TWU informer
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The industry standard is unlimited outsource as long as the outsource does not cause loss of job to current employees.
APA,APFA & TWU
- Thread starter aapitbull
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The industry standard is unlimited outsource as long as the outsource does not cause loss of job to current employees.
strikeforce
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Was that language placed in the CBA's before or after UA, DL, WN & UPS outsourced 100% of OH??
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What I do not understand is how the users of this board can show a direct connection to the other airlines that went through bankruptcy. Laws have change, the company carried a cash balance going into bankruptcy. The company is their own debtor in possession.The company is renewing it's fleet and is offering to keep 40% of it's work force at a lower rate. while the other airlines had the ability to outsource 100%. Can anyone clear the differences up?
WorldTraveler
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except not every other airline does outsource 100%.
If AA keeps a significant amount of maintenance capabilities in-house but reduces the wages of a number of the people that do the work, then they have just added a different twist to the maintenance formula that other carriers have used... not unlike Delta's use of ready reserves in airport customer service.
It is a viable alternative from the company's perspective but it still results in the loss of full-time, permanent, full scale employees. No one argues either method is ideal or in the best interests of employees.
But as the outsourced MRO business continues to evolve, there could be a case for saying that AA can be cost competitive by keeping maintenance in-house but using a higher percentage of lower paid workers. If it means that AA can keep maintenance inhouse at least the argument that quality control is stronger when done in the US, then that is a plus over foreign MROs.
As with any restructuring, there will be people laid off in the process...
strikeforce
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what law prevents the company from asking for 100% outsourcing of OH in binding arbitration??? By accepting Binding Arbitration, the union is placing the entire CBA at risk, including scope. You know what your getting with the term sheet. In binding arbitration, the TWU is placing the entire membership at risk. AA can ask and get 100% outsourcing of OH because that's what their competitors have. The union just lost an additional 4K to 5K jobs at the stroke of a pen from neutral arbitrators that will also take into account that AA is BK and is on the brink of extinction.
strikeforce
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Ok. so what's the percentage of outsourcing at UA, DL, WN & UPS, if it's not 100%?? Is it more than 40%???
WorldTraveler
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I don't have the numbers right here but I believe statistics show that DL and UA outsource about 60% of their maintenance. I don't know that there are any statistics specific to overhaul.
And according to the same statistics, AA's total maintenance outsourcing is about 25%.
Remember that in DL's case that number is offset by insourcing - which is about equivalent to 25% of the total DL spends on maintenance... or DL's NET outsourcing is probably somewhere around 40%. And DL's execs have said they want to double DL's insourcing business in the next couple years.
.
Whose planes are in the hangars at US airlines is less important than that they employ US workers -making the maximum wage possible.
Even by AA's own charts on the aanegotiations.com site it ranges from 40%-60% for all other airlines. No body wants to have their pants around their ankles if an "incident" were to occur as the result of an MRO's negligence. Strike, your 100% outsource is just not going to happen.
strikeforce
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does the union want to risk additional job loses in BA?? at the sake of gaining what??
eolesen
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Without having anything to back me up, I'm pretty certain UPS, FDX, JBLU, VX, G4 and NK outsource 100% of their overhaul.
I'm also pretty certain that pre merger CO was also outsourcing close to 100% of their OH, but could be mistaken on that. They used to have some overhaul at EFD, ELP & LAX, but IIRC, that's been gone since the 1990's bankruptcy.
I don't recall what ALK or HA are doing for overhaul, but I'm pretty certain they have little to no capability to insource.
WN outsources probably in the 60-70% range.
Pre-merger UA's likely higher than 60% since OAK and IMC were both shuttered.
No idea what infrastructure is left for US, but again, a number higher than 40%.
DL? Your guess is as good as anyone's. WT's claim that they offset with the 3P work sounds great, but 3P work can also evaporate very quickly.
Bringing their own work in sounds great, but if you don't already have the tooling to handle an A330 or its components, wishing it to happen doesn't mean it makes economic sense to do so.
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While some unions want to divide overhaul from other types of maintenance, it is an unnatural division. There is good money to be done in line maintenance and some airlines make money doing line maintenance even if they don't do overhaul. It is possible for one carrier to make money on line money doing insourcing while other carriers outsource even line maintenance.
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Freight carriers typically operate older aircraft than passenger carriers and they also are newer. The basis for comparison is between passenger carriers, and even specifically network carriers to other network carriers. Low fare and cargo carriers never went down the road of establishing large maintenance operations in the first place; the standard should be what carriers who had those capabilities and who operate a mix of new and older aircraft across vast networks in passenger service do.
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Any work can dissipate whether it be done by employees or not but the reality is that MRO business is not shrinking, including at DL. The fact that they believe there is room for them to grow that business speaks well about the possibility for an airline to do not only its work but also make money doing work for others. Even if AA keeps its maintenance in-house, they are clearly going to shrink their maintenance operations as they bring in hundreds of new aircraft (if they succeed at doing so, which they should). OTOH, there is a growing shortage of quality maintenance services worldwide as Bob Owens has told us and one of the strengths that both AA and DL have is that they still have extensive maintenance operations and capabilities.
While it is not realistic to think that AA will emerge from this restructuring doing the same level of maintenance work they do now, either based on volume or scope, I continue to hope that AA's business plan will include actively seeking a significant amount of insourcing.
There will always be a market for quality work and there is no reason to believe AA can't compete and succeed in that market.
.
Freight carriers typically operate older aircraft than passenger carriers and they also are newer. The basis for comparison is between passenger carriers, and even specifically network carriers to other network carriers. Low fare and cargo carriers never went down the road of establishing large maintenance operations in the first place; the standard should be what carriers who had those capabilities and who operate a mix of new and older aircraft across vast networks in passenger service do.
.
Any work can dissipate whether it be done by employees or not but the reality is that MRO business is not shrinking, including at DL. The fact that they believe there is room for them to grow that business speaks well about the possibility for an airline to do not only its work but also make money doing work for others. Even if AA keeps its maintenance in-house, they are clearly going to shrink their maintenance operations as they bring in hundreds of new aircraft (if they succeed at doing so, which they should). OTOH, there is a growing shortage of quality maintenance services worldwide as Bob Owens has told us and one of the strengths that both AA and DL have is that they still have extensive maintenance operations and capabilities.
While it is not realistic to think that AA will emerge from this restructuring doing the same level of maintenance work they do now, either based on volume or scope, I continue to hope that AA's business plan will include actively seeking a significant amount of insourcing.
There will always be a market for quality work and there is no reason to believe AA can't compete and succeed in that market.
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AMR Risks Cash Drain as Discord Bogs Down Union Concession Talks
By Mary Schlangenstein - Tue Mar 13 04:01:00 GMT 2012
American Airlines (AMR)’ push for $1.25 billion in labor savings is bogging down, possibly imperiling its turnaround bid, as the union strife that preceded parent AMR Corp.’s bankruptcy spills into a new round of talks.
A failure to win negotiated concessions would force AMR to ask a bankruptcy judge to let it impose new contract terms, adding legal steps and prolonging losses, said Vicki Bryan, a senior bond analyst at New York-based Gimme Credit LLC.
A slower turnaround would erode AMR (AAMRQ)’s $4.1 billion in cash and short-term investments on hand as of Feb. 29, the same total as three months earlier when the company filed for Chapter 11 protection. That hoard, a record for a U.S. airline entering bankruptcy, has bolstered American’s goal of fending off any suitors and remaining an independent carrier.
“Cash is limited,” Bryan said in an interview yesterday. “It’s going to only get worse the longer the beast is bleeding. That hemorrhaging is going to cost money.”
The prospect of a new labor-management standoff echoes the five years of failed contract talks at the third-largest U.S. airline before AMR entered bankruptcy. The Fort Worth, Texas- based company ended 2011 with its fourth straight annual loss, pushing the cumulative deficit over that span to more than $6 billion.
While AMR hasn’t said when it will ask Judge Sean Lane in Manhattan for the power to dictate contract terms, it has signaled that such a step is near and noted that losses persist. Bankruptcy law requires a good-faith effort to negotiate concessions first.
‘Extremely Slow’
“It is vital that we reach consensual agreements very soon with all of our unions,” Bruce Hicks, a spokesman for American, said yesterday in a statement. “We are still a long way from that point and can’t afford to continue at this extremely slow pace.”
Since unveiling a plan for 13,000 job cuts on Feb. 1 and beginning talks, American has been sued by its pilots and challenged last week by work groups representing 49,700 employees to submit to binding arbitration. Labor makes up the bulk of American’s plan for $2 billion in cost reductions.
“American must acknowledge that its term sheet is not written in stone, but can and must be molded and transformed for creative and mutually beneficial solutions,”
Laura Glading, president of the
Association of Professional Flight Attendants, told members in a hotline message.
The Transport Workers Union, which represents mechanics and bag handlers, said after the arbitration request was submitted that “all efforts” for direct negotiations had been exhausted.
Takeover Equation?
While protracted legal wrangling with unions may deter possible suitors because of questions about future costs, jettisoning contracts over labor’s objections also may add to the risk of a takeover, said Jeff Straebler, an independent airline analyst in
Stamford, Connecticut.
That’s because American’s three major unions and insurer Pension Benefit Guaranty Corp. hold four of nine seats on AMR’s unsecured-creditors committee, Straebler said.
“A potential acquirer could offer a deal that would secure those votes, and would only need one more” to have a majority of the panel, Straebler said.
US Airways Group Inc. (LCC) has said it’s weighing a possible AMR merger, and TPG Capital and
Delta Air Lines Inc. (DAL) also are evaluating bids, people familiar with the matter have said.
Even going to court to throw out labor contracts takes time. Once such a request is made, a hearing must begin within 21 days, and the judge must rule within 30 days. Talks could be held during the interval and lead to an agreement before a judicial order.
‘Long, Bad History’
American and its unions “just have such a long, bad history that it may end up being the judge will have to make unilateral decisions on what ends up being the new contracts,” said
Michael Derchin
, a CRT Capital Group LLC analyst in Stamford, Connecticut. “It’s unfortunate from a labor standpoint.”
The airline has blamed its bankruptcy filing in part on annual labor costs that are about $800 million more than those of its largest rivals,
United Continental Holdings Inc. (UAL) and Delta.
With the latest negotiations stymied, American stepped back on March 7 from a demand to terminate its underfunded pensions, saying it would freeze plans for employees other than pilots.
Arbitration Request
A day later, the Allied Pilots Association, TWU and the flight attendants union asked the National Mediation Board
to intervene and send the airline’s job-cut plan to binding arbitration. Neutral examiners would study positions on both sides and craft solutions.
“What they’re asking for is pretty extraordinary,” said Richard L. Wyatt, a partner at Hunton & Williams in Washington who has represented major airlines in collective bargaining disputes. “The NMB doesn’t have that power. American is, for better or worse, under supervision of the
bankruptcy court. I can’t imagine they’d agree to this and basically take it out of court oversight.”
American hasn’t commented publicly, saying it would wait until being asked for a response from the NMB. The board hasn’t replied to Bloomberg News requests for comment.
“Bargaining a consensual agreement may not prove to be possible,” APA President David Bates
told members last week. The TWU reacted to the pension freeze by calling it a “major move forward” while saying the union still needs “consensual agreements with all TWU-represented work groups.”
United’s former parent, UAL Corp. (UALAQ), secured union agreements to help cut spending by $4 billion, including eliminating almost 24,000 jobs, before leaving Chapter 11 in 2006. Delta got rid of 6,000 jobs in bankruptcy.
Bitter Feelings
The former Northwest Airlines chopped its workforce by 22 percent while in court protection and imposed new contract terms on attendants after bargaining failed. A year later, the attendants union was still demanding that then-CEO Doug Steenland resign.
“The history of airlines in bankruptcy has been one of judges plunging ahead and the union and workers be damned,” said Ray Abernathy, a spokesman for American attendants in their 1993 strike who now leads a Washington-based labor communications firm. “That’s happened over and over again. I don’t see anything here that would change that.”
Labor memories also run deep at American, where unions agreed to $1.6 billion in givebacks in 2003 amid an earlier bankruptcy threat. CEO
Tom Horton’s predecessor, Gerard Arpey, stirred hopes of management goodwill that year when he took the job after those givebacks.
Labor Opening?
Pilots saw a similar opportunity with Horton, 50, who succeeded Arpey on the day the company filed for Chapter 11, said Sam Mayer, an APA spokesman.
“In our initial talks with the new CEO that was emphasized: ‘You have an opportunity here to take the first steps to reset the culture,’” Mayer said. “What we have seen in the initial stages of this process is more of the same, almost a doubling down of the old way of doing business.”
Even before last week’s efforts to inject the mediation board into the bankruptcy cuts, the pilots union went to court to challenge American’s right to rework labor contracts, forcing the airline to defend another legal front.
“At the very least, this throws a wrench in the gears,” Robert Mann, a former executive at American who now runs consultant R.W. Mann & Co. in Port
Washington, New York. “This is a prima facie example of how toxic the relationship is all across the property. This is just the tip of the iceberg, but it’s obviously capable of taking down the whole ship.”
By Mary Schlangenstein - Tue Mar 13 04:01:00 GMT 2012
American Airlines (AMR)’ push for $1.25 billion in labor savings is bogging down, possibly imperiling its turnaround bid, as the union strife that preceded parent AMR Corp.’s bankruptcy spills into a new round of talks.
A failure to win negotiated concessions would force AMR to ask a bankruptcy judge to let it impose new contract terms, adding legal steps and prolonging losses, said Vicki Bryan, a senior bond analyst at New York-based Gimme Credit LLC.
A slower turnaround would erode AMR (AAMRQ)’s $4.1 billion in cash and short-term investments on hand as of Feb. 29, the same total as three months earlier when the company filed for Chapter 11 protection. That hoard, a record for a U.S. airline entering bankruptcy, has bolstered American’s goal of fending off any suitors and remaining an independent carrier.
“Cash is limited,” Bryan said in an interview yesterday. “It’s going to only get worse the longer the beast is bleeding. That hemorrhaging is going to cost money.”
The prospect of a new labor-management standoff echoes the five years of failed contract talks at the third-largest U.S. airline before AMR entered bankruptcy. The Fort Worth, Texas- based company ended 2011 with its fourth straight annual loss, pushing the cumulative deficit over that span to more than $6 billion.
While AMR hasn’t said when it will ask Judge Sean Lane in Manhattan for the power to dictate contract terms, it has signaled that such a step is near and noted that losses persist. Bankruptcy law requires a good-faith effort to negotiate concessions first.
‘Extremely Slow’
“It is vital that we reach consensual agreements very soon with all of our unions,” Bruce Hicks, a spokesman for American, said yesterday in a statement. “We are still a long way from that point and can’t afford to continue at this extremely slow pace.”
Since unveiling a plan for 13,000 job cuts on Feb. 1 and beginning talks, American has been sued by its pilots and challenged last week by work groups representing 49,700 employees to submit to binding arbitration. Labor makes up the bulk of American’s plan for $2 billion in cost reductions.
“American must acknowledge that its term sheet is not written in stone, but can and must be molded and transformed for creative and mutually beneficial solutions,”
Laura Glading, president of the
Association of Professional Flight Attendants, told members in a hotline message.
The Transport Workers Union, which represents mechanics and bag handlers, said after the arbitration request was submitted that “all efforts” for direct negotiations had been exhausted.
Takeover Equation?
While protracted legal wrangling with unions may deter possible suitors because of questions about future costs, jettisoning contracts over labor’s objections also may add to the risk of a takeover, said Jeff Straebler, an independent airline analyst in
Stamford, Connecticut.
That’s because American’s three major unions and insurer Pension Benefit Guaranty Corp. hold four of nine seats on AMR’s unsecured-creditors committee, Straebler said.
“A potential acquirer could offer a deal that would secure those votes, and would only need one more” to have a majority of the panel, Straebler said.
US Airways Group Inc. (LCC) has said it’s weighing a possible AMR merger, and TPG Capital and
Delta Air Lines Inc. (DAL) also are evaluating bids, people familiar with the matter have said.
Even going to court to throw out labor contracts takes time. Once such a request is made, a hearing must begin within 21 days, and the judge must rule within 30 days. Talks could be held during the interval and lead to an agreement before a judicial order.
‘Long, Bad History’
American and its unions “just have such a long, bad history that it may end up being the judge will have to make unilateral decisions on what ends up being the new contracts,” said
Michael Derchin
, a CRT Capital Group LLC analyst in Stamford, Connecticut. “It’s unfortunate from a labor standpoint.”
The airline has blamed its bankruptcy filing in part on annual labor costs that are about $800 million more than those of its largest rivals,
United Continental Holdings Inc. (UAL) and Delta.
With the latest negotiations stymied, American stepped back on March 7 from a demand to terminate its underfunded pensions, saying it would freeze plans for employees other than pilots.
Arbitration Request
A day later, the Allied Pilots Association, TWU and the flight attendants union asked the National Mediation Board
to intervene and send the airline’s job-cut plan to binding arbitration. Neutral examiners would study positions on both sides and craft solutions.
“What they’re asking for is pretty extraordinary,” said Richard L. Wyatt, a partner at Hunton & Williams in Washington who has represented major airlines in collective bargaining disputes. “The NMB doesn’t have that power. American is, for better or worse, under supervision of the
bankruptcy court. I can’t imagine they’d agree to this and basically take it out of court oversight.”
American hasn’t commented publicly, saying it would wait until being asked for a response from the NMB. The board hasn’t replied to Bloomberg News requests for comment.
“Bargaining a consensual agreement may not prove to be possible,” APA President David Bates
told members last week. The TWU reacted to the pension freeze by calling it a “major move forward” while saying the union still needs “consensual agreements with all TWU-represented work groups.”
United’s former parent, UAL Corp. (UALAQ), secured union agreements to help cut spending by $4 billion, including eliminating almost 24,000 jobs, before leaving Chapter 11 in 2006. Delta got rid of 6,000 jobs in bankruptcy.
Bitter Feelings
The former Northwest Airlines chopped its workforce by 22 percent while in court protection and imposed new contract terms on attendants after bargaining failed. A year later, the attendants union was still demanding that then-CEO Doug Steenland resign.
“The history of airlines in bankruptcy has been one of judges plunging ahead and the union and workers be damned,” said Ray Abernathy, a spokesman for American attendants in their 1993 strike who now leads a Washington-based labor communications firm. “That’s happened over and over again. I don’t see anything here that would change that.”
Labor memories also run deep at American, where unions agreed to $1.6 billion in givebacks in 2003 amid an earlier bankruptcy threat. CEO
Tom Horton’s predecessor, Gerard Arpey, stirred hopes of management goodwill that year when he took the job after those givebacks.
Labor Opening?
Pilots saw a similar opportunity with Horton, 50, who succeeded Arpey on the day the company filed for Chapter 11, said Sam Mayer, an APA spokesman.
“In our initial talks with the new CEO that was emphasized: ‘You have an opportunity here to take the first steps to reset the culture,’” Mayer said. “What we have seen in the initial stages of this process is more of the same, almost a doubling down of the old way of doing business.”
Even before last week’s efforts to inject the mediation board into the bankruptcy cuts, the pilots union went to court to challenge American’s right to rework labor contracts, forcing the airline to defend another legal front.
“At the very least, this throws a wrench in the gears,” Robert Mann, a former executive at American who now runs consultant R.W. Mann & Co. in Port
Washington, New York. “This is a prima facie example of how toxic the relationship is all across the property. This is just the tip of the iceberg, but it’s obviously capable of taking down the whole ship.”
If PBGC is not getting the AA pensions why are they on the unsecured-creditors committee
Mr Red
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It hinges on a Ratified CBA. No agreement, No Freeze.
