Exclusive: US Airways Pilots Mull Merger Contract With $10,000 Bonuses

CHARLOTTE, N.C. -- (TheStreet) -- In a crucial step on the road to a potential merger between US Airways (LCC) and bankrupt American (AAMRQ.PK) , US Airways pilot leaders are reviewing proposed contract terms agreed to by negotiators for the union and the airline.

The terms, contained in a memorandum of understanding that negotiators approved late Monday, involve a series of sensitive tradeoffs for both sides and face a difficult path before they could take effect.

That path would include backing from the executive board of the U.S. Airline Pilots Association, which is meeting Wednesday in Charlotte to review them; approval by the Allied Pilots Association board, which represents American pilots: a vote by US Airways pilots, inclusion in a final tentative contract and then approval by pilots from both US Airways and American if a merger were to occur.

Negotiating committees for the two pilot unions are scheduled to meet next week to discuss the memorandum.

Among its most important components are signing bonuses approaching $10,000 for each US Airways pilot, furlough protection for all US Airways pilots and abandonment of a "change of control" provision in the existing contract, pilots said in interviews with TheStreet. Also, the amount of flying by both pilot groups could be reduced. The pilots were not authorized to speak publicly on contract maters.

Under the negotiated terms, US Airways pilots would give up the right to "snap back" to sharply higher salaries in the event of a change of control, the pilots said. This item would provide US Airways executives with more flexibility as they seek to craft a merger with American.

The $10,000 bonuses would be based on the airline's award of $40 million to USAPA to split up among members. On Thursday, some pilots said in interviews that the amount is insufficient as a return on billions of dollars of wage and pension concessions made by US Airways pilots since a 2004 bankruptcy that enabled a 2005 merger with America West, particularly since US Airways would allocate $100 million to support pension funding for American pilots.

Other pilots would welcome the money in addition to the sharply higher pay rates a merger would bring. No one disputes that a merger would provide double-digit pay increases for most US Airways pilots, who are currently paid at a discount to pilots at the big three carriers - American, Delta(DAL) and United (UAL) .