Premium-Class Service, Long Before Fliers Board

Turkish Airlines

 

 

The Turkish Airlines premium-class lounge at Ataturk Airport in Istanbul has a pool table and masseuse, and is open to members of the airline’s corporate incentive program.

 

 

By CHRISTINE NEGRONI

TO celebrate the beginning of service between Dulles International Airport and Abu Dhabi on April 2, Etihad Airways’ chief executive, James Hogan, made the 13-hour flight to Washington to host a party for 450 people with entertainment by Harry Connick Jr.

      

But do not try to talk to Mr. Hogan about New York. After four years of flying out of Kennedy International Airport, Etihad is still waiting to lease space for a premium airport lounge. 

      

Emirates Airlines of Dubai, Etihad’s competitor, has a 4,000-square-foot private waiting room overlooking the gate at Terminal 4, and business and first-class travelers can board the plane from there. This month, Delta Air Lines will open a Sky Club in the same terminal; at 24,000 square feet it will be the largest club at the airport and in the Delta system, with seating for 450 people and an additional 2,000 square feet dedicated to an outdoor deck. 

      

Offering lavish airport services to premium-class passengers is a worldwide phenomenon.

In Istanbul, Turkish Airlines built a lounge that includes a pool table and a masseuse. In Frankfurt, Lufthansa’s first-class passengers are assigned a personal assistant; when it is time to leave the cigar lounge or dining room for the plane, they are taken by private car, without having to board with other passengers. In the home bases of Emirates and Etihad, business-class passengers get deluxe accommodations; first-class passengers, ultradeluxe. 

      

“We believe that the comfort and convenience of dedicated lounges enables our passengers to enjoy the Emirates experience even before they have boarded the plane,” said Mohammed H. Mattar, divisional senior vice president at Emirates Airport Services. Etihad has a similar philosophy, which is why its executives are so frustrated at their lack of space in New York. 

      

“I can’t control customs or security; some are good, some are bad, but what I can control is our touch points,” Mr. Hogan said. “So the experience in the lounge is important to us.” 

      

Mr. Hogan complained in February that the airline was getting the runaround in New York, but by April the airline was predicting a new Etihad lounge would open at Kennedy in 2014 or 2015. “A potential space has been identified,” Niall Doheny, an Etihad spokesman, said by e-mail. JFK International Air Terminal, the company that runs Terminal 4, declined to answer questions about Etihad’s complaint. 

      

Improving the airport experience has long been a priority for airlines with heavy passenger traffic passing through their home base en route to somewhere else, according to a report on airports by the consulting firm Oliver Wyman. “In the Middle East in particular, the newly developed hubs have based their business models around transfer passengers,” the report says, but it is also true for airlines like Cathay Pacific, Singapore, Turkish and Lufthansa. Song Hoi See, chief executive of the airport services company Plaza Premium Lounge Management Hong Kong, said American airlines came late to the game. 

      

“The reason why the U.S. is lacking is because traffic used to be concentrated on domestic traveling,” Mr. Song said. “Before 9/11, it was like going on a bus, you get to the airport half an hour before the plane leaves. After 9/11, even domestic traveling meant passengers had to wait longer in the airport.”

Now some airlines in the United States have decided that giving passengers a comfortable place to wait gives them a competitive advantage, especially at older airports, which can be short on amenities like electrical outlets, Wi-Fi, quality food and beverages and a place to sit and work. 

      

“Increasingly what we’re focused on is having a highly segmented space, such that there are people in there doing work, people gearing up for the day. There are people in there unwinding and doing different things,” said Tim Mapes, senior vice president for marketing at Delta, which has spent $20 million on new or renovated lounges in Atlanta, Minneapolis, Seattle and Los Angeles, as well as in New York at Kennedy and La Guardia Airports. It is a lot of pampering and it is not over yet. Having spent 15 years managing airport lounges that cater to the minority of travelers for whom service is more important than price, Mr. Song says the trend is still evolving. 

      

“Now you go to the lounge and they provide hot food and shower, wellness services, pedicure, manicure and also business center services, more than printing, but secretary, meeting and videoconferencing,” he said. 

      

Premium services can even go beyond the airport; airlines, including Lufthansa, offer limousines, and Delta is considering what kind of amenities it can offer in city centers.

“Traditional airline thinking results in traditional customer experiences,” Mr. Mapes said. “We have to be a lifeline and have customers’ backs 24/7.”    

A version of this article appeared in print on May 1, 2013, on page F7 of the New York edition with the headline: Premium-Class Service, Long Before Fliers Board.

Filing lays out long road to the American Airlines-US Airways merger

By Terry Maxon
tmaxon@dallasnews.com
10:46 am on April 17, 2013 | Permalink

For those historians amongst us, American Airlines had laid out the long road from idea to merger navigated by American and its persistent suitor US Airways.

According to an S-4 registration document filed Monday, the first stop was an April 14, 2011, meeting of the US Airways Group board in which airline executives outlined the potential of a US Airways-American merger.

The S-4 says Tom Horton, the American’s president, approached US Airways chairman and CEO Doug Parker at an industry event Sept. 7, 2011. “Mr. Horton explained that AMR had recently completed the then-largest ever order of new aircraft and that upon entering into new labor agreements AMR might soon be positioned to engage in discussions about strategic alternatives, including a combination with US Airways Group.”

In return, “Mr. Parker agreed that a combination of the two airlines could be beneficial to both parties, and that the two should speak again after AMR had secured new labor agreements.”
AMR chairman and CEO Gerard J. Arpey called Parker in October 2011 and said “he was aware of the earlier discussion between Mr. Horton and Mr. Parker. Mr. Arpey said that once AMR had achieved new labor contracts, he would be open to discussing potential strategic transactions.”
In the same call, Arpey “encouraged Mr. Parker to consider the possibility of US Airways departing the Star Alliance and becoming a member of the Oneworld alliance as an initial step, but one that might result in a larger transaction sometime in the future.”

Of course, American and parent AMR filed for bankruptcy on Nov. 29, 2011. For about the next five or six months, we had Parker pursuing AMR/American and Horton trying to fend him off with protests that merger discussions should wait after AMR/AA emerged from bankruptcy proceedings as a reorganized, stronger company.

After that, American and the unsecured creditors committee entertained the idea as American was also developing its plan to emerge as a stand-alone carrier. We had the signing of the non-disclosure agreements, followed by a long period of negotiating.

Keep reading for a long account of the pursuit, wooing and marriage.

Horton, who took over as chairman and president of AMR and American on the evening of Nov. 28, 2011, called Parker and other airline CEOs the next day to advise them of the bankruptcy filing.
On Dec. 21, 2011, “Mr. Parker called Mr. Horton and asked if he and members of his management team could meet with Mr. Horton to discuss a potential combination,” the document said.
“Mr. Horton said to Mr. Parker that while he believed a combination could be beneficial to both companies and that he was always willing to talk, AMR and its board of directors were completely focused on completing the company’s restructuring.”

In January, US Airways hired legal and financial advisors to look at an AMR merger, a fact that Parker disclosed to Horton in a phone call. US Airways representatives began talking to the unsecured creditors committee, which had to be on board if there were to be a merger.
On April 20, 2012,

Parker and American’s three labor unions made public their secret talks to negotiate collective labor agreements that would go into effect if US Airways and American merged. Parker contacted Horton to tell him of the deals, and to present a merger proposal that would have US Airways shareholders holding 50.1 percent of the stock in the combined companies.

Horton repeated to Parker that his company’s focus was on the bankruptcy case, but he informed the AMR board that day of US Airways’ proposal.

With pressure mounting on AMR, the company and UCC on May 1 agreed to a process to consider strategic alternatives and compare them to the stand-alone plan that AMR was pursuing. But the AMR board concluded in meetings May 15 and 16 that US Airways’ April 20 proposal was too low.
“Accordingly, AMR’s board determined that the April 20 Indication of Interest did not merit further discussion,” the document said. “However, Mr. Horton explained that at a significantly different equity split a combination with US Airways Group could be attractive to AMR and its stakeholders.”
On July 10, “AMR announced that, in cooperation with the UCC, it would begin a review of strategic alternatives, including a potential merger.”

On July 17, Horton met with Parker and said the company was preparing to look at potential mergers and would soon propose some non-disclosure agreements.

AMR and its advisors in July and August “approached several other airlines to gauge their interest in a strategic combination,” the document stated.

“AMR also had discussions with potential financial investors with experience in the airline industry to gauge their interest in financially supporting an independent plan of emergence or other investment. AMR’s board was periodically apprised of the status of these potential alternatives,” it said.

On Aug. 30, 2012, American and US Airways announced publicly that they were signing non-disclosure agreements to discuss a potential merger. From there, it became a matter of negotiations.
On Oct. 22, AMR sent US Airways the form of a possible merger. On Nov. 1, the US Airways board replied with its own offer, known as the “November proposal.”

■ US Airways shareholders would get 30 percent of the combined company, with the rest going to AMR stakeholders.

■ The headquarters would be in Fort Worth.

■ The merged carrier would be branded American Airlines.

■ Parker would be chairman and CEO.

■The new company’s board would have 11 members, five picked by US Airways.

 

Parker gave Horton the November proposal on Nov. 2, and the AMR board reviewed it the same day. Although the proposal was found wanting, “at Mr. Horton’s urging, the AMR board decided it was prudent to continue pursuing a potential transaction with US Airways Group, but to set aside any discussions about management or board composition until other aspects of a transaction were resolved.”

The AMR board on Nov. 10 endorsed the idea of a merger, upon Horton’s endorsement.
“However, the board instructed Mr. Horton to inform Mr. Parker that uncertainty surrounding the combined company’s labor costs rendered it difficult to determine the right Equity Split, which AMR’s board believed needed to be in excess of 80%, and that these matters had to be addressed if discussions were to continue.”

On Nov. 14, “Mr. Horton called Mr. Parker to indicate that the AMR board had expressed its general support for the transaction. He explained, however, that AMR’s share of the Equity Split likely needed to be above 80%, and that the uncertainty surrounding the combined company’s labor costs needed to be mitigated.”

The next day, the US Airways board balked at AMR’s position that its stakeholders needed more than 80 percent of the merged company. The US Airways board said it didn’t support extending the non-disclosure agreements to take them beyond their scheduled Nov. 30 expiration.

“In addition, the board instructed management to inform AMR’s advisers that if the AMR board’s view of an appropriate Equity Split was as communicated by Mr. Horton, then it was not productive to continue discussions,” the document said.

After a series of discussions between AMR, the UCC and US Airways, Horton called Parker on Nov. 25 “and suggested that further discussions between the companies’ advisers regarding the proposed Equity Split should be deferred,” the document said.

“Mr. Horton further advised that that while he believed there was likely a solution somewhere between the two parties’ respective positions on the Equity Split, it was not possible for AMR to reach a final conclusion on the Equity Split without first mitigating the potential labor costs and risks attendant to a potential merger,” it said.

“Mr. Parker agreed that the two parties should address the labor issues and make progress on negotiating the merger agreement prior to revisiting the Equity Split.”

At an AMR board meeting on Nov. 27, the airline’s advisors said that AMR shareholders might actually get something after all, that their stock wouldn’t be entirely worthless.

Parker persuaded the US Airways board on Nov. 28 to keep talking and extend the non-disclosure agreement past its Nov. 30 expiration. The next day, the two airlines signed the extension.
In December, the unions and management worked out the transition deals that would spell out how labor would be treated in a possible merger, eliminating that potential roadblock.

The issues were narrowing down to two big questions: How would the equity in the new company be split between US Airways and AMR interests? And who would run the new company?
The registration statement doesn’t elaborate on the discussions about governance, other than to note that they happened among the airlines, the unsecured creditors committee and the Ad Hoc Committee of AMR Corporation Creditors.

But on Jan. 24, Horton and Parker met to discuss the equity split and who would run the company. Horton said the 70-30 split supported by US Airways “was insufficient,” the statement says.
“Mr. Horton also informed Mr. Parker that, assuming a transaction, while he would support Mr. Parker as CEO of the combined company, the AMR board believed that the continued involvement of senior AMR executives and managers, including Mr. Horton as chairman of the combined company’s board, was important,” it added.

Three days later, AMR board member Armando Codina, the lead independent director, sat down with Parker. He told him that the 70-30 split had to improve, that AMR shareholders needed to get something in the merger, and that the merged company’s board needed to skew more toward AMR. Or to use the document’s wording, it needed “a board composition that more closely reflected the relative ownerships of AMR’s stakeholders and US Airways Group’s stockholders.”
On Jan. 28, the next day, Parker told Horton that US Airways was prepared to go to 72-28, and agreed to weight the board more heavily to AMR.

In a Feb. 4 telephone call, Parker told Codina that US Airways was prepared to drop its requirement that AMR eliminate its liabilities for “other post-employment benefits,” namely health care coverage for retirees. US Airways would accept the 72-28 split. Codina told Parker he would support the merger at 72-28.

On that call, Codina and Parker also talked about the idea of Horton being chairman for only a limited time after the merger.

Parker and Horton discussed the terms in an exchange of emails. Parker on Feb. 5 said his board backed the 72-28 split and wasn’t requiring AMR to get rid of the post-retirement benefits. In an email the next day, Horton said his board still supported a 75-25 split, but that he’d take US Airways’ proposal back to the AMR board.

Horton also agreed in general with the idea of who would run the company, but worried that American’s managers wouldn’t get a fair chance.
“Mr. Horton reminded Mr. Parker that AMR’s board still wanted assurance that the combined company’s management would be drawn from the ‘best of the best’ of each company, and that he and Mr. Parker would be jointly involved in selecting senior executives for the combined company,” the document said.

The next day, Parker told Horton via email that Parker “would consult with him in the selection of the management team for the combined company.” On Feb. 12, they agreed on the final arrangement in which Horton would be board chairman for a maximum of a year.

Horton, other American managers, Parker and Kirby met with the unsecured creditors on Feb. 11. Two days later, the UCC voted to support the merger.


The afternoon of Feb. 13, Parker met with the AMR board and “expressed his excitement and enthusiasm for the Merger, praised AMR’s brand, heritage and people, and affirmed his belief that consolidation would position the combined company to compete effectively with United and Delta.” He assured the board that he would pick executives from both airlines with assistance from Horton.

With Parker out of the room, the AMR board voted to approve the merger. In a subsequent meeting, the US Airways board endorsed the merger as well after its financial advisors said the offer was fair.
Before the markets opened on Feb. 14, the airlines announced the merger. Horton and Parker held a conference call with analysts at 7:30 a.m. CST, then met the news media at a mid-morning press conference. The pair stood before American employees at an early afternoon meeting before Parker headed home to Phoenix to meet with his employees.

And finally, on Feb. 22, AMR and American asked the U.S. Bankruptcy Court to approve the deal.

Why American Airlines Employees Loathe Management Richard Finger, Contributor The mistrust that labor harbors for American Airlines management is a feud with a history filled with a powerful vitriol that only duplicitous behavior engenders. It all began back in 2003 when then CEO Don Carty, after multiple years of billions in losses, used the threat of bankruptcy to wring $1.8 billion in wage and other concessions from the three major constituent unions; the APA (American Pilots Association), the TWU (Transit Workers Union, an AFL-CIO affiliate), and the APFA (Association of Professional Flight Attendants). While a somber Mr. Carty preached to labor that in this dark hour the necessity for “shared sacrifice” he failed to mention the deca-millions in retention bonuses of 200 percent of salary that management had concurrently approved for top executives. The second tranche of perfidy was the major commission of the omission of disclosing the creation of a new “secret” supplemental executive retirement plan (think pension) being squirreled away only for top executives. Apparently, Mr. Carty felt no comfort in being on equal footing with rank and file employees whose primary pensions may potentially be at risk in a bankruptcy scenario. So the CEO in October 2002 clandestinely funded an irrevocable trust for the top 45 executives which specifically delineated in the trust agreement that trust assets “shall not be subject to the claims of the creditors of the corporation in a bankruptcy”…. Employees were so indignant they threatened to abrogate the recently ratified pay cut labor agreements. The retention bonuses were hastily cancelled but the supplemental pension plan remains in place to this day. Further fallout was the swift “resignation” of the woodenheaded Mr. Carty who received no severance package. But thanks to that recently created executive retirement plan, magically Mr. Carty was gifted $8.2 million. The award was actually closer to $12 million as the $8.2 million was an after tax figure. During the intervening eight year period leading up to the bankruptcy, Mr. Carty’s successor, Gerald Arpey, continued the rich American tradition of, one way or another, of rewarding failure. While recording billions in losses in his own right, Mr. Arpey was insistent in attempting to push through hundreds of millions in executive bonuses. Mr. Arpey, enjoyed regurgitating to the rank and file a pithy little cheer “share the pain, share the gain”. More accurate might have been “all the pain, with none of the gain.” The perpetual struggles of employees protest of executive bonuses in light of their own reduced circumstances leaves many both acrimonious and disillusioned. The covert supplemental retirement plan remains a festering open wound. The airline refuses to issue public disclosures as to its current assets or how much money goes to fund it or where the money comes from. Until the bankruptcy, union representatives had been negotiating since 2008 to reach new labor accords. Only since the bankruptcy with management’s legal right to reject labor contracts has the process moved forward. The Merger: Who’s Getting What Judge Sean Lane has blessed the marriage but the couple won’t be cohabitating for perhaps another six months or so. We know the equity split is 72 percent to 28 percent in favor of American shareholders. Given that stock split and an estimated $1.2 billion in cost efficiencies both secured and unsecured American Airlines creditors are likely to be repaid in full. Doug Parker will be CEO of the combined entity, and Judge Lane disallowed Tom Horton’s $20 million bonus not for any moral reasons, but because it is illegal under bankruptcy law. The board of the new company will have the legal freedom to award Mr. Horton whatever compensation they wish. American Airlines has frozen its employee pension plan which has $18.8 billion is liabilities and an estimated $ 8 billion funding shortfall. Because payments under defined benefit programs are calculated on both years of employee service and a certain percentage of final salary the American unfunded gap likely went down by a few billion. Current employees who retire in twenty years have their benefit computed as of today’s years of service and salary so actuarial future pension liabilities will by definition be reduced. The plan has been replaced with a 401k defined contribution plan where American Airlines will match employee’s contributions up to 5.5 percent of their salary. The company will likely save tens of millions annually under this defined contribution scenario as not everyone will save 5.5 percent of salary every month. Also, this shifts the investment risk from the company to the employee. And come now the egregious insult of a $20 million bonus for caretaker CEO Tom Horton. Here is one more depredation. Regardless of whether Tom Horton receives his undeserved $20 million, he has a pension worth at least $5million. Through accounting legerdemain Horton has been given credit for at least four extra years of American Airlines employment. I almost forgot about employees. Guess what they are getting; the shaft, as usual. I have been in contact with several employees both by phone and e-mail during the past couple of weeks. I got a little detail from a TWU mechanic. In the 2003 giveaway, this gentleman saw his wages reduced 17.5 percent or nearly $20 thousand per year and had vacation time reduced by a week. A decades long American Airlines employee, before the latest new labor contracts he was making a little less than $70, 000 annually. After a decade of wage stagnation, the new post-bankruptcy accord initially calls for a paltry three percent salary increase. But because of increased employee health care cost burdens, a frozen pension and the newly implemented defined contribution 401K program, our example is taking home about $4,400 less per year! While this atrocity was unfolding, the airline and the TWU jointly issued a memorandum which I think was intended as some sort of mission statement delineating myriads of “business improvement opportunities”. There is a climax which specifies areas where “Union and Company agrees……to become best in class.” Like….you just gave me my first raise in ten years which perversely cut my after tax wages by 7 percent………and you throw this nonsense in my face. Are Unions Too Cozy With Management At least in the case of the flight attendants and the mechanics I have gotten some feedback that many are less than happy about the job that APFA and the TWU are doing representing their interests. Did labor have a strong enough voice at the table? All three unions knew about and approved the $20 million bonus for Tom Horton. All three unions readily agreed to place language in the labor agreements “gagging” employees from complaining about excessive management bonuses. Some are of the opinion that inserting “gag” order language was a quid pro quo for the American Airlines reimbursing APFA $5 million for bankruptcy financial consultants and $2 million to pay investment banking firm Jefferies & Co. American also refunded to the TWU over $2.7 million in bankruptcy related expenses. At least in the case of the TWU, I came into possession of union form LM-2 which is a required annual report to the Department of Labor. Total TWU expenditures were $45.6 million versus $44.8 million in receipts. The point is that $2.7 million is not an insignificant number for the TWU. Top management at all the unions receives a designation A-5 travel pass. With this perk, APFA president Laura Glading and her family can travel first class anyplace, anytime and have priority that can bump a full fare passenger. Ms. Glading can retire at the end of her term with this benefit intact. Her predecessor, Tommy Hitto-Blake retired with A-5 travel. At the time it was kept secret from union membership. Why keep it hidden if there is nothing underhanded going on. I also came into possession of a number of TWU form L-10’s which are disclosures of gifts or perks that American Airlines doles out to union officials. I discovered thousands of dollars in free airline travel, meals, and even baseball tickets. Also, top TWU officers are appointed for life and not elected like counterparts at APA and APFA. If an appointment lacks accountability to those to whom you are to represent, then it becomes little more than a sinecure. Woven all together, a case can be made for an incestuous relationship between union management and executives at American Airlines. Top union officials make $200,000 or $250,000 or more exclusive of perks and benefits worth many thousands more. With these “cushy” jobs does there exist a lack of incentive for these agents of the workers to fight their hardest for them. Judging by the results of the latest rounds of labor negotiations, it is at least a possibility. Deregulation and The Law Of Unintended Consequences When dust has settled, and these two companies begin cohabitating together, the United States will be left with but four airlines that control 90 percent of all domestic traffic. Prior to the October 24, 1978 enactment of the Airline Deregulation Act (“Act”) or the “big bang” in airline jargon, airlines were governed by the now defunct Civil Aeronautics Board. It was a staid if not gentlemanly arrangement. It set fares and granted (or not) licenses to airlines for new routes. The system had functioned for over four decades when in the early 1970’s the Arab oil embargo drastically increased fuel prices and the economy suffered from stagflation. The rate system often subsidized inefficient routes. As air fares were escalating rapidly, congressional pressure mounted to scrap this antiquated bureaucracy. The theory was that an industry once untethered from government shackles would surely thrive under unfettered capitalism. After thirty five years and hundreds of new startup airlines, hundreds of bankruptcies, liquidations, reorganizations, and mergers, in 2013 what are the remnants of the “Act”? The Justice Department evaluates all airline mergers and acquisitions on competitive grounds with the Transportation Department and FAA chirping in background advice. Congress which has the discretion to intervene has opted out of the major mergers between United/Continental and Delta/Northwest. Each mega merger effectively grants near monopoly at many airports and for many routes. Justice denies ATT the right to merge with T-Mobile but yet blesses a United/Continental union that has limited or no competition on many routes. Either doing proper diligence is neglected or it is fair game to call Justice Department competence into question. Will Justice do their usual wink and nod and bless the US Airways/American combination that will create the world’s largest airline? If they do then airline consolidation, with full government blessing, will be complete. Four airlines (United, American/US Air, Southwest, and Delta) will control the domestic skies. Intra market monopolies will predominate to detriment of the traveler. If an aberration occurs and the marriage is denied, pundits question whether either US Airways or American can compete solo against the giant tentacles of United, Delta, and Southwest. So we’re damned if they do and damned if they don’t. With these four mega airlines having near domestic monopoly at many regional airports, contrary to whatever nonsense the consultants parade before Congress, airfares will drastically increase. I live in Houston, Texas and after the United/Continental combination, United now controls over 90 percent of domestic travel in and out of our Houston Intercontinental Airport. Many fights have been consolidated so travelers have fewer choices and fares have been radically increased .The landscape is the same at major airports like Denver, Dallas, and Atlanta. The Future After the multitudes of iterations of three and half decades, the airline industry is now structurally in its most powerful position in the history on aviation; it is poised to reap massive profits from the now entrenched government approved oligopolistic framework. Was this what the framers of the Airline Deregulation Act envisioned? These big four major airlines are all not surprisingly projected to make lots of money in 2013 and 2014. With current industry configuration, I do believe a trained chimpanzee could run these airlines profitably. Within this industry structure of near guaranteed profitability there needs to be significant profit participation formula for TWU, APFA, and APA members. These employees have truly sacrificed and the time has come for a little bit of catch-up. To prevent executives from gaming the system, calculations should be based on the same criteria that any future executive bonuses are based on. Each of the three unions should have a seat on the board of directors to act as a check against management over reach. American Airlines employees have no shortage of grievances to be angry about. It is the cronyism of this management team that serves as a paradigm for why many complain about the unfairness perpetuated in the boardrooms of corporate America. No one can know whether workers will be treated more equitably under the US Airways managers. I only know there is only one way it can go.

 

Here come the Vikings

For Bjorn Kjos, Norwegian Air Shuttle’s boss, success may depend on ruthlessness

Apr 27th 2013 | OSLO |

HE WAS a pilot in the Norwegian air force, then a lawyer. Like many Scandinavians, he has penned a thriller in his spare time. But Bjorn Kjos (pictured) is celebrated in his home country as the man who brought low-cost flying to one of Europe’s most expensive countries.

Last year the airline he co-founded and runs, Norwegian Air Shuttle (NAS), placed the biggest aircraft order Europe has yet seen. It will buy 222 Boeings and Airbuses for around $10 billion, aiming to compete with Ryanair and easyJet, Europe’s champions of cheap aviation.

In this section

 

This is on top of an earlier order for a fleet of Boeing 787 Dreamliners, which NAS will use (now that their battery problems have been fixed) to launch flights to Asia and America later this year. Offering such a long-haul, low-cost service will be fiendishly hard. Mr Kjos has the ambition and appetite for risk of a Viking hopping on a longboat and paddling off to pillage Northumberland.

To escape high Nordic labour costs and taxes, NAS is increasingly basing planes and hiring people elsewhere: in Spanish resorts and at London’s Gatwick airport. Its back office is in Latvia; its IT department is in Ukraine. It plans to run its Asian flights out of Bangkok, and hopes to fill the planes mostly with newly rich Asians enjoying their first foreign holidays. Already it is flying British tourists to Spain and Spaniards to Britain. NAS’s planes, which like Santa’s chief reindeer have shiny red noses, are set to become a familiar sight.

As Mr Kjos tells it, he became a buccaneering airline boss largely by accident. In 1993, when he was a partner in a law firm, some friends asked him to draft an investment plan to revive their collapsed aviation company, which was flying commuter routes under contract to another carrier, Braathens. Finding fresh investors proved hard, so after all the work he had put in, Mr Kjos and his brother decided to take a 55% stake (since reduced to 27%) in what became NAS. In 2001 Braathens was taken over by SAS, a struggling carrier part-owned by the governments of Sweden, Denmark and Norway, and took the commuter routes in-house. Thus Mr Kjos was forced to relaunch NAS as a low-cost airline, mainly serving Scandinavia.

As fuel prices soared in the mid-2000s, and competition from the likes of Ryanair and easyJet intensified, Mr Kjos realised that the only route to survival was to buy lots of new, fuel-efficient planes to achieve economies of scale, and to base some of them in cheaper countries. Boeing and Airbus are straining to keep up with booming demand for new aircraft, so by reserving a large chunk of their delivery slots NAS is denying potential rivals the chance to refresh their fleets with better planes.

Axeing costs, not skulls

 

Preben Rasch-Olsen of Carnegie, an investment bank in Oslo, reckons this gamble will pay off. Even before NAS’s planned expansion across Europe and beyond, there is much scope in the Nordic countries for swiping passengers from SAS—perhaps enough to fill all the new planes it will receive in the next five years.

Last month Ryanair announced a big order of its own, saying it would buy 175 Boeing 737s, probably costing around $8 billion. But whereas Norwegian is mainly ordering the re-engined “MAX” version of the 737, to be launched in 2017, Ryanair is choosing a less fuel-efficient version. Its boss, Michael O’Leary, seems to be betting on a lower fuel price than Mr Kjos. Indeed, says Mr Rasch-Olsen, a big fall in oil prices would be bad news for NAS. Other airlines with older fleets would no longer find them uneconomical to fly, so there would be lots more planes chasing the same passengers, and perhaps a price war.

Some have also assumed that Mr Kjos was betting on SAS going bust. But last year the rival airline’s threat to close itself down if staff did not accept big cuts paid off, and SAS is still flying. However, Mr Kjos argues, this is good news, not bad: it is better to have a still-limping competitor than to see it disappear and its routes and airport slots snapped up by a more efficient rival—such as Ryanair, which is sniffing around Scandinavia looking for domestic routes to fly. When Hungary’s national airline, Malev, collapsed in early 2012, it took Ryanair only hours to announce that it would take over many of its flights.

New lands to conquer

 

The move into long-distance flying is the latest example of Mr Kjos seeking to expand wherever he can. Jonathan Wober, an analyst, reckons it will be hard to recruit and manage staff at a distant Asian base, and that NAS will be competing against Asian carriers with lower costs. Many have tried unsuccessfully to fly long-haul cheaply, from Freddie Laker in the 1970s to AirAsia’s Tony Fernandes in recent years. True, says Mr Kjos, but they did not have the Boeing 787 or its forthcoming Airbus equivalent, the A350, which are designed to fly long routes profitably with fewer bottoms on seats than earlier craft.

From the Vikings to Roald Amundsen, Norwegians have always been up for a foreign adventure. But nowadays their country runs along consensual Scandinavian lines, with high costs and taxes and strong unions and labour laws. So far, says Jacob Trumpy, author of “Hoyt Spill” (High Stakes), a history of NAS, Mr Kjos has been seen as a local hero, but of late he has been acting in a rather un-Norwegian manner, demanding labour-law reforms, hiring cheap foreigners and threatening to shift more aircraft out of the country.

Parat, the main union at NAS, complains that Mr Kjos has been drafting in Spanish flight attendants to operate Norwegian domestic flights. The airline says it has brought in a few, to help cope with the summer peak, and that they are enjoying Norwegian pay and perks. The book claims that in tense talks with the unions last year, Mr Kjos threw a chair at a wall; he denies this. He says he believes he has good relations with staff but, given the threat from Ryanair and easyJet, he is “prepared to be unpopular” to save jobs.

A report this month by CAPA, an aviation consultancy, shows how cost-effective NAS has become under Mr Kjos. Since most of its staff are still Scandinavians, their average cost is almost as high as SAS’s. But since it makes far better use of them than its rival, those costs as a share of revenue are closer to easyJet’s, though still well above Ryanair’s (see chart). In the past year NAS’s post-tax profits have almost quadrupled to NKr457m ($80m), though these were far behind the €540m ($700m) that Ryanair is likely to have made.

A long way still to go, then. But is Mr Kjos moving too fast, in danger of losing his cuddly, Richard Branson-like image and becoming a media hate-figure like Mr O’Leary? That is a risk, but Norwegian opinion may be moving in his direction. Polls suggest that in this autumn’s election the left-wing coalition government will be replaced by a more free-market one.

Since 2006, Mr Rasch-Olsen reckons, Europe’s low-cost carriers have increased passenger numbers by 12% a year, whereas its full-service airlines have grown by only 2% annually. Air France-KLM and IAG (the parent of British Airways and Iberia) are now getting tough with their unions and seeking to expand their own low-cost subsidiaries. IAG said on April 23rd that it would increase its stake in Vueling, a low-cost Spanish carrier, from 45.9% to 90.5%. It has also told Iberia pilots that it will cut their pay by 18% because they rejected a cut of 14%. But despite these efforts, traditional carriers are likely to see more of their passengers carried off by the Celtic, Anglo-Saxon and now Viking raiders.

 

TWA flight attendants deserve earned seniority restored before merger is approved

By Dixie Daniels, flight attendant - 03/14/13 04:00 PM ET

One of the great workforce injustices in aviation history occurred when the Association of Professional Flight Attendants at American Airlines (APFA), took unilateral action against the former TWA flight attendants by stripping them of all earned date of hire seniority from TWA.

In an interview with The Fort Worth Star Telegram, APFA President Laura Glading admitted APFA made a “mistake” and “screwed-up big time” by stapling the TWA members to the bottom of the seniority list. Ms. Glading has done nothing to remedy that mistake. APFA continues to cause direct financial harm to the former TWA attendants hoping they will retire or quit. Because the TWA attendants were laid off after 9/11 and unemployed for almost 10 years, they lost pension contributions, salary and benefits totaling more than $2 Billion. They must continue to work and many will until they are no longer physically able.

American recently offered a $40,000 lump sum buy-out to flight attendants. Over 2,250 accepted the offer. This company action provides the solution to the seniority problem that is simple and fair. There is no harm financially or otherwise to any current American flight attendant by integrating the remaining 950 former TWA members into their proper place on the seniority list now that 2,250 are departing. By the time 2,250 depart, every American flight attendant will move up the seniority list.
Congress must demand that DOJ, DOT, and Labor, require this solution before any merger is finalized. APFA should not jeopardize a merger when it can quickly remedy its own mistake and avoid litigation on seniority and other questionable actions to spite the TWA attendants.

The litany of APFA injustices is too long to fully recount. Former TWA flight attendant Amy Ludwig started flying in 1969 and timely applied for the $40,000 buyout. Amy had stage 4 ovarian cancer. Because she was deprived of her seniority from 1969 to the acquisition in 2001, she could not depart with the first group leaving in December 2012. She was assigned to depart in June 2013. She called APFA to ask if she could depart immediately because she might not survive until June. APFA responded “If you die before your departure date, you lose your money and your heirs will forfeit the money too.” Amy died December 18, 2012. Had she not been deprived of her seniority, she would have been one of the first to choose her departure date, not one of the last. APFA stopped the earned payout and Amy’s heirs have nothing.

To further disenfranchise the TWA flight attendants, APFA changed its constitution to require that furloughed employees pay full union dues. Because TWA was unemployed for years with little or no income, they accrued substantial arrearages. When they were recalled, APFA demanded that the dues be paid. Some owed well over a thousand dollars and most could not pay, placing the vast majority of TWA flight attendants in bad standing. This means that you are denied the right to vote in elections or contract offers, access information on the APFA website or go to Congress to voice your opinion.
Almost all the 950 TWA attendants who remain could not vote in the recent APFA election for president. That election was narrowly won by Ms. Glading by 150 votes in a runoff. The same Ms. Glading who said depriving TWA of seniority was a mistake that never should have happened. She would have been defeated by TWA votes and would not be representing APFA in the merger before Congress had she corrected the mistake.

American granted a 3% equity stake in the company to the APFA workforce upon emergence from bankruptcy. APFA devised a method to disenfranchise the TWA members. Ms. Glading made the motion to use a look-back period of W-2 earnings from American when all the TWA attendants were unemployed from American for some or all of the time. The result will give the TWA attendants an insignificant percentage of the distribution compared to those who were not laid off.

If APFA merges with the Association of Flight Attendants, (AFA) at US Airways, APFA insists that both groups receive their date of hire seniority. AFA is the largest flight attendant union in the country with over 60,000 members. The AFA president wrote to Chairman Rockefeller supporting the former TWA attendants and urged Congress to act because their own constitution recognizes that the date of hire is the only fair, impartial and blind way to merge seniority lists.

APFA is playing the clock to sweep their mistake that never should have happened under the rug. APFA knows the TWA attendants will be further damaged by being on the bottom of both carriers in the combined seniority list. The problem must be corrected to avoid workforce unrest that is detrimental to the newly merged company. TWA will be only 4% of the merged workforce. Congress must insist that APFA reverse its discrimination and admitted mistake or Congress will need to legislate an end to this discrimination that has caused so much pain to a small minority. Fix it now.

Daniels has been a TWA/AA flight attendant since 1973.

Read more: http://thehill.com/blogs/congress-blog/economy-a-budget/288193-twa-flight-attendants-deserve-earned-seniority-restored-before-merger-is-approved#ixzz2OxB5nQF1
Follow us: @thehill on Twitter | TheHill on Facebook

TWA flight attendants deserve earned seniority restored before merger is approved

By Dixie Daniels, flight attendant - 03/14/13 04:00 PM ET   

 

One of the great workforce injustices in aviation history occurred when the Association of Professional Flight Attendants at American Airlines (APFA), took unilateral action against the former TWA flight attendants by stripping them of all earned date of hire seniority from TWA.
In an interview with The Fort Worth Star Telegram, APFA President Laura Glading admitted APFA made a “mistake” and “screwed-up big time” by stapling the TWA members to the bottom of the seniority list. Ms. Glading has done nothing to remedy that mistake. APFA continues to cause direct financial harm to the former TWA attendants hoping they will retire or quit. Because the TWA attendants were laid off after 9/11 and unemployed for almost 10 years, they lost pension contributions, salary and benefits totaling more than $2 Billion. They must continue to work and many will until they are no longer physically able.

American recently offered a $40,000 lump sum buy-out to flight attendants. Over 2,250 accepted the offer. This company action provides the solution to the seniority problem that is simple and fair. There is no harm financially or otherwise to any current American flight attendant by integrating the remaining 950 former TWA members into their proper place on the seniority list now that 2,250 are departing. By the time 2,250 depart, every American flight attendant will move up the seniority list.Congress must demand that DOJ, DOT, and Labor, require this solution before any merger is finalized. APFA should not jeopardize a merger when it can quickly remedy its own mistake and avoid litigation on seniority and other questionable actions to spite the TWA attendants.

The litany of APFA injustices is too long to fully recount. Former TWA flight attendant Amy Ludwig started flying in 1969 and timely applied for the $40,000 buyout. Amy had stage 4 ovarian cancer. Because she was deprived of her seniority from 1969 to the acquisition in 2001, she could not depart with the first group leaving in December 2012.

She was assigned to depart in June 2013. She called APFA to ask if she could depart immediately because she might not survive until June. APFA responded “If you die before your departure date, you lose your money and your heirs will forfeit the money too.” Amy died December 18, 2012. Had she not been deprived of her seniority, she would have been one of the first to choose her departure date, not one of the last. APFA stopped the earned payout and Amy’s heirs have nothing.

To further disenfranchise the TWA flight attendants, APFA changed its constitution to require that furloughed employees pay full union dues. Because TWA was unemployed for years with little or no income, they accrued substantial arrearages. When they were recalled, APFA demanded that the dues be paid. Some owed well over a thousand dollars and most could not pay, placing the vast majority of TWA flight attendants in bad standing. This means that you are denied the right to vote in elections or contract offers, access information on the APFA website or go to Congress to voice your opinion.
Almost all the 950 TWA attendants who remain could not vote in the recent APFA election for president. That election was narrowly won by Ms. Glading by 150 votes in a runoff. The same Ms. Glading who said depriving TWA of seniority was a mistake that never should have happened. She would have been defeated by TWA votes and would not be representing APFA in the merger before Congress had she corrected the mistake.

American granted a 3% equity stake in the company to the APFA workforce upon emergence from bankruptcy. APFA devised a method to disenfranchise the TWA members. Ms. Glading made the motion to use a look-back period of W-2 earnings from American when all the TWA attendants were unemployed from American for some or all of the time. The result will give the TWA attendants an insignificant percentage of the distribution compared to those who were not laid off.

If APFA merges with the Association of Flight Attendants, (AFA) at US Airways, APFA insists that both groups receive their date of hire seniority. AFA is the largest flight attendant union in the country with over 60,000 members. The AFA president wrote to Chairman Rockefeller supporting the former TWA attendants and urged Congress to act because their own constitution recognizes that the date of hire is the only fair, impartial and blind way to merge seniority lists.

APFA is playing the clock to sweep their mistake that never should have happened under the rug. APFA knows the TWA attendants will be further damaged by being on the bottom of both carriers in the combined seniority list. The problem must be corrected to avoid workforce unrest that is detrimental to the newly merged company. TWA will be only 4% of the merged workforce. Congress must insist that APFA reverse its discrimination and admitted mistake or Congress will need to legislate an end to this discrimination that has caused so much pain to a small minority. Fix it now.
Daniels has been a TWA/AA flight attendant since 1973.

Read more: http://thehill.com/blogs/congress-blog/economy-a-budget/288193-twa-flight-attendants-deserve-earned-seniority-restored-before-merger-is-approved#disqus_thread#ixzz2NlwkCitx

10 shocking secrets of flight attendants

By Heather Poole | The Week – 13 hrs ago

A seasoned flight attendant for a major carrier dishes 10 workplace secrets

1. If the plane door is open, we're not getting paid
You know all that preflight time where we're cramming bags into overhead bins? None of that shows up in our paychecks. Flight attendants get paid for "flight hours only." Translation: The clock doesn't start until the craft pushes away from the gate. Flight delays, cancellations, and layovers affect us just as much as they do passengers — maybe even more. Airlines aren't completely heartless, though. From the time we sign in at the airport until the plane slides back into the gate at our home base, we get an expense allowance of $1.50 an hour. It's not much, but it helps pay the rent.

2. Landing this gig is tough
Competition is fierce: When Delta announced 1,000 openings in 2010, it received over 100,000 applications. Even Harvard's acceptance rate isn't that low! All that competition means that most applicants who score interviews have college degrees — I know doctors and lawyers who've made the career switch. But you don't need a law degree to get your foot in the jetway door. Being able to speak a second language greatly improves your chances. So does having customer service experience (especially in fine dining) or having worked for another airline, a sign that you can handle the lifestyle. The 4 percent who do get a callback interview really need to weigh the pros and cons of the job. As we like to say, flight attendants must be willing to cut their hair and go anywhere. And if you can't survive on $18,000 a year, most new hires' salary, don't even think about applying.

3. We can be too tall or too short to fly
During Pan Am's heyday in the 1960s, there were strict requirements for stewardesses: They had to be at least 5-foot-2, weigh no more than 130 pounds, and retire by age 32. They couldn't be married or have children, either. As a result, most women averaged just 18 months on the job. In the 1970s, the organization Stewardesses for Women's Rights forced airlines to change their ways. The mandatory retirement age was the first thing to go. By the 1980s, the marriage restriction was gone as well.

These days, as long as flight attendants can do the job and pass a yearly training program, we can keep flying. As for weight restrictions, most of those disappeared in the 1990s. Today, the rules are about safety: Flight attendants who can't sit in the jump seat without an extended seat belt or can't fit through the emergency exit window cannot fly. The same goes for height requirements: We have to be tall enough to grab equipment from the overhead bins, but not so tall that we're hitting our heads on the ceiling. Today, that typically means between 5-foot-3 and 6-foot-1, depending on the aircraft.

4. We can be fired for bizarre reasons
Newly hired flight attendants are placed on strict probation for their first six months. I know one new hire who lost her job for wearing her uniform sweater tied around her waist. Another newbie got canned for pretending to be a full-fledged attendant so she could fly home for free. (Travel benefits don't kick in until we're off probation.) But the most surprising violation is flying while ill: If we call in sick, we aren't allowed to fly, even as a passenger on another airline. It's grounds for immediate dismissal.

5. Diet Coke is our nemesis!
Of all the drinks we serve, Diet Coke takes the most time to pour — the fizz takes forever to settle at 35,000 feet. In the time it takes me to pour a single cup of Diet Coke, I can serve three passengers a different beverage. So even though giving cans to first-class passengers is a big no-no, you'll occasionally spy 12 ounces of silver trimmed in red sitting up there.

6. If you try to sneak a dead body onto a plane, we will notice
You may have heard the story of a Miami passenger who tried to board a flight with his dead mother inside a garment bag. Why would someone do such a thing? Because it's expensive to transport human bodies! Prices vary by destination, but delivering a body on a flight can cost up to $5,000. Commercial carriers transport bodies across the country every day, and because the funeral directors who arrange these flights are offered air miles for their loyalty, they're not always concerned about finding the lowest fare.

Thankfully, I've never had someone sneak a deceased passenger on board, but my roommate did. She knew the man was dead the moment she saw him looking gray and slumped over in a wheelchair, even though his wife and daughter assured her he was just battling the flu. Midway through the flight, the plane had to make an unscheduled landing when it became apparent that no amount of Nyquil was going to revive him.

No one officially dies in-flight unless there's a doctor on board to make the pronouncement. On these very rare occasions, the crew will do everything possible to manage the situation with sensitivity and respect. Unfortunately, most flights are full, so it's not always possible to move an "incapacitated" passenger to an empty row of seats. Singapore Airlines is the most prepared. Its planes feature a "corpse cupboard," a compartment for storing a dead body if the situation arises.

7. We'll also notice if you try to join the Mile High Club
It's usually the long line of people waiting to use the bathroom that gives you away, and nine times out of 10, it's a passenger who asks the flight attendants to intervene. Strictly speaking, it's not against the law to join the Mile High Club. But it is against the law to disobey crew member commands. If we ask you to stop doing whatever it is you're doing, by all means, stop! Otherwise, you're going to have a very awkward conversation when you meet your cell mate.

8. We're the first line of defense against human trafficking
When I started flying, I never dreamed I'd be working with the police, but it's become an important part of the job. This new role started with Sandra Fiorini, an American Airlines flight attendant who testified to Congress about an 18-year-old male passenger carrying a newborn with its umbilical cord still attached. No mother in sight, just one bottle of milk and two diapers stuck in his pocket for the six-hour flight. When Fiorini reported her suspicions to the authorities, she got no response.
In 2007, Fiorini met Deborah Sigmund, founder of the organization Innocents at Risk, and they began working together to train airline employees on what to spot and who to call. In 2011, this translated into hundreds of flight attendants from different airlines volunteering to help police at the Super Bowl, a hotbed for trafficking prostitutes.

9. Seniority means shorter skirts
Our tenure on the job doesn't just determine which routes we fly and which days we get to take off; it also affects the hierarchy in our crashpad, an apartment shared by as many as 20 flight attendants. Seniority is the difference between top or lower bunk, what floor your bed is on, and just how far away your room is from noisy areas such as doors or stairwells.

Seniority even determines the length of our skirts — we can't hem them above a certain length until we're off probation. Afterward, it's OK to shorten the hem and show a little leg. Some of the friskier pilots take advantage of the long hems; they know that new hires tend to be more flattered by their advances than senior flight attendants. (One senior flight attendant I know intentionally left her skirt long just to keep these guys interested!)

10. You've never experienced extreme turbulence
More than 2 million people fly in the United States each day, and yet since 1980, only three people have died as a direct result of turbulence. Of those fatalities, two passengers weren't wearing their safety belts. During that same time period, the Federal Aviation Administration recorded just over 300 serious injuries from turbulence, and more than two-thirds of the victims were flight attendants. What do these numbers mean? As long as your seat belt is on, you're more likely to be injured by falling luggage than by choppy air.

Interestingly, on some airlines, a flight attendant's injuries in flight can't be officially classified as an on-duty injury unless it happens during what's known as "extreme turbulence" — where the captain loses control of the plane or the craft sustains structural damage. In both of those cases, the aircraft must be grounded and inspected. Because no one wants to ground a plane, captains are very hesitant to hand out the "extreme turbulence" label. A friend of mine who works closely with airline management said he's never seen a pilot label rough air as "extreme turbulence." So the next time you're nervous about some mid-flight bumps, just take a deep breath and remind yourself, "This isn't extreme!"

Heather Poole has worked for a major carrier for more than 15 years and is the author of Cruising Attitude: Tales of Crashpads, Crew Drama, and Crazy Passengers at 35,000 Feet.

In path to American's merger,
One CEO had to leave


Tom Horton and Doug Parker both wanted to run American Airlines; how 1 ultimately relented
By Scott Mayerowitz, AP Airlines Writer | Associated Press – 1 hour 0 minutes ago.. .

It wasn’t an easy fight, but by the end of this year the 51-year-old Parker will be at the helm of a combined American and US Airways, the world’s largest airline. Horton, also 51, will step aside, getting $19.9 million in cash and stock as well as a lifetime of free first class flights, excluding taxes, on American for himself and his wife. Horton will serve as chairman for about a year before stepping down. (AP Photo/LM Otero, File)

NEW YORK (AP) -- The 14-month battle for control of American Airlines came down to two men who got their start there.

When the airline filed for bankruptcy in November 2011, Tom Horton was simultaneously elevated to CEO. But from the minute he reached the top, a number of forces started converging against him. The airline's unions didn't trust him. Those owed money by American questioned his plans.

The strongest opposition, however, soon came from his old friend Doug Parker. The two had worked side-by-side as financial analysts at American's Fort Worth, Texas, headquarters in the 1980s, until Parker moved on to other airlines, eventually becoming CEO of rival US Airways.

Parker had spent the last five years looking to merge with another airline. With American in bankruptcy, he sprang into action.

By the end of the year, the 51-year-old Parker will be at the helm of a combined American and US Airways — the world's largest airline. Horton, also 51, will serve as chairman for about a year and then depart the company he worked at for nearly a quarter century. For his efforts, he will receive $19.9 million in cash and stock as well as a lifetime of free first-class tickets on American for himself and his wife.

Parker and Horton have spent most of their lives in the airline business. But that's about where the similarities end.

Horton is a buttoned-up guy who loves long runs and starts each morning with a bowl of oatmeal and freshly cut Texas peaches. Parker, on the other hand, is easily the life of a party. He commands a room and fills his conversations with energy.

There was never going to be room for both at the top of American.

This is the story of how two old friends and former protégés of legendary American Airlines CEO Robert Crandall found themselves on opposite ends of what may be the last great airline merger in the U.S. Horton and Parker declined to comment but interviews with executives, union officials, lawyers and others connected to the deal — agreed to late Wednesday — outline how it was filled with tactical negotiations, clandestine meetings and gut-wrenching decisions. The prize: A chance to bring American back to its glory days.

Horton initially was safe in his job.

When American's parent, AMR Corp., filed for bankruptcy five days after Thanksgiving in 2011, it did so from a unique position. It had lost more than $12 billion during the past decade but still had $4.1 billion in cash. That meant it didn't need to borrow money to keep operating, and that gave Horton more autonomy and control over the company's fate.

His first task was to get the airline to stop bleeding money. Aircraft leases and vendor agreements were quickly changed. The airline reviewed every part of its revenue and moved to cut labor expenses.

This was not the time to work out a merger, although Wall Street analysts were already speculating.
The official line became: American was open to a merger, but only after it emerged from bankruptcy protection. Horton's preference was for American to remain an independent airline. The unspoken reason was that American wasn't worth as much as executives hoped it would be later.

And that's exactly why Parker wanted to move quickly, while he still had the upper hand and could pay significantly less. US Airways hadn't signed new contracts with its unions in years. That was benefiting shareholders. Eventually, Parker would need to pay out large raises which would weaken his position in any merger. Time was of the essence.

In January 2012, Parker decided to shop around his idea for a merger on Wall Street and in Washington.

He wasn't the only one floating the idea of a merger.

Horton was also feeling pressure from American's creditors, who were owed $29.6 billion. Bankruptcy law gives a company 18 months to exclusively present its own plan to return to profitability. The creditors and judge have to sign off on the plan but typically sit on the sidelines.
American's creditors took a much more active role.

It started with their choice of lawyers. After American filed for bankruptcy protection, the creditors interviewed several law firms in a basement ballroom of the Sheraton New York Times Square Hotel.
"You have to decide whether you are going to be proactive or reactive," Jack Butler, of Skadden Arps Slate Meagher & Flom, told the committee.

The creditors chose proactive, and Butler's team was hired.

It probably helped that Butler had represented US Airways in its 2002 bankruptcy and Skadden's head of restructuring, Jay M. Goffman, had worked closely with Parker after 9/11, when Parker ran America West. Skadden was also America West's counsel when it later merged with US Airways.
"We said: You should pick a firm that does a lot of deals," Goffman recalled.

The full press started in February 2012, when the committee's lawyers invited Horton and two of his top lieutenants to a dinner at the firm's Times Square office. There, 38 floors above the city, overlooking the Empire State Building, creditor representatives talked about the merits of a merger. They didn't like American's plan to stay independent, thinking they could get back more of the money they were owed through a merger.

Horton stood firm, preferring to consider a merger only after American emerged from bankruptcy.
Then came American's unions.

David Bates, who was head of American's pilots' union at the time, was worried that the airline's plan would fail and the company would shortly return to bankruptcy. He also wanted to stop Horton from gutting his members' pay and benefits. So he turned to US Airways for a better deal.
"If we had hope of a better outcome, I needed to move very quickly," Bates said.

Through a mutual friend, he set up a dinner on March 12, 2012, with Scott Kirby, president of US Airways and Parker's right-hand man. They were both in New York for an investor conference and met at Oceana, an upscale seafood restaurant in the heart of Manhattan.

Kirby had reserved a private table. It turned out to be in the kitchen.

"It was private," Bates said. "Just noisy."

Bates and another union leader — Dennis Tajer — ordered a mix of East Coast and West Coast oysters. A joke was made because US Airways has two separate unions, referred to as east and west.
Kirby passed on the appetizer.

"I found out he's not a fan of oysters," Bates said.

The meeting otherwise went well. Bates and union vice president Tony Chapman flew to Phoenix 10 days later for dinner with Kirby and Parker. A steakhouse dinner quickly followed with the union's entire leadership team and most of US Airways management.

Steps were taken to ensure the meetings remained a secret.

Too many American pilots recognize Bates and the other union officials. So they flew US Airways.
Pilots will often fly other airlines in uniform and chat with the crew. That couldn't happen on these flights.

"Everybody was told to be invisible, not to talk to anyone," Bates said.

When Parker and Kirby flew to Texas to make their case to the union, there was even a higher level of secrecy. They used a private jet and Bates personally made the 12-mile drive to the meeting site in the union's red Chevrolet Suburban.

Union security guards were stationed around the Hilton Arlington, but when Bates pulled up at the back entrance, he recognized a reporter lurking nearby. He quickly made a U-turn and the meeting was moved to the union's headquarters.

Similar meetings were being held with the flight attendant union and one that represents ground service employees and maintenance workers.

Around this time, Parker sent a letter to American formally proposing a merger. US Airways would own 51 percent of the new airline. The offer wasn't taken seriously.

On April 20, Parker publically announced that American's three unions were backing a merger.
It was an audacious move.

American was still in control of its bankruptcy but suddenly there was another option on the table. The unions told the court that jobs and wages didn't need to be cut.

Wall Street analysts supported a merger, preferring Parker as the new CEO.

Horton publically told employees "nothing changes as a result of these announcements." But privately he and other top American executives were rethinking a deal.

American had originally planned to emerge from bankruptcy and talk to several airlines, including US Airways. Horton became convinced that if he waited too long, a deal might not be available to him.

"He's a great numbers guy," said Thomas Roberts, a partner with Weil, Gotshal & Manges, the law firm that represented American.

In summer, Horton alerted his board that it was time to investigate a merger.

He reached out to Parker and arranged a 6:15 a.m. breakfast on July 19 at the Jefferson Hotel in Washington. Both men had oatmeal. They spoke about sharing financial documents and Horton asked Parker to ratchet down the public push for a merger.

A deal and decision about who would run the new airline was still way off.

Three days later, Horton started to spin the idea of a merger as his own.

He told The Associated Press that the first conversation the two men had about a possible merger took place in September 2011, when Horton was just American's president. They were at an exclusive gathering of top airline executives in Wyoming known as "conquistadores del cielo," or the conquerors of the skies. During a barbeque lunch, Horton approached Parker, saying there could be value in a merger.

"I made that pitch. We nodded heads to one another," Horton had said in July 2012.
On Aug. 31, the airline announced that nondisclosure agreements had been signed and they were considering a merger.

"It does not mean we are merging — it simply means we have agreed to work together to discuss and analyze a potential merger," Parker told employees.

For the next three months, teams of lawyers, accountants and consultants started reviewing each airline's books. There were so many people that eight separate conference rooms in Weil's Dallas office were required.

US Airways executives came to Dallas to hammer out details between sips of Dr. Pepper and iced tea.

"We wowed them with Mexican food and BBQ," said Glenn West, a partner with Weil who oversaw American's negotiations.

By this point, American had secured new contracts from its unions, cut other costs and improved its revenue.

After months of negotiations, US Airways presented the merger to the creditors on Jan. 10. It proposed giving 70 percent of the new airline to them and American's employees and the remaining 30 percent to US Airways shareholders. The creditors were sold. But Horton wasn't.

His team eventually was able to shift another 2 percent ownership away from US Airways shareholders, ensuring that American's pre-bankruptcy shareholders would see some money. The new airline would be valued at $11 billion.

The only sticking point was who would lead it.

Parker badly wanted to be the one in charge. Horton, who had spent a year fixing a broken American, believed he should be able to finish what he started.

A small group of advisors met with Horton and appealed to his principles. It was time to do what was right for American. The airline needed a fresh start. Horton agreed and prepared to hand over the reins to Parker, his friend and rival for three decades.

"He's put his heart and soul into this for most of his career," says Beverly Goulet, American's treasurer and chief restructuring officer. "All things being equal, he might prefer to be the guy sitting in the CEO chair."
__
Scott Mayerowitz can be reached at http://twitter.com/GlobeTrotScott.
..