It’s really pretty simple. US Airways doesn’t currently generate the kind of revenues American, Delta, or United do. It compensates for that by having lower costs, particularly lower labor costs. A merger pushes US Airways’ portion of a newly combined operation to American Airlines’ much higher labor costs.
You don’t have to take my word for it. The US Airline Pilots Association, US Airways’ pilots union, just signed a memorandum of understand with American’s pilots union. It said in a message to its members that “If this merger transpires, we believe this MOU is the quickest and surest path to a better lifestyle for us all.”
Key points USAPA stressed include:
o US Airways pilots will be paid the same as American pilots starting on the Effective Date (of approved Plan of Reorganization).
o After the Effective Date, US Airways pilots will receive a retrospective payment based on the new pay rates back to the date of pilot ratification.
o These new rates will result in pay increases ranging from 13% to 35% over today’s rates for this year, plus substantial annual increases for the life of the contract.
Those higher labor rates will undoubtedly render portions of US Airways’ existing route structure unprofitable, including a percentage of the flying from Charlotte, the airline’s largest hub. The only way to compensate for that is by reducing the number of flights (capacity) at CLT and/or increasing fares.