Updated from Wednesday, April 7
CHARLOTTE, N.C. (
) -- On March 17, at the conclusion of a meeting with pilots at the
Charlotte training center, CEO Doug Parker raised the topic of a potential merger.
Parker told the pilots that a provision in their contract was a barrier to any merger the carrier might pursue. About four to five dozen pilots attended the meeting, and many pilots said afterward that they found it odd that Parker would raise the topic on his own, unprompted.
"We've had talks with airlines in the past," Parker said. "This (provision) always comes up. (It) is a large issue in consolidation talks. There will not be a merger if that's where the pay rates go. Anybody we would merge with can't let the pay rates go to those levels.
"You can't have both," Parker added. "You can't have a merger with that provision. (It) will either result in a merger never being done or it will be a merger that doesn't trigger that provision."
The inspiration for Parker's remarks became clear on Wednesday, when
The New York Times
reported that US Airways and
( UAUA) United Airlines were in merger talks for at least the third time since 2000. The newspaper said that the two "are deep in their merger discussions," that "a transaction is not expected to be announced for at least several weeks," and also that "talks may still collapse" -- something worth mentioning since that is exactly what happened in 2006.
The rationale for a United/US Airways merger has not changed much since Stephen Wolf pursued one after joining US Airways as CEO in 1996. Then, as now, United was an international airline with a vast global network, but it didn't have a strong presence in the Northeast or a hub in the Southeast. US Airways, meanwhile, remains primarily a domestic carrier. Its hubs are not big enough to support extensive international flying, and its costs are not low enough to match the low-cost carriers.
A few things have changed since 2000. United has built a hub at Washington's Dulles Airport and signed a variety of partnership agreements with
, which operates a hub in Newark, N.J. US Airways still operates a Northeast shuttle, but is seeking to trade some of its slots at LaGuardia Airport with
, in return for a strengthened presence at Washington's National Airport.
US Airways retains a hub in Philadelphia, while in Charlotte it has the only Southeast hub besides Atlanta. At the start of the decade, US Airways began to add Latin American connections at Charlotte. That buildup has continued recently, with the addition of Brazil service in December.
In the west, both carriers are players. United has hubs in San Francisco and Denver and a strong presence in Los Angeles, while US Airways operates a hub in Phoenix. Since Phoenix does some of the same things that Denver does (just as Dulles does some of the same things Philadelphia does), it seems likely that one of the opportunities presented by a merger would be to reduce duplicate service.
Not surprisingly, Parker's suggestion last month that the pilot contract was a barrier to a merger brought a skeptical reaction from the pilots.
Scott Theuer, spokesman for the U.S. Airline Pilots Association, responded that "nothing in the pilot contract blocks a transaction." Theuer said the contract provision, negotiated as the carrier prepared to enter the 2002 bankruptcy, was intended to compensate pilots in the event that bankruptcy-linked concessions led to a successful outcome.
"The company agreed to a provision which brings our pay back to where it should be," Theuer said. "Now the company says it is either not going to merge or it is going to merge and make sure we do not get what we negotiated."
Earlier, in an April 1 letter to pilots, USAPA president Mike Cleary blasted Parker's remarks. "Now that the company is in a position where it may find a merger beneficial, it is ironic indeed that our CEO touts his willingness to deprive us of previously bargained-for provisions that were put in place specifically for a merger event," he said.
For several years, Parker and United CEO Glenn Tilton have been the airline industry's leading advocates for consolidation. Following the success of the 2005 US Airways/America West merger, Parker unsuccessfully pursued a hostile takeover of Delta. Tilton, meanwhile, has talked with both Continental and US Airways.
In after hours trading Wednesday night, stock in both carriers was surging. US Airways shares were up 59 cents at $8.79. United stock was up $1.49 at $20.44.
-- Written by Ted Reed in Charlotte, N.C.