* American Airlines unions want merger talks with US Airways
* Unions say they reached deal with US Airways
* Say a merger would save at least 6,200 jobs
* American Airlines has shunned merger talks
(Adds ruling on pilot union lawsuit, details on AMR creditors)
By Kyle Peterson, Karen Jacobs and Soyoung Kim
April 20 Labor groups at bankrupt American
Airlines said on Friday they support a potential merger with
rival US Airways Group Inc in a deal they say would save
more jobs than a plan by parent AMR Corp to reorganize as a
The unions representing American's pilots, flight attendants
and ground workers said they struck a deal with US Airways that
would preserve 6,200 of the 14,200 jobs American says it would
cut if it pursues its current plan.
Their joint statement supporting a merger is an unusual and
dramatic twist that comes ahead of a showdown next week with AMR
over the company's request in bankruptcy court for
permission to void labor contracts and impose new terms.
Airline consultant Robert Mann, a former AMR executive, said
he cannot think of another occasion when airline unions actively
supported a merger, because those deals usually mean job cuts.
"For the American unions, it's a real indictment to the
company's plan. In fact, they are casting their lot with the
devil they don't know rather than the devil they do," Mann said.
He added that none of the posturing by unions ahead of next
week's hearing necessarily moves AMR any closer to a merger.
"We're not yet even to the point where an alternate plan has
been presented to the court," he said.
US Airways Chief Executive Doug Parker cautioned his
employees in a letter on Friday that the union deal does not
mean a merger is in the works. He noted that a deal would need
support from the AMR creditors, management team and its board of
"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.
AMR spokesman Bruce Hicks dismissed union support for merger
talks, noting the company's right in bankruptcy court to create
its own reorganization plan without interference at least until
"These statements do not in any way alter the company's
commitment to pursue our business," the airline said in a
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
Although AMR has tried for months to blunt speculation, US
Airways has hired advisers to explore merger options with AMR,
but has not issued a proposal.
In a statement on Thursday, Horton said recent merger talk
is "fueled by those who seek to serve their own agendas,
including the circulation of misleading information."
NEW AMERICAN AIRLINES
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 oneworld global airline
alliance and would be comparable in scope and size with rivals
United Airlines and Delta Air Lines Inc, which
overtook AMR in size after their own mergers, Bates said.
He said American's orders for narrow-body aircraft would
proceed and the former US Airways system would be aligned with
American Airlines routes to add more cities.
AMR's three labor unions are members of the company's
unsecured creditors committee, which has nine members and gets a
say in how AMR restructures.
"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.
Typically, a company cannot exit bankruptcy without the
support of its unsecured creditors committee. AMR also needs the
support of the large investors that hold their secured debt,
although their claims are guaranteed and are the first to be
AMR management has said it may consider a merger with
another airline only after it emerges from bankruptcy as an
People familiar with the airline's thinking have said that
management wants to negotiate a merger on its own terms and
could set its sights on different targets, ranging from JetBlue
Airways Corp to Alaska Air Group Inc to US
But AMR's creditors believe the management's plan to remain
independent is not viable and that it should actively explore a
merger with US Airways or another airline to compete in the
consolidating industry, several people close to the creditors
In addition to AMR's labor unions, the rest of the unsecured
creditors committee also thinks AMR management should engage
with US Airways to evaluate whether such a combination will
generate a better recovery of their claims as well as synergies
on the operation front, the same sources said.
In March, US Airways gave a presentation to representatives
of AMR's unsecured creditors and told them that a proposed
merger of the two airlines would create about $1.5 billion in
synergies, the sources said.
Aside from the unions, the committee includes the Pension
Benefit Guaranty Corp (PBGC), the government agency that
protects under funded pension plans; Boeing Co,
Hewlett-Packard Co ; and the banks acting for AMR
bondholders - Wilmington Trust Co, Bank of New York
Mellon Corp and Manufacturers & Traders Trust Co
Delta is also studying a potential bid for AMR, but the
carrier has not presented a merger plan to AMR's unions or
creditors in a way that US Airways has made an outreach to the
stakeholders of AMR, people familiar with the matter have said.
SHOWDOWN WITH UNIONS
AMR filed for Chapter 11 last November, citing labor costs
that were uncompetitive with profitable rivals such as United
Airlines and Delta Air Lines that restructured in bankruptcy and
later took on merger partners.
AMR has pursued deals with unions on concessions, drawing
outrage by workers, who point to sacrifices they made to keep
the company afloat in 2003.
The airline still wants negotiated deals, but frustrated
with the pace of talks, has asked the U.S. bankruptcy court in
Manhattan for permission to void labor contracts. A hearing on
the matter is set to begin next week.
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.
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.
Separately on Friday, U.S. Bankruptcy Court Judge Sean Lane
dismissed a suit by the Allied Pilots Association that had
sought a ruling holding that American cannot void its labor
contract because it has technically expired.
Judge Lane, in ruling on that matter, said the union's
collective bargaining agreement has not expired but rather had
become amendable under U.S. labor law, meaning the contract
could be subject to dismissal as part of the bankruptcy process.
AMR shares closed 4.7 percent down at 55 cents. US Airways
shares were down 1.8 percent at $9.34.
(The lawsuit was Allied Pilots Association vs. AMR Corp et
al, US Bankruptcy Court, Southern District of New York, No
(Reporting By Kyle Peterson in Chicago, Karen Jacobs in Atlanta
and Soyoung Kim in New York; editing by Dave Zimmerman, Steve
Orlofsky, Matthew Lewis, Andre Grenon and Richard Chang)