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4-Traders Homepage  >  Equities  >  Nyse  >  AMR Corporation    AAMRQ

AMR CORPORATION (AAMRQ)
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Unions call on AMR board to support U.S. Air merger

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05/04/2012 | 03:15am CET
A US airways plane takes off behind an American Airlines jet at Ronald Reagan National Airport in Washington

(Reuters) - Three labor unions at American Airlines are appealing directly to the company's board of directors to support a merger with rival carrier US Airways Group (>> US Airways Group, Inc.), a step that managers at carrier's parent, AMR Corp (>> AMR Corporation), have so far resisted.

(Reuters) - Three labor unions at American Airlines are appealing directly to the company's board of directors to support a merger with rival carrier US Airways Group (>> US Airways Group, Inc.), a step that managers at carrier's parent, AMR Corp (>> AMR Corporation), have so far resisted.

In a letter addressed to the board and signed by leaders of unions representing 55,000 flight attendants, pilots and ground workers, the unions say a merger plan offered by US Airways will save jobs, boost revenue and shore up the combined network of the two airlines.

AMR, based in Fort Worth, Texas, which filed for Chapter 11 bankruptcy in November citing a need to cut labor costs, has said it is committed to emerging from Chapter 11 as a stand-alone company.

"Under the plan put forth by US Airways management, a merger now between American Airlines and US Airways would result in a rejuvenated American Airlines," according to the letter, signed by leaders of the Allied Pilots Association (APA), the Transport Workers Union (TWU) and the Association of Professional Flight Attendants (APFA).

The text of the letter was set to appear on Friday in ads published in the Wall Street Journal, the Dallas Morning News and the Fort Worth Star-Telegram, a TWU spokesman said.

US Airways has not submitted a formal merger proposal to AMR, which has the exclusive right in bankruptcy court to reorganize without interference from outsiders.

US Airways, however, has struck a labor deal with AMR's unions, which are members of AMR's creditors committee and therefore have a say in the restructuring.

"An American Airlines-US Airways merger would be mutually beneficial by filling the gaps in each carrier's network and boosting overall revenue," the letter said.

US Airways declined comment on labor's outreach to American's board.

American said the maneuver changes nothing, that the airline will continue on its restructuring path that includes a proposal to abrogate union contracts.

"It should be easy for anyone to understand the agendas of other interested parties and their sense of urgency to advance them, and their actions continue to demonstrate that. We don't need to address them again," spokesman Bruce Hicks said in an emailed statement.

Hicks noted that American executives have said the carrier's restructuring will be disciplined and dictated by facts, including whether the company chooses consolidation down the road.

"This is the charge of the board of directors and the leadership team to be done in close collaboration with the creditors committee," Hicks said.

US Airways has said a merger with AMR would generate at least $1.2 billion a year beyond the benefits that could be passed to employees of the combined carrier.

AMR, however, insists its stand-alone plan would create $3 billion in financial improvements by 2017. To achieve this goal, the company says, it must slash labor costs by $1.25 billion a year.

AMR has been locked for years in fruitless negotiations with its unions on concessions it says it needs to survive. The company has asked its bankruptcy court for permission to void the contracts it has with unions that are not willing make required sacrifices.

Spokesmen for the TWU and the APFA confirmed their unions have talked with their counterparts at US Airways to lay the foundation for joint contracts in the event of a merger.

James Ray, spokesman for US Airline Pilots Association, which represents the pilots at US Airways, said members are working with the APA on a joint contract.

US Airways, formed from a 2005 merger with America West Airlines, still has not integrated its pilots' and flight attendants' work groups.

American Airlines is the third-largest U.S. airline behind United Airlines (>> United Continental Holdings, Inc.) and Delta Air Lines (>> Delta Air Lines, Inc.), both of which have already restructured in bankruptcy.

Separately, American is challenging a decision by federal mediators to allow a union representation election for about 10,000 non-union airport agents and other passenger service workers.

The airline said in a suit this week in Texas that the National Mediation Board (NMB) applied an outdated standard for gauging the level of worker support needed to hold a union election.

The NMB could not immediately be reached for comment.

The suit is not part of American's bankruptcy case.

(Reporting by Kyle Peterson; Editing by Steve Orlofsky and Eric Meijer)

By Kyle Peterson

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