American's unions on hot seat on contracts
Posted Saturday, Aug. 04, 2012
BY MITCHELL SCHNURMAN
Jerry Jones likes to say, "Don't let your money get mad."
That's easier to do if you have a lot of it, like the Cowboys owner, but it's a solid principle for regular folks, too -- especially union workers at American Airlines.
Anger and distrust run so deep at American that some pilots, mechanics and flight attendants will soon reject new contracts, even though the deals are significantly better than the alternative. If enough workers turn down these so-called last, best offers from American, the bankruptcy judge could impose tougher terms. And the debate over a potential merger with US Airways could be delayed.
Most important, the labor groups would forgo a big equity stake that gives them more power in charting the company's future. The value of that equity, to be awarded as part of the new contracts, cannot be overstated.
Advisers to the pilots put it this way: Without the stock, they'll be relegated to the kids' table, where they can scream and whine all they want -- and largely be ignored.
But if labor has a combined 20 percent of the shares in the new company, along with its three seats on the unsecured creditors committee, the unions will be sitting at the parents' table. They'll have a say on dinner and how it's divvied up.
Still not convinced? Consider that American CEO Tom Horton and US Air CEO Doug Parker both want union workers to approve the contracts this month. The two execs don't agree on much, especially the end game for American, but they see this issue the same way.
The contracts are a milestone in American's Chapter 11 reorganization and a prerequisite to everything that comes next. Get them done, and the process moves forward and builds toward the conclusion everyone's waiting for -- the showdown between Horton's vision and Parker's.
Reject the deals, and more court fights, chaos and delays will follow.
These contract votes -- scheduled to conclude this week for pilots and mechanics, and in mid-August for flight attendants -- should not be a tough call. While the offers include deep concessions, it would only make things worse to give up the stock and invite the judge to act.
But union politics are intense, and negotiators face a backlash from workers who are distressed about the looming cutbacks. Consider that the pilots' union board approved its tentative agreement by a slim 9-7 margin.
As with Congress, some votes were political theater, intended to burnish hard-line reputations. Many leaders are treading lightly, even though they want the contracts approved. It's almost as if an endorsement -- from union officials and certainly from American -- would be a kiss of death.
Some mechanics also see nothing but downside. American's Alliance maintenance facility, for instance, is slated to close. How do those workers approve any deal? Other opponents ran an unsigned half-page newspaper ad aimed at Tulsa mechanics, urging a no vote to "save our profession."
Last week, the flight attendants union turned more aggressive, holding road shows in San Francisco, Los Angeles and St. Louis. This week, they're scheduled to go to Boston, Chicago and New York. They have an additional fear: If pilots approve a deal and they don't, they could be marginalized.
Pilots are the linchpin in the contracts, because of their pay and status (and a proposed equity stake of 13.5 percent for their group alone). That's even more reason for other groups to swallow hard and approve.
"My initial reaction to the company's last best final offer was, 'Oh, hell no!' And at first I thought I could never endorse this," Marcus Gluth, vice president of the Association of Professional Flight Attendants, wrote to members last week. "The more I read and understood the offer and the realities we face as a union, the easier my yes vote became."
In addition to hostility toward management, there's some confusion about the contracts, and that's understandable. Union leaders have been so adamant in support of a merger that some workers want to vote for US Air.
Many also don't want to give any wins to Horton. They're afraid that his team will take credit and champion the labor deals for its own agenda.
That sentiment was summed up in a question on the Allied Pilots Association website:
"How does supporting the tentative agreement not end up supporting Tom Horton and the 'stand-alone plan?' It seems like reverse logic to me."
What a new contract would do is take labor issues off the table, the union said. And that has to happen in order for management to submit a reorganization plan -- and for US Air and others to counter with their own ideas.
In short, the path to a merger goes through an American contract first.
It's a bit counter-intuitive, but workers don't have the option to vote for a US Air deal at the moment. Unsecured creditors want a stand-alone plan first, to both weigh that option and serve as the baseline to measure other proposals.
Here's one more way to think of it: New union contracts will shift the focus from labor to management.
With one side resolved, it will be the other's turn in the bankruptcy spotlight. That's a detailed review many American stakeholders are eager to see.
