In the conversations that take place regarding the US Airways / American Airlines merger opportunity, naysayers within both companies frequently end up being the pilots.  The minority groups of these pilots like to ask for (demand) firm agreements on seniority integration and point to Doug Parker and his team being unable to achieve seniority integration for US Airways pilots since the America West / US Airways merger of 2005.

That’s really not true.  The history there is bloody but it really is the fault and responsibility of the pilots involved that combination.  Here is what has happened:

America West and US Airways pilots were both represented by ALPA.  As such, when the merger occurred there was a mechanism in place at ALPA to arbitrate such a seniority integration.  There were many issues but the overriding viewpoints on each side were centered around a couple of things.  America West pilots felt they deserved to have their seniority (and job opportunities) guarded to some fair degree because it was their airline that was consuming US Airways which had been in bankruptcy not once but twice in the same decade.  That was a reasonable viewpoint and it could have been handled by using “fences” to protect some percentage of jobs for those pilots.

US Airways pilots wanted a date of hire seniority integration because their pilot group had some very old, very senior pilots who didn’t want to be knocked down from the premium pilot opportunities.  Since these pilots had agreed to major wage concessions in two bankruptcies, they felt they had given enough at that point.  This wasn’t entirely reasonable but it wasn’t entirely unreasonable either.

In the arbitration discussions, US Airways representation basically went “hardline” and drilled in on a date of hire seniority integration and avoided discussing any ways to come to a compromise using mechanisms that would give each side some protection and some opportunity.  Fencing routes and/or aircraft was one way this could have been handled and the most senior of each pilot group could have had their retirement protected reasonably well.

But the hardline negotiations on the part of the US Airways group led to the arbitrator having to make a tough ruling that blended each group with a relative date of hire integration.  This solution had some fairly junior America West captains sitting in front of some fairly senior US Airways captains (as an example.)

US Airways pilots went livid and used the nuclear option.  They held a new union representation election and formed a new independent union called USAPA.  They were able to do this because they actually outnumbered America West pilots.  Essentially, US Airways pilots didn’t like the binding arbitration and had a rare opportunity to stick it to everyone and did so.

This breakaway and the lack of seniority integration has been litigated in court ever since between the two pilot groups.  Doug Parker and his executive team have very wisely stayed far, far away from this problem the whole time.  They’re not even sure who they should legally engage in negotiations with and have (rightly) offered the opinion that the pilots had to get their act together first.  The pilots have been unable to do so for more than 5 years.

Frankly, my own opinion is that a court should have made a decision that looked like this:

• The pilots may organize in any way they wish including creating an independent union.  However,
• The pilots must integrate according to the ALPA/Nicolau seniority integration arbitration decision before anything else occurs.  Binding arbitration that results in a decision should be enforced otherwise binding arbitration isn’t binding.
• After the seniority integration is implemented, the pilots may work out their contracts and future seniority issues among themselves and with the company leadership.

Under that scenario, no one gets their cake and the chance to eat it too.

Now, there is a reason why most pilots actually view the US Airways / AA merger as a good thing.  There is now federal law which governs a seniority integration which didn’t exist when America West bought US Airways.  This law works fairly well.  Not perfectly but it does get the job done and that’s important.

American Airlines pilots are very senior and know that under that federal law they’ll do pretty well.  If they do pretty well and the new airline is successful, their future is pretty secure and that’s what a pilot wants.

America West pilots know that they’ll do pretty well because the merger framework pretty much raises their incomes to levels never thought of before because the baseline for those wages will be AA pilot wages.  Even if they lose some positions in seniority, everyone makes a lot more money.  Best of all, USAPA almost certainly goes away as a union and that is an emotional win for America West pilots.  (I would argue that while USAPA is pretty awful as a union, they aren’t exactly upgrading big with AA’s Allied Pilots Association.)

US Airways (Old) pilots are very senior and know that they’ll do pretty well under the federal law as seniority integration goes and they, too, get a big raise.

All three parties in this know that they don’t have to deal with a multi-year mess of seniority integration if this deal is made because the McCaskill Bond statute provides adequate framework for a fairly timely seniority integration.  No union leadership in this battle has to “fight” because there is only so much that can be fought for under the law now.  Notice that in the United / Continental merger there really wasn’t much “fight” between the unions as there were few areas where any “fight” could occur.

So despite the naysayers predicting a mess of seniority integration, that’s not really true.  It will happen and the worse case scenario is that everyone gets a pay raise and gets a fairly secure future with an airline that can compete globally.  More so, Doug Parker and his team also know this and also know that if they present a deal that gets everyone a bit of what they want in a worst case scenario, they’ll be integrated in fairly short time.  They can do this deal and succeed in the labor area without much fear and most creditors know this by now.

Filed under: Mergers and Bankruptcy by ajax