What the West pilots do not understand is that the majority of the East pilots would rather remain separate and keep their DOH seniority then negotiate a joint contract and have the Nicolau Award proceed.
Moreover, the majority of the combined operations revenue is on the East Coast and PHX/LAS are low yeild markets. In a merger there may be more concern on a PHX/LAS downsizing because other airlines have a stronger operations, which would create even larger profits when combined with US Airways' East Coast operation.
For example, at a recent Wall Street conference United indicated it wanted a merger partner "a compatible mate, with a presence in both the Northeast and the South and a yen for travel in Latin America."
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I'm not sure, but that does not sound like much downsizing to me. During the failed 2000 merger the DOJ offered the parties a remedy to proceed with the merger, which did not result in a major East Coast downsizing.
Here's what happened:
On July 12 UAL Corp. and US Airways jointly submitted their 21-day Hart-Scott-Rodino Act notice to the Justice Department. This notice advised the government of the airline’s intent to complete the proposed transaction and required the regulators to render an antitrust opinion by August 1. Regulators told sources that UAL submitted the final requested documentation to the Antitrust Division on July 13 and the parties genuinely tried to complete the deal.
On July 23 all interested parties met in Washington at the Department of Justice and the airlines aggressively lobbied the federal government to not oppose the transaction. The parties in attendance included airline senior management (from UAL, US Airways, AMR, and DC Air), the company’s antitrust attorneys, States Attorneys Generals from Pennsylvania, New York, and Maryland, Senator Arlen Specter (R-PA), and the Justice Antitrust Division staff lead by Deputy Attorney General for Antitrust Hewitt Pate.
Reports indicate both UAL and US Airways aggressively sought to complete the deal, but no one knows for sure if UAL’s efforts were designed to complete the transaction or to avoid a potential breach-of-contract lawsuit. Nonetheless, Pate was said to be a “problem solver†versus “problem maker†and he tried to broker a deal that the federal government believed was within established M&A guidelines and case law. The airlines had no choice but to submit the original UAL-US Airways MOU, amended by the UAL-AMR Corp. January 9 agreement, to complete the transaction by the August 1 termination date, because any material change would require up to another four month regulatory review per M&A law.
During the July 23 meeting at the Justice Department reports indicate Pate offered a solution for the deal to proceed with a government “no action†letter. The proposed changes included eliminating DC Air, selling Washington National gates/222 slots to an established carrier(s), if this carrier was AMR eliminate the Shuttle Joint Venture/limits on American Airlines growth to permit AMR to create its own independent Shuttle, and sell approximately 15 PHL gates to provide effective competition for both the post-merger route monopoly/duoply issue.
Sources with knwoldege of the discussions indicated UAL was agreeable to the governments requirements provided there would by no labor interference. Why? Simply put UAL found itself in a “catch 22â€. The Chicago- based airline was projected to lose over $1 billion during the year, it was experiencing a serious increase in costs, like other airlines has witnessed a stunning year-over-year revenue loss of approximately 10%, and had limited access to the capital markets. With open labor contracts for the mechanics and ramp workers, coupled with the AFA mid-term wage increase demands/scope clause issue, UAL could ill afford to complete the transaction and pay $4.3 billion for US Airways (minus the capital obtained from the post-merger divestitures) plus assume $8.1 billion in debt, if the airline was going to face continued labor unrest.
When UAL chairman Jim Goodwin approached the unions about UAL’s predicament and the IAM was generally agreeable, but the AFA was not. The AFA said they would support the transaction and waive their scope agreements provided the company would provide the Flight Attendants with a pilot type wage increase of 20%. The company rejected the AFA demand and when the union filed its lawsuit in U.S. District Court on July 26, UAL could not accept the governments brokered plan to complete the merger transaction(s) and the deal(s) collapsed.
Faced with no alternative and the airlines request to have the regulators announce their decision by July 27, the government was forced to issue its press release announcing it would seek injunctive relief to block the merger if the airlines attempted to complete both the UAL-US Airways and UAL-AMR transactions. In response, the airlines elected to jointly terminate the MOU and US Airways agreed to accept the $50 million termination fee.
Regards,
USA320Pilot