United Labor Issues Cloud Merger

PA16

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Nov 12, 2005
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CHICAGO (TheStreet) -- The merger between Delta(DAL) and Northwest may have created the false impression that it is easy to put two airlines together. The United(UAL)/Continental merger could well cause that concept to be rethought.

Already, the two pilots groups are bickering. The leader of the International Association of Machinists, the biggest union at United, is calling for snapbacks to 2002 wage and benefits. In several cases, work groups must negotiate contracts, then vote in union representation elections and then negotiate new contracts. The stakes are particularly high for the Association of Flight Attendants and the IAM because both recently lost members they had at Northwest, which merged with Delta in 2008, and both face union representation elections to retain United or Continental members they already have.

In union elections at Delta this month, the merged carriers' flight attendants and fleet service workers voted not to organize. AFA had 7,000 Northwest flight attendants and IAM had 4,700 Northwest fleet service workers. Both unions are expected to appeal the results: Delta has said it followed the rules. United does not require contract deals to complete the merger, already approved by regulators. . But United does not want the sort of conflict among work groups that continues to separate pilots at US Airways(LCC), who are bitterly battling over seniority integration five years after a 2005 merger between US Airways and America West.

But let's not get ahead of ourselves. Before work group mergers can begin to occur, open contracts must be signed at the two predecessor carriers. So far, just one of the 13 unionized work groups has a signed contract. At old United, the IAM represents about 8,100 customer service agents as well as 7,900 fleet service workers. These workers, like most in the airline industry, signed concessionary contracts around the middle of the decade when four major carriers filed bankruptcy.

"We're not going to be the pawns that make it easy by saying 'we should take less so their merger can work,'" said Robert Roach, IAM general vice president. "We intend to get the best contracts for our members who are working under sacrifice contracts. We intend to snap back to where we were and get enhancements as well."

Snapbacks would be costly for United. In 2002, a top-scale fleet service worker earned $23.79 an hour and paid nothing for a family health care plan. Today, the same worker earns $21.01 an hour and pays $212 a month for the plan.

At Continental, about 9,500 IAM-represented flight attendants reached a tentative agreement in September. Then members rejected it. Tom Brickner, IAM airlines coordinator, said the agreement was a good one, with a no-furlough guarantee, profit sharing and wage hikes of 2.5%, 2.5% and 2% over three years. Compensation would have been $11.50 hour higher than what United flight attendants make, he said. The problem? Brickner said the union "viewed this agreement as a down payment on what the merger could produce [with] a second bite at the apple" after a representation election. Members would have a good contract in place as the process played out, he said. But too few flight attendants were convinced, and only about 60% turned out to vote.

United's 13,500 flight attendants are represented by the Association of Flight Attendants. "There's a lot of optimism about how this [merger] will be going forward," said Sara Nelson, spokeswoman for the United AFA chapter. "But at this point, people are still hurting, like they have been for the past decade, while waiting for [contract] improvements."
AFA's position in the representation election will be that it is best qualified to represent flight attendants, its only constituents. "We negotiate contracts based on priorities determined by flight attendants," Nelson said. "No other union offers that direct relationship." For their part, the IAM and the Teamsters, with more diverse memberships, say bigger is better. (IAM members also have the only defined benefit pension plan at United.)

The Teamsters represent mechanics at both United and Continental as well as 8,000 Continental fleet service workers. They will battle the IAM to represent the combined fleet service group. Currently, "we own everything under the wings except United [fleet]," said David Bourne, Teamsters airline division director. "That's a lot of clout."
Bourne said the Teamsters have good relationships with both Continental and United where, after replacing a weak AMFA local, the union brought back outsourced maintenance work. Bourne wants intensive United negotiations during the week of Dec. 6. "I don't like that the pace has slowed since we got the agreement with Continental," he said. "We want to resolve this and move forward."

As for pilots, they must negotiate both a new joint contract and an integrated seniority list, and the effort has hit a snag. In a letter to members, Jay Pierce, chairman of the Continental chapter of the Air Line Pilots Association, said he will not accept the United pilots' contention that 747 pilots should be paid more than any other pilots. United has two dozen 747s and Continental has none. Pierce also said Continental pilots are willing to separate seniority list issues from contract negotiations, but some United pilot leaders are balking. In another letter, Wendy Morse, head of the United ALPA chapter, contends that Continental pilots want compensation levels associated with groups of aircraft rather than single aircraft. She said she too wants seniority list integration and a new contract to be separate matters. But she noted that "while this has been advertised as a merger of corporate equals, that does not make it a merger of pilot groups with equal career expectations," reflecting the view that United pilots have greater prospects at the bigger airline.

-- Written by Ted Reed in Charlotte
 
FYI, I think it's against board rules to post entire articles without the consent of the author. Here is a link to the article though:
United Labor Issues Cloud Merger

Anyway, I saw this article yesterday and I'm not sure how accurate or current the information is. I can't speak for all the labor groups, but the info about the pilots is kind of old news by now. Here is an article about the pilot roadblock:

United, Continental pilots split on pay

But notice it's dated 11/08. And that article was a bit late on the scoop. In the last 2 weeks there has been a definite warming of relations between the groups again, with progress being made on some type of resolution. Monday we (UA) will be picketing with our CO brothers and sisters at EWR in protest to the company's stated intention of violating the CO scope language by flying 70 seat RJ's from CO hubs.

Pierce and Morse will both be present, and I plan to speak with both of them about the impasse.

My overall feeling is that most groups are pretty unified in getting good contracts from the company. As much as infighting makes for good headlines, I just don't see it going on first hand.

Regardless, there is too much to lose on both sides (management and employees) from derailing this great opportunity. So when the posturing is done, at the end of the day the labor issues will not be insurmountable.
 
Just heard that there has been some more progress in resolving the pay banding issue. Tomorrow's picketing event should be interesting. I'm looking forward to talking to my CO counterparts. One thing is certain though. Both sides have resolved themselves to accept the final outcome of binding arbitration. Since men (and women) of honor follow through with commitments, there won't be any civil wars on this property. At least not with the pilots.

On another note, I re-read the article and it suddenly struck me that it sounds like so many other articles written during UA's bankruptcy. During that time there was always another vulture predicting UA's demise. Here we are again, the biggest airline in the world with the most incredible route structure, bar none. Looks like all those talking heads were wrong. They will be wrong again.
 
Regardless, there is too much to lose on both sides (management and employees) from derailing this great opportunity. So when the posturing is done, at the end of the day the labor issues will not be insurmountable.

Things seemed to work out well for DL/NW. They seem mostly satisfied with their seniority and contract. Aren't you afraid of falling victim to endless in-fighting like USAirways pilots? Or do you think UA and CO will follow in Delta's footsteps?
 
Things seemed to work out well for DL/NW. They seem mostly satisfied with their seniority and contract. Aren't you afraid of falling victim to endless in-fighting like USAirways pilots? Or do you think UA and CO will follow in Delta's footsteps?

Unlike USAirways, the pilots of UA and CO are very unified in the singular goal of using our leverage to obtain the best contract from the company at a time when the gettin' is good. We are also committed to resolving our differences, and accepting the result of arbitration if it gets to that. And lets face it... (and if you work for US please don't take this the wrong way) but no one ever really wanted to hook up with US in the first place.

We are using Delta as a blueprint and a starting point for our contract. Economics have improved since DL negotiated their contract, and we actually expect much more. As for seniority, DOH is a non starter. Most pilot integrations in recent (and not so recent) history use some form of slotting by equipment and category, which is what I expect will be used in some form with the UA/CO merger. There may be adjustments here and there, which is where it is useful to have two sides who are committed and open to finding solutions. No on will be going "all in." But DOH is antiquated and never has been a good solution for pilot integrations. (Which is why ALPA merger policy was changed MANY, MANY years ago.)

There will always be some on both sides crying foul, claiming unfair treatment, and putting up websites promoting independence as a means to escape their perceived injustices. Hey, some people are just born victims. But so far, I have attended many joint union functions, including a joint picketing event in EWR tomorrow. While I have heard concerns from both sides, I have witnessed nothing but unity between our groups so far.
 
How did that picketing event go in EWR?
It was very successful. There were about 35-40 UA pilots present (not bad for a small domicile) and over 300 CO pilots present. Also saw 2 AA pilots. I spoke to many of my new co-workers and we all received enormous praise for showing up to support them. I can also say that to a man, every pilot I spoke with was excited about the potential and leverage this merger brings, had obvious concerns about unity and seniority, but also said that nothing we are facing as a group is insurmountable. It was comforting to see that the CO pilots are just as focused as the UA pilots on directing our attention to the company and not each other.

USAirways came up MANY times as an example of what not to do, while DL was considered not a benchmark but a starting point for negotiations. While some discussions were passionate, not one person considered the pay banding of the 777/747 a deal breaker either way. There are good arguments on both sides of the issue that will benefit both UA AND CO pilots. As for seniority, everyone seemed to think that an arbitrator will make a final decision and we will all live with it. So I left with a very good feel for the CO pilots. I honestly can't see any labor strife within the pilot ranks, except toward the company for outsourcing of flying. And on that front we made a pretty strong showing at EWR.

There will be several other picketing events in the weeks to come. I only wish I could find the time to attend the one in Chicago at the World Headquarters.
 
I honestly can't see any labor strife within the pilot ranks, except toward the company for outsourcing of flying. And on that front we made a pretty strong showing at EWR.

There will be several other picketing events in the weeks to come. I only wish I could find the time to attend the one in Chicago at the World Headquarters.

Save CAL Pilots
 
So what are you saying Nostradamus? That there are a few misinformed, disgruntled Continental pilots? No kidding! Every airline has a few. You should know, being cut from the same cloth at USAirways.

Bottom line is that a vast majority of CO and UA pilots seem to be unified and working well together resolving their differences. Posting links like that does nothing to change that fact. It's the type of unity that will never be seen between east and west thanks to people like you. That you wish for the same miserable fate to befall others is very telling though. But to most it looks more like envy than anything else. (The same reason child bullies on the playground try to cut everyone else down.)

You do realize that people are laughing at you and your buddies on this forum. It's no wonder you are being ignored by many. Their indifference to you is obvious.

To the CO and UA pilots, I look forward to seeing what type of contract a real unified group of unionists can achieve! Good luck! And btw, your turnout and display of unity against outsourcing has not gone unnoticed.
 
To the CO and UA pilots, I look forward to seeing what type of contract a real unified group of unionists can achieve! Good luck! And btw, your turnout and display of unity against outsourcing has not gone unnoticed.

Congrats to you guys. Hopefully we can follow your example and turn our careers around as well.
 
Just heard that there has been some more progress in resolving the pay banding issue. Tomorrow's picketing event should be interesting. I'm looking forward to talking to my CO counterparts. One thing is certain though. Both sides have resolved themselves to accept the final outcome of binding arbitration. Since men (and women) of honor follow through with commitments, there won't be any civil wars on this property. At least not with the pilots.

On another note, I re-read the article and it suddenly struck me that it sounds like so many other articles written during UA's bankruptcy. During that time there was always another vulture predicting UA's demise. Here we are again, the biggest airline in the world with the most incredible route structure, bar none. Looks like all those talking heads were wrong. They will be wrong again.
There were lots of vultures out there after USAirways also. Both airlines have too much to let go. There was too much good cashflow after the deals were re worked, too many fees for the lawyers and management not to pluck.
 
There were lots of vultures out there after USAirways also. Both airlines have too much to let go. There was too much good cashflow after the deals were re worked, too many fees for the lawyers and management not to pluck.
Not sure if I agree with that analogy. While there may be some similarities, look at the reasons the vultures were hoping for failure during bankruptcy.

Many wanted UA to fail because the route structure was the envy of the industry. The Pacific operation alone was a sought after gem by every major airline. Shortly after 9-11 it is a well known fact that NW's business plan was a UA failure, which is why they spoiled each and every attempt by anyone else to raise fares. (Hoping UA would run out of cash before them.) Even US was one of those vultures if I'm not mistaken. Which was it? The Super Secret Corporate Transaction #3 or 4 according to one of the most infamous US east posters ever to grace these pages?

In the case of USAirways 2 bankruptcies, it was more the hope of eliminating a competitor in order to gain pricing power through reduced options and available seats. When it didn't happen, every airline started reducing capacity instead. Something the "experts" now like to call "capacity discipline."

While I agree that there is always money to be made by management on the backs of employees (ie: concessions), each of the bankruptcies that occurred post 9-11 were very different. Restructuring in CH11 is one thing. And I do think UA took an inordinate amount of time in CH11 to get the house in order. But US on the other hand was days away from closing the doors with no financing readily available except through the merger. I know this is, and has been, forever debatable. But the fact is that no matter how much money management stands to make on the other side of bankruptcy court, emerging is a function of exit financing, not management or investor desire to cash out later on. US Airways failed to secure any type of exit financing, (equity or debt) without the merger with America West. The synergies that the merger brought were the key factor in securing the investment, no matter where the money came from. Not the strength of USArways as a stand alone company (at the time.)

As a comparison, look at the DL/NW merger. Initial estimates were conservatively stated as $1.6 Billion per year. After new contracts were signed and the merger came together those estimates have been revised to over $2 Billion per year. UA has similarly estimated $2 Billion per year in synergies, and it is expected to go up from there in the coming year. That's a huge amount of money and everyone wants a piece, including the employees, management, and investors. Back to US Airways, I don't know the numbers at the time of the merger, but it was those synergies that convinced the money people to open their wallets. Without the merger, no synergies... no money... no USAirways... and some say (although I personally disagree) shortly thereafter no America West.
 
Just a relatively minor correction. US had some exit financing - $125 million DIP from Air Wisconsin that converted to equity upon BK2 exit and $125 million from Republic as equity financing upon BK2 exit. Of course, both wanted something and were willing to pay for it - Air Wisconsin a home for it's CRJ-200's and Republic the E170's/DCA/LGA slots and a fee for departure contract to go with them.

But you are basically right. No other financing was available without the merger as part of the package. Air Wisconsin's money was spent about as quickly as it came in while Republic was only putting in the money for the planes/slots prior to BK2 exit (and recouping that from leasing the planes/slots back to US until they were transferred).

Jim
 
I had forgotten about those two. Thanks. So I'll rephrase. With the exception of Air Wisconsin and Republic, who each had specific stipulations upon Emerging from BK2, there was no other money for exit financing absent the merger. Perhaps America West did not save US Airways, but the merger certainly did.
 
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