Well, this is getting interesting. While we’ve know for awhile that US Airways was making a play to buy American Airlines out of bankruptcy, US Airways has turned up the heat considerably by reaching agreements with three big union at American — pilots, flight attendants and mechanics. That’s big in part, because the unions also have seats on American’s unsecured creditor committee which must approve any merger.
The union’s motivation for cutting a deal with US Airways? Simple, better terms than what American’ management was offering. Remember, a company can ask the bankruptcy court to through out existing union contracts. But let’s not kid ourselves, this thing is far from over. And American Airlines’ current management retains the exclusive right to present a reorganization plan for several more months.
And then there’s the other issue: It’s one thing to get an agreement to merge US Airways and American Airlines. It’s quite another to make any such merger work in practice. Among American’s problems are that its labor costs are too high. US Airways is still in business despite not being able to generate the kind of revenue American (or Delta or United) does exactly because it has lower labor costs. Putting the two together is tricky — the exact pay rates and work rules matter, as do the scope rules — especially with US Airways saying they’ll cut 6,200 less jobs than what American’s management has proposed. Get the costs wrong, and a merged carrier could be crippled for a very long time.
