While the closing of their merger agreement caps off a tough regulatory battle, and face an even more daunting challenge in integrating the two carriers and their workforces.
Dec. 9 was a significant milestone for the new American Airlines. On that day the merger was officially consummated, American exited Chapter 11 bankruptcy protection, and the new parent company's stock was listed. One more court sign-off is needed, but this is regarded as a formality.
Now begins the complicated task of melding their two operations; the smoothness of this process will determine how quickly financial benefits will be realized.
While there will be hurdles, the management of the new company is well-equipped to tackle the integration. Both airlines have experience with previous mergers, and they also have the benefit of being able to study recent mega-mergers in the U.S. airline industry. Knowing the potential pitfalls will undoubtedly help, even if risks cannot be avoided entirely.
Although now owned by one company, the carriers must continue to function under separate names until they obtain a single operating certificate, which is expected to take 18-24 months. A key interim step will be reaching a code-share agreement between the two airlines, a process they have already begun.
Co-locating gates and check-in counters at airports they both serve will be important as well. The company has achieved this at New York, and is working to do the same in other cities.
New American also must combine the separate labor groups, an aspect that has caused headaches in many previous airline mergers. The new company has a good start on the labor front, as the major unions support the deal and US Airways reached tentative agreements with American's labor groups while the merger was being negotiated.
However, there is still friction between the airlines and some of their unions, and in at least one instance between the unions that have been thrown together by the merger.
The respective pilots' unions have been particularly open to working with each other. The Allied Pilots Association (APA) and the US Airline Pilots Association (USAPA), representing American and US Airways pilots respectively, issued a joint statement applauding the closure of the merger and to underscore their cooperation with each other.
The pilot groups note that the broader trend of U.S. airline consolidation was what brought them together. They claim they are now in a more powerful position than before the merger—“rather than fight it, APA and USAPA recognized and embraced this [consolidation] trend,” the unions stated. “After many years of unfruitful talks at our respective negotiating tables we've leveraged consolidation to our collective advantage.”
According to the pilots' unions, they have “developed a collegial working relationship.” Negotiations for a joint collective bargaining agreement (JCBA) will start soon, and the labor groups have been developing contract goals together. However, the unions also acknowledge that challenges remain—including an eventual seniority integration.
Relations have not been as harmonious between the two flight attendant unions—the Association of Professional Flight Attendants representing American workers, and the Association of Flight Attendants on the US Airways side. Disagreements have arisen over how a JCBA will be negotiated, and the argument has become public.
An existing dispute between US Airways and its mechanics union may also slow the workforce integration. The International Association of Machinists and Aerospace Workers (IAM) announced it would not join other unions and management in celebrating the listing of the new company on Dec. 9.
US Airways and IAM have been locked in long-running contract negotiations, and the union says these must be resolved before it will agree to combine the two labor groups. The IAM asserts “this is a merger in name only” until this occurs.
The IAM says it formed an alliance earlier this year with its counterpart representing American mechanics and related workers, the Transport Workers Union. Under this agreement a joint body would represent both sets of employees. However, the pact stipulates that the unionized workforces will only begin the integration process once the IAM contract is set.
The American-US Airways merger also has significant ramifications beyond the two carriers. US Airways is scheduled to exit theon Mar. 30, and it will join American in Oneworld the next day.
US Airways will be an affiliate member of Oneworld until it is fully integrated with American. The new member will add 60 destinations to the Oneworld network—most in the U.S. with three in Canada and one in Mexico.