U.S. Markets closed

Unions describe how airline merger affects pilots

DALLAS (AP) -- The union for pilots at American Airlines says its members could gain $522 million over six years under an agreement that could take effect if there is a merger between American and US Airways.

Union leaders at both airlines have approved an outline for producing a single contract that would cover both groups in the event of a merger. The unions sent messages to their members on Tuesday describing some terms of the outline — the details of which have not been made public.

American, owned by AMR Corp., which filed for bankruptcy protection in November 2011, is considering whether to merge with smaller US Airways or remain on its own. Together they would form an airline roughly equal in size to United Airlines and Delta Air Lines.

Analysts expect American and US Airways to soon announce a merger that would leave AMR creditors owning roughly three-fourths of the company and US Airways shareholders the rest. The airlines have not agreed on who would run the combined outfit.

The Allied Pilots Association, which represents about 7,500 pilots at American, said that a new "memorandum of understanding" with American and US Airways would — in case of a merger — let the union add $522 million in improvements, or $87 million per year, to a contract that it approved late last year. That process could be subject to arbitration, the union said.

Helane Becker, an analyst with Dahlman Rose & Co., said the sweetener for pilots is not likely to be a big concern to AMR creditors or US Airways shareholders.

"In order for the company to either emerge from Chapter 11 or merge with US Airways, they need a consensual pilot contract," Becker said. "It is the only way to achieve the stated synergies," or financial benefits of the merger.

The deal would also require that American pilots fly planes currently owned or on order by American, and that US Airways pilots fly that company's planes. The US Airways pilots are represented by a separate union, the Air Line Pilots Association.

While that would create separate pilot groups in the short run, the combined company would aim to merge the groups over time. That's what is supposed to happen in mergers, although pilots from US Airways and America West remain apart more than seven years after those airlines combined.

The presidents of the two pilots unions said there was an "increasing possibility" of a merger. "We recognize the prospect for substantial improvements this potential merger holds for both pilot groups," Keith Wilson of the American group and Gary Hummel of the US Airways group said in a statement.

American Airlines spokesman Bruce Hicks said the memorandum was negotiated to pinpoint the costs and labor issues involved in a potential merger. He said American was still reviewing its options.