Pictured: American Airline pilots picketed at O'Hare Airport in Chicago in September. American's top three unions support a merger.
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Thomas W. Horton, American's chief executive, has long insisted American would emerge from bankruptcy as a stronger, independent carrier. But his counterpart at US Airways, Doug Parker, has been trying to keep up the pressure for a merger. The two airlines signed a nondisclosure agreement in September allowing them to share confidential information and work together to evaluate a combination. And last month, US Airways put forward a merger proposal, according to a person with knowledge of the discussions.
The proposal, which values the combined entity at around $8 billion, would give American's creditors 70 percent of the new airline and US Airways' shareholders 30 percent. American has insisted that its creditors are entitled to a bigger share, closer to 80 percent, leaving US Airways with just 20 percent, a level at which Mr. Parker would balk, according to analysts. American, meanwhile, has asked the bankruptcy judge for a six-week extension, to March 11, in the period in which it has the exclusive right to plan its bankruptcy.
A merger would give the enlarged entity the size to compete with Delta Air Lines and United Airlines, both of which overtook American after their own mergers with other carriers in recent years. While many analysts expect American and US Airways to merge, a combination also poses some risks, said Ray Neidl, an analyst with the Maxim Group. "It would be a difficult merger to engineer and could create major disruptions over at least the next two years," Mr. Neidl wrote in a note to clients.
In either case, the pilots' contract was a critical hurdle for American to clear. It finally clarifies labor costs and allows the company's board and creditors to more properly consider their options. Whatever the outcome, the federal bankruptcy judge will have the final say on the matter.
American's top three unions are those representing pilots, flight attendants, and mechanics and other ground workers. Each has one seat on the company's nine-member unsecured creditors' committee.
US Airways can count on the backing of these three unions, which have all supported Mr. Parker's merger plans in an unusual show of defiance against American's management. The unions all came to a provisional agreement with US Airways that would provide the basis for new contracts for all workers after a merger.
SOURCE: JAD MOUAWAD
The New York Times
The New York Times