Special Report: Two major ALPA contract violations


May 18 Special Airline Report

Prepared by Chip Munn

US Airways 170 Firm Delivery Regional Jet Aircraft Order Appears To Violate Pilot’s Contract

US Airways – ALPA Restructuring Agreement, Small Jets, Attachment B


Definitions of Small Jets – Large SJs are defined as jet aircraft having a certificated capacity of 51-70 seats and a certificated maximum gross takeoff weight not greater than 75,000 pounds. In addition Large SJs include (a) the EMB-170 aircraft with a maximum seating capacity of 78 seats and a certificated maximum gross takeoff weight of 82,100 pounds and (B) the EMB-175 aircraft with a maximum gross takeoff weight not greater than 86,000 pounds, provided, however, that every such EMB-170 and EMB-175 aircraft will only be configured for operations with a seating capacity of no more than 76 seats. Any jet aircraft configured for operation with more than 76 seats or with a certificated maximum gross takeoff weight greater than 86,000 pounds shall be operated by US Airways.

Accelerated Small Jets - Letter of Agreement #83


Other than as specifically modified in this Letter of Agreement, all terms and conditions of the ALPA-US Airways Restructuring Agreement effective July 1, 2002 (hereinafter referred to as the Restructuring Agreement) as modified by the Supplementary Cost Reductions Letter of Agreement (L.O.A. 84), shall remain in full force and effect.

2. The terms and conditions for placement of the Small Jet code share aircraft that are authorized to be placed at other carriers and flown under the US Airways code by the provisions of Attachments B, B-1, and B-3 of the Restructuring Agreement shall be modified under the terms and conditions stated below:

C. Up to 25 Large SJs, specificially limited to the CRJ-700, may be placed into revenue operation at a Participating Wholly-Owned Carrier, other than MDA. All Large SJ positions created by operation of this paragraph shall be filled by US Airways pilots in accordance with the Jets for Jobs Protocol, Attachment B-3 of the Restructuring Agreement. In addition, as an exception to the Jets for Jobs Protocol, 100% of the first 25 Medium or Small Jet positions at the Wholly Owned Carrier where the above Large Small Jets are placed shall be filled by pilots of that Wholly Owned Carrier. Upon completion of the staffing of these aircraft, the 50/50 balance of hiring pursuant to the Jets for Jobs Protocol will be followed.


US Airways Slated As Launch Customer of CRJ-700 Variant


WASHINGTON (Aviation Daily) - US Airways, launch customer for Embraer 170, is also slated as the first customer of Bombardier’s CRJ-700 variant - the -705. The 75-seat -705 is a variant of the -700 that is dimensionally the same as the CRJ-900, a Bombardier spokesman said. The -900 is Bombardier’s largest regional jet, seating 86 passengers in a single class configuration. The spokesman stressed the -705 has its own type certification and manuals. The 82,500-pound maximum takeoff weight of the -705 meets the weight limits in the US Airways pilot scope clause of just under 86,000 pounds.


Chip’s OpEd Comment: The ALPA Restructuring Agreement states Large SJs are defined as jet aircraft having a certificated capacity of 51-70 seats and a certificated maximum gross takeoff weight not greater than 75,000 pounds, except the EMB-170/175, and the airline is specifically limited to the CRJ-700, not the CRJ-705, which exceeds the size authorized in the regional jet agreement. The ALPA Supplemental Restructuring Agreement states up to 25 Large SJs, specifically limited to the CRJ-700, may be placed into revenue operation at a Participating Wholly-Owned Carrier, other than MDA. US Airways’ order for 25 CRJ-705 aircraft violates the ALPA contract and if the Arlington-based airline attempts to take delivery of these aircraft, this move could be a major violation of the CBA.

Reports indicate US Airways management and ALPA will meet on this dispute this week.

US Airways Minimum Active (Mainline) Fleet – CEO’s modest fleet reduction Comment Appears To Violate Pilot’s Contract



US Airways reports first quarter results


On May 6 US Airways issued a press release discussing first quarter results and the company said, While major combat operations in Iraq are now effectively over, we continue to see its lingering impact on the industry, and we anticipate a lengthy recovery of demand. Our summer schedule has been set, and our pilot bids have been extended through July, so we will not disrupt the summer travel season and our chances for recovery. However, if we do not see improvements in traffic and yield, we may be forced to make some modest fleet reductions in September to further protect the airline’s financial position.


US Airways – ALPA Restructuring Agreement, Job Security and Grievance Settlements, Attachment E

Minimum Active Fleet - No less than 275 aircraft (including permanent bid plus 8% for maintenance and spares), with daily utilization rate measured monthly of 10 hours. In the event of Chapter 11, the minimum active fleet may be no less than 245 (permanent bid plus 8% for active spares).


Revisions to Restructuring Agreement, LOA 83, Accelerated Small Jets



Minimum Aircraft - As a condition of implementing and maintaining any of the Productivity Improvements, the Minimum Active Fleet specified in Attachment E of the Restructuring Agreement shall be increased to 279 aircraft (excluding SJs but including permanent bid plus 8% for active spares) with daily utilization rate measured monthly of no less than 10 hours, whether or not the Company is in Chapter 11. The Minimum Active Fleet number may be reduced only as made necessary by a new force majeure event, which includes acts of terrorism with a material adverse impact on commercial aviation.


Chip’s OpEd Comment: US Airways is contractually required to operate a Minimum Active (Mainline) Fleet of 279 aircraft. The only way the company can reduce the fleet is to reach a mutual agreement with ALPA or declare force majeure, if an event occurs that has a material adverse impact on commercial aviation. In my opinion, major combat operations in Iraq are now effectively over and US Airways has not experienced a material adverse impact on its financial performance because:

  • US Airways ended the first quarter with total restricted and unrestricted cash of $1.84 billion, including $1.27 billion in unrestricted cash, cash equivalents and short-term investments.

  • US Airways outpaced the industry in improving cost per available seat mile (CASM) for its mainline operations, ranking between Continental Airlines and America West Airlines on a stage length adjusted basis.

  • On May 15 the Pittsburgh Business Times said US Airways is slated to receive slightly more than $216 million from a $2.3 billion pool set aside by Congress to help defray costs related to aviation security measures taken in the wake of Sept. 11, 2001, according to the federal Transportation Safety Administration. The money was expected to be delivered to the carrier on May 16. Also noteworthy, Delta Air Lines, the nations third largest airline, recently said it lost $125 million due to the Iraqi War. The Atlanta-base airline is the largest carrier to Europe where the greatest amount of war related revenue was lost; therefore, from this observers perch US Airways may have received more funds from the federal government than it lost due to the war.

  • On May 16 the Pittsburgh Tribune Review reported US Airways will get another break from the federal government when the TSA suspends the passenger security fee, which amounts to $2.50 per flight segment, from June 1 through Sept. 30. The fee could save US Airways roughly $35 million over those four months, based on passenger boardings of more than 3.5 million last month.

  • US Airways has implemented its domestic code share alliance with United Airlines. In bankruptcy court papers the Arlington-based carrier said it expected its increased revenue, once the alliance was fully implemented, would increase by approximately $200 million per annum through the new business relationship. Also noteworthy, US Airways recently said its alliance revenue was exceeding expectations.

  • On May 15 Reuters reported US Airways and Lufthansa reached a code-sharing agreement that would give the American carrier a new business foothold just weeks after emerging from bankruptcy. The deal could yield both companies an estimated $50 million annually and when US Airways joins the Star Alliance as expected (according to multiple news reports) the total revenue increase would climb to $75 million per year.

  • On May 17 the New York Times reported executives from the Star Alliance would vote in Washington on whether to let US Airways join the group on May 31, which is expected to occur.

  • US Airways told the ATSB and bankruptcy court its regional jet order would generate about $300 million in new revenue, once the aircraft are fully deployed.

  • Since the end of the Iraqi War, jet fuel prices have dropped about 40% from $1.05 to 65 cents per gallon, which is the company’s second largest expense.

  • US Airways implemented its War Contingency across-the-board union 5% wage deferral effective April 1, for up to 18 months, which gives the airline additional cash flow relief. This contractual item is a corporate benefit unavailable to its competitors.

  • On May 14 Reuters reported the Travel Industry Association of America (TIA) projects Americans will take 275.4 million leisure trips during June, July and August, an increase of 2.5 percent from last summer.
  • Sam Buttrick, a UBS Warburg analyst, told the Chicago Tribune on May 16, The (airline) environment is getting better, not worse. The industry is clearly recovering.

  • Lufthansa chairman and CEO Juergen Weber said in a May 15 news release US Airways a newly invigorated company.

  • SARS has had a dramatic effect on revenues at United Airlines, Northwest Airlines, and other Pacific carriers, but US Airways has been largely immune to this negative fundamental problem because it does not fly west of Los Angeles, San Francisco and other West Coast cities.

  • From this observers perspective, since the end of the Iraqi war, US Airways’ loads have dramatically increased, largely due to a release of pent-up demand and the reduction of passenger fear, which should be indicated in the May traffic reports the firsts week of June.

  • The second and third quarters are typically the strongest for the company.


Conclusion: Based on the fundamental factors listed above, I believe US Airways cannot reduce its mainline fleet below the current limit of 279 aircraft because current fundamental factors do not support a force majuere claim and ALPA will not authorize a fleet reduction. If the company attempts to lower the fleet to less than 279 aircraft, this move could be another major violation of the CBA.
 
Chip:

While I have not agreed with everything that you have posted on the boards, at least your postings made for interesting reading. Nice comments about the pilots.

Welcome Back!
 
Hi Chip,

Welcome back, "I think". Ha Ha just kidding. Now down to business.

Speaking of contract violations, is''nt your pilot group responsible for trying to violate the WO''s pilots contract when after we agreed to the original J4J''s your group tries to change it without our approval? Giving you guys 100% of any aircraft on our property is not what we agreed to.
 
Chip,

You left on purpose.. just so we could miss the hell out of you.

Very happy to see you back.

I am a little confused. At the labor Coalition meeting it was said that ALPA made some exceptions to the small jets that U was buying. Some will have 76 seats, but will not exceed the 75,000 pounds. Many issues were discussed, however, who was reporting this didn't imply a violation.

Thanks for reporting all the info above. Besides U not being able to reduce the fleet according to ALPA agreement, I think they should again return the 5% back to the employees in addition to your comments above.

I am so glad your back. And don't you ever do this again...leave like that. Shame on you, too.
 
BordedToDeath and PITBull:

BordedToDeath said: “Speaking of contract violations, is'nt your pilot group responsible for trying to violate the WO's pilots contract when after we agreed to the original J4J's your group tries to change it without our approval? Giving you guys 100% of any aircraft on our property is not what we agreed to.

Chip comments: The Revisions to the Restructuring Agreement and LOA 83, Accelerated Small Jets, provides specific language for Mesa Air Group, or a subsidiary of Mesa (Freedom Airlines), to operate up to 30 CRJ-700s only, and these aircraft were not part of J4J. Working in conjunction with the Mesa MEC, US Airways ALPA agreed to this clause after Jonathan Ornstein agreed to merge Freedom and Mesa pilot groups.

To compensate for the loss of mainline jobs and RJ outsourcing of mainline flying, which we have already seen with many former Mainline cities now Express, US Airways and US Airways ALPA agreed that up to 25 “Large SJsâ€￾, specifically limited to the CRJ-700, could be placed at a “wholly-ownedâ€￾ carrier and would be initially staffed by furloughed mainline pilots. Then upon completion of staffing of these aircraft, the 50/50 balance of hiring pursuant to the J4J protocol will be followed.

In my opinion, this issue is one of the reasons why Siegel told reporters after a signing ceremony in Montreal that the 75-seat, dual-class RJ will "go somewhere else" other than subsidiary PSA or US Airways’ new MidAtlantic division.

According to the May 15 Aviation Daily article, Michael Scheeringa, VP of US Airways Express said, "Economics will bear out" who will operate the CRJ700s. Siegel added there are several considerations, including "operational issues," and would not guess whether the RJs will end up with wholly owned subsidiaries, such as Piedmont or Allegheny, or a partner, such as Mesa Air. The bottom line is that a decision on an operator will have to be made in a matter of weeks, Scheeringa said. For more information on this you may want to check out my May 15 ChipsPlace.com article on this issue.

PITBull said: "I am a little confused. At the labor Coalition meeting it was said that ALPA made some exceptions to the small jets that U was buying. Some will have 76 seats, but will not exceed the 75,000 pounds. Many issues were discussed, however, who was reporting this didn't imply a violation."

Chip comments: PITBull, your comments are accurate, but refer to Laarge SJs with 51-70 seats and a maximum certificated gross takeoff weight of 75,000 pounds. However, the Restructuring Agreement had a "carve out" clause to permit the EMB-170/175 "Large" Small Jet exception to permit up to a 76-seats and certificated gross weight to not exceed 86,000 pounds. In addition, the Revision to the Restructuring Agreement, LOA 83, Accelerated Small Jets, specifically permitted 25 CRJ-700s, but not the CRJ-705 Variant. The issue is the CRJ-705 Variant aircraft is a CRJ-900 (86-seat single class configuration) aircraft with a lower seating capcity. Nowhere in either ALPA agreement is the CRJ-705 authorized and if the company attempts to take delivery of this aircraft, there will be a major dispute.

I cannot publicly discuss this issue further, but it has the potential to be a "powder keg" now that US Airways is out of bankruptcy, the company has nearly $2 billion in liquidity, and the liquidation threat no longer exists.

In conclusion, there will be much more forthcoming on both of these issues and it’s best if I do not publicly comment further.

Best regards,

Chip
 
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