Merger still leaves plenty up in the air
BY KYLE ARNOLD World Staff Writer
Saturday, February 16, 2013
2/16/13 at 6:57 AM
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Much was settled this week for the air transportation industry and workers when American Airlines and US Airways agreed to merge and create
the world’s largest carrier.
Doug Parker will lead as CEO of
Fort Worth-based American Airlines
Group Inc., and AMR Corp. stakeholders
will get 72 percent of the
new company. Executives
expect the
merger to be completed
in as little as
six months.
Union leaders in
Tulsa said workers
were welcoming the news with
“cautious optimism,” because while
more than a year of speculation
ended Thursday, there seem to be
more questions now than before the
merger announcement. A lot still lies
ahead as two companies and nearly
100,000 employees are combined and
leaders try to figure out how to make
American Airlines competitive again.
Who will lead the company?
It’s clear that US Airways CEO
Doug Parker will have control of
American Airlines Group Inc. and
AMR Corp. CEO Tom Horton will
step to the side and serve as chairman
for a year.
But Parker, who started his career
at American, is the only executive
who has a job right now when the
merger closes.
Horton is gone a year after the
merger and Parker will take over as
both chairman and CEO.
That means top executives at American and US Airways
could be on their way out, even
longtime managers such as
American Airlines vice president
of operations Bill Collins,
who heads the 6,200-employee
maintenance base in Tulsa.
And that shake-up could extend
all the way down as new
managers settle.
Parker and Horton said
Thursday they will immediately
put together transition
teams and try to identify the
senior leadership at American
Airlines.
The new company will be
based in Fort Worth with a
significant presence in metro
Phoenix, and Parker said some
senior managers may not be
willing to move.
What is the future of the Tulsa
maintenance base?
Officials of both companies
have said no firm decisions
have been made on what to do
with the Tulsa center, good or
bad.
American Airlines officials
point out that they operate
the largest non-military aircraft
maintenance base in the
world, but US Airways has
major facilities in Charlotte,
N.C., and Pittsburgh.
Collins said the immediate
future of the Tulsa base is secure
but that it will probably
take at least 18 months to get
Federal Aviation Administration
approval for maintaining
the bigger fleet.
After that, American’s new
leadership will make strategic
decisions to how the Tulsa
base fits into the new company.
Tulsa business leaders are
hopeful that the size of the
facility and its central location
in the U.S. will persuade
the combined airline to bring
more work here.
“I don’t think that anything
happens with the maintenance
facility in Tulsa in the next few
years,” said Henry Harteveldt,
an airline industry analyst for
Hudson Crossing in San Francisco.
“Part of the challenge
with an integration like this is
aircraft maintenance records,
data and everything else that
goes along with it."
Harteveldt said Parker has
a long history at US Airways
as pragmatic manager, so if
having a base in Tulsa is best
for the company financially, it
will remain in operation for
years.
The Tulsa maintenance base still
has $200 million in needed upgrades.
How will those be paid for?
Tulsa County voters rejected
a $368 million package in
November that would have
paid for significant upgrades
to the base, but American
officials have indicated that
improvements are needed to
accommodate the next generation
aircraft.
“There was a lot of disappointment
when the (Vision2)
vote failed,” Collins
said. “We have to make adjustments
and look at how we
can move forward."
Tulsa Regional Chamber
CEO Mike Neal said local
leaders are working on a
smaller list of improvements,
possibly just to the maintenance
base and not the entire
industrial complex at Tulsa
International Airport, that
would be easier for voters to
digest.
He said it could be incorporated
into a larger tax
package for roads or other
improvements.
“I’m not sure when or how
we’re going to pay for this,
but these are city-owned
facilities and they need to
be maintained,” Neal said.
“American Airlines were appreciative
that we put it forth
and gave them a chance the
first time, and they’ve indicated
that they are willing
to give us more time to put
something together."
How will two companies integrate
employees and unions?
US Airways gained key
support for a merger early by
going to the Transport Workers
Unions and other American
Airlines labor groups and
agreeing to some major contract
terms, including a 4.3
percent raise for mechanics
in Tulsa.
But a final deal with labor
groups will still need to be
worked out, and then those
workers will have to be combined
with employees and labor
unions working under US
Airways.
TWU Local 514 president
Sam Cirri said he met with
International Association of
Mechanics officials Thursday
to make introductions,
but in the coming months
there will be questions about
pay, benefits and equity between
existing labor at the
two companies.
“I know there are some
things that are different in
benefits and work,” he said.
“There will be some changes,
but there isn’t much we know
right now."
US Airways never fully integrated
labor unions after
merging with America West,
and the new company will
now have to negotiate deals
with separate groups doing
the same work in many areas,
Harteveldt said.
Horton fought fiercely to
trim labor costs, saying it was
vital to the chances of American
Airlines emerging profitably
from bankruptcy.
Will antitrust regulators object to
a merger of two of the nation’s five
largest airlines?
The merger doesn’t only
create the world’s largest airline,
it takes a major, top-tier
competitor out of the nation’s
travel market.
In announcing the merger,
Parker noted that of 900
routes served by American
Airlines and US Airways, only
a dozen overlap.
That fact, according to analysts,
will help the airlines
move quickly through regulatory
approval from the U.S.
Department of Justice and
the National Transportation
Safety Board.
Fred Lowrance, a travel
industry analyst at Avondale
Partners, had this take:
“Over the last five years
we’ve seen fares go up and
seats supply go down. When
United and Continental
merged it resulted in less capacity.
But with this merger
I don’t think we are talking
about shrinking your way to
a more profitable position.
Fares may continue to grow
up, but it probably won’t be
because of the merger."
American Airlines has hubs
in major destination cities
such as Dallas, Miami, Los
Angeles and New York. US
Airways hubs are in smaller
markets in Philadelphia,
Charlotte, Washington, D.C.,
and Phoenix.
Fitch Ratings said the
merger will likely be bad
news for some of the hubs
and result in reduced traffic
at some airports as the new
airline increases efficiency.
Kyle Arnold 918-581-8380
kyle.arnold@tulsaworld.com
Associated Images:
merican Airlines supervisor Steve Yates moves a ladder at the American Airlines Maintenance Base in Tulsa. STEPHEN PINGRY/Tulsa World
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