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.