April 20--American Airlines' three largest unions are expected to announce today that they will support a potential takeover bid by US Airways, union sources said Thursday evening, heightening the tension between the troubled company's executives and its workers.
The unions' decision to side with another airline over existing management comes as the two sides prepare to square off in Bankruptcy Court in New York on Monday over the company's request to terminate union contracts.
The Allied Pilots Association, Association of Professional Flight Attendants and Transport Workers Union have been in talks for a couple of months with American executives over $1.25 billion in proposed employee-related cuts, which include more than 14,000 layoffs, mostly of union members. The airline maintains that the cost-cutting is necessary to fix its finances and allow it to compete with lower-cost competitors.
Earlier Thursday, Fort Worth-based American reported a $1.7 billion first-quarter loss, mainly from restructuring costs related to bankruptcy. Excluding the one-time write-offs, the airline said it had a net loss of $248 million, smaller than the $436 million loss in the first quarter of 2011.
In a letter to employees discussing the first-quarter report, CEO Tom Horton addressed takeover rumors that have swirled around Wall Street and in the news media in recent weeks.
Without specifically naming US Airways, Delta Air Lines or private-equity firm TPG -- all of which have been named as possible bidders for AMR, American's parent -- Horton said he believes that the best outcome for American is to restructure quickly and on its own.
"As you know, there continues to be much takeover speculation in the press fueled by those who seek to serve their own agendas, including the circulation of misleading information. I expect this to continue and to escalate," Horton said. "Naturally, there are many who do not want American to succeed. Surprisingly, our competitors have even been encouraged by a few within our own ranks."
The pilots and flight attendants unions declined to comment on their support for US Airways. Transport Workers Union spokesman Jamie Horowitz declined to specifically address US Airways. The sources who confirmed the union decision declined to be identified because they were not authorized to speak publicly.
"We are considering all options, and our bargaining teams are continuing to work on final language with the goal of getting a consensual agreement," Horowitz said. "We'll also be in the court next week and beyond fighting for our members there and in the streets of New York with signs saying 'Jobs. Jobs. Jobs.'"
The transport workers and flight attendants unions plan to protest Monday on the steps of the New York courthouse where American will be making its arguments.
Starting the day that AMR filed for bankruptcy in November, Wall Street analysts have speculated that US Airways would be interested in merging with a restructured American.
"Although we put a high probability that an eventual merger will happen, we believe that this could be aggressive timing since AMR management has the exclusive right to reorganize through the summer," Maxim Group analyst Ray Neidl wrote in a research note published Thursday. "However, US Airways' stock price is up in a mixed airline market, and we attribute this to the possibility of a bid."
A US Airways bid cannot be presented in court until September at the earliest. Until the end of September, American management has the exclusive right to submit a reorganization plan to the Bankruptcy Court. And the judge could extend that exclusivity period for eight more months.
US Airways declined to comment Thursday on reports about the unions. Its CEO, Doug Parker, has previously said the airline has hired advisers to examine a possible bid for American. More recently, there have been reports that US Airways executives have been meeting with American union leaders and creditors to garner their support for a bid.
Phoenix-based US Airways is the fifth-largest domestic airline and is scheduled to report its first-quarter earnings Tuesday.
The airline, which merged with America West in 2005, has attempted other mergers and made a bid for Delta Air Lines when it was in bankruptcy in 2006.
American spokesman Bruce Hicks declined to comment on the reports that US Airways had won the unions' support.
"We are in the midst of a complex restructuring, intensely focused on successfully reorganizing to restore American Airlines to industry leadership, profitability and growth. Achieving that goal will position American to chart the very best path forward for all of its stakeholders," Hicks said Thursday.
The airline said its first-quarter results included $1.4 billion in reorganization items, including $1 billion related to aircraft-financing renegotiations and rejections. Also included in the reorganization items were $340 million attributed to American's motion to reject its facility agreements for special revenue bonds at Dallas/Fort Worth Airport and Fort Worth's Alliance Airport and $45 million for professional consultant fees.
Revenue grew 9.1 percent to $6 billion amid "significant demand and a positive pricing environment," American said.
American said it paid about $3.24 per gallon of jet fuel, up 17 percent from $2.76 per gallon in the same quarter last year. It said it paid $325 million more for fuel in the first quarter of 2012.
The airline ended the quarter with $5.6 billion in cash and short-term investments. AMR has improved its cash position since it filed for bankruptcy, when it reported $4.8 billion in cash and short-term investments on its balance sheet.
Lawmakers weigh in
As reports of the unions' support for a takeover emerged on Capitol Hill, lawmakers from Texas called on all parties to stand down and let the bankruptcy process go forward.
"The American Airlines family has my complete support in its quest to remain an independent Texas-based company," said Rep. Joe Barton, R-Ennis. "I am strongly opposed to any hostile takeover, and rumors to that effect only hurt AMR and its employees as they try to maneuver through the legal process. Any talks of mergers or acquisitions should wait until court proceedings are complete."
Last weekend, the three union presidents issued a joint statement telling politicians to keep an open mind to possible industry consolidation after Sen. Kay Bailey Hutchison, R-Texas, said she was concerned about takeover rumors disrupting American's bankruptcy.
"We respectfully request that all stakeholders of American Airlines -- including lawmakers and everyone else with a vested interest in the outcome of the restructuring -- withhold judgment about any industry consolidation that could involve our airline until all of the facts become known," the union presidents said.
Separately, the National Mediation Board ruled that a union representation election should be held for American's agents and representatives to decide whether they want to become members of the Communications Workers of America. American's airport agents and customer service representatives were informed Wednesday that American plans 1,200 layoffs in their work group and changes to their pay and work rules.
"The NMB did not give a specific date for the election," American spokeswoman Missy Cousino said. "The company maintains its original position that the union did not demonstrate sufficient interest from the employees to qualify for an election. American is reviewing the NMB's ruling and will continue to review its options as we await additional information from the NMB."
Washington bureau chief Maria Recio contributed to this report.
Andrea Ahles, 817-390-7631
Twitter: @Sky_Talk
Copyright 2012 - Fort Worth Star-Telegram, Texas
