More about those younger, inexperienced pilots.
We get letters about Airline Biz, and labor disputes bring a few more
By Terry Maxon
tmaxon@dallasnews.com
10:29 am on March 8, 2013 | Permalink
The Airline Biz items we did about pilot lawsuits drew a few interesting emails, which I’ll pass on.
The first is from a former Trans World Airlines pilot now flying for American Airlines. He was hired in 1989 by TWA, but he was among the TWA pilots stapled to the bottom of the American seniority list.
I’m sure he is referring to “St. Louis judge moves TWA dispute over to American Airlines bankruptcy court in New York,” a blog item about a lawsuit some ex-TWA pilots had brought against the Allied Pilots Association. The story never went into the paper, but appeared on the blog. I know he wasn’t happy with the item. I’m not sure why.
Dear Terry,
Whenever I read the paper I feel that reporters do not research. On the TWA article, it is terrible. Did you even do the math. I am a pilot and if I flew my airplanes like you reported i would be dead. I am sorry that you can put in such pathetic reports. I for one have more self respect for my work.
[UPDATE: The TWA pilot wrote back to say he had misread the item and thought I had written that the 2,500 most senior TWA pilots were at the top of the American Airlines pilot seniority list.]
An American pilot I’ve known for a long time weighed in on the TWA item and the USAPA item, in particular to point out that the APA-AA agreement specified that the Supplement CC arbitration won’t touch the existing seniority list at American Airlines. Here’s what he wrote about the TWA matter:
“I just read your piece about the TWA pilots’ suit being moved to Lane’s court … and yes, the TWA pilots are screwed. That is why they were fighting like hell to keep it from going from MO to Lane’s court. Lane is going to say ‘Too bad, too sad…see ya.’ And they know it. ….
“The Supplement CC arbitration is going to be interesting, but get ready to take some heat for saying ‘American and APA agreed in a new contract adopted last year that they would submit the question of what to do with the St. Louis pilots, their seniority and Supplement CC to binding arbitration.’ I think I know what you meant, but APA specifically agreed to language that said the arbitrators shall not rule on anything that alters the seniority of the merged list as it stands. I suspect you meant they are going to rule on ‘…the question of what to do with the St. Louis pilots, [how they will exercise] their seniority and Supplement CC to binding arbitration.,
Changing numbers – never going to happen. Allowing some number of TWA captains to keep their seat but have to be on reserve as the perpetually junior captain at the base; that (in my opinion) is precisely what the outcome will be. And the TWA pilots know this and they’re trying everything they can do to keep what I view as the inevitable from occurring.’
An American Airlines pilot I know wrote me about the US Airline Pilots Association’s action in U.S. Bankruptcy Court to head off a threatened lawsuit by some ex-America West pilots, “US Airline Pilots Association files suit to head off lawsuit by America West pilots.” USAPA represents US Airways pilots, which includes pre-merger US Airways pilots from the East and ex-America West pilots from the West.
Terry
In all of your articles on USAir and America West, you fail to mention that the “easties” have screwed themselves out of $40/hour pay by not let the Nicolau Award be implemented.
We are talking 10′s if not 100′s of thousands of dollars in lost pay PER PILOT due to their own stupidity.
Well, that’ll kick the anthill.
And we have this letter from a reader who was responding to the USAPA lawsuit item, particularly to a comment from “Floyd.” You might want to read Floyd’s comment to put the letter below in context. (For the record, we found the lawsuit on the AA bankruptcy website and wrote entirely from the lawsuit. USAPA has not contacted us on the matter.)
Terry,
I wrote this in response to Floyd. I am a pilot for America West. I’m withholding my name because of USAPA’s history of intimidating opposition which includes lawsuits against those who speak out.
Eric paid a $30,000 retainer to start the process of protecting the rights of pilots against a fake union who’s only goal was to advance the intersects of former Us Air pilots which includes placing 1800 furloughed pilots above actively flying pilots at America West. Floyd, I’m disgusted with East pilots like yourself who formed a ‘union’ to get out of binding arbitration.
The Dallas Morning News story has USAPA’s fingerprints all over it. The common theme being younger, less experienced pilots. Our average age groups is within 4-5 years. I’d also remind the East folks of a dismal safety record. America West retired it’s operating certificate without a single fatality, USAPA has been discrediting West pilots and even sued 18 West pilots for speaking out against the tyranny of the majority. These false RICO charges were tossed out of court by the 4th Circuit with prejudice.
West pilots sued because they were not being fairly represented. Many pilots refused to pay USAPA dues and were forced to pay under threat of termination.The case was known as the Addignton trial or DFR (Duty of Fair Representation).USAPA brought Sully and Skiles into court to try and influence the jury. Anybody in court that day who heard him say the words, ‘Integrity means doing the right thing even if it’s not convenient.’ The right thing would be to abide by the binding arbitration which decided our seniority by a respected arbitrator and chosen by East pilots.
Sully is hated by our pilot group and is seen as a false hero and exploited his status at the trial. If he and his fellow East pilots had integrity, they would have abided by their agreement to accept the seniority list. Nicolau was an arbitrator of their choice, FYI.
Finally, I included a court transcript about a story Sully told in court. Nobody who was in court believes a daughter would ask such a question. The West pilots had an ‘integrity matters’ campaign to counter their ‘seniority matters’ lanyards they were wearing with their ID badges.
I hope to ask Sully one day the meaning of the word….Integrity.
I’m embarrassed to be associated with East pilots and their faux union and can speak for the 97% majority of West pilots who took the advice of our attorneys who voted for the MOU. By voting in the MOU, we voted out USAPA and sent it to the trash heap of history.
(You know it’s a divided pilot group when they begin talking trash about Sully Sullenberger.)
http://aviationblog.dallasnews.com/tag/america-west/
Who really gives a #### right now. Do you really think anyone cares Dodgson?
http://youtu.be/pLtMS9bI8g8
How about THIS?
http://www.aviationweek.com/Article/PrintArticle.aspx?id=/article-xml/AW_08_19_2013_p24-607366.xml&p=1&printView=true
Lawsuit Expected To Delay American/US Airways Merger
By Jens Flottau, Darren Shannon
Source: Aviation Week & Space Technology
August 19, 2013
U.S. airlines have always argued that consolidation is not only good for them, but is also good for the consumer—and now that theory will be tested in court.
Regardless of the outcome in what now becomes a very public fight with the federal government over the proposed merger of US Airways and American Airlines, the antitrust suit that the Justice Department filed last week represents a tectonic shift. No longer, the government signaled, will it analyze the impact of mergers and acquisitions (M&A) on prices and competition mainly on nonstop routes between cities. Now, the full panoply of connections will be examined, with routes through third cities getting much more emphasis.
Firing a cannonball though the two carriers' oft-cited datum of overlapping on a mere 12 routes, Justice said it found 1,044 city pairs in which a combined US-AA would be bad news for ticket buyers.
“They have finally figured out that this is a network business,” airline regulation scholar Michael Levine says of the government's lawyers. Levine, an architect of deregulation under Civil Aeronautics Board Chairman Alfred Kahn in the 1970s, adds, “Competition policy in this area should balance the public benefits of expanding networks against the cost of tightening the oligopoly, and the balance in this case from the consumer perspective comes out strongly against approving the merger.”
But US Airways and American say they will fight back vigorously. They will argue that the combination would allow them to compete against the other two big domestic network carriers—United Airlines and Delta Air Lines—to force prices lower.
And they have some influential allies in making the case that the government is ignoring the benefits of a healthy airline industry. The Air Line Pilots Association says Justice has “interfered with the steady progress that the airline industry has made to achieve an economically rational yet vigorously competitive industry. . . . By filing this lawsuit, the department has completely ignored decades of instability in the airline business that has caused many carriers to go out of business.”
The Justice action initially sent stockprices plummeting.
“I don't know of anyone who had seen this coming,” says George Hamlin, president of Hamlin Transportation Consulting, although some argue the carriers must have suspected trouble by the nature of the questions from the Justice Department.
The planned merger was supported by all of the constituents in the industry and even American's large competitors—Delta and United—were officially in favor of it for the same reasons that Justice is now opposing it: The industry argued that the combination would help with continued capacity discipline leading to sustainable “pricing power” (higher fares).
“They [Justice] got this wrong . . . very wrong,” says Rich Parker, partner at Washington law firm O'Melveny & Myers and a noted antitrust specialist. “We intend to have our day in court, and look forward to it.”
The defense strategy, according to three leading antitrust lawyers employed by the airlines, will center on proving how the merger will create benefits for consumers via cost synergies that will, in part, be passed to passengers. The defense also will show that the “new American” will increase services and create a competitive network for corporate travelers (including on connecting services) that currently have to rely on United and Delta. Parker, along with Dechert partner Paul Denis and Jones Day's Joe Sims, says the airlines' defense also will dispel the department's claim that U.S. airlines collude to set ticket prices, and notes that the burden of proof is on the regulator, not them, to show the merger is anti-competitive. “No one should assume the merger is over,” Sims, who represents American, insists.
Levine points out that “the incremental network benefits to the public of this transaction are minimal and the costs to the public of the difference between a three-firm network oligopoly in which all the participants have aligned incentives and a four-firm oligopoly that leaves them misaligned and hence willing to defect from the tacit joint monopoly equilibrium are considerable.”
He quips that “[US Airways CEO Doug] Parker and his crew and the Wall Street guys have been telling us for a year at least that a tighter oligopoly will perfect the industry's “pricing power.” I don't know why we shouldn't believe them!” And: “I understand why tightening the oligopoly should be good for shareholders, managers and organized labor, but I don't understand why anyone should believe that it will be good for the public.”
While the deal is not dead and its fate now lies in the hands of U.S. District Court in Washington, a significant delay beyond the planned third-quarter closing is all but unavoidable. Last week's American Bankruptcy Court hearing in New York became almost a side note in the new process. Judge Sean Lane said he had “lingering doubts” about whether it was appropriate to confirm the plan under the circumstances. And the industry now has reason to review the various scenarios that would result if the merger is ultimately blocked. The conclusions are not comforting, many argue, but here's the thing: The U.S. airline industry has managed to greatly improve its finances. In the second quarter, Delta, US Airways, United, American and Southwest Airlines earned a combined $1.9 billion profit, up from $1.4 billion a year earlier. And most insiders believe that all four legacy carriers will continue to be viable in the future. “Call off the funeral,” says Levine.
Looking at the situation from a global perspective, the U.S. would be the only major market in which four big legacies compete. Low-cost carrier Southwest is another major factor. Latin America has consolidated around three operators, as have Europe, China, the Middle East and Africa (see table). There are also three global alliances. If the Justice Department has its way, the U.S. will be the exception.
“We believe this represents a seminal negative event for the U.S. airline industry and significantly jeopardizes industry capacity discipline,” Jamie Baker, airline analyst at JP Morgan says. “A potential independent [American] will significantly diminish longer-term investor confidence in the sector.” In Baker's view, Justice has “significantly altered its usual M&A analysis to introduce connecting markets and baggage fees into its calculus. As such, it is difficult for us to imagine how both parties could offer any meaningful regulatory appeasement.”
That Justice has approved the Delta/Northwest and United/Continental mergers, but not this one, is because “circumstances are different, the facts changed, they came too late,” Levine says. The government could live with having four network carriers with differing interests, but not with three that are so closely aligned.
That an administration changes its view is not without precedent. In 1998, after years of encouraging major defense contractors to consolidate, the Clinton administration's Justice Department, backed by the Pentagon, successfully filed a suit to block a proposed merger of Lockheed Martin and Northrop Grumman, arguing that the combination of the Defense Department's largest and third-largest suppliers would create “unprecedented anti-competitive concerns.” The suit came just a year after the government had OK'd Boeing's acquisition of McDonnell Douglas.
The future of American is indeed the wild card in the industry. Obviously, if Justice is successful in its opposition, that “would not lead to immediate elimination,” says Hamlin, of American or US Airways, but “it will be increasingly difficult for American to compete with giants [Delta and United].”
Baker points out a key difference: Having merged with US Airways, the new American would not be forced to make any risky capacity moves in order to be on a par with the other two big players. But without it, American “would have to grow (rather than merge) its way to competitive network parity with post-merger Delta and United.” Therefore, “we expect industry capacity to accelerate and longer-term earnings prospects to be diminished.”
In the longer term, according to Morgan Stanley's John Godyn, Delta and United would benefit if the merger did not happen because of “structural advantages that would generate outsize relative returns across cycles.” And US Airways? The Tempe, Ariz.-based airline would be by far the smallest of the Big Four. It currently has one key advantage over the others in that its stage-length-adjusted unit costs are much lower, so it can still make money at fare levels where its competitors cannot. But on the global stage, it would remain a niche player with major gaps in its domestic network, subscale transatlantic presence and no transpacific services.
Justice argues that the proposed merger could be illegal on more than 1,000 city pairs and must be dismantled to stop a clique of national carriers from manipulating services and ticket prices. It cites numerous public comments and internal communications by senior US Airways executives—some dating to 2006—that the regulator says prove competition between U.S. airlines would be weakened if the merger goes forth.
The Justice Department was expected to demand some conditions for the merger, with concessions at US Airways' Reagan Washington National Airport hub the most likely target. But the argument goes far beyond any request for a deal, instead demanding “that [the] defendants [the airlines] be permanently enjoined from and restrained from carrying out the planned merger of US Airways and American or any other transaction that would combine the two companies,” as the deal violates U.S. antitrust law.
The lawsuit's list of 1,044 city pairs “where the merger is presumptively illegal,” stands in stark contrast to the 12 overlapping routes cited by the airlines.
Justice's lawsuit regularly refers to comments made by US Airways management, and uses statements by CEO Parker and President Scott Kirby to illustrate the anti-competitive nature of the merger. The department puts particular weight on Parker's comments that consolidation—which he has championed for years—financially benefits the airline industry. The CEO has said mergers have allowed the U.S. airline industry to control capacity, and that there is an “inextricable link” between reduced supply and higher prices.
William Baer, the assistant attorney general in charge of Justice's antitrust division, says his concern stems in part from the result of earlier mergers that have closed hub operations or focus cities.
Baer acknowledges that this opposition is due, in part, to the limited competition that resulted. He notes, however, that this lawsuit “is fully consistent with what we have done in the past.” In 2000, a proposed merger between US Airways and United was rejected by the regulator, he says, noting that similar rejections were considered by the department in 2007 when US Airways made an unsolicited bid for Delta and in 1998 when Northwest Airlines sought a controlling stake in Continental Airlines.
Since then, however, Justice has approved three substantial mergers (Delta/Northwest, United/Continental and Southwest/AirTran Airways), two of which at the time created the world's largest operator.
Justice would still consider a concessions package, but “the degree of competitive overlap” between US Airways and American leaves little option but to seek a full dismissal of the merger agreement, Baer argues. He says if either airline can prove its future is in jeopardy, the objection could be lifted. But he notes that the two airlines are posting record profits, proof alone that both are viable entities and necessary to maintain competition.
Baer also targets US Airways' apparent fervor for ancillary fees—a major contributor to U.S. airline revenues—and that “post-merger, the new American would likely lead to new fee increases.” He also criticizes US Airways' “tendency” to signal price and fee increases to its competitors, and argues that a “tacit coordination” between the few remaining legacy carriers would only increase if US Airways and American merged.
In 1998, the U.S. Justice Department signaled that consolidation of the U.S. defense industry had gone far enough by moving to block Lockheed Martin's planned acquisition of Northrop Grumman. Tap the icon in the digital edition of AW&ST to read Aviation Week's report on that suit, or go to AviationWeek.com/antitrust
Largest Legacy Carriers in Key Markets(by 2012 revenue passenger kilometers)
North America
United 288.3 billion
Delta 271.5 billion
