American CEO bashes US Airways; calls it desperate

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BOSTON — American Airlines CEO Tom Horton wants to set the record straight: It was he who approached US Airways CEO Doug Parker about the possibility of combining the two airlines, not the other way around.

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American Airlines CEO Tom Horton says he approached US Airways about the possibility of combining the two airlines, not the other way around.  FILE/ASSOCIATED PRESS
FILE/ASSOCIATED PRESS
American Airlines CEO Tom Horton says he approached US Airways about the possibility of combining the two airlines, not the other way around.

Horton has never made that fact public before, but he’s doing so now to send a message. If American is going to combine with US Airways or any other airline, the decision will be Horton’s.

Since American’s parent AMR Corp. filed for bankruptcy last November, Parker has been aggressively promoting a combination of the two airlines as the only way to save American. Parker has championed the idea on Wall Street and in the media and lined up support from the three labor unions at American.

Investors have treated the possibility as a near inevitability, pushing up shares of US Airways Group Inc. 150 percent over the past seven months.

In an interview with The Associated Press, Horton was emphatic that there’s more financial pressure on US Airways than American to find a partner. He cited Parker’s repeated overtures as a sign of desperation.

Perhaps the biggest problem on the horizon for US Airways is that its labor costs are going to rise, Horton said. Unions there haven’t had a new contract in more than seven years. A combination with
American would help do that because American flies many more international routes, which bring in higher fares per passenger.

American has exclusive rights until the end of December to present its own plan for restructuring to the bankruptcy court. Ultimately, it will be the bankruptcy judge and the airline’s creditors that decide its fate. American’s three unions hold a third of the creditors’ votes.

Horton said that the union leadership’s feelings are “not reflective of how the 80,000 people of American feel. So stay tuned.”

There would be some advantages to a merger for American. US Airways has a strong domestic presence that would feed well into American’s European and Latin American routes. Combined, they would be nearly equal in size to rivals Delta Air Lines and United Continental Holdings Inc. That size would help to steal away large corporate contracts.

But Horton notes that US Airways is “not the only option.” There has been talk about a merger with JetBlue Airways Corp. or Alaska Air Group, Inc., but the leaders of both airlines said publicly that they want to remain independent.

US AIRWAYS INCOME JUMPS

US Airways hit the airline jackpot in the second quarter – higher fares plus lower fuel prices. Its net income tripled to $306 million.

The results could strengthen US Airways’ case for a merger with American Airlines while American reorganizes in bankruptcy court.

The bigger profit for US Airways wasn’t because it carried a lot more passengers – traffic rose just a half-percent. But passengers paid 7.4 percent more to fly over the same period a year ago. Airlines raised fares in 2011 and early this year, and those paid off for US Airways in the quarter ended June 30.

Lower fuel prices helped, too. US Airways’ fuel spending per gallon fell 3.5 percent from a year ago, slicing about $40 million from what its fuel bill would have been at last year’s prices, CEO Doug Parker said.

– Associated Press


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