What is really going on behind closed doors with the United Airlines’ and US Airways’ Merger Talks? Can You Really Afford to Just Stand By and Watch?
Last week the New York Times broke the news that US Airways and United Airlines are once again discussing a merger (or possibly some form of consolidation). This is the 5th time in the last 15 years the parties have looked at completing a corporate combination; however, this round of discussions is possibly the most important ever because so much is at stake for all of the parties interested in the success of United Airlines and US Airways, including shareholders, customers, and the 80,000 employees of both companies.
Captain Wendy Morse, UAL ALPA MEC Chairman has issued a press releases with carefully chosen words. In a prepared statement Morse said, “It has been our long-standing position that the pilots of United Airlines would support a merger if such a transaction would benefit the careers and futures of our pilots.”
Morse indicated, "Several media outlets have reported today that United and Continental have reopened merger talks. For United's pilots, Continental, rather than US Airways, represents a more logical merger partner for United Airlines. In light of the recent reports of merger discussions between United Airlines and US Airways, it is our belief, along with many analysts, that a merger between United and Continental would contain less route overlap and greater attainable synergies. These factors would contribute to the protection of pilot careers, lead to long-term security for both airlines' pilot groups and produce a stronger overall enterprise."
"We have been down this path before, and we have a long-standing working relationship with the pilots of Continental. We would parlay this relationship to help make a merger between United and Continental viable for both pilot groups, as well as toward the success of the combined operations," Morse said.
Why? Could it be it that the United pilots do not want to inherit the open-ended seniority integration dispute, the RICO & Addington lawsuits, the Addington Damages Trial & Permanent Injunction, and our reputation for union dysfunction? These issues are far from being resolved.
Unlike the Delta-Northwest merger where a seniority integration and a contract was agreed upon before the merger proceeded, it has been 5 years since US Airways and America West merged, 3 years since the Nicolau (Pilot Seniority) Award was issued, and 2 years since USAPA became the pilot’s collective bargaining agent.
United’s pilots appear to understand the economic benefits of a merger with US Airways and an alliance with Continental Airlines. The United MEC has likely been briefed on this subject by ALPA International’s E&FA Department amid reports that Continental has begun negotiations to merge with United Airlines. Presuming the US Airways’ pilot labor issues are reasonably resolved, the United pilots may recognize more value with a merger with US Airways and then promote a deal that makes sense. See page 3 below for USAPA’s description of (pilot) labor obstacles.
Susan Carey and Dennis Berman of the Wall Street Journal reported Thursday night that “UAL Corp. appears to be angling to have it all in renewed airline merger discussions: It wants to cut a deal to combine with US Airways Group Inc. while retaining its lucrative marketing alliances with rival Continental Airlines Inc.”
“People familiar with the matter said Thursday that UAL is talking with Continental about a potential combination, but the two remain far apart. These people said the talks don't necessarily mean UAL aims to dump US Airways in favor of Continental, but may be seeking to sustain deals that fall short of a merger while producing substantial revenue,” the WSJ said.
The Journal noted, “The United-US Airways talks, which date back ‘some months,’ would serve a different purpose if they result in a deal that would bolster United's presence in some parts of the U.S. market and allow the two to cut costs and overhead by combining operations. Both UAL's chairman and chief executive, Glenn Tilton, and Doug Parker, his counterpart at US Airways, have been vocal proponents of the need for more consolidation in the fragmented U.S. airline industry.”
“The combined cost and revenue synergies of a US Airways merger offer more than a Continental- United merger, said another person familiar with the situation, because two-thirds of the revenue benefits already are captured by the United-Continental alliance. And for shareholders of UAL and US Airways, the gains from revenue and cost-savings would be spread over a smaller combined equity base, providing a larger return, knowledgeable people said,” the WSJ said.
Last Monday USAPA president Mike Cleary and Vice-president Randy Mowrey met with US Airways CEO Doug Parker, President Scott Kirby, and COO Robert Isom in Tempe on short-notice.
Two days later USAPA filed an Emergency Motion under 9th CIR. RUL. 27-3 For Renewed Motion to Stay Judgment in the Ninth Circuit Court of Appeals.
USAPA’s Motion included the following key points:
1. A corporate merger between US Airways, Inc., employer of the pilots Appellant represents, and United Airlines, Inc., whose pilots are represented by another union, is suddenly and currently the subject of intensive negotiations between these two major airlines and their unions, and has reached a critical stage.
2. Continued corporate and labor negotiations for a merger are impeded, however, by uncertainty regarding pilot labor integration issues resulting from the District Court’s injunction in this case and pendency of this appeal. This has been identified as one of the principal obstacles to a major corporate merger. Appellant is subject to a non-disclosure agreement but news media reports (attached hereto as exhibits A, B and C) substantiate the same, specifically that labor issues are the obstacle.
3. A present emergency results from the fact that the pending injunction will prevent a corporate merger that would create an airline capable of competing with the recent Delta/Northwest combination and thus thwart economic benefits and preservation of jobs that might accrue to the corporations and employees, including Appellees.
I believe it is important to note and reiterate USAPA’s Emergency Motion. The Union’s Counsel stated:
• There are currently intensive merger negotiations between these two major airlines that have reached a critical stage.
• Continued corporate and labor negotiations for a merger are impeded by uncertainty regarding pilot labor integration issues.
• This has been identified as one of the principal obstacles to a major corporate merger.
• A present emergency results from the fact that the pending injunction will prevent a corporate merger that would create an airline capable of competing with the recent Delta/Northwest.
• If the pilot seniority integration problem is not immediately solved this will thwart economic benefits (of the merger) and preservation of jobs that might accrue to the corporations and employees, including Appellees, (if the merger does not proceed and the seniority integration legal case is not “stayed”).
So, what is possibly going on here and what could be USAPA’s likely intentions?
In its Emergency Motion USAPA did not ask the Appellate Court to rule on Addington decision; however, the Union indicated it is most likely trying to prod the Court into immediately issuing its order and making its decision.
Why?
USAPA indicated in their Iron Compass Update issued today, April 16, 2010, “The reasons are accurately stated in the (Emergency) Motion, but our lawyers might be thinking this is also a way to prod the Ninth (Circuit Court) to give us our ruling, which we were all hoping we'd have by now.”
What USAPA did do is ask the Appellate Court to order a “STAY” for all District Court Proceedings and the Permanent Injunction (issued by Judge Neil Wake). A “STAY” is a suspension of a case or a suspension of a particular proceeding within a case. Thus, USAPA is asking the Ninth Circuit Court to prevent the Damages Trial and the Attorney Fees Hearing from going forward. Why? Because USAPA and its Members could be ordered by the Court to pay the Damages and the Defendant’s legal fees; along with this on-going litigation will likely jeopardize a merger between United Airlines and US Airways.
USAPA has clearly stated the Merger and US Airways’ jobs, not only for the pilots, but all 31,000 employees are at risk. According to USAPA United Airlines and US Airways merger discussions are at a critical stage, the US Airways pilot seniority integration litigation has been identified as one of the principal obstacles to a major corporate merger, and a present emergency results from the fact that the pending injunction will prevent a corporate merger that would create an airline capable of competing with the recent Delta/Northwest merger.
In conclusion, it appears USAPA is looking for a way out of the merger obstacle problem by trying to prod the court into a decision on the Addington appeal and to order a “STAY” in the upcoming Damages Trial and Attorney Fees Hearing.
It's imperative for pilots to follow what is going on. In its BPR Meeting Update – Day 3, dated April 16, 2010, USAPA said, “The (BPR) meeting recessed to the Call of the Chair at 3:15 p.m. ET, allowing the Board to reconvene on short notice should events warrant” because it appears major events could unfold in the very near-future, which are of paramount importance to all of US Airways’ stakeholders, Shareholders, Customers, and Employees alike.
If the benefits USAPA describes with the proposed United merger, including: job preservation, the potential for Delta/Northwest type job security, and the opportunity to immediately negotiate with the United pilots major contract enhancements that are important to you it is incumbent on you to contact USAPA Representatives. It appears USAPA has control over obstruction of this deal. Obstruction which could create a future of uncertainty for US Airways' employees by USAPA’s own definition. Again, if the events described above are of concern to you you should contact USAPA’s leadership to voice your opinion.
Please share this information with your friends and colleagues.
REgards,
USA320pilot
