[SIZE=10pt]PilotAction Merger News for US Airways & American Airlines: November 13, 2013[/SIZE]
[SIZE=10pt]Judge signs order approving settlement of American Airlines-US Airways lawsuit[/SIZE]
[SIZE=10pt]There’ll be a required 60-day comment period before it becomes truly, truly final, but that 60-day period wouldn’t be an impediment to the merger going forward before then.[/SIZE]
See Story:
[SIZE=10pt]http://aviationblog.dallasnews.com/2013/11/judge-signs-order-approving-settlement-of-american-airlines-us-airways-lawsuit.html/[/SIZE]
[SIZE=10pt]Big Airline Merger Is Cleared to Fly - [/SIZE][SIZE=10pt]AMR, US Airways Agree to Limited Concessions in Settlement With U.S.[/SIZE]
[SIZE=10pt]CHICAGO (WSJ.com) - AMR [/SIZE]
[SIZE=10pt]Corp. and US Airways Group Inc. reached an antitrust settlement with the U.S. government to allow their $17 billion merger to proceed with only limited concessions, paving the way for a new global airline colossus.[/SIZE]
[SIZE=10pt]US Airways and AMR, parent of American Airlines, agreed to give up space at several major airports across the U.S., most notably reducing their combined daily departures at Reagan National Airport near Washington by about 15% and at La Guardia Airport in New York by about 7%.[/SIZE]
[SIZE=10pt]hey also pledged to retain the big hubs that underlie their combined network and continue service to certain smaller cities.[/SIZE]
[SIZE=10pt]Many antitrust and airline industry experts deemed the settlement a victory for the carriers, because it left the vast majority of their merger plan intact. They added that the airlines likely would have given up some of the airport slots or gates now slated for divestiture anyway to consolidate operations after their merger.[/SIZE]
[SIZE=10pt]The settlement would affect just 112 of the new carrier's planned 6,500 daily flights, the airlines said[/SIZE]
[SIZE=10pt]The pair now aim to close their transaction by December, creating American Airlines Group Inc., the world's largest airline by traffic. The settlement still must be approved by a federal judge.[/SIZE]
[SIZE=10pt]US Airways Chief Executive Doug Parker[/SIZE]
[SIZE=10pt], who will lead the combined carrier, said in an interview Tuesday that the concessions were "not material enough to offset what we said the day we announced," which was that the merger would create more than $1 billion in total annual savings and revenue gains.[/SIZE]
[SIZE=10pt]The Justice Department described the divestitures as the biggest ever in an airline deal. Bill Baer, the department's antitrust chief, said that the settlement was better for competition than if the government had won a court injunction against the merger, because the concessions will allow low-cost carriers to expand at major airports. "It will disrupt today's cozy relationships among the incumbent legacy carriers and provide consumers with more choices and more competitive airfares," he said.[/SIZE]
[SIZE=10pt]Still, the concessions are far more limited than what the Justice Department called for when it sued to block the merger in August, arguing that the deal would harm consumers by reducing air service and increasing fares. I think it'd be an overstatement to say the [Justice Department] settled for a mere slap on the wrist," said antitrust attorney Jeffrey Shinder, a partner at Constantine Cannon LLP. "But the settlement certainly…doesn't address the fundamental issues behind the [government's] complaint." [/SIZE]
[SIZE=10pt]Those issues, he said, include the potential for the three biggest remaining carriers United Continental Holdings Inc., Delta Air Lines Inc. and the new American — to cooperate on pricing, and the loss of "a maverick" US Airways that had helped keep competition strong.[/SIZE]
[SIZE=10pt]The settlement averted a trial set for later this month that posed risks for both sides. An outright defeat for the Obama administration could have tarred its record of successes in antitrust cases and left it without any remedies against airline consolidation. A court ruling against the airlines would have left US Airways flying solo as a smaller carrier and required American Airlines to find another way to exit bankruptcy proceedings.[/SIZE]
[SIZE=10pt]The airlines had waged an intense lobbying campaign, touting the support for the merger of eight big-city mayors, 183 members of Congress and 100,000 of their mostly unionized employees. AMR Chief Executive Tom Horton said Tuesday that the carriers' advocacy "was helpful" to getting a deal.[/SIZE]
[SIZE=10pt]The Justice Department's Mr. Baer said pressure from the deal's supporters didn't affect the Justice Department's stance.[/SIZE]
[SIZE=10pt]For fliers, the settlement will mean more competition at some of the nation's biggest airports and on some of the most-traveled routes, particularly to and from Washington and New York. But because of the divestments at Reagan, some smaller and midsize cities will likely lose nonstop service to Washington, Messrs. Parker and Horton said.[/SIZE]
[SIZE=10pt]The airlines agreed that the combined carrier would give up enough slots for 52 daily round-trip flights at Reagan and 17 round trips at La Guardia. That opens up highly sought-after space for rivals. But the new airline will have the flexibility to keep running its most-profitable routes at those airports—including US Airways' popular shuttle from La Guardia to Reagan National and Boston Logan International Airport.[/SIZE]
[SIZE=10pt]The combined carriers will divest two gates at Boston Logan, Chicago O'Hare International, Los Angeles International and Miami International airports—though these divestments will have a much smaller impact on its operations. AMR said that it already planned to divest the two gates in Miami to consolidate operations, and that it will be able to operate the same number of flights planned in Chicago without the two gates there. The new American will also divest two gates at Dallas Love Field, which it already leases to Delta.[/SIZE]
[SIZE=10pt]Neither AMR nor US Airways currently serves Love Field, although the airport is expected to become more competitive next year when the government lifts restrictions on where airlines can fly to from it.[/SIZE]
[SIZE=10pt]The carriers also agreed to retain virtually all of their hubs for at least three years and, for at least five years, to maintain at least one flight daily to cities in six states that joined the Justice Department's lawsuit: Virginia, Michigan, Florida, Arizona, Pennsylvania and Tennessee.[/SIZE]
[SIZE=10pt]The Justice Department said the low-cost carriers would be able to use the new slots and gates to offer increased competition not only on direct flights, but also on connecting flights nationwide.[/SIZE]
[SIZE=10pt]Mr. Baer cited as proof Southwest Airlines Co.'s entry into Newark Liberty International Airport after the merger of United and Continental in 2010. He said Southwest acquired 36 divested slots at Newark Liberty and added direct service to six cities and connections to 60 more. Fares subsequently dropped more than 10% on the nonstop routes alone, while passenger traffic increased 36%, he said.[/SIZE]
[SIZE=10pt]George Hoffer, a professor of airline economics at the University of Richmond, said the airlines likely would have shed some of the divested slots or gates in a merger anyway to eliminate redundant routes and consolidate operations at a single terminal.[/SIZE]
[SIZE=10pt]"It looks like the combined carrier is giving up a lot, but in reality, they're not," he said.[/SIZE]
[SIZE=10pt]Eric Holder's Antitrust Bust - [/SIZE]
[SIZE=10pt]Justice retreats on an American Airlines-US Air merger to avoid losing in court.[/SIZE]
[SIZE=10pt]Modern antitrust enforcement is increasingly an exercise in arbitrary politics, and there's no clearer example than the Justice Department's humiliating retreat Tuesday in its effort to block a merger of American Airlines and US Airways. [/SIZE]
[SIZE=10pt]When Justice sued in August, Assistant Attorney General Bill Baer said: "If this merger were to go forward, consumers will lose the benefit of head-to-head competition between US Airways and American on thousands of airline routes across the country." Mr. Baer warned that customers would likely see the end of low US Airways "Advantage" fares on connecting flights that reach the same destinations as American non-stops. The trust-busters also warned of spiking ancillary fees for checked baggage and the like.[/SIZE]
[SIZE=10pt]With a trial set to begin in two weeks, Attorney General Eric Holder's troops instead agreed to a deal that does nothing about ancillary fees or Advantage fares—or any other fares—and doesn't change the rules for "thousands of routes." The two airlines say their merger will generate every additional dime of profit they were forecasting even before the government decided to sue, which explains the 26% gain in American's share price Tuesday.[/SIZE]
[SIZE=10pt]Confirming that all politics is local, and often cynical, the one issue significantly addressed in both the August complaint and in the settlement is Justice's desire to curtail the companies' operations at Reagan National Airport, a few miles away from Main Justice in Washington. The Antitrust Division's dedicated public servants are requiring that the airlines sell 52 slot pairs (take-off and landing windows), which means about 44 fewer daily departures from Reagan. The bureaucrats will set the rules for the sale of these slots and intend to get them into the hands of lower-cost competitors who are expected to offer Washington residents more affordable options to Florida. It's good to be the kings of airline regulation.[/SIZE]
[SIZE=10pt]US Airways and American will also have to sell 17 slot pairs at La Guardia in New York plus two gates each in Boston, Chicago, Dallas, Los Angeles and Miami. Overall the divestitures are expected to cut 112 flights a day from the combined airline's current total of 6,700, and the merged company will likely remain the largest carrier at Reagan.[/SIZE]
[SIZE=10pt]It's easy to see why the airlines took this deal. But American Airlines parent AMR and US Airways Group could have done a public service by forcing Justice to prove a case it never should have brought. Antitrust enforcement is supposed to prevent dominant firms from abusing customers. But there are no dominant firms in air travel, a commodity business that has struggled to return its cost of capital ever since Kitty Hawk.[/SIZE]
[SIZE=10pt]US Airways Group is so fearsome a would-be monopolist that Standard & Poor's recently upgraded the company's credit rating to single-B. This puts the airline in the august company of Fiji and Rwanda. As the stand-alone strength of American parent AMR, the company is currently operating in bankruptcy. Standard Oil it is not. [/SIZE]
[SIZE=10pt]The deal means the merged company will be better placed to compete against the combinations of Delta-Northwest and United-Continental that Justice had previously approved. The U.S. will also have three large global competitors. But overall this deal looks like an example of D.C travelers taking care of themselves on the way out of an unwinable case. [/SIZE]
[SIZE=10pt]Details of American Airlines-US Airways settlement[/SIZE]
[SIZE=10pt]Washington Reagan National Airport (DCA): Divest 52 slot pairs, plus gates, including 16 to JetBlue Airways Corp in exchange for slots at New York's John F. Kennedy International Airport.[/SIZE]
[SIZE=10pt]See Story: [/SIZE]
[SIZE=10pt]http://finance.yahoo.com/news/factbox-details-american-airlines-us-185801298.html[/SIZE]
[SIZE=10pt]Horton: We expect to complete American Airlines-US Airways merger in first half of December[/SIZE]
[SIZE=10pt]See Story: [/SIZE]
[SIZE=10pt]http://aviationblog.dallasnews.com/2013/11/horton-we-expect-to-complete-american-airlines-us-airways-merger-in-first-half-of-december.html/[/SIZE]
[SIZE=10pt]Execs: Settlement doesn’t hurt American-US Airways merger[/SIZE]
[SIZE=10pt]See Story: [/SIZE]
[SIZE=10pt]http://www.dallasnews.com/business/airline-industry/20131112-execs-settlement-doesnt-hurt-american-us-airways-merger.ece[/SIZE]
[SIZE=10pt]Politicians and others applaud settlement between DOJ and American Airlines-US Airways[/SIZE]
[SIZE=10pt]See Story: [/SIZE]
[SIZE=10pt]http://aviationblog.dallasnews.com/2013/11/politicians-and-others-applaud-settlement-between-doj-and-american-airlines-us-airways.html/[/SIZE]
[SIZE=10pt]North Texas wins big in DOJ settlement[/SIZE]
[SIZE=10pt]See Story: [/SIZE]
[SIZE=10pt]http://www.dallasnews.com/business/airline-industry/20131112-north-texas-wins-big-in-doj-settlement.ece[/SIZE]
[SIZE=10pt]Experts don’t see dramatic impact on fares from air merger[/SIZE]
[SIZE=10pt]See Story: [/SIZE]
[SIZE=10pt]http://www.star-telegram.com/2013/11/12/5330662/experts-dont-see-dramatic-impact.html[/SIZE]
[SIZE=10pt]Antitrust regulators back off and everybody wins[/SIZE]
[SIZE=10pt]See Story: [/SIZE]
[SIZE=10pt]http://www.dallasnews.com/business/columnists/mitchell-schnurman/20131112-antitrust-regulators-back-off-and-everybody-wins.ece[/SIZE]
[SIZE=10pt]Wolfe Research: Hunter Keay: November 11, 2013[/SIZE]
[SIZE=10pt]Following today’s announcement of a settlement between AMR/LCC and DoJ we are suspending our rating and target price on the equity. We upgraded AAMRQ to Outperform on 10/3 when the stock was at $4.56. At the time we established an $11 target price, which was based on our probability-weighted view of the merger occurring. We derived our $11 target price by assuming 75% of $13 (estimated value in a merger) and 25% of $2.50 (estimated standalone value).AAG (LCC+AMR) is divesting 104 daily takeoff and landing slots at DCA, 16 of which were already leased to JBLU, and AAG will still be bigger at DCA than it was prior to the merger with a net gain of six daily slots (250 from 244). We believe the DCA divestitures reduce merger synergies by less than 5%.[/SIZE]
[SIZE=10pt]Tom Horton & Doug Parker Letter: November 12, 2013[/SIZE]
[SIZE=10pt]Dear American and US Airways Team Members,
Great news! We have settled the litigation brought by the Department of Justice (DOJ) and the State Attorneys General and we now expect to complete the merger of American Airlines and US Airways in December. We also have entered into a separate agreement with the Department of Transportation (DOT) regarding small community service from Washington Reagan National Airport (DCA).
Reaching these agreements was made possible by your support. From running two great airlines to reaching out to your local, state and federal representatives, your collective voice was heard. You said, “Let us Compete. Together,” and now we can begin to do just that. Thank you very much for all you did to ensure your voices were heard.[/SIZE]
Under the terms of the settlement:
[SIZE=10pt]• The new American will divest 52 slot pairs at DCA and 17 slot pairs at New York LaGuardia Airport (LGA), as well as certain gates and related facilities to support service at those airports.
• Included are eight DCA slot pairs that American currently leases to JetBlue and five LGA slot pairs that American leases to Southwest.
• As a result, we expect the settlement to result in the new American operating 44 fewer DCA daily departures than the 290 that American and US Airways currently operate.[/SIZE]
• At LGA, we will operate 12 fewer daily departures than the approximately 175 we collectively operate today.
• We will also divest two gates and related support facilities at each of Boston Logan International Airport, Chicago O’Hare International Airport, Dallas Love Field, Los Angeles International Airport, and Miami International Airport.
Despite the divestitures, the new American is still expected to generate more than $1 billion in annual net synergies in 2015, as we estimated when the merger was announced in February.
To ensure much of the service to small- and medium-sized markets from DCA is maintained, the new American has agreed with the DOT to use all of its DCA commuter slot pairs for service to these communities (DCA designates slots for either “commuter” or “mainline” use. Seventy-four of our slots are allocated to commuter slots, which mean they must be operated by aircraft with 76 seats or less). In addition, in the agreement with the state Attorneys General, the new American has agreed to maintain its hubs at CLT, DFW, JFK, LAX, MIA, ORD, PHL and PHX consistent with historical operations for a period of three years. With limited exceptions, for a period of five years the new American will continue to provide daily scheduled service from one or more of its hubs to each airport in each of the states involved in the original lawsuit that has scheduled daily service from either American or US Airways.
Fortunately, the divestitures required by the settlement are not expected to impact total employment at the new American. Certain airports may be affected as a result of the divestitures, but we will offer those employees opportunities elsewhere in the system. In addition, the reductions in DCA and LGA are expected to have little or no impact on mainline flying and will impact regional jet flying mostly done by contract partners and those regional jets will be deployed elsewhere in the new American’s network.
These divestures will require the new American to discontinue nonstop service from DCA to some destinations currently served. Those cities are not yet known, but as soon as those decisions are made, we will share it with you.
We still need to obtain approval of the settlements by the U.S. Bankruptcy Court and other closing approvals, but today’s agreements allow us to complete the merger next month and we wanted to pass along this outstanding news and our gratitude to all of you immediately. Thank you again – we look forward to celebrating the creation of the new American with all of you within a few weeks.
[SIZE=10pt]APA Update (MOU Modifications) : November 13, 2013[/SIZE]
[SIZE=10pt]With today's announcement of the DOJ settlement, and with Judge Lane’s prior approval of the merger POR, we finally have clarity on the path forward. Upon merger consummation our 2012 Collective Bargaining Agreement (CBA) will be replaced by the Merger Transition Agreement (MTA), which is an amendment to the 2012 CBA with the improvements and amendments provided for in the four-party Memorandum of Understanding (MOU).[/SIZE]
[SIZE=10pt]Contract Modifications[/SIZE]
[SIZE=10pt]The MOU modifications will take effect as follows:[/SIZE]
[SIZE=10pt]Company-paid defined contribution rate increases to 16% starting January 2014[/SIZE]
[SIZE=10pt]Additional pay raise of 6% effective January 2014 (8% total)[/SIZE]
[SIZE=10pt]Additional pay raise of 1% effective January 2015 (3% total)[/SIZE]
[SIZE=10pt]Mid-contract pay adjustment on January 2016 (the comparators will now be limited to DAL and UAL)[/SIZE]
[SIZE=10pt]Additional pay raise of 1.5% effective January 2017 (3.5% total)[/SIZE]
[SIZE=10pt]Per diem improvements:[/SIZE]
[SIZE=10pt]2014 $2.10 domestic, $2.40 international
2015 $2.25 domestic, $2.75 international
2016 $2.30 domestic, $2.80 international
2017 $2.30 domestic, $2.80 international
2018 $2.30 domestic, $2.80 international[/SIZE]
[SIZE=10pt]dditional improvements that will take effect Jan. 1, 2014:[/SIZE]
[SIZE=10pt]Deadheading on Transoceanic, Deep South, Alaska and Hawaii flights in business class or higher[/SIZE]
[SIZE=10pt]Training pay increased to four hours per day[/SIZE]
[SIZE=10pt]Distance learning pay increased to 1 for 2 (one hour of pay for every two hours of distance learning)[/SIZE]
[SIZE=10pt]Scheduled sit times over two hours pay 1:2 (i.e., three-hour scheduled sit time pays 30 minutes of additional pay)[/SIZE]
[SIZE=10pt]Pay charts and contractual language for these improvements are contained in LOA 13-08. We will be publishing the new MTA in the near future, which will replace our 2012 CBA and incorporate all of these contractual improvements.[/SIZE]
[SIZE=10pt]ALLIED PILOTS ASSOCIATION: MERGER SETTLEMENT WILL HELP AMERICAN "SURVIVE AND THRIVE" [/SIZE]
[SIZE=10pt]FORT WORTH, Texas (Nov. 12, 2013) — The president of the Allied Pilots Association (APA), certified collective bargaining agent for the 10,000 pilots of American Airlines, issued the following statement in response to news that the Justice Department has settled its lawsuit with American Airlines and US Airways regarding the airlines' pending merger.[/SIZE]
[SIZE=10pt]"The Allied Pilots Association leadership is pleased the DOJ and the two airlines have found a mutually acceptable way to address concerns about the merger. As we have said since the lawsuit was filed, this merger is pro-competition," said APA President Capt. Keith Wilson. "Merging with US Airways will remedy American Airlines' longstanding network shortfalls and put American on equal footing with Delta and United. With the merger, American will offer travelers a viable alternative to Delta and United.[/SIZE]
[SIZE=10pt]"Today marks the culmination of an aggressive and unconventional strategy APA began pursuing early last year. Our primary goals were to help ensure American would survive and thrive, thereby ensuring long-term career stability for our pilots. This merger will accomplish both goals.[/SIZE]
[SIZE=10pt]"With the DOJ settlement, American now has the opportunity to return to a position of industry preeminence. We look forward to working with our colleagues at the US Airline Pilots Association as we shift our focus to negotiating a joint collective bargaining agreement."[/SIZE]
[SIZE=10pt]USAPA President's Message: November 11, 2013[/SIZE]
[SIZE=10pt]Fellow Pilots,[/SIZE]
[SIZE=10pt]Today, American Airlines and US Airways announced a settlement with the U.S. Justice Department, resolving the DOJ’s lawsuit to block the merger of the two airlines.[/SIZE]
[SIZE=10pt]As with any negotiations, there was give and take on both sides. While the merged airline will give up some takeoff and landing slots, the overall synergies of the combined airline will be good for the employees and flying public. Moreover, while the Company has said the divestiture of slots won’t affect employment at the new American, your union will monitor the situation closely to make sure that there is no adverse impact on pilot jobs.[/SIZE]
[SIZE=10pt]If approved by U.S. District Judge Colleen Kollar-Kotelly and the bankruptcy court, today’s settlement would resolve the last major hurdle to the merger. Under the merger, the MOU ratified by the pilots in February 2013 will take effect on the Effective Date of the Plan of Reorganization, which could be as soon as the end of the year.[/SIZE]
[SIZE=10pt]While we don’t have all the details, today’s news is important. We will update you as soon as we have more information.[/SIZE]
[SIZE=10pt]A Message from Laura Glading, APFA President: November 11, 2013[/SIZE]
[SIZE=10pt]By now, you’ve all heard the terrific news that the DOJ announced a settlement on our merger with US Airways earlier today. I was able to share this news with members of my base at the JFK Roadshow this morning which made the news that much more meaningful.
The next legal step in this process is a final approval by the U.S. Bankruptcy court which is scheduled for November 25, 2013, ironically, the day we were scheduled to go to trial with the DOJ. Following that, we can anticipate exiting bankruptcy the first half of December.
What does that mean? For starters, it means we will begin receiving our equity stake in the new American in the form of unrestricted stock beginning on the day we exit. It also means that the LBFO will begin to be replaced by the Conditional Labor Agreement (CLA) as modified by the MOU and its associated improvements.
Congratulations to all flight attendants at both airlines. It would not have happened without your support. We have a lot to look forward to and still have work to do. I remain hopeful that we can reach agreement with AFA-CWA on how best to represent the flight attendants at the new American so we can get the contract we all deserve for building the world's leading airline.
Tomorrow, I will be at the Miami roadshow along with the the APFA negotiating team and our advisors beginning at 11:00 a.m. Come join us if you can in the auditorium, Concourse D, Miami Airport, 4th Floor.
Lastly, please take a moment to remember our colleagues from AA Flight 587, several of whom were my friends. I am pleased that there is now some new hope associated with today's date.
Here’s to the memory of those we lost 12 years ago today. We will never forget...
Deborah Fontakis
Barbara Giannasca
Wilmer Gonzalez
Joseph Lopes
Michele Mills
Carol Palm
William Valdespino
Edward States, Captain
Sten Molin, First Officer
In Unity,[/SIZE]
[SIZE=10pt]Laura[/SIZE]