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The new American Airlines: Maintenance crews breathe sigh of relief

Feb 15, 2013 9:36 am

Skift Take

Outsourcing maintenance to foreign countries has been a cost-saving move that some airlines have done, but Boeing’s international maintenance woes will likely cause companies to look more fondly on home-grown options like Tulsa.

— Jason Clampet

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American Airlines’ 6,500 employees in Tulsa are expected to have a new boss soon and maybe even new hope after the company announced it had reached a merger agreement with US Airways.

After more than a year of speculation, board members of both companies approved the deal late Wednesday and announced it to employees and the public early Thursday.

A combined US Airways and American Airlines would become the world’s largest airline when the merger is completed, led by US Airways CEO Doug Parker.

Secure future

CEO Doug Parker: “This is about a more secure future for all of our employees. We are so excited about the opportunity to work together to build an airline we can all be proud of.”

“This is about a more secure future for all of our employees,” Parker said during a news conference Thursday at Dallas-Fort Worth International Airport. “We are so excited about the opportunity to work together to build an airline we can all be proud of.”

The company would be called American Airlines and be based in Fort Worth, the home of AMR Corp., American’s parent company.

The airline would have nearly $13 billion a year in combined revenue and almost 100,000 employees.

Parker said he expects the merger to be approved by US Airways shareholders, a federal bankruptcy court and regulators by the third quarter.

Thomas Horton, CEO of AMR Corp., would become chairman of the new company but would not occupy an executive role. A year after the merger is finalized, Horton, whom Bloomberg News reported would leave with a payout of nearly $20 million, would give the chairmanship up to Parker and leave the company.

Parker said the combined airlines would be able to save about $1 billion a year by consolidating operations.

American Airlines is Tulsa’s largest private employer, almost entirely due to the company’s 3.3 million-square-foot maintenance base, which is its largest repair and overhaul facility.

Local employees have been uncertain about the future since the bankruptcy. Shortly after the court filing in November 2011, Horton called for cutting more than 2,000 jobs in Tulsa, and it seemed for a time that American Airlines could possibly close the facility.

“You have to realize that we have been on one hell of a roller coaster ride and at least now we can see the end,” said John Hewitt, chairman of maintenance for Transport Workers Union Local 514 in Tulsa. “Of course we see it as a positive for our members because they have been working for a company that’s in bankruptcy. Now we get some new blood.”

Tempe, Ariz.-based US Airways reached out early and cut deals with labor unions at American Airlines. The TWU already has agreed with US Airways to key parts of a contract, including a 4.3 percent pay raise when the merger is completed.

There have also been deals with pilots, flight attendants and other key labor groups that helped Parker and US Airways gain employee support for the deal while still lobbying Horton and other AMR executives.

Hewitt said Tulsa mechanics have an unfavorable view of current American management because workers took contract concessions during rough times in 2003 only to watch the airline fall further into financial turmoil.

Horton took over as CEO in late 2011 just after AMR filed bankruptcy. He fought vigorously to cut billions in costs from the company and got new contracts with major concessions from many of the key labor groups.

American laid off about 450 people at the end of 2012 at the Tulsa base, and 770 took early retirement packages, which helped prevent further cuts.

American Airlines and US Airways officials have stopped short of saying there is a permanent place for the Tulsa maintenance base in the future, but the merger does provide some clarity for current employees.

“This deal creates a lot of stability here,” said Bill Collins, vice president of base maintenance for American. “This is a full base and will continue to be so for some time.”

David Seymour, senior vice president of operations at US Airways, told the Tulsa World the combination would make the company strong on the East Coast, in Latin America and Europe, and provide opportunities for growth.

The deal is a bright sign for creditors, who were owed nearly $30 billion when the bankruptcy was filed.

US Airways shareholders would get 28 percent of the new company. AMR shareholders would get a 3.5 percent stake in the estimated $11 billion new airline, even though stockholders in bankrupt companies often walk away with nothing.

Jeff Kauffman, an airlines analyst for Sterne Agee, said the payout for AMR stockholders was one final push to help US Airways persuade American Airlines management to take the deal.

“I think the idea is that management wanted to send is that there is something in this for everyone,” Kauffman said.

The rest would go to creditors, employees and union workers.

The board of directors would be made up of five American Airlines creditors, four representatives of US Airways and three representatives of American Airlines.

Despite worries of airline consolidation and rising fares, Parker said the new airline — including regional carrier American Eagle — plans to maintain all routes and hubs served by the carriers. Of more than 900 routes served daily, he said there are just 12 that overlap between the two companies.

“I wouldn’t talk contraction, it’s consolidation,” Parker said. “The number of seats aren’t shrinking. It creates three stronger airlines. It’s creating a third very strong competitor to United and Delta, which have gone through their own consolidations.”

The deal also strengthens the OneWorld alliance, a global partnership between airlines founded in part by American Airlines. US Airways plans to leave the Star Alliance and join OneWorld, weakening competitors such as United Airlines.

Even with the announcement, there is still much uncertainty about the new American Airlines and the Tulsa maintenance base.

Parker is the only executive with a clear role at American, and he said he will be putting together a transition team with Horton in the coming weeks.

He said he plans to bring the best management together from both companies, although he understands some may choose not to pick up and move from the Phoenix area to Dallas.

(c)2013 Tulsa World (Tulsa, Okla.). Distributed by MCT Information Services. 

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