Pilots for bankrupt American Airlines and US Airways have agreed to a memorandum of understanding addressing working conditions related to a potential merger before American emerges from bankruptcy, union and company executives said Tuesday.
The MOU document — a transitional labor contract — was negotiated over the past month by American’s Allied Pilots Association and US Airways’ US Airlines Pilots Association, representatives of senior management of the companies and the Unsecured Creditors Committee in American’s bankruptcy case, officials said.
American spokesman Bruce Hicks said the MOU is based on American’s collective bargaining agreement ratified by the Allied Pilots Association and signed by the parties last month. The agreement also makes adjustments to economic parameters in the conditional labor agreement APA reached with US Airways in April, he said.
“The MOU was negotiated to give the parties greater clarity on both the costs and the pilot integration processes associated with a potential merger, as American reviews its strategic alternatives,” Hicks said. “It defines the terms and conditions of employment for American and US Airways pilots in the event of a merger and the process to reach a joint collective bargaining agreement.
“The MOU also specifies the process to develop a combined seniority list within two years of a merger, and it establishes certain protections around the flying that would be performed by pilots at each airline until a joint collective bargaining agreement is established. The terms of the MOU currently are not effective and only become effective in the event a merger is approved and consummated.”
A key to a merger between the companies is an accord that addresses seniority issues between the two pilots unions, officials said.
Seniority issues have slowed airline mergers in the past because they determine compensation, work schedules and aircraft flown by pilots, union executives said.
Since August, when American and US Airways signed non-disclosure agreements that permit the companies to exchange confidential financial information, senior executives have been negotiating terms of a potential merger.
The MOU provides both companies the means to evaluate the impact of pilot labor costs as well as operational and union seniority integration issues in a merger, officials said.
The MOU also establishes wages and working conditions agreed to by American and APA in the latter’s 2012 collective bargaining agreement as the baseline contract for all pilots if the two carriers should merge.
In a letter to APA members on Tuesday, union executives said US Airways pilots would be covered by APA’s modified collective bargaining agreement on the date American parent AMR Corp.’s bankruptcy reorganization plan is approved by the bankruptcy court.
Following the court’s approval of a bankruptcy reorganization plan, the two pilots unions would negotiate a joint collective bargaining agreement until one union is certified by the National Mediation Board to be the authorized representative of the two airlines’ pilots. At that time, the designated union would have exclusive authority to negotiate a joint collective bargaining agreement on behalf of the pilots, APA executives said.
Keith Wilson, president of the 8,000-member APA, and Gary Hummel, president of the 5,000-member US Airlines Pilots Association, addressed pilots at both organizations in a joint email Tuesday.
“(We)…share the goal of achieving the best possible contract for our memberships, and the increasing possibility of an American Airlines/US Airways merger has brought us together to work for that common cause,” Wilson and Hummel said. “While this is the first joint communication you are receiving, your respective negotiating committees have been working well together since shortly after the announcement of the possible merger last April.
“One of the results of these cooperative efforts has been the memorandum of understanding that was approved by the APA board of directors on Dec. 29 and approved on Jan. 4 by the USAPA board of pilot representatives. … Due to restrictions imposed by a confidentiality agreement, we have been unable to share any details of this MOU with you until now. In addition to this joint update, you will be receiving information today from your respective negotiating committees outlining what the MOU means to you.”
The chief executives of American and US Airways have taken opposing positions toward a merger.
US Airways CEO Doug Parker has sought a merger of American, the nation’s third-largest carrier, and fifth-rated US Airways for the past year. A merger, he said, would create the world’s largest airline and a formidable competitor in any market.
American CEO Thomas Horton said the Fort Worth-based airline can emerge from Chapter 11 as a stand-alone carrier or seek merger partners after exiting bankruptcy.
AMR’s lawyers asked the bankruptcy court last week for an extension until April 1 on its exclusive right to file a bankruptcy reorganization plan.
Terms of a joint pilot contract in a merger between American Airlines and US Airways, as described in Memorandum of Understanding:
- Duration: Six years
- Pay: 31 to 39 percent wage increases over six years
- Active pilots: $750 deductible medical plan
- Pension: 14 percent contribution to 401(k) plan
Sources: American Airlines, US Airways
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