APA speaks about potential American-US Airways merger

From the Allied Pilots Association leadership to its membership:

Fellow pilots,

The APA Board of Directors reconvened today at 9 a.m. at union headquarters as part of the ongoing four-party negotiations between American Airlines and US Airways management, APA and the US Airline Pilots Association (USAPA) on behalf of US Airways’ pilots.

These negotiations are aimed at reaching a Memorandum of Understanding (MOU), or interim agreement, to address each pilot group’s respective concerns if the two carriers proceed to merge. The MOU would serve as the transition agreement and would also include improvements to our newly ratified collective bargaining agreement.

Some have suggested that the only way APA should “agree” to a merger is to first negotiate an integrated seniority list with USAPA. Major corporate mergers involving represented employee groups don’t work that way. No legal mechanism exists that would allow union-represented employees to interfere with a major transaction such as a merger. With McCaskill-Bond the law of the land, unless management predicates a merger on an integrated seniority list—much as we saw at Southwest in their acquisition of Air Tran–we are left to pick up the pieces after the merger has occurred.

While APA’s institutional position has consistently been one of support for a merger between the two carriers within bankruptcy, support for a merger at this juncture is not unanimous within the union. Likewise, AMR management has not embraced the concept of expediting a merger before restructuring concludes and clearly wants to retain control of the corporation and consider a merger on their terms following exit from bankruptcy. Keep in mind that AMR management has executed four different mergers—beginning with Trans Caribbean and ending with TWA—while completely disregarding the impact on our pilots’ seniority. I doubt that pilot seniority is anywhere near the top of their concerns right now. Likewise, I doubt that  pilot seniority would be a key consideration if they were to execute a merger with US Airways, JetBlue or any other carrier following an independent exit from bankruptcy.

Instead, what we’re seeing is likely a deliberate attempt to sew fear amongst our pilots in an effort to derail consensual merger talks. A small group of pilots, with assistance from AMR management and a former CEO [here and here], has been advancing the notion that an integrated list should be a precondition to any further consideration of a merger. Their motives are crystal clear: hold on to the reins of power and control any merger on their terms. To be clear, fundamental capital transactions such as a merger involve a large number of parties. By virtue of the 13.5 percent equity stake we now hold as part of our ratified agreement, APA can exert influence over various aspects of a merger as a major stakeholder in AMR. However, we don’t have the ability to stop the clock and make everyone else wait while we sort through all of the issues associated with an integrated seniority list. To suggest otherwise is disingenuous, and simply ignorant of the law and the facts.

Our advisers have indicated that if we do not finalize an MOU in the very near future, in all likelihood there will be no merger before American Airlines exits restructuring. An MOU specifying wages and working conditions for the pilots, along with interim seniority protection in the form of fences, would enable creditors to identify synergies that would result from a merger of the two carriers. Absent an MOU, the financial benefits of a merger would remain unclear.

We all understand that seniority is extremely important to our careers. Of course, your seniority number is irrevocably tied to the airline you work for, so it’s likewise critical for your employer to be able to compete and thrive. The analysts who study our industry and make judgments about which airlines are best positioned in the marketplace have been virtually unanimous in the view that a merger with US Airways represents the best way to address our airline’s current deficiencies. Make no mistake—a merger of some sort is inevitable. The questions before us: Who do you want at the helm and do you want the ability to have some control over the process? In a post-bankruptcy merger, we would have little ability to influence any potential leadership changes at American Airlines and would represent nothing more than a speed bump.

It’s worth revisiting some of the reasons why the APA leadership decided several months ago that despite the inherent difficulties, a merger with US Airways represents the best path to a reinvigorated American Airlines and, by extension, a brighter future for us all. With the mergers of Delta-Northwest and United-Continental, American Airlines now stands at a distant third (and, by some measures, fourth in the U.S. industry) in terms of our revenue base and route network. A merger with US Airways is essential for both carriers and represents the quickest way to recapture the critical mass essential to competing effectively with those two carriers.

We have seen a model for a successfully arbitrated seniority integration at Delta-Northwest using fences and a ratio methodology based on a percentile seniority list ranking. Also, if an American Airlines-US Airways seniority integration were to be arbitrated, our attorneys have indicated that the ongoing seniority dispute between “West” and “East” at US Airways would be settled as part of the process and should not have any negative impact on an arbitrator’s decision under the McCaskill-Bond statute.

Many analysts believe that American Airlines finds itself in its present predicament because of an excessively cautious approach to consolidation during the past several years. Instead of vigorously pursuing Northwest Airlines as a remedy to American Airlines’ deficiencies in the Asian network, they sat on the sidelines as the rest of the industry flew by. How much longer should we wait before deciding that something needs to happen to fix American Airlines’ revenue and network disparities? Merging within bankruptcy also affords APA opportunities to “re-attack” sooner rather than later to capture additional contractual value in the form of a transition agreement/MOU for our members. On the other hand, a “wait and see” approach would ensure that American Airlines exits Chapter 11 restructuring as an independent carrier with our newly ratified contract. At that point we would have no mechanism for making any near-term contractual improvements, and little ability to influence the management structure or strategic direction of the corporation.

If the four parties agree to an MOU/transition agreement, we would proceed to the next phase of the process, which would involve the creditors assessing the financial benefits of a merger. If a merger meets with their approval, a series of additional steps would have to occur before a merger is approved and the new company exits restructuring, including consideration by the two companies’ boards of directors; antitrust review by the federal government; and approval of a plan of reorganization by the Unsecured Creditors’ Committee and the bankruptcy court.

Upon exit from restructuring, an application for single-employer status with the National Mediation Board must be made, which would take approximately six months. Once single-employer status is declared, we would go through a process to determine the bargaining agent for the pilots. After that we would begin negotiating a joint collective bargaining agreement (JCBA), which would focus primarily on reconciling and integrating the US Airways pilots into the American Airlines operation. This JCBA must be completed within 24 months of a plan of reorganization being approved. If not, it would be submitted to binding arbitration for any remaining open items. Seniority integration negotiations would then commence. In the interim, we would operate in accordance with the protections stipulated by the MOU, including fences and provisions to ensure that pilots on the American Airlines seniority list would operate any aircraft delivered as part of the previously announced aircraft orders.

Fellow pilots, we understand your keen interest in the ongoing MOU negotiations, and we will continue to provide updates as developments warrant.

Thank you for remaining engaged in determining our collective futures.

In unity,

Keith Wilson

First Officer Dennis Tajer

Allied Pilots Association (APA)
APA Industry Analysis Committee – Chairman
APA Communications Committee

4 comments on “APA speaks about potential American-US Airways merger

  1. Well, Mr. Wilson is dreaming of something, what, I don’t know. APA is the biggest pilot union in the world, and will impose its will upon the USAPA, just as they have done to other pilot’s unions that were merged into AA. Getting a pilot’s seniority list in place before any is like putting the horse before the cart. A final merger agreement needs to be in place before employees are merged into the new airline. There has to be an airline before there are employees. APA wants Doug Parker to run the merged AA/US airline, but Parker’s history of managing the union’s senior lists after a merger is poor, at best. The US and HP pilots still are not merged, even though HP and US merged 7 years ago. Parker is just not interested in doing it. He likes the idea of one employee group battleing another one and not “his” airline.

    I still believe any merger between US and AA, the nation’s two worst customer service airlines, before or after bankruptcy exit is a bad idea.

  2. kc135topboom :
    Well, Mr. Wilson is dreaming of something, what, I don’t know. APA is the biggest pilot union in the world, and will impose its will upon the USAPA, just as they have done to other pilot’s unions that were merged into AA. Getting a pilot’s seniority list in place before any is like putting the horse before the cart. A final merger agreement needs to be in place before employees are merged into the new airline. There has to be an airline before there are employees. APA wants Doug Parker to run the merged AA/US airline, but Parker’s history of managing the union’s senior lists after a merger is poor, at best. The US and HP pilots still are not merged, even though HP and US merged 7 years ago. Parker is just not interested in doing it. He likes the idea of one employee group battleing another one and not “his” airline.
    I still believe any merger between US and AA, the nation’s two worst customer service airlines, before or after bankruptcy exit is a bad idea.

    Its been a while since I have flown AA, having relocated to an area where AA is not nearby and so its been quite a few years since flying on AA. In the past AA was my exclusive carrier and I felt they had very good customer service, from check in to gate personnel and flight crews. Seemed to display a professional attitude above what US had, but with all US had gone through over the years, 2 chapter 11’s, almost closing done, I imagine it must have taken its emotional toll on employees.
    It remains to be seen if and when a merger will occur. I think Parker is on an ego trip at the thought of running a large major airline. As you stated, US still has unresolved pilot and flight attendant issues that have gone on for years and this should make AA employees think long and hard about supporting this merger.
    US management said a few weeks ago that if the merger does not occur, US will be fine, should not the same reasoning apply to a stand alone AA which is twice as large as US?
    AA has worldwide recognition and with the new labor contracts and new airliners coming on line, its ATI with BA and with slowed planned expansion, both domestic and international, AA can come out of chapter 11 and be one of the leading airlines at home and abroad.

    • Are two elephants joined at the hip nimbler than a single elephant?

      What I wonder is : don’t these mergers run into diminishing returns?
      There is a short lived cosmetic improvement due to expectations
      but that usually evaporates in a short timeframe.

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