Last week, the new employment contract between American Airlines (AAMRQ.PK) and its attendants passed as 60% of the flight attendants approved the new contract. After the voting, the union of the flight attendants made it clear that they wanted American Airlines to merge with US Airways (LCC).
The leadership of Association of Professional Flight Attendants addressed the flight attendants of American Airlines in a letter saying: "We will now continue our strong and concise message that we have zero confidence in this management team. We firmly believe that the only way for American Airlines to grow and compete and perhaps even to survive is through a merger that puts Doug Parker and his team in charge."
The flight attendants agreed with a new contract in order to make the process as smooth as possible. If the new contract wasn't agreed for, the bankruptcy process could have been lengthened. As of right now, pilots are the only group of employees that did not agree with the contract offered to them by American Airlines, and they will have to wait until the bankruptcy court decides on their new contract, which may have conditions worse off than the contract offered by the management of American Airlines. So at the end of the day, the approval of this contract doesn't translate into approval of the management of American Airlines.
The bankruptcy court still has the authority to accept the contract as it is, modify it or reject it altogether. Companies going through bankruptcy can also ask the bankruptcy court to make changes or even cancel the existing employee contracts. In fact, American Airlines is currently attempting to do this with the contracts it has with its pilots. The new contract with the flight attendants includes will update the pay, vacation, hours and retirement conditions of the 18,000 flight attendants that work for American Airlines.
Legally speaking, the company could emerge from the bankruptcy without new employee contracts; however, this would have made it difficult for the company to convince the bankruptcy court and its creditors regarding the feasibility of its reorganization plan. In addition, having employee contracts at hand will make a possible merger process much easier as these contracts will be good after the merger and this will reduce much of the uncertainty surrounding the story.
From the looks of it, the employees of American Airlines can't wait for the management team to change. Many of them want to see Doug Parker rather than Tom Horton running the company. Three of the unions with employees in American Airlines have agreed with Doug Parker regarding a possible merger earlier this year. As long as Doug Parker has backing of the American Airlines employees, the US Airways will be ahead of the other merger candidates in this race.
At this point, Tom Horton must be realizing that his days as the CEO of American Airlines are numbered. Most people at American Airlines including the creditors of the company will blame Tom Horton for the company's troubles and many people want him out. As the company's biggest union has said to its members in a letter: "With this vote behind us, our focus will be on achieving a merger with US Airways." The only visible resistance to the merger of two companies came from Tom Horton himself and he will have to either step away or concede and this merger will end up materializing sooner or later. This is the only chance for both companies to remain competitive.
As I mentioned in my past articles, I am bullish with US Airways. The company has posted impressive results lately. Doug Parker continues to prove that he is one of the best CEOs in the industry and his company will continue to be successful.
Disclosure: I am long LCC.