American Airlines and creditors will talk with US Airways

Source: Fort Worth Star-Telegram

May 13–American Airlines and its creditors committee have agreed to explore all options, including a merger with US Airways, as the Fort Worth-based airline continues through the bankruptcy process.

However, American is adamant that the agreement with the unsecured creditors committee, announced Friday, does not mean that American will necessarily pursue a merger. American’s parent company, AMR Corp., filed for Chapter 11 bankruptcy in November.

“To be clear, American has committed to work in collaboration with the committee to develop only potential consolidation scenarios, and this agreement does not in any way suggest that a transaction of any kind or with any particular party will be pursued,” said AMR’s chief restructuring officer, Beverly Goulet.

The binding protocol agreement was announced Friday afternoon, several hours after a few hundred pilots, flight attendants and other union workers marched on AMR’s headquarters to present a petition of “no confidence” in AMR’s management team. American’s three largest unions have publicly supported a possible takeover bid by US Airways.

Jack Butler, the creditors committee counsel, said the committee recognizes that one of its core responsibilities is to consider “all reasonable and viable strategic alternatives.” He added that the committee still supports American’s plan to remain independent but that alternatives need to be vetted.

“Both the debtors and the committee are in alignment that it is incumbent on them to explore strategic alternatives on a collaborative basis as part of this Chapter 11 case,” Butler said.

Tempe, Ariz.-based US Airways reiterated its interest in pursuing a bid for American, saying that a combined company would be in the best interest of employees, customers, creditors and investors.

“We look forward to engaging in the AMR process to demonstrate the significant advantages of our plan to maximize value for all constituents,” US Airways said.

Carrying signs that said “AA: From 1st to Worst?! Time for New Management” and “Leading Airlines Need Leading Management,” the American workers, mostly pilots and flight attendants, marched from the Allied Pilots Association offices to AMR’s headquarters to deliver their petition.

More than 18,700 pilots and flight attendants signed the petition, urging American to consider a merger now instead of later in the bankruptcy process.

“The team that took us into bankruptcy is not the team who should lead us out. We have a better alternative for our employees, our communities and the future of the airline,” Allied Pilots Association President Dave Bates said at a rally before the march.

The union members walked down C.R. Smith Drive to Sovereign Road and then on to Amon Carter Boulevard in front of the headquarters.

“We respect the right of our unions and their memberships to voice their opinions,” American spokesman Bruce Hicks said. “But the contractual changes we have proposed are necessary for our successful restructuring, and similar to the changes other airlines made in their restructurings. This process requires many tough choices and there is no easy way out.”

American met with its pilots and flight attendants this week to continue contract negotiations, as the bankruptcy judge had suggested. On Monday in court, the unions will begin their arguments to try to stop American from rejecting their labor agreements under Section 1113 of the bankruptcy code.

Under Section 1113, companies can ask a bankruptcy court to reject their labor agreements and put in place new ones with changes deemed necessary for the company to restructure.

While American’s unions have reached tentative agreements with US Airways if a merger occurs, American executives say American workers may encounter seniority integration issues if a merger occurs while American is bankruptcy.

If the unions cannot come to a seniority agreement, an arbiter would be called in to decide the issue under the McCaskill-Bond Amendment. In the past, arbiters have considered workers at a bankrupt airline as having “reduced career expectations,” so preference is given to the seniority of workers at the financially stable airline in the merger.

“In response to questions that we’ve gotten from employees, we thought about this a little bit and it’s clear that potentially we think our employees and our unions ought to give consideration to the notion that there could be some seniority degradation as a result of a merger inside of bankruptcy,” said Jeff Brundage, senior adviser at American.

APA spokesman Tom Hoban said American was expressing “faux concern” for its workers’ seniority.”

“Has management ever been concerned about a seniority integration on its pilots ever?” Hoban said. “The short answer is they don’t give a damn what happens in a merger with seniority integration. … To hear them express crocodile tears of a negative impact on a merger with US Airways is laughable.”

Andrea Ahles, 817-390-7631

Twitter: @Sky_Talk