US Airways could leave Ariz. after American merger

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by DAVID KOENIG and JOSHUA FREED / AP

Video report by Jared Dillingham

Posted on April 20, 2012 at 9:49 PM

Updated Thursday, Jul 19 at 3:36 PM

DALLAS (AP) -- US Airways has struck deals with unions at American Airlines to win their support for a possible merger with American, which has angered the unions by trying to cut jobs and labor costs while under bankruptcy protection.

The unions represent 55,000 pilots, flight attendants and ground workers at American, the nation's third-largest airline.

The unions can't force a merger on their own, but they can work with other creditors of American's parent company, AMR Corp., to persuade the bankruptcy judge to open the door to a deal.

Industry experts say a merger would probably lead to US Airways moving its headquarters from Tempe Town Lake to American's base in Dallas.

"As Mayor of Tempe, you hate to see a corporate headquarters leave," said Mayor Hugh Hallman, "But overall this is good for US Airways and the airline industry, and that's good for jobs here."

Hallman and the Dean of Arizona State University's WP Carey School of Business, Robert Mittelstaedt, say a fraction of the Valley's US Airways employees will lose their jobs or be forced to move.

Mittelstaedt expects roughly 150 managers at corporate headquarters will be relocated to Dallas.   The 6,000 other US Airways employees will likely keep their jobs, and the airline will keep its hub at Sky Harbor Airport in Phoenix.

"It's grow or die.  If you don't grow, someone else will eat your lunch.  A merger is a smart move for both US Airways and American," said Mittelstaedt.

Doug Parker, the chairman and CEO of US Airways Group Inc., said Friday that to win a merger with American, his company still needs support of AMR's creditors, management and board of directors.

"But this is obviously an important first step along that path, and we are hopeful we can all work together to make this happen,"

Parker said in a note to US Airways employees.Parker said a merger could save about 6,200 jobs at American, or nearly half the jobs that American wants to eliminate. He said he would keep both airlines' current hubs and planes to create a bigger company that could compete against United Airlines and Delta Air Lines.

The three unions at American said in a statement that a merger with US Airways is the best way to fix American, which filed for bankruptcy protection in November.

The unions oppose American's plan to cut 13,000 union jobs and sharply cut labor costs to return to profitability. American is seeking to throw out contracts with the unions that govern pay, benefits and work rules, and impose its own terms on employees.

US Airways and the unions said that they have agreed on terms for collective bargaining agreements if there is a merger between the airlines. However, no such deal exists.

AMR CEO Thomas Horton has indicated he would prefer that Fort Worth, Texas-based AMR remain independent but is open to a merger after his company emerges from bankruptcy protection. Friday's gambit by US Airways and American's unions could complicate Horton's strategy, however.

On their own, the unions can't force a combination. However, they hold three of the nine seats on the committee of unsecured creditors in AMR's bankruptcy case. That committee can ask the judge to review AMR's current exclusive right to present a reorganization plan to the bankruptcy court, and if the judge agreed, it could open the door to a merger bid.

Scott Shankland, an officer with the Allied Pilots Association, said the unions began having serious doubts about American's turnaround plan about three weeks ago after their consultants gave the plan poor reviews. American would rely heavily on cutting costs, mostly labor expenses, and Shankland said it wouldn't do enough to help American grow.

"We have a much smaller market presence than United or Delta and because of that we're losing a great deal of business travel," Shankland said. "American Airlines has a revenue problem that's much bigger than their cost problem, but they're just going after labor costs."

Leaders of the pilots' union met with Parker and other top US Airways executives and negotiated terms of agreements that would cover labor if there is a merger. In the meantime, the pilots' union and the Transport Workers Union are continuing to negotiate with American. The Association of Professional Flight Attendants broke off talks with American.

American Airlines representatives had no immediate comment.

US Airways is the nation's fifth-largest airline. As recently as 2008, American was the world's biggest, but it has been eclipsed by United, which combined with Continental, and by Delta, which bought Northwest.

In morning trading, US Airways shares fell 27 cents, or 2.8 percent, to $9.24.
 

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