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

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.

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.

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 said: But 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.

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"

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.

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.