US Airways aims to convince other AMR creditors

AP News
Posted: Apr 25, 2012 4:15 PM
US Airways aims to convince other AMR creditors

The CEO of US Airways said he's trying to convince creditors of American Airlines of the virtues of a merger even though American executives don't want one right now.

Last week US Airways got unions at American to say they would support a merger.

US Airways CEO Doug Parker said he would rather be working directly with the management team and board at American parent AMR Corp. AMR officials have rejected the idea of merging before the company comes out of bankruptcy protection.

After US Airways gets the support of the full committee of American creditors, "we would look forward to a cooperative and consensual process with AMR's board and management team," Parker said.

Putting the two airlines together would generate $1.2 billion in cost savings and new revenue, even though American Airlines workers would make smaller concessions than AMR is demanding in its restructuring plan, US Airways President Scott Kirby said.

American lawyers are in bankruptcy court in New York this week, seeking permission to throw out labor contracts and impose the company's terms. American's plan also includes layoffs of some 13,000 union workers.

US Airways has promised smaller concessions and to save about 6,200 jobs, prompting unions to back its plan.

Their view carries weight because the three unions each have a spot on the nine-member committee of American's unsecured creditors. That group will have a large role in deciding what the company looks like when it emerges from bankruptcy protection.

Other unsecured creditors include three big banks, the Pension Benefit Guaranty Corp., a unit of Hewlett-Packard, and Boeing Co.'s finance arm.

Kirby said the merged airline would have union contracts similar to those at Delta Air Lines and United Airlines. "This merger creates an airline that can compete effectively against United and Delta," he said.

American's unions and US Airways need each other right now. US Airways needs the union votes on the creditor's committee and wants to start on a good foot with workers who it hopes are one day part of its company. And by siding with US Airways, the unions gain leverage in their fight with American to minimize the damage to their pay and benefits.

American Airlines didn't respond directly to the US Airways comments, but referred to a letter to employees on Monday that reminded them that until September its executives have the exclusive right to propose a restructuring plan.

Parker, the US Airways chairman and CEO, said his airline can go it alone if needed. On Wednesday, it reported first-quarter net income of $48 million, or 28 cents per share, helped by one-time gain.

The first three months of the year are seasonally weak for travel. US Airways would have lost $22 million, or 13 cents per share, if not for a $73 million gain related to its trade with Delta for landing rights in Washington and New York. Analysts surveyed by FactSet had been expecting a loss of 25 cents per share.

A year ago, the airline lost $114 million, or 71 cents per share.

Revenue rose 10.3 percent to $3.27 billion, more than analysts had expected.

Fuel expenses jumped 17 percent to $859 million.

Like other airlines, US Airways has been raising fares to offset higher fuel prices. Per-seat passenger revenue rose 8.2 percent. Even with higher fares, passenger traffic rose 4.7 percent. US Airways said passenger demand remains strong.

Shares of the Tempe, Ariz.-based airline rose 31 cents, or 3.3 percent, to $9.62 in afternoon trading.