Disclaimer, not posted with the intent to inflam but rather to inform and educate.
Special note, NWA got the neutrals incorrect but not a big deal.
NWA ALPA
Merger Committee
News Update Mike Lazarowicz
Chairman
Steve Mayer
May 15, 2007 Member
Lane Kranz
Member
America West – USAirways Merger
Arbitrator’s Decision on the Integrated Seniority List Art Aaron
WASHINGTON – On May 19, 2005 a merger
was announced between America West and
USAirways. Over the next year and a half,
Merger Committees of both carriers engaged in
direct negotiations. Unfortunately, the Merger
Committees were unable mutually to agree upon
a seniority list integration method. Per ALPA
Merger Policy, the parties entered the Arbitration
phase from December, 2006 through February,
2007. This phase removes the decision making
ability of both Merger Committees, as well as the
ability to control the destiny of their respective
pilot’s seniority status, and places this immense
responsibility in the hands of a neutral, mutually
agreed upon, non-pilot, Arbitrator.
The Committees agreed upon George Nicolau,
Esq. as Arbitrator. Considered to be among the
most experienced arbitrators, Mr. Nicolau has
decided many seniority list integrations including
those of FedEx/ Flying Tigers and Continental/
Frontier.
Additionally, each Committee was permitted to
select one “Pilot Neutral†to assist Arbitrator
Nicolau with his decision and understanding of
the situation. The USAirways pilots selected
Captain Steven Gillen (United) and the America
West pilots selected Captain James Brucia
(Continental).
On May 1, 2007, Arbitrator Nicolau announced
his decision on the Integrated Seniority List
combining the pilots of America West and
Alternate
Tom Facer
Alternate
USAirways. The Award has been thoroughly
reviewed by your NWA Merger Committee.
ALPA Merger Policy
In order to understand the Award, a basic review
of ALPA Merger Policy is in order. ALPA
Merger Policy states 5 specific “goalsâ€:
1) Preserve jobs.
2) Avoid windfalls to either group at the
expense of the other.
3) Maintain or improve pre-merger pay and
standard of living.
4) Maintain or improve pre-merger pilot status.
5) Minimize detrimental changes to career
expectations.
This is also a good time to dispel 2 rumors.
Rumor—ALPA Merger Policy requires Date-of-
Hire (DOH) to be used. FALSE. The goals are
stated above.
Rumor— The Arbitrator is required to consider
previous Arbitration Awards and consider those
awards as precedent in his decision. FALSE.
2
While previous merger awards are frequently
quoted and referred to by the attorney’s
representing the parties, the Arbitrator is under
no legal requirement to consider them or use
them as a basis for his decision.
Background
America West (AW) and USAirways (US) are
strikingly different airlines. Their cultures are as
different as night and day. AW began
operations in 1983 and has never been involved
in a merger. It is no stranger to bankruptcy,
however, as it experienced a Chapter 11 filing in
the mid-90s. Additionally, AW was the recipient
of an ATSB government loan following
September 11, 2001.
In contrast, US began operations in 1968 as
Alleghany Airlines and subsequently
experienced several mergers, including those
involving Piedmont, PSA, and Trump Shuttle.
Also, since 9/11, USAirways has filed twice for
bankruptcy protection.
The Positions
Each merger committee desired a different
solution to combining seniority lists. US sought
a DOH list, adjusted for length of service. AW
sought a ratio method, considering pre-merger
financial conditions and pre-merger expectations
regarding jobs, status, pay, and future career
paths.
After the arbitration phase ended, and both
attorney’s gave their closing remarks the
Arbitrator and two pilot neutrals commenced
their deliberation. However, something highly
unusual occurred in the following weeks.
Arbitrator Nicolau ordered both sides to reconvene
for a “special†meeting. At this
meeting, Arbitrator Nicolau indicated that, “both
approaches created difficulties if….. those
positions were not fundamentally changed.†In
other words, he was giving the parties notice
that neither side was going to get what they
wanted and he was granting them one last
opportunity to change their position or to submit
a new proposal. Neither side budged.
Side-by-Side Comparison
America West USAirways
Pilots
(on 5/19/05)
1894 (no
furloughed pilots)
5098 (1,691 or 33%
on furlough)
Aircraft
(on 5/19/05)
144 jets 270 jets
(on 1-1-07) 132 jets 226 jets
9 A330s
10 767s
12 757s 34 757s
94 A320 Family 102 A320 Family
26 737s 69 737s
2 E190s
Financial
Status
OK Still in bankruptcy at
time of merger and
unprepared to
present a
reorganization plan
for its emergence.
Notable Quotes
We found the following quotes to be of interest.
Arbitrator Nicolau states, “The fact is that the
career expectations of the AW pilots on May 19,
2005 were far superior to those of the
USAirways pilots. USAirways pilots had more to
gain from the merger than their new colleagues.â€
Mr. Nicolau also quotes himself directly from the
FedEx/ Flying Tigers Award. Your NWA Merger
Committee finds the following quote to be most
useful and expressive of modern day airline
mergers:
“There are four basic lessons to be
learned from those submissions;
that each case turns on its own
facts; that the objective is to make
the integration fair and equitable;
that the proposals advanced by
those in contest rarely meet that
standard; and that the end result,
no matter how crafted, never
commands universal acceptance.â€
3
Nicolau implies the following:
1) No two mergers are the same
2) Fair and Equitable is the arbitrator’s goal
3) It is difficult for either side to be neutral and
non-emotional
4) Frequently, neither side likes the outcome.
Why not just use DOH?
One of the most frequent questions received by
your NWA Merger committee is, “…Why not just
use DOH and be done with it?â€
DOH is sometimes used, but arbitrator’s
frequently site many other overriding factors.
Some considerations sited in the AW-US award
include: the financial state of each company,
the equipment and routes that each carrier
brings to the merger, the career expectations of
each pilot group and, most notably, the staffing
and efficiencies of each airline.
For example, in the AW-US Merger, the US
Merger Committee strictly pursued a DOH list,
adjusted for length of service. Had this method
been used, the #1 America West pilot would
have had 998 US pilots placed ahead of him on
the combined list. Additionally, approximately
1600 furloughed US pilots would have been
placed SENIOR to approx. 1500 currently
employed and working AW pilots. Clearly the
arbitrator felt that the DOH method would have
violated nearly all or some of the “goals†of the
ALPA Merger policy.
The End Result
Arbitrator Nicolau used a Ratio Method with
specified conditions and restrictions. He
employed a ratio method similar to that used in
the 1988 Federal Express/ Flying Tigers merger.
In that case, a healthy, growing, and vibrant
Federal Express acquired a financially troubled,
‘old school’ company. Using the ratio method,
Arbitrator Nicolau placed AW and US pilots into
different groups.
Group America West USAirways
Group 1
All Widebody
positions on the
A330 and 767-Int’l.
None Top 517 US pilots
(423 active + 94
mgmt. and long-
term sick)
Group 2
All 757 Captains
90 AW pilots 167 US pilots
Group 3
All A320 and B737
Captains
767 AW pilots 873 US pilots
Group 4
All 757 F/Os
87 AW pilots 176 US pilots
Group 5
All A320 and B737
F/Os
718 AW pilots 840 US pilots
Group 6
All US pilots on
furlough, as of
1-1-07.
None Remainder
Conditions and Restrictions:
1) Standard no bump–no flush restriction.
2) Protects US Widebody positions for 4 years
from date of award. If the Age 60 Rule changes
this restriction would no longer apply.
Reaction of both pilot groups
As Mr. Nicolau predicted, neither side is
particularly fond of the award. However, this is
an excellent time to point out the risks
associated with failing to make the hard
decisions internally and handing over the
disagreement to an arbitrator.
4
Some US pilots have been “shocked†to see that
their DOH of 1985 puts them in the same group
as AW pilots with a DOH of 1998. Removing the
emotion and looking at the facts, a US pilot with
a DOH of 1985 means that he was a very junior
Narrowbody Captain at US. And looking at an
America West pilot, hired in 1998 means that he
is a junior Captain. On the combined list, each
of these pilots is in the exact same, relative
position.
If you were furloughed on the old list, you are
still furloughed on the new list. If you are
recalled, and choose to return, you will be a
junior F/O for a long time. The same conditions
held true on the previous US list.
Conclusion
Mr. Nicolau was charged with deciding a case
that was notably difficult, but he used ALPA
Merger Policy to lay the framework for his
decision.
The US-AW Arbitration Award is available on
the "Merger Committee" page of the NWA MEC
website (https://crewroom.alpa.org/nwamec).
We encourage you to read it. Inside this award,
you will see that priority and emphasis was
placed on four items:
1) Financial Condition of each carrier
2) Career Expectations of each pilot group
3) Planes and Routes; what each airline
brought to the merger
4) Staffing; the internal efficiencies of each
carrier
After reading the Award, ask yourself these
questions…..
1) Did Arbitrator Nicolau preserve jobs for each
pilot group?
2) Did Arbitrator Nicolau avoid windfalls to
either pilot group at the expense of the other?
3) Did Arbitrator Nicolau maintain or improve
pre-merger pay and standard of living?
4) Did Arbitrator Nicolau maintain or improve
pre-merger pilot status?
5) Did Arbitrator Nicolau minimize detrimental
changes to career expectations?
Finally, ask yourself if it was possible to avoid
arbitration and work out these differences
internally between merger committees?
This was the first merger of two ALPA-
represented major carriers in well over 15 years.
The industry has changed.
We hope that the pilots of both carriers will rise
above emotion and respect the mutual need for
survival. We hope that both pilot groups will
move on and re-focus their attention on working
together to improve their contract. Nearly two
years after the merger announcement, both
carriers are still operated separately (no mixing
of pilots or aircraft). Each pilot group still works
under their previous contract.
We also hope that they can learn from history,
including that of NWA. The reality of the modern
era airline business brings many changes. One
change that is needed internally, among pilots,
is to learn to respect each other. Nothing can be
gained by name calling and hurling insults.
Everything can be lost without cohesiveness and
unity.
The Northwest Merger Committee
[email protected]
Special note, NWA got the neutrals incorrect but not a big deal.
NWA ALPA
Merger Committee
News Update Mike Lazarowicz
Chairman
Steve Mayer
May 15, 2007 Member
Lane Kranz
Member
America West – USAirways Merger
Arbitrator’s Decision on the Integrated Seniority List Art Aaron
WASHINGTON – On May 19, 2005 a merger
was announced between America West and
USAirways. Over the next year and a half,
Merger Committees of both carriers engaged in
direct negotiations. Unfortunately, the Merger
Committees were unable mutually to agree upon
a seniority list integration method. Per ALPA
Merger Policy, the parties entered the Arbitration
phase from December, 2006 through February,
2007. This phase removes the decision making
ability of both Merger Committees, as well as the
ability to control the destiny of their respective
pilot’s seniority status, and places this immense
responsibility in the hands of a neutral, mutually
agreed upon, non-pilot, Arbitrator.
The Committees agreed upon George Nicolau,
Esq. as Arbitrator. Considered to be among the
most experienced arbitrators, Mr. Nicolau has
decided many seniority list integrations including
those of FedEx/ Flying Tigers and Continental/
Frontier.
Additionally, each Committee was permitted to
select one “Pilot Neutral†to assist Arbitrator
Nicolau with his decision and understanding of
the situation. The USAirways pilots selected
Captain Steven Gillen (United) and the America
West pilots selected Captain James Brucia
(Continental).
On May 1, 2007, Arbitrator Nicolau announced
his decision on the Integrated Seniority List
combining the pilots of America West and
Alternate
Tom Facer
Alternate
USAirways. The Award has been thoroughly
reviewed by your NWA Merger Committee.
ALPA Merger Policy
In order to understand the Award, a basic review
of ALPA Merger Policy is in order. ALPA
Merger Policy states 5 specific “goalsâ€:
1) Preserve jobs.
2) Avoid windfalls to either group at the
expense of the other.
3) Maintain or improve pre-merger pay and
standard of living.
4) Maintain or improve pre-merger pilot status.
5) Minimize detrimental changes to career
expectations.
This is also a good time to dispel 2 rumors.
Rumor—ALPA Merger Policy requires Date-of-
Hire (DOH) to be used. FALSE. The goals are
stated above.
Rumor— The Arbitrator is required to consider
previous Arbitration Awards and consider those
awards as precedent in his decision. FALSE.
2
While previous merger awards are frequently
quoted and referred to by the attorney’s
representing the parties, the Arbitrator is under
no legal requirement to consider them or use
them as a basis for his decision.
Background
America West (AW) and USAirways (US) are
strikingly different airlines. Their cultures are as
different as night and day. AW began
operations in 1983 and has never been involved
in a merger. It is no stranger to bankruptcy,
however, as it experienced a Chapter 11 filing in
the mid-90s. Additionally, AW was the recipient
of an ATSB government loan following
September 11, 2001.
In contrast, US began operations in 1968 as
Alleghany Airlines and subsequently
experienced several mergers, including those
involving Piedmont, PSA, and Trump Shuttle.
Also, since 9/11, USAirways has filed twice for
bankruptcy protection.
The Positions
Each merger committee desired a different
solution to combining seniority lists. US sought
a DOH list, adjusted for length of service. AW
sought a ratio method, considering pre-merger
financial conditions and pre-merger expectations
regarding jobs, status, pay, and future career
paths.
After the arbitration phase ended, and both
attorney’s gave their closing remarks the
Arbitrator and two pilot neutrals commenced
their deliberation. However, something highly
unusual occurred in the following weeks.
Arbitrator Nicolau ordered both sides to reconvene
for a “special†meeting. At this
meeting, Arbitrator Nicolau indicated that, “both
approaches created difficulties if….. those
positions were not fundamentally changed.†In
other words, he was giving the parties notice
that neither side was going to get what they
wanted and he was granting them one last
opportunity to change their position or to submit
a new proposal. Neither side budged.
Side-by-Side Comparison
America West USAirways
Pilots
(on 5/19/05)
1894 (no
furloughed pilots)
5098 (1,691 or 33%
on furlough)
Aircraft
(on 5/19/05)
144 jets 270 jets
(on 1-1-07) 132 jets 226 jets
9 A330s
10 767s
12 757s 34 757s
94 A320 Family 102 A320 Family
26 737s 69 737s
2 E190s
Financial
Status
OK Still in bankruptcy at
time of merger and
unprepared to
present a
reorganization plan
for its emergence.
Notable Quotes
We found the following quotes to be of interest.
Arbitrator Nicolau states, “The fact is that the
career expectations of the AW pilots on May 19,
2005 were far superior to those of the
USAirways pilots. USAirways pilots had more to
gain from the merger than their new colleagues.â€
Mr. Nicolau also quotes himself directly from the
FedEx/ Flying Tigers Award. Your NWA Merger
Committee finds the following quote to be most
useful and expressive of modern day airline
mergers:
“There are four basic lessons to be
learned from those submissions;
that each case turns on its own
facts; that the objective is to make
the integration fair and equitable;
that the proposals advanced by
those in contest rarely meet that
standard; and that the end result,
no matter how crafted, never
commands universal acceptance.â€
3
Nicolau implies the following:
1) No two mergers are the same
2) Fair and Equitable is the arbitrator’s goal
3) It is difficult for either side to be neutral and
non-emotional
4) Frequently, neither side likes the outcome.
Why not just use DOH?
One of the most frequent questions received by
your NWA Merger committee is, “…Why not just
use DOH and be done with it?â€
DOH is sometimes used, but arbitrator’s
frequently site many other overriding factors.
Some considerations sited in the AW-US award
include: the financial state of each company,
the equipment and routes that each carrier
brings to the merger, the career expectations of
each pilot group and, most notably, the staffing
and efficiencies of each airline.
For example, in the AW-US Merger, the US
Merger Committee strictly pursued a DOH list,
adjusted for length of service. Had this method
been used, the #1 America West pilot would
have had 998 US pilots placed ahead of him on
the combined list. Additionally, approximately
1600 furloughed US pilots would have been
placed SENIOR to approx. 1500 currently
employed and working AW pilots. Clearly the
arbitrator felt that the DOH method would have
violated nearly all or some of the “goals†of the
ALPA Merger policy.
The End Result
Arbitrator Nicolau used a Ratio Method with
specified conditions and restrictions. He
employed a ratio method similar to that used in
the 1988 Federal Express/ Flying Tigers merger.
In that case, a healthy, growing, and vibrant
Federal Express acquired a financially troubled,
‘old school’ company. Using the ratio method,
Arbitrator Nicolau placed AW and US pilots into
different groups.
Group America West USAirways
Group 1
All Widebody
positions on the
A330 and 767-Int’l.
None Top 517 US pilots
(423 active + 94
mgmt. and long-
term sick)
Group 2
All 757 Captains
90 AW pilots 167 US pilots
Group 3
All A320 and B737
Captains
767 AW pilots 873 US pilots
Group 4
All 757 F/Os
87 AW pilots 176 US pilots
Group 5
All A320 and B737
F/Os
718 AW pilots 840 US pilots
Group 6
All US pilots on
furlough, as of
1-1-07.
None Remainder
Conditions and Restrictions:
1) Standard no bump–no flush restriction.
2) Protects US Widebody positions for 4 years
from date of award. If the Age 60 Rule changes
this restriction would no longer apply.
Reaction of both pilot groups
As Mr. Nicolau predicted, neither side is
particularly fond of the award. However, this is
an excellent time to point out the risks
associated with failing to make the hard
decisions internally and handing over the
disagreement to an arbitrator.
4
Some US pilots have been “shocked†to see that
their DOH of 1985 puts them in the same group
as AW pilots with a DOH of 1998. Removing the
emotion and looking at the facts, a US pilot with
a DOH of 1985 means that he was a very junior
Narrowbody Captain at US. And looking at an
America West pilot, hired in 1998 means that he
is a junior Captain. On the combined list, each
of these pilots is in the exact same, relative
position.
If you were furloughed on the old list, you are
still furloughed on the new list. If you are
recalled, and choose to return, you will be a
junior F/O for a long time. The same conditions
held true on the previous US list.
Conclusion
Mr. Nicolau was charged with deciding a case
that was notably difficult, but he used ALPA
Merger Policy to lay the framework for his
decision.
The US-AW Arbitration Award is available on
the "Merger Committee" page of the NWA MEC
website (https://crewroom.alpa.org/nwamec).
We encourage you to read it. Inside this award,
you will see that priority and emphasis was
placed on four items:
1) Financial Condition of each carrier
2) Career Expectations of each pilot group
3) Planes and Routes; what each airline
brought to the merger
4) Staffing; the internal efficiencies of each
carrier
After reading the Award, ask yourself these
questions…..
1) Did Arbitrator Nicolau preserve jobs for each
pilot group?
2) Did Arbitrator Nicolau avoid windfalls to
either pilot group at the expense of the other?
3) Did Arbitrator Nicolau maintain or improve
pre-merger pay and standard of living?
4) Did Arbitrator Nicolau maintain or improve
pre-merger pilot status?
5) Did Arbitrator Nicolau minimize detrimental
changes to career expectations?
Finally, ask yourself if it was possible to avoid
arbitration and work out these differences
internally between merger committees?
This was the first merger of two ALPA-
represented major carriers in well over 15 years.
The industry has changed.
We hope that the pilots of both carriers will rise
above emotion and respect the mutual need for
survival. We hope that both pilot groups will
move on and re-focus their attention on working
together to improve their contract. Nearly two
years after the merger announcement, both
carriers are still operated separately (no mixing
of pilots or aircraft). Each pilot group still works
under their previous contract.
We also hope that they can learn from history,
including that of NWA. The reality of the modern
era airline business brings many changes. One
change that is needed internally, among pilots,
is to learn to respect each other. Nothing can be
gained by name calling and hurling insults.
Everything can be lost without cohesiveness and
unity.
The Northwest Merger Committee
[email protected]
