American Airlines pilots reject tentative labor agreement; two other union groups OK deals
By SHERYL JEAN
Staff Writer
sjean@dallasnews.com
Published: 08 August 2012 10:46 PM
Pilots at American Airlines Inc. rejected a tentative labor agreement Wednesday, meaning those workers could face tougher terms if a bankruptcy judge allows the airline to toss out its existing contracts.
Sixty-one percent of American’s unionized pilots voted against the agreement.
Also on Wednesday, two groups of American workers represented by the Transport Workers Union approved their tentative agreements. Now, all seven TWU work groups at American, or 24,000 people, have ratified agreements.
The result of the pilots’ vote surprised Allied Pilots Association spokesman and pilot Tom Hoban.
“We thought it would be much closer,” he said. The APA represents about 8,000 active pilots at American.
“We are disappointed with the outcome of today’s APA voting results, as ratification would have been an important step forward in our restructuring,” said Bruce Hicks, a spokesman for the Fort Worth-based airline.
American now awaits a court ruling that would let it toss out its current unresolved labor contracts. U.S. Bankruptcy Judge Sean Lane is scheduled to rule by Wednesday unless he delays his decision until voting by American’s flight attendants ends Aug. 19 on the airline’s “last, best and final offer.”
Last week, American officials said that if allowed, it would cast aside old contracts and impose new terms for any union that rejects the company’s latest contract proposals.
American’s term sheet is “quite ugly,” Hoban said. “It’s far worse than what was just rejected.”
Reduced costs key
Reduced labor costs are a keystone of American and parent AMR Corp.’s plan to exit bankruptcy as a stand-alone carrier and fend off a takeover bid by US Airways Group Inc. American filed for bankruptcy reorganization in November.
Of the two TWU work groups, the vote by the mechanics and related workers on a new contract was the closest, with 50.25 percent in favor of the agreement. Seventy-nine percent of TWU maintenance stock clerks voted for their agreement.
TWU International president James C. Little said in a statement that no one likes concessions, but “this result is a lot better than what our members would have faced with a court-imposed solution.”
The TWU-ratified agreements include a 3 percent pay raise for mechanics and related workers and a 3.5 percent raise for maintenance stock clerks. The six-year agreements include a readjustment, based on average industry compensation, after 36 months. Health care insurance coverage improved from a previous company offer.
“The ground employees know if things get really rough with American … and there aren’t jobs for all of them, they can be out on the street and, in this economy, they don’t have really strong labor options,” said Peter Feuille, a labor professor at the University of Illinois at Urbana-Champaign.
On the other hand, he said, “the pilots know that no airlines fly without them.”
In an online letter to members Monday, APA officials noted the tough terms American has said it would impose if the proposed agreement was rejected.
The APA said the April 19 term sheet called for no hourly pay increases and no three-year readjustment to industry average (that change alone would cost pilots more than $500 million), a pension contribution contingent on consensual agreement, loss of all furlough protection and outsourcing of certain jets at commuter carriers.
No recommendation
In the letter, APA officials didn’t tell pilots how to vote but listed five positives from a “yes” vote and seven negatives from a “no” vote. Pilots didn’t heed the advice.
Why? Hoban pointed to a toxic relationship with American management and unhappiness about concessions required in the proposed agreement. Under the rejected agreement, for example, Airbus 319 pilots would have been paid significantly less than the industry average and health care costs would have increased, he said.
However, the agreement also would have given pilots a 13.5 percent equity stake in AMR after its restructuring, 14 percent pension contributions and an hourly pay rate increase of 4 percent with subsequent pay increases of 2 percent. It also called for no pilot furloughs.
“There’s a great deal of anger that was generated” as pilots took significant concessions in the last decade, Hoban said. “In total, it probably was a bridge too far to get to ratification.”
Bankruptcy’s cost
American’s proposed contracts with its three unions would require more than $800 million in annual cost-cutting by its unionized workers and would include thousands of job cuts.
“AMR management has no intention of emerging from Chapter 11 without ratified [collective bargaining agreements] in place,” airline analyst Hunter Keay of Wolfe Trahan wrote Wednesday in a report.
Even if American imposes its own terms on pilots, it “will then resume negotiations with a pilot community that suddenly has little else to lose,” he said. “We can easily see those negotiations going nowhere, pushing AMR close to the end of its exclusivity period and thus opening the door for [US Airways] to file its own plan of reorganization with the courts.”
American has until Dec. 28 to file its reorganization plan with the bankruptcy court.
“The bottom line is the final chapter in this bankruptcy round with American hasn’t been written,” Feuille said. “Two chapters still out are mutually agreed employment terms with all of its unions and what will happen with US Airways’ attempt to take over American.”