complete document and the approval to present it from the other parties, prior to discussing it with the BPR.

As we mentioned in our update to you Friday, due to non-disclosure restrictions, we will be unable to discuss the details of this or any other MOU with you until certain legal steps are taken."

The board of AMR Corp., American's parent company, is reportedly scheduled to meet Wednesday, Jan. 9, to discuss the merger. An announcement could come then, although if MOUs and a complete merger proposal aren't ready for the board to consider, that could be delayed.

Any merger could have big implications for Charlotte, of course. US Airways is the largest provider of air service at Charlotte-Douglas International Airport, responsible for almost 90 percent of daily flights. There are also more than 7,100 US Airways employees based in Charlotte.