It appears that not all of American Airlines' pilots are pleased with the union's agreement to support a US Airways bid.
In a long message sent to pilots on Friday afternoon, Allied Pilots Association president Dave Bates provided details on how the union came to its "conditional labor agreement" with US Airways, even though the Tempe-based carrier has not yet officially launched a takeover bid of American.
"In vivid contrast to the wood chipper that AMR management had in mind for us, it became clear that there was a better path for our future. Beginning with the first discussions we had with US Airways, we delineated key prerequisites that would be required to gain APA’s support for a merger with US Airways. These priority items include, but are not limited to: a viable business plan and a strong capital structure; furlough and pay protection for all active pilots; support for a pension freeze with an industry-standard defined-contribution retirement plan; pay scales that would quickly exceed the current rates at Delta and United; and scope protections that would protect AA pilot jobs. Few if any of these items could be obtained from AMR management," Bates wrote.
Bates noted that there were some "naysayers" who are urging members to contest the US Airways agreement and that simply plays into American's hands.
"While our market-based CLA with US Airways management is not the “industry-leading contract” we would all prefer, we believe that the final contract we are now negotiating with US Airways is supportable in bankruptcy court, enhances our case and will be significantly better than what AMR management has in mind for us. In comparison to what other legacy airline pilots experienced in bankruptcy, APA did much better than any before us. Most of our CBA is preserved and we have stopped the downward spiral that typifies bankruptcy. The alternative to a consolidation with US Airways is to have our contract gutted and to continue to suffer under the failed leadership at AMR under a business model that few believe can succeed," the letter said.
Keep reading for the full text of Bates letters to the pilots.
-Andrea Ahles
The Path to the US Airways Conditional Labor Agreement
The APA leadership has received a number of member queries in recent days regarding the conditional labor agreement (CLA) we reached with US Airways.
To understand the path to our agreement with US Airways management, we must acknowledge the reality of our current situation. It’s sometimes necessary to point out the obvious— negotiations in bankruptcy are not the same as bargaining with a profitable company. Without the ability to compel AMR management to bargain in good faith—actually, to even bargain at all— in Chapter 11, we are facing massive displacements, more furloughs and drastic changes to our benefits and quality of life. In short, AMR’s failed cornerstone strategy (sometimes referred to as the “Tombstone Plan”) has put American financially at the very bottom of the industry—not the best conditions for us to negotiate contractual gains. Sadly, the legal process in bankruptcy heavily favors American Airlines’ management, with minimal safeguards to preserve contractual provisions that define our compensation, benefits and working conditions.
AMR is now in bankruptcy primarily due to bad decisions management has made during the past decade. As we have said many times, all of APA’s advisers and nearly every analyst on Wall Street believe that AMR’s restructuring plan will fail and AMR will likely end up in bankruptcy again—perhaps under a break-up or liquidation scenario.
After extensive due diligence and with the future of the airline in mind, APA made the decision to pursue an alternative that is better for our pilots, our fellow employees, the communities we serve and the industry itself. Our primary objective was to pursue the best path to achieve a successful restructuring and help ensure a more promising future for the company.
From the outset, it was clear that AMR management’s objective was to gut our contract, either through an 1113 rejection or by forcing APA to capitulate and agree to an extremely onerous consensual agreement.
In vivid contrast to the wood chipper that AMR management had in mind for us, it became clear that there was a better path for our future. Beginning with the first discussions we had with US Airways, we delineated key prerequisites that would be required to gain APA’s support for a merger with US Airways. These priority items include, but are not limited to: a viable business plan and a strong capital structure; furlough and pay protection for all active pilots; support for a pension freeze with an industry-standard defined-contribution retirement plan; pay scales that would quickly exceed the current rates at Delta and United; and scope protections that would protect AA pilot jobs. Few if any of these items could be obtained from AMR management.
First, we specified that the Green Book would be the basis for a new contract. We would negotiate limited and specific changes to our CBA, instead of the massive changes AMR has been demanding.
To achieve success in merging the two airlines, APA and US Airways must have the support of a broad range of stakeholders. Keep in mind that bankruptcy strongly favors the debtor, which is AMR. The support of the diverse group of interests represented by the Unsecured Creditors’ Committee (UCC) is crucial to a successful outcome for us. In order to win the support of the majority of the members of the UCC, and ultimately the court, we were advised we needed to negotiate an industry-competitive contract.
Particularly during the past decade of “pattern bankruptcies,” our profession has been under severe assault. Most pilot groups have experienced a significant degradation of their compensation, benefits and working conditions. The exceptions have been pilots working for companies that have been consistently profitable such as Southwest, FedEx and UPS. Profits do matter and enable employees to share in the rewards of a company’s success.
While our market-based CLA with US Airways management is not the “industry-leading contract” we would all prefer, we believe that the final contract we are now negotiating with US Airways is supportable in bankruptcy court, enhances our case and will be significantly better than what AMR management has in mind for us. In comparison to what other legacy airline pilots experienced in bankruptcy, APA did much better than any before us. Most of our CBA is preserved and we have stopped the downward spiral that typifies bankruptcy. The alternative to a consolidation with US Airways is to have our contract gutted and to continue to suffer under the failed leadership at AMR under a business model that few believe can succeed.
Many pilots have expressed the opinion that a shorter term contract is preferable. Your leadership agrees. US Airways management focused on the fact that AMR was seeking a six-year duration in their 1113. The duration discussion was a major roadblock during negotiations with US Airways and went on for days. Ultimately, we decided that walking away from the table over that issue was not in our best interests. We agreed to the six-year term in exchange for an additional three percent pay raise in year five and a formula that indexes us to an average of United and Delta compensation in year six.
We have fielded some questions about why the A321 is pay banded with the S80 and 737-800. One of the often-overlooked provisions in the CLA is that US Airways agreed to put the A319 in the same band as the S80 and 737-800. This represents a very significant improvement compared with the AA term sheet, which seeks substantially lower pay rates for the A319 and the creation of a separate bid status. In the CLA, the A319/320/321 would be in the same pay band in a common bid status. Operating on an overall philosophy to add more value for junior pilots, we moved both the A319 and S80 pay scales toward the 737-800. Additionally, the 787—seen primarily as a replacement to the 767—is placed in the 777 pay band, although it weighs significantly less than the 777.
An important element of the CLA is the inclusion of binding arbitration to resolve issues that we didn’t have time to fully bargain, such as final contract language and valuation. There’s no shortage of examples of contract negotiations, merger negotiations and seniority integrations that drag on for years. We believe swift and decisive action is essential to our ability to steer this airline away from the iceberg. As I mentioned before, bankruptcy law favors the debtor. There are a number of very good reasons we needed to complete the CLA with US Airways before the 1113 court hearings began. That urgency drove our decision to resolve any remaining open issues with binding arbitration. Your APA leadership believes that the end result will be far superior to the AMR alternative, which would likely more resemble a document “agreed to” on the deck of the battleship Missouri.
While this is obviously not a CLA on parity with highly profitable airlines, our agreement with US Airways was designed to produce compensation that would exceed the highest paid “legacy carrier” (Delta) rates that were in place during the expedited negotiating process. The CLA will dramatically improve the US Airways pilots’ salaries, which have been well below industry standard—thus putting downward pressure on the value of our profession. The CLA helps the industry transition from a decade of pattern bankruptcy to a future of pattern advancement. A strong American Airlines exiting from bankruptcy with industry competitive pilot pay rates is a huge positive for our profession.
The details of a new tentative agreement negotiated by the pilots at Delta Air Lines emerged this week. The TA calls for an immediate hourly rate increase of 4 percent on date of ratification and another 8.5 percent on Jan. 1, 2013, with two additional annual salary increases of 3 percent. This is the second contract that the Delta pilots have negotiated since exiting bankruptcy in 2007.
It’s worth considering a few data points to put the Delta TA and our CLA in context. Last year Delta Air Lines generated approximately $1 billion in profits, while American Airlines lost around that same amount – a staggering difference of nearly $2 billion. In bankruptcy, the Delta pilots were forced to take a 14 percent pay reduction, in addition to a 32 percent decrease pre-petition, with no annual pay increases during the life of that contract. APA negotiated a 5.5 percent upfront increase with five additional raises of 3 percent apiece in the US Airways CLA. Meanwhile, AMR has proposed no upfront increases in their 1113 and five subsequent annual increases of 1.5 percent.
We congratulate the pilots at Delta for accomplishing an agreement many months before their contract’s amendable date. The Delta pilots established the foundation for this achievement several years ago by working extremely hard to establish a collaborative relationship with their management.This cooperative approach greatly assisted Delta in achieving a smooth transition during the Delta-Northwest merger. The successful merger and newly announced TA are excellent examples of the benefits that can be achieved by an engaged pilot union working collaboratively with an enlightened management team. These results typify what we hope to achieve by helping to facilitate an American Airlines-US Airways merger.
In contrast, APA’s efforts to try to work collaboratively with AMR management have yielded no meaningful results, which factors heavily in our pilots’ overwhelming verdict of “no confidence” in AMR management.
As of this date, there is only one known alternative to a merger with US Airways. In the opinion of your APA leadership, this merger is far preferable to the terms and conditions that AMR management seeks to impose on us. In discussing the importance of preserving our CBA to the greatest extent possible, a friend of mine who has been through bankruptcy recently said to me, “You could lose things that you’ve taken for granted your entire career, or even worse, things that you never even knew you had until they were forcibly taken from you.”
Much of the detail work remains to be done to transition from the CLA term sheet to a new CBA. The good news from our friends at Delta will be a factor in the bargaining that remains to be done with US Airways management.
On a final note, it has become very clear that American’s management has initiated a FUD (fear, uncertainty and doubt) campaign in an attempt to attack APA’s efforts to secure a positive future for our pilots and our airline. Jeff Brundage, described as a “senior adviser” to AMR, recently kicked this campaign into full swing with comments reported in theFort Worth Star-Telegram warning pilots about possible negative consequences to AA pilot seniority as a result of a merger. What Mr. Brundage always fails to mention is the elimination of up to 25 percent of our pilot positions under AMR management’s stand-alone plan. AMR is attempting to sow the seeds of doubt on all aspects of the agreement we reached with US Airways.
There are pilot naysayers in our ranks who are urging a rejection of the US Airways CLA. Inevitably there will always be a small minority who will play right into AMR’s hands. Filter out the noise.
We will continue to provide regular updates as events unfold. Thanks for your support.
