United's Note to US Airways: Mergers Can Be Ugly
One factor in 2013 expectations is that costs will rise due to improved labor contracts, some already signed and some still being negotiated. Rainey said United's 2013 cost per available seat mile, excluding fuel and special items, will rise between 4.5% and 5.5% this year, with 2.5 points of that related to new labor agreements, including a pilot contract that eliminated some of the concessions made during United's bankruptcy. Rainey called that a "mark to market adjustment."
At the moment, US Airways pilots are voting on a memorandum of understanding that would temporarily do the same thing, bringing their wages to American levels. A longer-term contract would follow.
It is worth recalling that the Delta and US Airways mergers encountered early problems. Delta, for instance, had the worst on-time record among major carriers in 2010. Delta shares, which traded near $11 when the merger was announced in April 2008, spent almost all of 2009 trading in the single-digits and fell as low as $3.51 in March 2009. Analysts kept saying, "They need more time."
As for the America West/US Airways merger, it started out well as route consolidation produced sharply higher RASM. But in 2007 US Airways' on-time performance was the worst in the industry, largely because of a March 2007 computer meltdown resulting from the effort to merge two computer systems. Also, the failure to successfully complete pilot seniority integration has been a lingering embarrassment, one that could resurface as US Airways and American pilots seek to merge their seniority lists.
-- Written by Ted Reed in Charlotte, N.C.
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