The three main unions at bankrupt American Airlines have reached a tentative deal with US Airways Group
The unions said they support a tie-up that they believe would preserve jobs that otherwise would be lost if American's parent, AMR Corp
We are pleased to confirm our support of a possible merger between our airline and US Airways, the unions said on Friday in a statement provided to Reuters.
We have reached agreements on terms sheets for collective bargaining agreements that would govern the American Airlines employees of the merged airline with US Airways, said the unions, which represent American's flight attendants, pilots and ground workers.
Although mergers often mean a reduction in staff, American's unions said a deal with US Airways would save at least 6,200 American Airlines jobs that would have been shed under the company's stand-alone strategy. American wants to cut 13,000 union jobs, or roughly 15 percent of its work force, as part of a plan to save $1.25 billion in annual labor costs.
AMR MANAGEMENT DISMISSIVE
AMR spokesman Bruce Hicks dismissed union support for merger talks, noting the company's right in bankruptcy court to create its own reorganization plan at least until September 28.
These statements do not in any way alter the company's commitment to pursue our business plan or our focus on moving steadily through the court supervised restructuring process to create a profitable, growing industry leader, the airline said in a statement.
US Airways CEO Doug Parker cautioned employees in a letter on Friday that the union deal does not mean we have agreed to merge with American Airlines.
To get to an actual merger, many more things must happen including gaining the support of AMR's creditors, its management team and its 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, who worked at AMR in the 1980s with Tom Horton, now AMR's CEO, has been a vocal proponent of airline consolidation as a means to cut excess capacity on unprofitable routes. He said a deal with AMR would create a preeminent airline with the enhanced scale and breadth required to compete more effectively and profitably.
David Bates, president of the Allied Pilots Association, which represents the pilots, said in a letter to members that a combined carrier would be branded American Airlines and be based in Fort Worth, Texas, which is where AMR is currently based. US Airways has its headquarters in Tempe, Arizona.
The new carrier would remain in the one world global airline alliance and would be comparable in scope and size with rivals United Airlines
He said American's orders for narrow body aircraft would proceed and the former US Airways route system would be aligned with the American Airlines routes to add more cities.
The flight attendants are represented by the Association of Professional Flight Attendants. The Transport Workers Union represents seven groups of ground workers at American.
In March, US Airways gave a presentation to members of AMR's creditors committee and told them that a combination of the two airlines would create about $1.5 billion in synergies, according to people familiar with the matter.
US Airways shares were down 2.3 percent at $9.29 on Friday afternoon.
SHOWDOWN WITH UNIONS
AMR continues to pursue consensual deals on labor concessions. But, frustrated with the pace of negotiations, it has asked the U.S. bankruptcy court in Manhattan for permission to void labor contracts. A hearing on the matter is set for next week. The airline said on Wednesday it intends to cut another 1,200 nonunion jobs to reach its goal of trimming 15 percent of the work force.
The company has tried for months to blunt merger speculation. US Airways has hired advisers to explore merger options with AMR, but the company has not issued a merger proposal.
In a statement on Thursday, Horton said the merger talk is fueled by those who seek to serve their own agendas, including the circulation of misleading information.
Sources have said US Airways, which formed in 2005 from a merger with America West Airlines, has pitched merger proposals to members of AMR's unsecured creditors committee, which includes labor unions, in hopes of winning support for a deal.
The unsecured creditors committee, which has nine members, gets a say in how AMR restructures. But for now, AMR has the right to reorganize without intrusion from outside parties. That right extends to September, but creditors could ask the judge to revoke it.
Typically, a company cannot exit bankruptcy without the support of its unsecured creditors committee. AMR also needs support of the large investors that hold their secured debt, although their claims are guaranteed and are the first to be repaid.
(Reporting By Kyle Peterson in Chicago, Karen Jacobs in Atlanta and Soyoung Kim in New York; Editing by Dave Zimmerman, Steve Orlofsky and Matthew Lewis)