Unions push merger with US Airways
In a split decision on the lesser of perceived evils, five bargaining units of American Airlines’ largest union voted to accept management’s final offer on concessions, while two voted to reject it. Members of the Transport Workers Union (TWU) voted via phone and Internet beginning last week, and the results were announced on Tuesday. The vote took place against the backdrop of a bankruptcy union leaders opposed, a legal process they distrust and a potential merger they’ve endorsed.
“We’re at the mercy of the court,” Tulsa machinist Joe McGill, whose unit voted against the deal, told the Associated Press Tuesday. “I hope we can survive this, keep the maintenance base open and functioning, and maybe start to rebuild.”
As I’ve previously reported, AMR — the parent company of American Airlines and its sibling American Eagle — filed for bankruptcy in November. AMR’s unions questioned the bankruptcy’s motivation, and its then-CEO’s resignation was announced the same day as the filing. Following two months of negotiations with its unions over proposed concessions, AMR filed with a bankruptcy judge to override its current union contracts. If approved, the motion would allow the company to impose greater concessions than those in its current offer.
With majorities ranging from 59 to 96 percent, American’s offer was approved by bargaining units consisting of fleet service clerks, dispatchers, ground school instructors, maintenance control technicians, and simulator technicians. While most bargaining units voted to ratify, TWU”s largest bargaining unit, which includes aircraft maintenance workers, voted 56-44 percent against it, as did store clerks (51−49 percent). In total, 51 percent of 17,521 voting members voted to approve the terms.
Under the deal, according to TWU, workers would make make concessions on wages and benefits, and American would retain some of the 9,000 TWU member jobs it had originally proposed to eliminate. TWU and AMR said that ratifying the contracts saved those five bargaining units a total of 1,300 jobs, and that had the maintenance and related positions bargaining unit voted to ratify, it would have saved an additional 1,960.
An American Airlines spokesperson told the Associated Press following the vote that if the court approved its motion to override contracts, its maintenance hub in Tulsa could be cut from 7,000 workers down to 4,700. Historically, companies usually win such motions; this one is being heard by Judge Sean Lane in New York.
(In a rare exception, on Monday U.S. Bankruptcy Judge Robert Drain rejected a motion by Hostess to override its union contracts with the Teamsters; as Bruce Vail reported, on May 4 the same judge approved Hostess’ motion to override its contracts with the Bakery, Confectionery, Tobacco Workers and Grain Millers Union.)
In an e-mailed statement, American Airlines spokesperson Bruce Hicks said, “Today’s ratification announcement demonstrates American’s willingness to address the TWU’s interests and the union’s willingness to negotiate new contracts that achieve the cost savings needed for our successful restructuring. We realize this was a very difficult decision for our TWU-represented employees.”
Hicks said that American would drop the bargaining units that had ratified the agreement from its motion to override contracts. That leaves the remaining two TWU units, as well as those represented by AMR’s two other unions, the Allied Pilots Association and the Association of Professional Flight Attendants, which have not reached agreements with AMR.
In an e-mailed statement, TWU President Jim Little said, “The bankruptcy courts are designed to protect assets not people.” Little said that while some members “found the company’s last offer to be a safer bet than waiting on the court to make a decision,” others “thought the proposals were not in their best interests.”
TWU had not recommended either a “Yes” or a “No” vote. But the union had emphasized the risks in rejecting the contract.
“Both situations are concessionary and decimating,” Little said in a video posted online for members before the vote. “But the huge difference is: your bargaining teams worked long and hard at the negotiating table. The result is a last, best, and final offer in April that is significantly different from the company’s demands in March.” If workers rejected that offer and the bankruptcy judge granted AMR’s motion, said Little, “we will have no contract, and American Airlines in free to impose the terms and conditions in accordance with their 1113c March court filings.”
In a May 10 letter, American Airlines said those March terms would be even less generous than “some of the TWU Locals” had made them out to be. The letter from American Airlines Vice President Laura Einspanier was addressed to Little and was posted on the TWU website.
“If the proposals do not ratify and if the court permits rejection of the collective bargaining agreements,” wrote Einspanier, “the Company has no plans to implement these ‘upside’ provisions until it achieves a ratified consensual agreement.”
Merger on the horizon?
Prior to the vote, TWU advised members that their decision would not affect the likelihood of a merger with US Airways. Last month TWU joined AMR’s two other unions in announcing their support for a merger as part of the bankruptcy plan.
In an open letter published as a newspaper ad this month, the presidents of all three unions urged AMR’s board to “engage with US Airways management now.” The presidents wrote that a merger would enhance American’s competitiveness, increase customers’ choices, and would protect the jobs of 6,200 workers “who would lose their jobs under AMR management’s standalone plan.” They noted that all three unions had already reached tentative agreements with US Airways on contract terms under a potential merger.
In a Monday interview with The Street, a spokesperson for the International Association of Machinists (IAM), which represents workers at US Airways, was less than enthusiastic about the proposed merger.
“We have open contracts,” he said. “The airline seems to prefer to negotiate with employees it doesn’t even have yet, but our focus is on getting a deal now…We are not going to waste time entertaining somebody’s merger fantasy.” Following US Airways’ 2005 merger with America West, IAM beat TWU in a bitterly contested election to determine which union would represent some workers at the merged airline.
Under bankruptcy law, US Airways cannot intervene unilaterally in the bankruptcy process at this stage. In a May 11 statement, AMR’s Chief Restructing Officer, Beverly Goulet, announced a “joint protocol agreement” under which AMR and its unsecured creditors would develop “potential consolidation scenarios,” but emphasized that “this agreement does not in any way suggest that a transaction of any kind or with any particular party will be pursued.”
After Reuters and other media, noting CEO Tom Horton’s previous statements that any merger should come only after bankruptcy, described AMR’s new statement as a reversal, AMR issued an additional statement from Jack Butler, the Counsel for its Creditors Committee. Butler wrote that the Committee “supports the Debtors’ business judgment in pursuing a robust, stand-alone business plan,” while also agreeing with AMR that “it is incumbent on them to explore strategic alternatives on a collaborative basis as part of this chapter 11 case.” In a statement, TWU attributed American Airlines’ willingness “to consider a possible merger before exiting the bankruptcy process” to “pressure from TWU and other creditors.”
In a May 7 conference call prior to the vote, Little told members, “This has been a very tough process for everyone. Every time that we think that we’re moving a little bit forward, it seems that we slide a little bit backward. And a lot of that is because of the laws that we have in this country. And we love our country dearly, but I think there’s got to be a time when we can put pressure and try to get these things changed.”