Aa's Purchase Of Twa
- Thread starter Hopeful
- Start date
Delivered as received: highlighted items are my own. Make your own judgement.
Regards,
Boomer
_______________________________________________________________
ARBITRATION OPINION AND AWARD
RICHARD R. KASHER, ARBITRATOR
APRIL 29, 2002
In the Matter of an Arbitration Between
TRANSPORT WORKERS UNION OF AMERICA
And
INTERNATIONAL ASSOCIATION OF
MACHINISTS AND AEROSPACE WORKERS
And
AMERICAN AIRLINES
Involving the Integration of Seniority Lists
Of the Mechanics and Related Employees,
Fleet Service Employees, Stock Clerks and
Flight Simulator Technicians
Introduction and Jurisdiction
During the first quarter of 2001 the Transport Workers Union of America (hereinafter the “TWUâ€) became aware of American Airlines’ (hereinafter “American†or the “Carrierâ€) proposal to acquire the majority of the assets of Trans World Airlines, Inc. (hereinafter “TWA†or “TWA-LLCâ€) and to offer employment at American to TWA’s represented employees.
During this same period of time the TWU and American were engaged in contract negotiations pursuant to Section 6 of the Railway Labor Act. AS part of those negotiations and in consideration of the closing of the TWA transaction on April 10, 2001 the TWU proposed and the parties agreed to modifications of the Scope language in their basic working agreement. This new language was tentatively agreed to in June, 2002, and ratified in September, 2002. As will be more fully discussed below, the new language provides that in the event of a merger, purchase or acquisition of another company by American, the integration of employees will be governed by the agreement and will be subject to the provisions of Sections 3 and 13 of Allegheny-Mohawk, 59 CAB 22 (1972).
Following ratification of the American-TWU agreement, the parties engaged in good faith negotiations at which time they discussed issues concerning the integration of the TWA employees represented by the International Association of Machinists and Aerospace Workers (hereinafter the “IAMâ€) into American’s workforce whose employees were represented by the TWU,
The American-TWU collective bargaining agreement was the only agreement on the property which contained language providing for seniority integration using the Allegheny-Mohawk provisions.
As a result of this agreement, the TWU and the IAM met in an effort to reach agreement regarding merged seniority lists for the four (4) crafts or classes they represented, those being the Mechanics and Related Employees, Fleet Service Employees, Stock Clerks and Flight Simulator Technicians. When these meetings/negotiations proved unsuccessful the integration process was submitted to arbitration in accordance with Sections 3 and 13 of Allegheny-Mohawk.
The below-signed Arbitrator was designated to take evidence and consider the parties’ respective positions, and to confine the Opinion and Award to the single question at issue, that is:
How the system seniority lists of each of the respective employee groups shall he integrated for purposes of occupational seniority In light of the applicable provisions of the AA-TWU collective bargaining agreements?
The parties further agreed that the arbitration “shall be organized and conducted pursuant to Article 1(h) of the Mechanics and Related collective bargaining agreement, Article 1(e) of the Fleet Service collective bargaining agreement, Article 1 (1) of the Stock Clerk collective bargaining agreement and Article 1(e) of the Plight Simulator Technician collective bargaining agreement, and the standards and procedures respectively of Sections 3 and 13 of Allegheny-Mohawk, 59 CAB 22 (1972).†The above- cited articles in the four (4) American-TWU collective bargaining agreements provide as follows:
(1) The integration of seniority lists of the respective employee groups will be governed by the provisions of Sections 3 & 13 of Allegheny-Mohawk, 59 CAB 22 (1972), provided that no employee on the master seniority list will be adversely impacted in rates of pay, hours, or working conditions by the integration.
(2) The rates of pay, rules, and working conditions contained in the Basic Agreement, as amended, will not be open for collective bargaining in the event of a merger nor will the TWU or the Company have any obligation to bargain upon changes thereto except as provided in Article 47 - Duration of the Basic Agreement.
Arbitration hearings were conducted on February 27 and 28, March 1 and March 11, 2002 at the Wyndham Franklin Plaza in Philadelphia, Pennsylvania. The hearings were transcribed, and the three parties, represented by counsel, were afforded a full and fair opportunity to present all relevant evidence through the testimony of witnesses and in documentary proofs. Counsel provided the Arbitrator with post-hearing briefs in support of their respective positions concerning the question at issue. The record was held open in accordance with Paragraph No. 13 of the agreement to arbitrate in order that the Arbitrator could contact any of the parties for the purpose of clarifying their respective positions or otherwise gathering information which he deemed pertinentâ€, which he did.
Appearances
Arthur M. Luby, Esquire
Richard S. Edelman, Esquire
O’Donnell, Schwartz & Anderson
for the TWU
Robert S. Clayman, Esquire
Guerrieri, Edmond & Clayman
for the IAM
Thomas K. Reinert, Jr., Esquire
Morgan, Lewis & Bockius
For American
Witnesses:
For the TWU:
Arthur Luby, Esquire
Mr. James Little, International Vice President
Mr. Dave Davis, Consultant, Organizational Concepts
Mr. Gary Peterson, President, Local 567
For the IAM:
Mr. Stephen Sleigh, Director of Strategic Resources
Mr. Al Calhoun, General Chairman, District 142
Mr. Sito Pantoja, Grand Lodge Representative
Mr. Thomas Stalnaker, Principal, Eclat Consulting
For American:
Mr. James Weel, Managing Director, Employee Policy and Relations
Background Facts
Many of the facts recited. Herein are the product of stipulations by counsel.
The TWU, as noted above, is the representative of American’s Mechanics and Related Employees, Fleet Service Employees, Stock Clerks and Flight Simulator Technicians.
--------------------------
MASSIVE SNIPPAGE. HERE'S THE LINK
Post any highlighted parts below. Thank you.
Regards,
Boomer
_______________________________________________________________
ARBITRATION OPINION AND AWARD
RICHARD R. KASHER, ARBITRATOR
APRIL 29, 2002
In the Matter of an Arbitration Between
TRANSPORT WORKERS UNION OF AMERICA
And
INTERNATIONAL ASSOCIATION OF
MACHINISTS AND AEROSPACE WORKERS
And
AMERICAN AIRLINES
Involving the Integration of Seniority Lists
Of the Mechanics and Related Employees,
Fleet Service Employees, Stock Clerks and
Flight Simulator Technicians
Introduction and Jurisdiction
During the first quarter of 2001 the Transport Workers Union of America (hereinafter the “TWUâ€) became aware of American Airlines’ (hereinafter “American†or the “Carrierâ€) proposal to acquire the majority of the assets of Trans World Airlines, Inc. (hereinafter “TWA†or “TWA-LLCâ€) and to offer employment at American to TWA’s represented employees.
During this same period of time the TWU and American were engaged in contract negotiations pursuant to Section 6 of the Railway Labor Act. AS part of those negotiations and in consideration of the closing of the TWA transaction on April 10, 2001 the TWU proposed and the parties agreed to modifications of the Scope language in their basic working agreement. This new language was tentatively agreed to in June, 2002, and ratified in September, 2002. As will be more fully discussed below, the new language provides that in the event of a merger, purchase or acquisition of another company by American, the integration of employees will be governed by the agreement and will be subject to the provisions of Sections 3 and 13 of Allegheny-Mohawk, 59 CAB 22 (1972).
Following ratification of the American-TWU agreement, the parties engaged in good faith negotiations at which time they discussed issues concerning the integration of the TWA employees represented by the International Association of Machinists and Aerospace Workers (hereinafter the “IAMâ€) into American’s workforce whose employees were represented by the TWU,
The American-TWU collective bargaining agreement was the only agreement on the property which contained language providing for seniority integration using the Allegheny-Mohawk provisions.
As a result of this agreement, the TWU and the IAM met in an effort to reach agreement regarding merged seniority lists for the four (4) crafts or classes they represented, those being the Mechanics and Related Employees, Fleet Service Employees, Stock Clerks and Flight Simulator Technicians. When these meetings/negotiations proved unsuccessful the integration process was submitted to arbitration in accordance with Sections 3 and 13 of Allegheny-Mohawk.
The below-signed Arbitrator was designated to take evidence and consider the parties’ respective positions, and to confine the Opinion and Award to the single question at issue, that is:
How the system seniority lists of each of the respective employee groups shall he integrated for purposes of occupational seniority In light of the applicable provisions of the AA-TWU collective bargaining agreements?
The parties further agreed that the arbitration “shall be organized and conducted pursuant to Article 1(h) of the Mechanics and Related collective bargaining agreement, Article 1(e) of the Fleet Service collective bargaining agreement, Article 1 (1) of the Stock Clerk collective bargaining agreement and Article 1(e) of the Plight Simulator Technician collective bargaining agreement, and the standards and procedures respectively of Sections 3 and 13 of Allegheny-Mohawk, 59 CAB 22 (1972).†The above- cited articles in the four (4) American-TWU collective bargaining agreements provide as follows:
(1) The integration of seniority lists of the respective employee groups will be governed by the provisions of Sections 3 & 13 of Allegheny-Mohawk, 59 CAB 22 (1972), provided that no employee on the master seniority list will be adversely impacted in rates of pay, hours, or working conditions by the integration.
(2) The rates of pay, rules, and working conditions contained in the Basic Agreement, as amended, will not be open for collective bargaining in the event of a merger nor will the TWU or the Company have any obligation to bargain upon changes thereto except as provided in Article 47 - Duration of the Basic Agreement.
Arbitration hearings were conducted on February 27 and 28, March 1 and March 11, 2002 at the Wyndham Franklin Plaza in Philadelphia, Pennsylvania. The hearings were transcribed, and the three parties, represented by counsel, were afforded a full and fair opportunity to present all relevant evidence through the testimony of witnesses and in documentary proofs. Counsel provided the Arbitrator with post-hearing briefs in support of their respective positions concerning the question at issue. The record was held open in accordance with Paragraph No. 13 of the agreement to arbitrate in order that the Arbitrator could contact any of the parties for the purpose of clarifying their respective positions or otherwise gathering information which he deemed pertinentâ€, which he did.
Appearances
Arthur M. Luby, Esquire
Richard S. Edelman, Esquire
O’Donnell, Schwartz & Anderson
for the TWU
Robert S. Clayman, Esquire
Guerrieri, Edmond & Clayman
for the IAM
Thomas K. Reinert, Jr., Esquire
Morgan, Lewis & Bockius
For American
Witnesses:
For the TWU:
Arthur Luby, Esquire
Mr. James Little, International Vice President
Mr. Dave Davis, Consultant, Organizational Concepts
Mr. Gary Peterson, President, Local 567
For the IAM:
Mr. Stephen Sleigh, Director of Strategic Resources
Mr. Al Calhoun, General Chairman, District 142
Mr. Sito Pantoja, Grand Lodge Representative
Mr. Thomas Stalnaker, Principal, Eclat Consulting
For American:
Mr. James Weel, Managing Director, Employee Policy and Relations
Background Facts
Many of the facts recited. Herein are the product of stipulations by counsel.
The TWU, as noted above, is the representative of American’s Mechanics and Related Employees, Fleet Service Employees, Stock Clerks and Flight Simulator Technicians.
--------------------------
MASSIVE SNIPPAGE. HERE'S THE LINK
Post any highlighted parts below. Thank you.
Before I begin, I would first like to say that this is NOT an attack on the former TWA people; it is my analysis from a purely business point of view. All the former TWA people I work/worked with are good people and professional when doing their jobs and we all get along very well. Now to the analysis. From a BUSINESS point of view, it was a very very costly mistake. Costly in terms of the price paid: $625 million cash+$117 million in surrender of flight equipment deposits+ assumption of short term and long term obligations (especially assuming about $730 million in TWA retiree medical benefits)+ the assumption of about 2 to 3 billion in capital and operating leases. Then there is the costs of integration; repainting the airplanes and configuring them to go on the AA certificate+ the cost of employee uniforms+ the cost of employee training+ the HUGE raises the TWA people received when they were integrated (JAN 2002). These integration costs bled AA of badly needed cash. And the expenses continue with lawsuit after lawsuit filed by the former TWA people who are bitter about the fact their unions signed away their seniority. This cost AA valuable time and money and it is a distraction from the task at hand to return AA to profitability. And after all this what do they have to show for it? A STL hub that is only 30% of what it used to be and about 40 ex-TWA planes sitting in the desert that AA is still paying leases on. They should have just let TWA shut down completely and picked up what they wanted. They could have gotten the planes for the same amount along with the gate and counter space. As for the employees, they could have been treated the same as the ex-EAL employees; you want to work for AA? Start day 1 seniority part time at $6.85 and hour. And they also would not have had to assume the $730 million in TWA retiree benefits (like the EAL retirees, the TWA retirees would have got NOTHING-- no retiree medical and no passes).
Arpey said that in order to hedge fuel you need 1 of 2 things, adequate cash or a strong balance sheet. If AA had not purchsed TWA's assets then I estimate that they would have a billion more in cash and maybe 1 billion less in debt thus giving AA a positive net worth instead of a negative one. The 1 billion in extra cash and the 1 billion less in liablitites would have enabled AA to hedge an awful lot of fuel. Had they been able to hedge they would have quarterly profits, just like Southwest.
Arpey said that in order to hedge fuel you need 1 of 2 things, adequate cash or a strong balance sheet. If AA had not purchsed TWA's assets then I estimate that they would have a billion more in cash and maybe 1 billion less in debt thus giving AA a positive net worth instead of a negative one. The 1 billion in extra cash and the 1 billion less in liablitites would have enabled AA to hedge an awful lot of fuel. Had they been able to hedge they would have quarterly profits, just like Southwest.
MCI transplant
Veteran
- Jun 4, 2003
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<_< aa! I got one word for that "B.S."! Or is that two? Did I mis- spell it?aafsc said:
MCI transplant
Veteran
- Jun 4, 2003
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Boomer said:
aafsc said:
Regardless of whether one's hindsight on the TWA purchase is 20-20 (like yours), do you really believe that AA would have extra cash in the bank right now if it had not bought TWA?
Wouldn't that extra cash merely have postponed the inevitable concessions? Wouldn't AA have had to spend that extra money before the represented employees could be convinced to slash their wages/benefits by at least $1.6 billion?
Besides, AA could have hedged fuel in early 2004. It had plenty of cash to engage in fuel hedging. But as Beer and Arpey explained late last year, they predicted that hedging would not be advantageous; apparently they predicted (wrongly) that fuel was on the way down (wayyyyy down) when in fact it had just begun to rocket toward its peak of $55. Failing to hedge in early 2004 was clearly one of the biggest AA management blunders of 2004. They thought they had missed the train - but in reality, the train was still waiting on them. Too bad they flipped it the bird and ended up hedging only a few percent of 2004's fuel needs.
FWAA, In all likelyhood, the TWU leadership most likely would have caved immediately. However, the APA and APFA would have not gave concessions until the cash was just about gone (like ALPA at DL). But AA would also have had a lot less debt if it did not pursue TWA's assets. And even if the TWU did not cave, it would have been better for the cash to go to AA employees than to TWA employees (who want our seniority number) and to TWA retirees for their medical (after all they never worked for one second at AA and they are pi$$ed about their non-rev boarding position). In a way, NAAtives are paying for the TWA transaction with the concessions.
goingboeing
Veteran
- Jan 30, 2004
- 584
- 1
TWA was a bad purchase from the beginning.The demand for seats was already in decline in the year 2000 because of excess capacity and Don Carty makes the BAD decision to increase capacity.Every AA employee has payed for Carty's Folly in lots of ways ,not just money from our pocket.
LaBradford22
Advanced
- May 15, 2003
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Hopeful said:
What the hell was Carty thinking? Let's see ... we've got an airline that went bankrupt on its own during what was a good time for airlines, and we're going to take it and add several hundred million dollars to its operating costs by bringing its employees over to our labor contracts, nevermind the issues of incompatible fleets and an outdated MCI maintenance facility and the employee strife caused by integrating two independent workforces.
But ... we'll make it all up on the revenue side! Abra cadabra, just sprinkle the magic revenue pixie dust over it, and voila!!!
Sounds like a good idea to me!!!
LaBradford22
Advanced
- May 15, 2003
- 206
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goingboeing said:
If Don Carty is not the worst CEO in the history of American business, he is certainly in the bottom five. American Airlines was the king of the sky in 1998 when Carty took over. Five short years later, American Airlines was reduced to falling on its knees and begging its employees to take severe concessions in order to avoid bankruptcy. The magnitude of that failure simply boggles the mind.
Royal Ambassador
Advanced
- Nov 24, 2003
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the worst decision and outcome in the history of aviation
