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US Airways pursuing merger with American Airlines

US Airways says it has already lined up support for its merger proposal from the largest labor unions at American Airlines, which is mired in Bankruptcy Court.

April 21, 2012|By Hugo Martín, Los Angeles Times
  • An American Airlines plane prepares for takeoff at Sky Harbor International Airport in Phoenix. American, ranked as the nation’s fourth-largest airline, is operating under bankruptcy protection.
An American Airlines plane prepares for takeoff at Sky Harbor International… (Joshua Lott, Getty Images )

After sitting out a recent series of airline mergers, Tempe, Ariz.-based US Airways Group Inc. wants to hook up with American Airlines.

But American's parent company, AMR Corp., which is mired in Bankruptcy Court, said it's not interested — at least for now.

American, ranked as the nation's fourth-largest airline, operates 617 planes, with an additional 281 jets operated by its regional carrier, American Eagle. US Airways ranks as the country's fifth-largest airline and operates about 340 jets.

US Airways announced its intention to merge Friday and said it had already lined up support from the largest labor unions at American Airlines. The agreement with the unions was not a formal merger bid but the most significant move taken by US Airways to unite with its larger competitor.

US Airways did not explain whether it wanted to buy Fort Worth-based AMR or merge with the company. There was no price tag put on the proposal or a timetable for action.

But American Airlines officials said they aren't interested in merger talks, and are working to restructure the air carrier and get out of bankruptcy protection.

"We are making substantial progress in our efforts to return American to industry leadership, profitability and growth and maximize its value for all of its stakeholders," American spokesman Ed Martelle said.

Shares of both air carriers changed little Friday, with US Airways stock dropping 17 cents, or 1.8%, to $9.34 and AMR sliding 3 cents, or 4.7%, to 55 cents.

Airline mergers often lead to higher fares for passengers and a cut in routes. But industry analysts said the union of American and US Airways makes sense and would help the two carriers compete against larger, recently merged competitors such as Delta Air Lines and United Air Lines.

"A combination of the two carriers would be positive for both of them and the industry," said Ray Neidl, an aerospace analyst at New York-based Maxim Group.

A Standard & Poor's report released Friday said US Airways would be likely to benefit more from the merger than would American Airlines, which has a larger fleet and more international routes than US Airways.

"From US Airways' perspective, the merger and the discussions with American's labor groups are a logical move," the ratings service said.

In the last five years the industry has seen several huge airline mergers, a trend that came in response to soaring fuel prices and a slump in demand during the recession.

Delta has completed a merger with Northwest Airlines, United is nearly finished merging with Continental Airlines and Southwest Airlines is expected to complete the acquisition of AirTran Airways by 2014.

Three unions representing 55,000 employees of American Airlines — the Allied Pilots Assn., the Assn. of Professional Fight Attendants and the Transport Workers Union — signed agreements with US Airways, saying they support a merger and have agreed to contract terms under such a merger.

As required, US Airways filed a statement with the Securities and Exchange Commission disclosing the agreement.

"Combining American Airlines and US Airways would create a pre-eminent airline with the enhanced scale and breadth required to compete more effectively and profitably," US Airways Chief Executive Doug Parker said in a statement.

American Airlines' union leaders said they support a merger because they believe such a move would save about 6,200 union jobs now on the chopping block under American's plan to restructure in Bankruptcy Court.

"Over the long term, the combined new airline would support greater job security and advancement opportunities for both American Airlines' and US Airways' employees that are far superior to those available to employees at either airline on a stand-alone basis," the union said in a statement issued Friday.

The announcement may have been made this week because American's parent company is scheduled to begin discussion of modifying its union agreements in Bankruptcy Court on Monday — a move its unions oppose.

But nothing is likely to happen any time soon because AMR has the exclusive right to propose a reorganization plan until Sept. 28.

hugo.martin@latimes.com

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