American merger could mean higher fares, analysts warn

4:13 PM, Apr 22, 2012   |    comments
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US Airways has taken a bold step toward merging with American Airlines, a prospect that would leave the country with four major airlines and probably lead to higher ticket prices.

US Airways reached an agreement Friday with American's three unions on what a combined airline would look like, drawing the unions' support for a merger.

Analysts say the last combination of major U.S. airlines - coming on the heels of Delta-Northwest, United-Continental and Southwest-AirTran mergers - would consolidate an industry that's increasingly left little room for smaller carriers.

"US Airways is in a position where if it doesn't merge, it's going to die," says Joshua Schank, president of the Eno Center for Transportation. "They saw this bankruptcy as an opportunity, and they're taking advantage of it."

And, Schank warns, "you're likely to see a bump in the cost of travel," particularly on flights between hubs served by US Airways and American such as Phoenix, Philadelphia, Chicago and Dallas.

If the airlines merge, the combined carrier would be called American Airlines and be based in American's home of Fort Worth, according to Capt. Dave Bates, president of the Allied Pilots Association.

US Airways said Friday in a filing with the Securities and Exchange Commission that it reached agreements on how to negotiate contracts with three unions representing 55,000 American workers.

The three are the Allied Pilots Association, the Association of Professional Flight Attendants and the Transport Workers Union representing mechanics and fleet-service workers.

Doug Parker, US Airways chief executive, says American's bankruptcy envisions laying off 13,000 employees, but that the merger contemplates saving at least 6,200 of the positions.

"First of all, today's news does not mean we have agreed to merge with American Airlines," Parker said in a statement. "But this is obviously an important first step along that path, and we are hopeful we can all work together to make this happen."

But Thomas Horton, chief executive of American's parent, AMR, has indicated he'd prefer American remain independent until it emerges from bankruptcy reorganization.

American is seeking to throw out labor agreements with the unions that govern pay, benefits and work rules, and impose its own terms on employees.

Bankruptcy court arguments on those proposals start today.

Union leaders say a merger would be the best and fastest way to restructure American.

By Bart Jansen, USA TODAY

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