US Airways Exec: AMR Merger/Pilot Seniority
 

So what does this mean? After reading the article I still don't see any "winners" after (if it happens) the merger. Maybe I am missing something.


US Airways Exec: AMR Merger Would End Pilot Seniority Mess - TheStreet

CHARLOTTE, N.C. (TheStreet) -- US Airways (LCC_) President Scott Kirby said a merger with AMR (AAMRQ.PK) would resolve the pilot seniority battle that still simmers following the 2005 merger between US Airways and America West.

"The solution to that issue is if we are able to get this deal done," Kirby said Thursday, speaking at the Bank of America/Merrill Lynch investor conference in Boston. "I think this is the way out of the box (because) this is a way to have a fresh beginning."

A merger deal between US Airways and AMR would involve pay raises for US Airways pilots as well as a better deal for American pilots than what AMR management has offered. A merger would create incentives for pilots on both sides to back the deal, especially given that one would be expected to produce more than $1 billion in revenue synergies, enabling American to better compete with Delta(DAL_) and United(UAL_).

As for the seniority issue, Kirby said what Dave Bates, president of the Allied Pilots Association, already has said: The 2007 McCaskill-Bond statute creates a path to a resolution because it mandates binding arbitration.

"Our union and APA will have a joint contract and we will have that on the day we close the merger," Kirby said. "Then more than likely, seniority will go through the process, go through arbitration."

The 2005 merger deal stalled, he said, because of a requirement that the two pilot groups negotiate a joint contract. That has not happened because the two groups could not agree on seniority despite a ruling by an arbitrator. "The side that didn't like it could prevent a joint contract," Kirby said. In the current effort, by contrast, the process would produce "a joint contract in advance" of the merger, he said, with the seniority details to be resolved later, but with an agreement to resolve them firmly in place.

The 2007 seniority ruling by arbitrator George Nicolau was so controversial that it resulted in US Airways pilots voting to leave the Air Line Pilots Association, their union for 57 years, to create USAPA.

It is a way to get another binding arbitration for seniority lists, and as long as the majority (APA pilots) are happy then it will stick and the world will move on. If there were more AWA pilots than US pilots in the original merger, then there wouldnt have been a USAPA or any continued fragmentation of the labor groups. I'd be terrified if I was a west/east pilot, but APA will come out on top regardless of when the merger happens, pre or post BK.

Could you expand on this? Side question to the audience, will this merger "benefit" LCC and thus result in a rise in stock price or will it hurt the stock because (maybe this reason...) LLC is being "saddled" with various AMR issues.

Legit questions, I am working on my MBA and just finished a project on the airline industry and thus I am interested to hear the opinions.

The APA has a majority of the group 4 and group 3 jets (the wide bodies). In every seniority integration that has gone down in the past 30 years that has been taken into account by the arbitrators or negotiators. The APA will get a majority of the slots for those jets because of the ratio of LCC wide bodies to AA wide bodies. Group 2, the 737/a320 series and the Mad Dog will most likely have a closer ratio of LCC pilots to AA pilots, but the sheer numbers of AA pilots will ensure that they have a majority in that category as well.

Cactusmike nailed it with the "APA coming out on top" sentiments. The sheer size of the group will ensure they are pandered to.


As far as the outcome, I think it will benefit LCC in the sense that it will no longer have the economy of scale issues, but it will have issues that it doesnt have today. LCCs CASM is super low for a legacy carrier, and they benefit greatly from that, making their less than ideal hubs work well for them. Add in AMR's mass and the anticipated labor cost increases (Parker's term sheets) and I dont think some of the US hubs will be able to sustain the traffic they do today. I could easily see PHX disappearing, and PHL cut in half. DCA is a great business market, but I dont see a lot of expansion there. CLT will no doubt be a good fit as a domestic hub in the southeast to give ATL some competition.

As far as the stock price goes, it has gone from roughly $4/share to $11 in about 6 months. I think any merger announcement is already baked into the price. Post merger it will depend on how quickly Parker can get the ducks in a row, and grow internationally, Asia in particular. Even if all goes well I cant see the combined AA/US stock going anywhere for at least 3-4 years. Look at the 5yr chart of DAL. The stock post-BK was close to $20 and since then it struggled to stay above $10, and DAL has done an amazing job of integrating NWA/DAL and getting things organized post-BK.

LCC stock: it's up 100+% for the year...due to merger...high(er) risk at this entry point. Though today's selloff makes it a decent entry, with stop around 9.50'ish...

LCC stock will probably be gone and re-issued as...maybe AMR;)...as this will be some kind of stock deal, I'd say...(LCC does not have enough $$$, so paper (stock) will have to used.)

yes LCC stock has kicked a** this year. I doubt anyone else's airline stock can claim the same. Good job guys

I'm an east pilot and I don't even see Phoenix "disappearing". Phoenix is the 5th largest city in the nation, has no airspace conflicts, good weather, and an efficient operation. True, there will be some redundancies with DFW and LAX but we're not going to drastically reduce the number of people we carry in the combined airline. PHL won't be cut in half because it's not slot restricted like JFK, so it's easier to feed the internationals. DCA is a huge money maker and we would jump to expand there but it is slot restricted. This is were the DOT will probably look at during the merger.

The industry has been consolidating for a while now and we're about at our saturation point. I know it's the popular thing to speculate on what bases will "disappear" but Airways already closed LAS and BOS a couple of years ago.

The airline industry as a whole has been setting up for this stretch since deregulation. Excluding extenuating circumstances (spikes in oil, terrorism) I would say the industry should make money for it's investors into the next decade.

Lots of "experts" said SLC would close for Delta after their merger and that hub is still going on.

If you close PHX you give up the ity to SWA. I don't see that happening. MayDaze makes most of the other good points. PHX has a lot of hi tech companies with operations here. There is a strong business market in addition to the large leisure market.

PHX also provides a lot of longer routes to other cities. If you take PHX out of the mix in our present operation the average stage length would go way down which drives up your costs. Kind of why the old US Air had a difficult time before. Short stage lengths and high costs do not work well anymore. Our load factors have been very strong out of here, which may be a factor of what fares are sold, but indicates that we do have a healthy market here.

We really do not know, however, so we will have to see what transpires. I am still only at 75% personally for believing this will all go through.

No doubt PHX has been good for US, but I wonder what would happen to it when placed between a DFW fortress hub and the LAX focus. I personally don't think there is enough room for all three to survive long term. A combined US/AA will still have a large presence in PHX years to come, but it will dwindle. 5yrs after the merger i think it would be on the same level as CVG/MEM are for DAL

AA pilots on top, PHX closing, PHL being cut, sounds like doom and gloom eh? So, vote no on a joint contract? Dont accept a SLI?

No, it's all going to be ponies and rainbows for everyone. Forget I ever said anything.

My broken, inop, crystal ball predicts that these will be kept for sure

DFW
MIA
PHX
ORD
PHL

Others, I don't know. I say "above kept" because too much existing investment and infrastructure (and the bottom line, customer have become conditioned to them....) at these hubs. Harder to fold up the tent and pack it away than keep it and exploit its advantages.

What I see is more international expansion/coverage versus domestic. Maybe some more PHX to Hawaii, Vegas to Hawaii (not technically international but....), PHX to additional Mexico cities, etc stuff

LMBO, ok, much better.

I would think that CLT and DCA would be the prime assets of US to be guaranteed to survive a merger. DCA because of the prime location/customer base and value of all the slots. CLT because its the only game in town in the southeast aside from ATL. Though, I could see CLT losing a lot of its international flying, both to the islands and Europe. All just guesses though.

I agree. DCA is a great business market, and CLT would be a great domestic hub in the southeast. MIA just doesnt work for backwards connections (think JFK-MIA-SAV) and CLT could streamline things nicely.

No LGA?! AA literally put LGA on the map as a major NYC airport. And how about JFK, with the investments AA has made into T8. JFK is probably the most important airport in the country if you want to have a serious international presence. I cant see them giving that up.

JFK ain't going anywhere, neither is LGA. They won't grow (not that they're growing anyway) but they will definitely stick around.

good points, yes I missed those

Binding arbitration and USAPA?!?

Hilarious! :D

USAPA vaporizes with the merger. The arbitration he's referring to would be accepted by APA. In that case, there will be no hijackings of unions and those who disagree with the outcome would simply quit.

Good thing. They already have a amr/u date of hire list circulating in the east cockpits.

Well, not worried about that. Not sure how the east/west resolution will occur relative to an AA merger (or when), but there won't be any USAPA hijackings in the future. A nice fence would negate that anyway, i.e., those on the east who MIGHT be advocating any such hijacking fenced in to the current U East fleet and domiciles for 5-7 years. THAT has a strong probability.

Anyone there who's intoxicated by the thought of east guys going straight to all the system captain seats or new widebody F/O slots via DOH has dementia. No need to get worked up about it at this point anyway.

I know, but it shows you who you are dealing with. BTW they removed the west pilot's from the list, nice guys huh?

Prove it..I call BS! I've yet to see it..Stop inciting hate!

Third lister Eastie called one of my AA buddies to tell him "where he was on the list". The list exists.

Prolly put out by the west. HAHAH....haven't seen such a list on the line.... Unlike a few other groups, I haven't heard anyone foaming at the mouth to go to all the system wide capt seats either.....don't think it's would even be expected unlike others would expect...

Reports of AA pilots encountering both easties and westies in their travels who voice their displeasure at the APA/U agreement. West seems to center on "not messing up their work rules" and east just about everything. Again, too premature to get in a twist over a merge yet to occur IMHO.

If there is a DOH list adopted by the east, it's their fantasy list only. Of course, the easties are known for inflicting torture on themselves for no benefit, so it wouldn't surprise me if there was a DFL (DOH Fantasy List).

If you have followed the various web boards you have seen mostly west pilots even talking about this merger, and complaining about the contract. I saw one say that it was "losing west support", as if any were needed. I have heard very little about it on the east, more of a "let's see if it really happens" attitude. I have not seen, or heard of a DOH list and only the most delusional east pilots would believe it would have a chance.

The funniest thing I've heard from west pilots is the thought that the east will get "spanked" leaving the west unscathed. At worst, we get the Nic and then a similar type slot with AA, which is what we would have gotten 5 years ago.

Eagle your previous post are usually well though opinions and partial facts. I've enjoyed reading such. However, as of recent, your opinion has turned sour towards the east US pilots. I caution you not to fall on the arms of the AOL minority crowd and in return isolate the east. It is still to early in the game to choose sides. This process has just begun to unravel. I caution you not to believe the rhetoric spewed by both sides, east and west, and I suggest that you adapt an objective view. Not all that you read here is an accurate assessment of what has transpired in the east/west saga now going on its 6th year. I am an east line pilot and I can tell you that most, if not all, the guys I fly with are somewhat skeptical of this process ever coming to fruition. Having said that, most are cautiously optimistic and hoping that a final resolution to the Nic might materialize if and when a merger does happen. And NO I have yet to see, or hear of any such DOH list. On a side note, the east will retire roughly 60% of its pilots in the next 7 years. Most guys are to old to get worked up about a merger that most will not benefit from.

Yes, I'm sure like everything of this sort, this type of stuff is from the extreme minority. Personally, I think that the Nicolau award will be implemented and then an AA/U arbitration would go forward using McCaskill-Bond, which stipulates "fair and equitable". Of course, that is a subjective concept and if one looks at the mergers of UAL/CAL, DAL/NWA, SWA/AT there are differences in that concept and outcomes. It's unpredicatable to assume how our final seniority merge would look like, suffice it to say that the APA would be the surviving bargaining representative so whatever did come down, there would be no "rope-a-dope" strategy by those who didn't like it.

East/West hijacked another thread... I haven't seen a "list" of 15,000 names. I'm pretty sure that would be a book anyways.

There are times I think, "those west guys aren't too bad," but then they pull stuff like this.

Relax and really read my posts. One cannot ignore what the east has chosen to do. That being said, I have little emotion about that as I'm confident it will play no part in any AA merge in the future and I'm concerned about what's in the front windshield and not in the rear-view mirror or standing on the sidewalk. SOME of our pilots HAVE reported less then cordial interaction with a FEW U pilots (both east and west) as I've stated, but again, I assume it's the extreme minority and a result of individual beliefs and agendas. I think the merger is highly probable barring some unforcast development, the only wildcards are timing and thus control of the process. It seems both carriers need it, although U more then AA. Having read everything I have so far on the seniority conundrum there, it seems to me either your situation will continue as is or the Nic award will be implemented. Either way, your carrier will only be weakened further go forward with either outcome as it seems there's no real way to place an east pilot in the same cockpit with a west one considering the animosity, thus irrepairably hamstringing flexibilty and synergy. As such, fences may indeed be part of any future SLI.

I'm sure more 'he said/she said' stuff will be forthcoming from both of the U pilot sides and while entertaining, most shouldn't read to much into it from the AA merge standpoint. Personally, I've elected to be more of an observer then a commentator on the U SLI debacle since the U merge potential transitioned to a very strong liklihood.

I saw in the APA brief that the union is testifying in court that the 1113 would result in 1400 extra pilots at AA, not 300 like they said. I would be very worried if I were the bottom 1500 at AA.

I see you're ratcheting up your flamebait from your previous posts that the bottom 1000 should be "very, very scared". I suppose the extra 100 pilots above the testimony is simply a little cherry for yourself in the giggity department, eh sister ?

I understand they were forced to admit their projections were innaccurate based on old calculations. It seems their statements change more often then the weather. What was said from what I understand was that that projection of 1420 pilots overmanned didn't necessarily mean that many would be "discharged". Under that statement, by the end of 2013 there will be at least 300 retirements and possibly twice that and that along with the new FT/DT changes would result in about 400 pilots too many, hence that furlough projection.

Two new fleet types coming (A319,787) and a training bubble is also needed. Actually too many variables to make ANY furlough projections yet (especially that far out), but they had to cut summer flying down due to low staffing not being able to accomodate unplanned absences and maximum usage of vacation blocks being that it's summer. It's one of the MAJOR reasons Parker's plan is far more attractive then AMR's, i.e., no furloughs. Actually, the 1113 ruling date has been pushed back to June 22 from June 6 and judge Lane has requested mediated negotiations by another judge to hammer out an agreement. I think ALL parties agree that a negotiated settlement is better then an imposed 1113 and the various undesirable consequences that could possibly result of that. You can rest assured that the #1 priority will be SCOPE and the size and number of SNB (Small Narrow-Body) jets (AKA large RJ's) that will be allowed for AA feeders/code-sharing. At the very least, limiting size to no more then 76-seats (with limits on number). Allowing AMR (or U) the flexibilty to place what is allowed at any carrier of course, is up to them. ;)

Hundreds of 64-seat CRJ-700 types and many 76-seaters (CRJ-900/E-175's) may be coming to AMR/U, but Eagle might only see half those (and thus shrink accordingly). :eek: If Parker runs the merge, most of Eagle might not even make the program card with AA and that would be even worse for certain ruby-throated flamebaiters chirping away on this forum. Thus, if I was a relatively junior Eagle F/O, I'd be very worried about the future myself. :cool:

Most of those RJs are already on the property at US. Operated by AW, Republic, and Mesa. The Scope change at APA would allow these AC to be operated within the new entity.

The current combined AA and U would include 10 regionals with about 600 aircraft and 6000 pilots. Personally, I don't think the combined carrier will need that many RJ's going forward. Therefore, one should anticipate consolidation, elimination and streamlining of feeders. Since the future combined AA/U is unlikely to hire for awhile while everything shakes out, a surplus of regional pilots is even more likely then mainline.

Which carriers (and pilots) survive is the question there. Already entrenched with larger RJ's would seem to improve odds. Large numbers of smaller RJ's or strictly old turboprops would seem to reduce them.

I think that Eagle's 47 CRJ's will remain, but the EMB's will be replaced in part. Those replacements won't all return to Eagle though, so at least SOME of that future streamlining will come at Eagle's expense.

oh, no. dont say that.

It's only my opinion. I wouldn't run screaming into the night over it. It could easily turn out differently. It seems AMR has a better idea of what they want to do with Eagle, Parker likely hasn't committed to AE and thus for Eagle pilots, they'll almost certainly make out better without a U merge.

The Nic award is available on the internet. AA pilots have access to it. Having access to it doesn't mean anything, just like it doesn't mean anything if a US or AW guy has an AA seniority list.

Eliminate the largest (NYC) and second largest (LAX) travel markets in the US, and the two largest international gateways to the US?