June 16 (Bloomberg) -- United Airlines’ proposed merger with Continental Airlines Inc. deserves support, provided the companies protect wages and jobs of their workers, the carriers’ pilot union chiefs told lawmakers.
“If done correctly, this merger can help resurrect an industry that is clearly failing,” Jay Pierce, who leads the Air Line Pilots Association branch at Continental, told the House Transportation and Infrastructure Committee aviation panel today.
Support from employee unions, particularly representing pilots, is a key step for United parent UAL Corp. in its plan to merge with Houston-based Continental and create the world’s largest airline. Plans were announced May 3 to combine the third- and fourth-biggest carriers in a stock swap valued at more than $3 billion.
“How this merger is handled will determine whether it is change for the better,” said Wendy Morse, who leads United’s branch of the union. “We would stand in opposition to this merger if it is to be used as a tool to continue the outsourcing of American jobs.”
The carriers’ pilot unions agreed on a framework for talks with management that requires a joint labor agreement before they combine union seniority lists, Pierce said in an interview last month. The list helps to determine pilots’ pay, benefits and the planes and routes they fly.
Continental Chief Executive Officer Jeff Smisek, who will retain the title at the merged carrier, told the panel he hopes to soon reach agreements with all labor groups and said combination is needed to help the carriers compete.
“We are eking out a hand-to-mouth existence” as a stand-alone carrier, Smisek said. That is “not a future I want for my employees.”
United CEO Glenn Tilton said “serial bankruptcies” cannot be a good industry strategy and that the status quo is “unacceptable.”
Unified labor contracts let merged airlines operate more efficiently. The role of labor unions led Delta Air Lines Inc. to start bargaining with pilots before unveiling a deal to buy Northwest Airlines Corp. in 2008.
The Delta-Northwest merger is “the template for success,” Pierce said. Union support and the success of United-Continental depends on “immediate and contractual assurances” of adequate wages, retirement, work rules and job protections, he said.
Pierce told the panel he has “cautious optimism” about the success of talks based on discussions so far.
Continental has 4,600 pilots and 147 on furlough, while United has 6,500 and 1,437 who have been laid off, according to the carriers’ unions.
Conditions should be imposed on the carriers “to protect jobs and competition,” Representative Hank Johnson, a Georgia Democrat, said today at a House Judiciary Committee hearing on the merger.
“Those of us from Texas worry about jobs,” Republican Representative Lamar Smith told Smisek, who has said positions would be reduced at Continental’s Houston headquarters. The new carrier will be based in Chicago.
Smisek said it is too soon to estimate the number of jobs to be cut, though “Houston will be better off in the long run.”
At the aviation panel hearing, Representative Frank LoBiondo, a New Jersey Republican, said the merger will strengthen the carriers and aid their workers. “Do we want to see our employees go by the wayside?” he asked.
Representative James Oberstar, a Minnesota Democrat and chairman of the full committee, told the carriers they “hate competition” and that the merger “is a terrible mistake to the purpose of the deregulation” of the airlines three decades ago.
The hearings were the first opportunities for labor groups to weigh in on the transaction that the carriers hope to complete this year.
The Senate Commerce, Science and Transportation Committee has scheduled a hearing on the merger tomorrow.
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