Pilots at AMR Corp. (AAMRQ)’s American Airlines and their peers at US Airways Group Inc. are studying terms of a transitional labor agreement for a possible merger of the carriers, three people familiar with the matter said.
The memorandum of understanding, based on a contract signed earlier between American’s pilots and US Airways, would set a process to negotiate a longer-term deal for the combined group, said the people, who asked not to be identified because the talks are private.
Acceptance by both pilot groups would further solidify ties between American’s workers and US Airways, which is pushing for a merger. Leaders of the Allied Pilots Association at American also met yesterday with US Airways Chief Executive Officer Doug Parker and President Scott Kirby to discuss “the potential for further industry consolidation,” the union told members.
US Airways also reached agreements in April with unions for American’s flight attendants and mechanics and baggage handlers as Fort Worth, Texas-based AMR restructures in U.S. Bankruptcy Court. Those accords are conditioned on a merger.
Pilots are considered a bellwether work group in airline labor talks, because they are the U.S. industry’s highest-paid union employees. An APA spokesman, Tom Hoban, said last week that the pilots’ rejection of a final contract reflected the opposition among many members to American CEO Tom Horton.
That vote left pilots as the holdout among American’s other unions, which have agreed to cost-cutting contracts that labor chiefs say would help speed a takeover by Tempe, Arizona-based US Airways. AMR is seeking court approval to impose new terms on pilots as it seeks to reduce industry-leading labor costs.
A combination between American, the third-largest U.S. airline, and No. 5 US Airways would create the world’s largest carrier. The prospect of a tie-up has helped US Airways’ shares more than double in price this year. The stock slid 4.9 percent to $11.04 at the close in New York as U.S. airlines slumped.
AMR’s 6.25 percent convertible notes due in October 2014 rose 1.25 cents to 62.75 cents on the dollar today, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Under the interim term sheet being considered by pilots, members of the US Airline Pilots Association would move to pay levels set for American’s APA members in US Airways’ accord with that union.
US Airways pilots would receive furlough protections given to American pilots and wage safeguards for those pushed to a lower-paying position, based on the terms now under review. US Airways pilots also would fly the carrier’s shuttle flights among Washington, New York and Boston and existing service between Phoenix and Hawaii, for a specified period.
Neither of the union’s boards has approved the agreement, and revisions are possible.
As written, it sets a process to meld the groups’ seniority lists, a vital issue to pilots because seniority determines pay scale, schedules and type of aircraft flown. A dispute over meshing the lists at US Airways means its pilots have worked under separate contracts since the 2005 merger that created the carrier from the old US Airways and America West Holdings Corp.
American faced additional pressure yesterday from its pilots when the APA board approved a strike authorization vote once the airline implements any givebacks. U.S. Bankruptcy Judge Sean Lane is set to rule Sept. 4 on American’s request to void its current contract.
“Any form of job action by pilots would be unlawful, either before or after a decision by the Court on the company’s motion,” said Hicks, the American spokesman. “The situation we find ourselves in is a result of a democratic process through which our pilots rejected the tentative agreement American had reached with APA’s leadership.”
A strike authorization vote gives APA leaders the right to call for a work stoppage once the union is legally allowed to do so by the National Mediation Board. The board hasn’t yet declared talks with American at an impasse, one of several steps that must occur before a strike.
While American and the union have said they are willing to resume bargaining, no talks have been set.
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