Friday, March 21, 2014

American Airlines: Mechanics Want to Strike, Cowen’s Still a Buyer

Remember when the merger of American Airlines (AAL) and US Airways was greeted with little angels singing hosannas and strumming their harps? Well, the integration has hit what might be its first notable snag: US Airways’ mechanics want to strike.


As a result, shares of American Airlines has dropped 1.2% to $36.11 at 1:54 p.m. today, while United Continental Holdings (UAL) has fallen 2.1% to $44.27 and Delta Air Lines (DAL) is off 1.8% at $33.05.

The Dallas Star-Telegram has the details on the union’s plans:

Union leaders for US Airways mechanics and ground workers met with American Airlines management and federal mediators this week in Washington, D.C., but made no significant progress on contract talks.

After the meetings, held at National Mediation Board offices, the International Association of Machinists reiterated its request to be released from talks and to have an impasse declared. The two sides have been in contract talks since 2011.

Before an airline union can consider a strike against its employer, it must first ask for "release" from negotiations from federal mediators. A 30-day cooling-off period begins before a union can take any stop-work action.

Cowen’s Helane Becker and Conor Cunningham call the mechanics’ request “mostly posturing.” They explain why:

We believe the statements by the IAM are mostly posturing to attempt to gain control of the combined labor group when American and US Airways are combined…We believe any strike is highly unlikely in the near term, and we would continue to remain a buyer of the shares.

Still, shares of American Airlines have gained 43% so far this year, while United Continental Holdings has risen 17% and Delta Air Lines is up 20%.

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