(Dallas Morning News)
Leaders of American Airlines Inc. unions offered a no-confidence vote Monday on management’s plan to turn the bankrupt carrier around.
But it also sounded a lot like a no-confidence vote on American’s leadership.
“Look at what they’ve done with other mergers, with Air Cal, with Reno, with TWA, Association of Professional Flight Attendants president Laura Glading told The Dallas Morning News’ editorial board, referring to American’s mergers between 1986 and 2001.
“What have they been able to do with those? There’s a track record here, and it hasn’t been a good one, Glading said.
She drew a contrast between American management’s history with mergers and that of US Airways’ current executives, who led a merger between America West Airlines Inc. and US Airways in 2005.
Glading, Transport Workers Union international president Jim Little and Allied Pilots Association secretary-treasurer Scott Shankland accompanied US Airways Group Inc. chairman and chief executive Doug Parker to support and defend US Airways’ efforts to merge with American.
The three unions have thrown their support behind US Airways’ plan and have signed agreements that set out the broad terms of their labor contracts if US Airways took over American.
American’s stance
Ever since American and parent AMR Corp. filed for bankruptcy Nov. 29, chairman and CEO Tom Horton has said American’s preference would be to emerge from bankruptcy without a merger and continue to operate as a stand-alone airline.
Under the scenario laid out by Horton, American could consider whether it makes sense to merge with another airline after it emerges from bankruptcy.
However, with US Airways working behind the scenes to develop support for a US Airways-led merger, American and the unsecured creditors committee in its bankruptcy case announced in May that the airline would explore “strategic alternatives” to the stand-alone plan.
Little said at one point that the TWU endorsed the US Airways proposal because a merger between American and US Airways was the best plan, and the endorsement had nothing to do with management.
But later, the veteran union leader said the same merger led by American executives wouldn’t be as good.
“If they make the purchase of US Airways, it still won’t correct the morale on the property,” Little said, adding that employees are now acting on emotion and don’t believe in management anymore. “I think they’ve lost touch with the employees.”
Little said he’s pleased that US Airways’ executives have kept an open mind about keeping many of the jobs and work that were to be outsourced, while American management plans to close its maintenance base in Fort Worth and slash jobs and operations at its Tulsa base.
“It’s like giving someone tools. You can give them tools, but if they don’t use them properly, it’s a waste of time,” Little said. “I think in talking to the management at US Airways, they have a plan in place. It changes the way American does business. I think it works very favorably for employees.”
As the others did, Shankland said the pilots’ union endorsed the US Airways’ proposal because it offered the hope of turning American around and making it successful over the long term.
“It’s not about the personalities,” Shankland said. “All three of our groups have gone to great lengths to analyze the business plan. What we’re interested in is the future.”
Little spoke with admiration for former AMR and American chairman and CEO Gerard Arpey, who retired the evening of Nov. 28 as the AMR board decided to file for bankruptcy. As for Horton, “I’m not even sure that Tom is going to be around after this,”Little said, noting that the CEOs of bankrupt airlines tend to leave their companies.
“He’s probably a great manager, and he’s probably a great guy. But I think there’s a loss of confidence by the employees. So even if I sat here and said, ‘You know what, I like the plan, I think it’s a good deal,’ I don’t think you can get the employees to buy in. I think it has to change. American really has to change,”Little said.
Decision on contracts
U.S. Bankruptcy Judge Sean Lane in New York is scheduled to rule this week on American’s request to reject its contracts with the APA and APFA and for two of the seven TWU bargaining units.
If Lane grants the request, American would be free to impose concessions, including the loss of 400 pilot jobs, 2,300 flight attendants and about 7,500 TWU-represented employees, out of nearly 12,800 jobs to be cut across the airlines.
The agreement with US Airways would reduce the pain for employees, but even the US Airways deals would require steep concessions.
“So the suggestion that labor somehow does extremely well on the US Airways proposal I think is unfair to labor and the people of American Airlines,” Parker said in an interview before the editorial board meeting. “They’re taking big concessions under either, just much smaller ones under ours.”
Glading said that if American would agree to the same terms as US Airways has offered, “I would still be sitting here today saying I’m 100 percent behind this merger.”
Parker, who offered no opinion on American’s leadership, instead touted the value offered by combining the networks of American with those of US Airways.
Parker said a combination will help put American back on top from its current No. 3 position behind United Airlines Inc., which merged in 2010 with Continental Airlines Inc., and Delta Air Lines Inc., which merged in 2008 with Northwest Airlines Inc.
“I know it’s hard sitting in Dallas to think of American as not being the biggest airline in the world, but they’re not,” he said. “Particularly up and down the East Coast where there are a lot of people and really important business markets, they’ve become increasingly irrelevant.”
American Airlines unions: Merger is best chance for recovery (Dallas Star Telegram)
Leaders of the three big unions at American Airlines said Monday that they support a possible bid by US Airways because they believe the bankrupt Fort Worth-based airline should be run differently.
In a meeting with the Star-Telegram’s Editorial Board, they said their desire for new management at American should not be seen as a personal attack on AMR Corp. CEO Tom Horton. Instead, they said they’ve concluded that the business plan put forward by US Airways, which would merge the airlines to create a bigger competitor, offers a better chance to compete against rivals United Continental and Delta than does American’s stand-alone restructuring plan.
“It can’t be business as usual,” said Jim Little, president of the Transport Workers Union, which represents mechanics, ground crew workers and flight dispatchers. “It’s not saying management is bad and that Tom Horton is a bad guy and he can’t run the company. It’s just saying there is a better way of doing it, and if we don’t seek this opportunity now, I don’t think American will recover.”
The unions have announced their support for a US Airways bid and reached tentative agreements on contract terms, even as they continued negotiating with American. American has asked the U.S. Bankruptcy Court to allow the company to reject existing labor contracts under the court’s Section 1113 process. Judge Sean Lane is expected to rule on American’s request by Friday.
Doug Parker, CEO of US Airways, also attended the meeting and declined to say when his company would make a formal bid for American as part of the bankruptcy process. But he said he’s confident that its proposal will prove more substantive than other restructuring proposals.
“We believe we have an idea here that can create a stronger airline, take care of all of the employees and also take care of the creditors of American Airlines than a stand-alone airline can,” Parker said. “The two networks are so complimentary, we will need all the airplanes of both companies. We need all the employees of both companies. We need all the hubs of both airlines.”
A merger, however, would not save American’s Alliance Airport maintenance facility, which was initially scheduled to close by the end of the year under American’s restructuring proposal. With American planning to renovate its older Boeing 777 and 767 interiors, Alliance may stay open longer, Little said, although he was unclear how long that may be.
While Parker said his deal with the unions would be require concessions, he stressed that it would not require as many employee-related cuts as American is seeking. But even if American reduces its cost-cutting demands on the unions, they say they would still support a merger with US Airways.
“If American Airlines came up to me tomorrow and offered me the same package as US Air, even a sweeter deal, I would still be for this merger,” said Laura Glading, president of the Association of Professional Flight Attendants. “It’s not really so much what’s in the contract as it is having a future, getting back that feeling that we had 30, 40 years ago when we first put the uniform on, getting the best airline possible. I firmly believe this opportunity will get us there.”
The board of the Allied Pilots Association met Monday to discuss American’s “best and final” contract offer received last week and whether it will send the proposal to members for a vote. If the board agrees to the proposal before members, the union and American will ask the bankruptcy judge to stay his Section 1113 ruling on the pilots contract until after the vote.
Scott Shankland, a national officer with the union, said he did not know how the board will proceed but reiterated his union’s support for US Airways.
“We’re committed to this plan; we’ve signed agreements,” Shankland said. “We’re doing what we can to support that plan and help it come to fruition.”
NMB says Congress didn’t intend union voting rules to apply retroactively (Dallas Morning News Airline Biz Blog)
In a federal court filing Tuesday, the National Mediation Board said that Congress never intended to retroactively apply a higher standard for union representation elections, and said a vote by American Airlines passenger service agents should proceed.
In February, Congress passed legislation that requires a “showing of interest” from 50 percent of the airline employees before the National Mediation Board could hold an union representation election.
Before that law change, the NMB required signatures from 35 percent of the employees for whom representation was sought.
The Communications Workers of America, which seeks to represent American Airlines’ passenger service agents, on Dec. 9 asked the NMB to call an election. The request prompted the board to begin its investigation of whether there was a sufficient showing of interest to justify a vote.
On Feb. 14, Congress imposed the 50 percent rule. On April 19, the NMB ruled that there were enough signatures under the 35 percent rule to justify the election.
American then went to court May 2 to argue that the 50 percent rule should apply, not the 35 percent, and that the CWA didn’t get a showing of interest from 50 percent of potential voters.
The NMB, in its filing Tuesday, said that NMB decisions are rarely reviewable by courts. And it said it should apply the rules that were in effect when the CWA asked for the vote.
“Under ‘traditional rules of statutory construction,’ the 2012 Act did not require the Board to impose the new 50 percent showing-of-interest requirement on applications that were received by the Board before the Act took effect,” the NMB said in its pleading.
“Plaintiff, in construing Section 1003 of the 2012 Act, fails to recognize the significance of a key phrase. Section 1003 provides that the Board, ‘upon receipt of an application requesting that an organization or individual be certified as the representative,’ shall not direct an election unless the Board determines that the application is supported by a showing of interest from not less than fifty percent of the employees in the craft or class,” the NMB argued.
The two sides face off Thursday morning in U.S. District Judge Terry Means’ Fort Worth court for a hearing on American’s request for a preliminary injunction to block the agent vote. Means last week gave American a temporary restraining order pending this week’s hearing.
The NMB had set Thursday as the start of a six-week voting period that would have ended Aug. 2. The TRO has prevented the start of the voting.
Iridium Moves Toward Satellite-Based Air-Traffic Control (WSJ)
Iridium Communications Inc. plans to install devices on its next fleet of commercial satellites to continuously monitor airliners and business jets on trans-Atlantic trips, an important step toward eventually replacing radar-based air-traffic control.
The satellite technology would supply more complete and continuous flight information to air-traffic controllers on the ground than radar or current bursts of data transmitted by planes on long flights over water or remote regions.
It also would give greater flexibility to pilots, allowing them to get permission to fly closer to nearby aircraft and to change altitudes and routes more easily to conserve fuel and avoid storms.
Governments and industry officials on both sides of the Atlantic are pursuing initiatives to replace ground-based radar with a satellite-based system. Iridium’s initiative is intended to help airlines quickly start achieving the economic and environmental benefits.
Today, pilots on long oceanic or polar routes typically rely on sometimes-unreliable radio transmissions to communicate with controllers on the ground.
Iridium expects Aireon, as its satellite-based effort is known, eventually to cover flights across the Pacific and remote polar regions as well, the company said Tuesday.
Nav Canada, the air-traffic-control organization that handles the bulk of Atlantic crossings, will begin using Iridium’s satellites in five years or so. Nav Canada is part of a joint venture supported by the U.S. and involving Iridium and its corporate partners.
Iridium said it expects to receive about $200 million from Nav Canada and other air-traffic-control organizations for installing the devices on its satellites. It also anticipates receiving fees from air-traffic-control organizations and other customers using the system.
Iridium last year announced plans to improve in-flight communications by using links between a satellite to periodically transmit the position of aircraft. Now the McLean, Va., company and partners including Harris Corp. and ITT Exelis intend to move toward continuous, automated data transmissions to keep track of aircraft.
With about 1,200 daily flights, the North Atlantic is the world’s busiest oceanic airspace. Iridium executives said they expect that major airlines, as well as air-traffic control agencies in Britain and elsewhere, eventually will participate. Iridium anticipates making similar arrangements for trans-Pacific flights. Total fuel savings could amount to more than $6 billion for airlines using the system through 2030, according to the company.
Iridium intends to install air-traffic control receivers as secondary, or, “hosted,” payloads on all 66 satellites in its next fleet.
“This is a big milestone for commercially hosted payloads and a groundbreaking use” of Iridium’s global reach, said Matt Desch, the company’s chief executive.
Extensive satellite-based tracking systems are expected to be phased in for domestic U.S. flights around the end of the decade. But many airlines are balking at the investments required for such systems—even though the technology could help conserve fuel and reduce the environmental impact of flying.
Ryanair Bids for Aer Lingus (WSJ)
LONDON—Irish budget airline Ryanair Holdings PLC said Tuesday it is making a €694 million ($873 million) bid to buy the shares it doesn’t already own in rival carrier Aer Lingus Group, in a push to create a single Irish airline.
The offer comes after Ryanair bid unsuccessfully to acquire Aer Lingus in late 2006 and was blocked by the European Commission on antitrust grounds. Ryanair still holds 29% of Aer Lingus from that bid and has been fighting efforts by regulators to force it to dispose of the stake. British competition authorities recently announced an inquiry into Ryanair’s continued holding.
Instead of selling down the stake, Ryanair said it now intends to make an all-cash offer of €1.30 ($1.63) per Aer Lingus share, valuing the target airline at €694 million. The offer price is a 38% premium over the closing price of 94 European cents for Aer Lingus shares on Tuesday and a 47% premium over the average closing price of the stock over the past six months.
Ryanair Chief Executive Michael O’Leary said in a written statement that the offer “represents a significant opportunity to combine Aer Lingus with Ryanair, to form one strong Irish airline capable of competing with Europe’s other major airline groups.” The offer is “the best way for Aer Lingus to continue to be owned, controlled and managed from Ireland for the benefit of Irish citizens and visitors,” he said.
An Aer Lingus spokesman declined to comment. A spokesman for the EU’s competition commission, which blocked the 2006 bid, declined to comment.
The Irish government still holds 25% of Aer Lingus after its privatization in 2006 and has said it wants to sell the stake to raise money to pay down national debt after a bailout by the EU and the International Monetary Fund. But the government has said it wouldn’t sell its stake to Ryanair.
Ryanair said its offer “does not require acceptance by the Irish government in order to be successful,” but argued it “represents the only means by which the Irish government can ensure that Aer Lingus will continue to be owned and managed in, as well as focused upon, Ireland.”
The EU ruling blocking Ryanair’s first takeover attempt remains the biggest obstacle to the current bid. Ryanair said that “circumstances have changed materially” since that failed bid because Europe’s airline industry has consolidated significantly.
Over recent years, Deutsche Lufthansa AG has acquired Swiss International Air Lines, Austrian Airlines and a stake in Brussels Airlines, British Airways PLC merged with Spain’s Iberia to form International Consolidated Airlines Group SA, which recently acquired smaller British Midland Ltd. Italy’s Alitalia has acquired several smaller Italian carriers.
Ryanair officials have been highly critical of all those deals, arguing that EU officials applied different standards to its 2006 bid for Aer Lingus. EU officials had ruled that because Ireland is an island, transportation to and from it are limited, and combining the two big Irish carriers would restrict competition and hurt consumers.
Another reason Ryanair cited for the new offer is that Dublin Airport now operates well below capacity, compared with at full capacity in 2006. At that time, it was “difficult for new entrants to offer services or competition to or from Dublin,” Ryanair said. Greater capacity now “creates significant availability throughout the day, thereby removing this barrier to any new entrants to Dublin Airport.”
Analysts voiced skepticism about the latest bid’s regulatory obstacles and commercial logic, particularly because Aer Lingus is very different from Ryanair. Aer Lingus has a long-haul operation that wouldn’t fit with Ryanair’s no-frills flights around Europe. Budget carriers have a poor history of managing takeovers of long-distance operations, said Craig Jenks, president of Airline/Aircraft Projects, a consulting firm in New York. Brazil’s GOL Transportes Aéreos hit trouble after taking over troubled national carrier Varig several years ago, and Germany’s Air Berlin struggled to absorb international charter carrier LTU International Airways.
“There is no example of a low-cost carrier successfully taking over a legacy carrier’s long-haul operation,” Mr. Jenks said.