The PJ Tatler

The American Airlines vs US Air Story Takes a New Twist

For months we’ve been hearing that US Air is working back channel talks with labor unions to force a merger with American Airlines. The latter airline is in bankruptcy, or more accurately its parent company AMR is in bankruptcy. US Air has been using AA’s weakened position to make the merger look like a good idea, and its stock has risen about 160% over the past few months as CEO Doug Parker talks up the potential merger’s alleged benefits. The Tatler encapsulated the implications of the ongoing battle here.

Today, there’s a new twist. American Airlines CEO Tom Horton says the merger was intially his idea, not Parker’s.

[I]n an interview with The Associated Press Horton was emphatic that there’s more financial pressure on US Airways than American to find a partner. And he cited Parker’s repeated overtures as a sign of desperation.

Perhaps the biggest problem on the horizon for US Airways is that its labor costs are going rise, Horton said. Unions there haven’t had a new contract in more than seven years. Horton said Parker is in “a race against the clock” to somehow increase revenue before he has to pay higher salaries in a new contract. A combination with American would help do that because American flies many more international routes, which bring in higher fares per passenger.

“It would be tremendously unwise for us to pursue a combination with a company because they are seeking to solve their own problems,” Horton said.

Elise Eberwein, US Airways executive vice president for communications, said in response: “Nothing could be further from the truth. We’ve got a very sustainable model.”

Horton says he made the pitch at an exclusive gathering of airline executives “called the conquistadores del cielo”, or “conquerors of the sky” in Wyoming last September. That was two months before AMR filed for Chapter 11. The message of Horton’s take is clear: If there is to be a merger, it will happen on American’s terms and not US Air’s.

If it’s true that US Air is clamoring for a merger because its financial position is even weaker than American’s, and the principal driver for US Air is its labor costs, then the unions may be truer zombifying parasites than I thought.

Related to that, meet Teddy Xidas. Teddy Xidas is a former US Airways Flight Attendant of 25 years and former Master Executive Council and Local Executive Council President of the Association of Flight Attendants at US Airways. In a video released today, she is warning American Airlines union members to be very careful when dealing with US Air CEO Doug Parker.

http://www.youtube.com/watch?v=-z4tKYLDVzM