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Will merger of US Airways, American Airlines take off?

| Apr 12, 2012 | Mergers And Acquisitions |

As U.S. Airways continues to court American Airlines for a potential merger, many are skeptical of the acquiring airline’s ability to complete it successfully. Such doubts can usually be found among employees of the company to be acquired, because they often have more to lose.

One of the biggest concerns of a workforce soon to be absorbed by a new company is integration. How many employees will be laid off, and from which of the two merging companies? In a recent memo to parent company AMR Corp.’s chief executive officer, American Airlines’ vice president for flight expressed his concerns about U.S. Airways’ ability to combine the two airlines’ workforces, saying he didn’t believe the merger would result in a better opportunity for pilots than what they already have under American.

But the memo may have been premature. AMR Corp.’s CEO has said recently that the company is open to a merger with U.S. Airways, but that it may be too large of an undertaking right now as it continues to undergo bankruptcy restructuring. Mergers have usually been good decisions for airlines, he said, but bankruptcy comes with its own complexities.

These complexities also carry risks for employees. Cutting costs is a standard element of emerging from bankruptcy, and that often means layoffs. American’s plan calls for about 13,000 job cuts; it’s asked permission from the bankruptcy court to void current union contracts so it can make the cuts.

And here’s where the possible combination of bankruptcy and a merger could get interesting. The American executive who wrote the memo to the CEO said American’s pilots might actually welcome the merger if they can use it as bargaining leverage in union contract negotiations. The unions representing pilots, flight attendants, mechanics and baggage handlers have a seat on the unsecured creditors committee, which can hold discussions with suitors like U.S. Airways and has a say in major decisions that are made during the bankruptcy restructuring.

It will be interesting to see what happens to American in the coming year. Will it emerge from bankruptcy intact, or will it be broken up or acquired? And how soon? You can bet that business analysts will be watching closely — and so will American Airlines employees.

Source: SFGate.com, “AMR Pilots Doubt US Airways Merger Chances, Executive Says,” Mary Schlangenstein, April 11, 2012

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