When the clock struck midnight last night, no pumpkins appeared for
, whose flight attendants were set to go on strike.
Instead, negotiators for America West and the
Association of Flight Attendants
, the union that represents the airline's flight attendants, continued to work and, in the wee hours of the morning, hammered out a contract agreement.
We believe this step will allow Bill Franke, the chairman of America West, to concentrate on merger and acquisition bids that apparently were put on hold during the last few weeks of the negotiations involving the flight attendants.
According to Bill McGlashen, the AFA representative who spoke to reporters early this morning, today's tentative agreement provides "flight attendants with fair wages, a per diem and work rules that will improve the quality of life." No further details were available today.
The tentative agreement will be presented to the union membership for a vote. Even without seeing the particulars, we expect that, unlike the first agreement, which the membership soundly voted down longer than a year ago, this one will pass. This will be the first contract for the airline's flight attendants, who have worked without a contract since 1994, when they first unionized.
Like they do for other labor groups, pay rates at the airline for flight attendants lag behind other airlines considerably. Flight attendants at the top end of the pay scale, which would include about two-thirds of America West's flight attendants, make roughly $23,800 a year. This lags significantly behind competitors' pay scales. A top-tier flight attendant at
, for example, earns $41,200 a year.
Low pay rates at the airline, many of which were set after the airline came out of bankruptcy earlier this decade, are one reason the airline has enjoyed a lower cost structure than most of its competitors. However, with this contract basically settled, the next one up for negotiation is the contract with the airline and its pilots union. And, as one source told us this morning, "These guys want the moon, and there is no doubt they will strike over it." Pilots at the airline are still seething over their last contract, which many pilots viewed as too favorable to the company.
While this increase in labor costs on the horizon would seem to mean a dark cloud is forming over America West in terms of future earnings, our take is that all of this really doesn't matter.
Sources told us this morning that a new offer for the airline from
United Airlines is in the wings, and that there is active due diligence being conducted between America West and
Trans World Airlines
Don't laugh. While the proposed United deal would be much
in many ways, a TWA/America West deal would allow David Bonderman, whose
Texas Pacific Group
is a major investor in America West, to continue to be in the mix. And there are many reasons, both operationally and financially, why this match-up is not particularly bad.
Now that America West and the union representing its flight attendants have come to terms, we think we'll hear about a new purchase offer or merger plan for the airline soon. It seems like the timing is right. As one person at America West told us this morning, "There's nobody here to run it -- something has to happen."
With all the merger discussions that have been running rampant for the last several months, the airline has had a difficult time filling key positions. We also understand that many top managers have job offers in the wings.
Trading in shares of America West leading up to Friday's deadline was fairly flat. On Friday, the stock closed down 5/8 at 17 5/8.
Holly Hegeman, based in Dallas, pilots the Wing Tips and Traveling With Wings columns for TheStreet.com. At time of publication, Hegeman was long Southwest Airlines, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. You can usually find Hegeman, publisher of PlaneBusiness Banter, buzzing around her airline industry Web site at
www.planebusiness.com. While she cannot provide investment advice or recommendations, she welcomes your feedback at