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Updated Q&As – May 2, 2012

Why would we want US Airways to merge with American Airlines?

AA has lost a significant amount of our business travelers to other carriers and alliances. The current big two carriers, United and Delta, have vast networks that business travelers and corporations find desirable. The merged networks of US Airways and AA (which have very little overlap) enable us to compete as one of the big three airlines for the lucrative business and corporate traveler. AA simply cannot compete for this revenue based on the Cornerstone strategy.

In addition, the oneworld alliance would be strengthened, allowing it to better compete with Star and Skyteam. Adding US Airwaysí network to oneworld creates a larger network domestically and we may be able to lure new members into our alliance, further improving our international network.

What does US Airways offer that would be desirable for American?

US Airways particularly brings renewed strength to our East and West Coast markets. Currently our business travelers must travel west in order to travel east, since most of our connections are through Chicago and Dallas-Fort Worth. For anyone who has tried to non-rev around the Eastern US you’ve probably found yourself trying to rely on DL, UA or US rather than AA to get you to your destination. Or at least youíve found they offer many more choices than AA.

Additionally, our LaGaurdia operation has been damaged due to our lack of a Shuttle, which US Airways provides. On the East Coast, the most profitable market in the US, alone we’d go from the #4 carrier to the #1 carrier with the addition of US Airways. They also boost our presence in the Midwest from #4 to #1. The West Coast market share improves as well.

Overall, they ensure we are a major player, if not the number one carrier, in over 100 cities on the East Coast and the Midwest,
In addition, they serve more European destinations than American.

Itís our position that they also bring a management team with a proven track record of running a successful operation. US Airways has been profitable in 4 of the last 6 years.

Why is the US Airways merger better than one with Delta, JetBlue or Alaska Airlines?

APFA believes that the U.S. government would likely have significant antitrust issues with a Delta-American transaction. There is too much overlap in our destinations which could result in Delta attempting to purchase select parts of our operation, like our highly desirable Miami and South American routes and then selling off other parts, like Chicago to United. A business plan that provides for chipping off various pieces of former American Airlines does not provide for more security for our members.

JetBlue is a largely leisure travel business and would not improve our ability to lure business travelers back. Beyond the obvious disadvantage of being in separate terminals, the fact that they operate out of JFK instead of LaGuardia and Newark (airports business travelers prefer), further disadvantages us. In addition, they only provide a partial solution to one of our network deficiencies. On the other hand, the US Airways shuttle will be an extremely valuable addition to our route structure that will allow us to greatly strengthen our network and increase our business feed.

Alaska Airlines Chief Executive Bill Ayer has repeatedly expressed the companyís lack of interest in a merger. He maintains that the airline is happy to continue as a mid size carrier and can continue to grow on the west coast and succeed as a stand alone with codeshares with other carriers (currently Delta and American).

It sounds like US Airwayís management is nearly as dysfunctional as AA management. Why not just stay with the devil we know?

Admittedly, the integration of East and West flight attendants has been a difficult process and it is still not complete since the tentative agreement did not ratify. Some of the most contentious issues have been with pilots and seniority integration. Because the East and West flight attendants are both represented by AFA, seniority has never been an issue and the McCaskill-Bond legislation will resolve any issues between the three flight attendant groups. The bridge term sheet seeks to solve the merged work group problem by creating a binding arbitration process to quickly integrate all groups on the property.

US Airways management understands they need integration of all work groups as quickly as possible in order to achieve the benefits of combining the two carriers. They recognize that theyíll be able to compete for revenue with a larger network that they cannot compete for today. That, along with the synergies created in the merger allow them to provide contracts that are competitive and market rate for a big three carrier. This should not only mean improvements for AA employees but current US employees (both East and West).

This has been lost on AA management. US Airways management understands what APFA and many analysts have been saying for years. AAís problems are less associated with costs and more a function of revenue or lack there of.

How will the proposed merger affect the 1113 process and the court hearing going on right now?

AMR has made it clear that they plan to continue with the 1113 process. The Unsecured Creditorsí Committee (UCC) has not chosen to recommend ending the exclusivity period at this time. The result is that AMR management retains the exclusive right to present a plan or reorganization until September 28, 2012. In the meantime, US Airways management will continue to work with the UCC to convince them that their business plan will create more value for the bondholders and result in a successfully reorganized company that does not return to Chapter 11.

Would it be better to wait until AA emerges from the restructuring before even considering a merger with another carrier?

If we wait there are several issues:

  1. We wind up with the same management team and style that got us here in the first place. Current management is financially incentivized to complete a merger/acquisition transaction on their terms post-bankruptcy.
  2. If we lose the 1113 motion and AAís term sheet is imposed, we will suffer under the term sheet for a minimum of six (6) years and probably more due to the length of time Section Six bargaining takes.
  3. AMRís business plan is unrealistic. It adds too much capacity to the industry and is more of the same as far as the continuing on the unprofitable cornerstone strategy. Most analysts believe it relies on unrealistic assumptions. More than likely, we would be back in Chapter 11 in short order.
  4. Waiting allows other airlines to get in the game. If AMRís real plan is to seek a merger with US Airways post-reorganization (the only real option in the industry), US Airways can then seek out other suitors, increasing the cost of the transaction, further weakening our financial position.

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APFA Headquarters
1004 West Euless Boulevard
Euless, Texas 76040

M-F: 9:00AM - 5:00PM (CT)
Phone: (817) 540-0108

Call APFA

Contract & Scheduling Desk
M-F: 7:00AM - 7:00PM (CT)
Phone: (817) 540-0108

Chat APFA

After-Hours Live Chat
M-F: 3:00PM - 11:00 PM (CT)
Sat-Sun: 9:00AM - 5:00PM (CT)

APFA Events

Currently, no scheduled events...

APFA Headquarters
1004 West Euless Boulevard
Euless, Texas 76040

M-F: 9:00AM - 5:00PM (CT)
Phone: (817) 540-0108

Call APFA

Contract & Scheduling Desk
M-F: 7:00AM - 7:00PM (CT)
Phone: (817) 540-0108

Chat APFA

After-Hours Live Chat
M-F: 3:00PM - 11:00 PM (CT)
Sat-Sun: 9:00AM - 5:00PM (CT)

APFA Events

Currently, no scheduled events...

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