Will American Airlines Be Reborn in 2013?

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On Friday, the pilot union of AMR’s (AAMRQ.PK) American Airlines warned that the carrier’s merger with US Airways (NYSE:LCC) may be postponed until it has exited restructuring unless unions from both airlines can agree on interim contract terms. While this delay does not immediately threaten the possibility of a merger, it does provide a more favorable opportunity for American creditors to sway the carrier’s bankruptcy proceedings. If creditors block the proposal, American will face a difficult road to financial recovery because it will be left behind in the industry’s trend toward consolidation.

What is the importance of labor agreement?

As The Wall Street Journal reported on December 20, a tentative agreement to establish labor terms for pilots is a critical component of the creditors’ decision to approve a merger between the Texas-based airline and US Airways.

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Pilot unions from both carriers, along with American and US Airways executives, began negotiating a deal earlier this month that would set wages, working conditions, and terms to protect pilot seniority until a joint contract is agreed upon. If an accord is not settled “in the very near future, in all likelihood there will be no merger before American Airlines exits restructuring,” Allied Pilots Association Keith Wilson wrote in a message on the union’s website.

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