Letter Sent To All Employees Tuesday
AMR CEO Tom Horton sent a letter to all company employees Tuesday indicating that the companies executives have determined that it is the proper time to consider potential mergers with other airlines.
The Street reports that Horton (pictured) said that the executives had held what he described as a "good" meeting with the creditors' committee, and reiterated that the airline needs to get its own financials organized "before considering a complex and challenging airline acquisition."
In a statement released to the media, US Airways said it was "pleased" that AMR is finally open to merger talks. "All we have asked for is a fair and balanced opportunity to present our plan versus others, and we are hopeful this is the beginning of such a process," the airline said. "We remain confident that our plan will maximize value for all stakeholders."
Horton did not specifically mention US Airways as a possible buyer in his letter. The Chicago Tribune reports that as many as five airlines are lining up to take a look at the struggling legacy carrier. Along with US Airways, those include JetBlue, Alaska Air, Republic, Frontier, and Virgin America.
Horton did say progress was being made in negotiations with its pilots' union. In a news release, APA president Capt. Dave Bates (pictured, below) said the letter indicting a shift in the merging thinking is an "important milestone" in the process. “Mr. Horton’s letter represents an important milestone by acknowledging what we have believed for some time—that consolidation involving American Airlines is essential for all of the airline’s stakeholders,” Bates said. “It’s an affirmation that consolidation represents the most promising path for our airline’s future. The biggest remaining questions center on who manages the new entity and whether a merger occurs during AMR’s Chapter 11 restructuring or thereafter.”
In April, the APA leadership and US Airways management—along with the leaders of the Association of Professional Flight Attendants and Transport Workers Union—jointly announced their support for merging the two carriers. The unions also announced that they had negotiated conditional labor agreements with US Airways management.
Meanwhile, APA and AMR management have been engaged in negotiations throughout the restructuring process, with the APA board of directors voting to approve a tentative agreement with management on June 27. That tentative agreement is now subject to a ratification vote by the APA membership. The tentative agreement includes a 13.5 percent equity stake in the restructured airline.
“The 13.5 percent equity stake is intended to compensate APA as an unsecured creditor on behalf of the pilots we represent,” Captain Bates said. “If our members approve the tentative agreement, this equity stake would give APA significant influence over strategic decisions that will be made in the weeks and months to come concerning American Airlines, including the makeup of the new board of directors and management team.”
The results of the APA membership ratification vote will be announced on August 8.
The letter also brought a reaction from the City of Philadelphia, where US Airways has a major hub. Philadelphia city councilwoman Blondell Reynolds Brown (D) (pictured) responded to the potential merger talks with a call for US Airways and American Airlines to ensure that in any merger agreement, Philadelphia would remain a hub and major international gateway.
"Any merger between US Airways and American Airlines that could cost our city thousands of jobs and divert travel to other locations should not be completed until it is assured that Philadelphia International Airport remains a hub and major international gateway. I am calling on both airlines to ensure that whatever decision is made by the companies that assurances of Philadelphia's stability, if not growth, are in place," Brown said.
"We've seen in just about every industry, and especially with the airlines, when companies merge because of financial pressures, services and workforce are among the first cuts to be made. When US Airways merged with America West in 2005, our neighbors in Pittsburgh, then one of the airline's primary connection cities, took a major hit. The Pittsburgh International Airport was downgraded from a hub and the city lost roughly 10,000 jobs that were supported either directly or indirectly by the airline. The city went from offering 542 US Airways flights each day to just 68.
"If US Airways acquires American Airlines, Philadelphia could suffer a similar fate. I value the relationship that US Airways has with the City of Philadelphia. They have proven time and again to be a good corporate citizen. However, I understand that their bottom line is that this is a business and my bottom line is to do what is in the best interests of Philadelphia. If there are commitments made to grow Philadelphia International Airport as a hub and major international gateway, I can be supportive of a merger, but until that is the case, I won't support any deal that will hurt our City."