American Airlines unions face decision on concessionary contracts
By TERRY MAXON
Staff Writer
[email protected]
Published: 05 August 2012 08:48 PM
For most of American Airlines Inc.’s history, the outcome of union votes usually swung on whether the contracts provided enough pay raises and other sweeteners to persuade employees to approve the deals.
But for the past decade, the question has been whether the employees could stomach the concessions they were forced to make. And that’s the decision facing members of American’s three unions right now.
Even union leaders who support American’s proposals are doing so while holding their noses. The fear is that American will give them something far worse if the carrier’s offers are turned down.
“It’s the great unknown,” Allied Pilots Association president Dave Bates said last week. “There’s a high level of risk and a great deal of uncertainty. Whereas, if you vote yes, you know where you stand.”
The bankruptcy case of American, now in its ninth month, reaches some key milestones in the next two weeks.
On Wednesday, the APA and Transport Workers Union will announce the result of contract votes by their members. A week later, U.S. Bankruptcy Judge Sean Lane is scheduled to rule on American’s motion to reject its unresolved labor contracts — unless he decides to wait to learn the results of the flight attendants’ contract vote, due Aug. 19.
Section 1113 of the federal bankruptcy code permits a company to abrogate its old labor contracts. American has to meet a number of legal requirements to win its case, but judges rarely turn down a bankrupt company’s request.
As they consider how to vote, union members are being warned that they’ll likely face the terms outlined by American on March 22 if the judge lets the airline toss their existing contracts. Those terms include far more draconian cuts than the deals the airline and its unions have since worked out.
To remove any doubt, an American executive told pilots Friday that if allowed by the judge, the company would toss out the old APA contract and impose the tougher term sheets. A company spokesman then added that the same would be true for any union that turns down its proposal.
The offers on the table still require more than $800 million in cost-cutting annually from American’s unionized workforce, as well as thousands of job cuts. But the deals being voted on are an improvement on the $990 million in annual cost cuts that American originally sought, and the number of jobs to be eliminated has shrunk.
Contract hearing
American and its unions squared off in Lane’s court in April and May for three weeks of hearings on the Section 1113 motion. The airline argued that it needed to reject the contracts to reorganize its affairs, while the unions said the company asked for too much and didn’t meet the law’s requirements.
But the advisers for the APA, TWU and the Association of Professional Flight Attendants are telling members that there’s not much chance that the judge will let them keep their current contracts.
“If the contracts aren’t ratified, then we’re in a position of having the 1113 term sheet if the judge rules against us. I think everyone is fairly confident that’s the way it’s going to play out,” APFA president Laura Glading said last week in an interview.
“I think we have a chance, but it’s a small chance, of having the judge ruling in our favor. But even then, it’d be a short-lived victory, I believe,” she said.
If the judge does reject the contracts, “then we’re sort of without contracts and we have to begin a negotiating process,” Glading added. “But where’s our leverage?”
Sharon Levine, TWU’s outside counsel in the 1113 hearings, and Tom Ward, a TWU expert witness in the case, both offered grim assessments of what will happen if the membership turns down American’s offer.
In a video recorded for TWU members, Ward warned that the union would lose the better terms it negotiated that lessened some of the damage of the March 22 term sheet. At best, he said, those March terms would likely be imposed instead.
“At the minimum, there’ll be a massive job reduction — 4,600 positions will be eliminated. Make no mistake about it. They will not be retrievable in [normal] negotiations,” said Ward, president of the Labor Bureau Inc., a consulting company that advises labor groups in collective bargaining talks.
In her video, Levine cautioned members not to make the mistake of thinking that these negotiations are anything like the usual negotiations that are governed by the Railway Labor Act. They aren’t, she said.
“Bottom line, we’re in bankruptcy court. We’re not in a labor court. We’re in a court that’s designed to help the debtor reorganize by cutting its costs and restructuring its business operations. It would be a very difficult ‘ask’ to go into this bankruptcy court and ask the judge not to give American Airlines labor concessions,” she said.
“Please remember that a vote on this tentative agreement is not the same as the simple vote on whether it’s an acceptable or unacceptable contract,” she said.
She also warned that the TWU, which began labor talks in the fall of 2007, likely would face several more years of contract talks if the judge allows the airline to throw out the existing contract.
Five TWU units approved a “last, best and final offer” from American in May. The two units that turned down those deals, the mechanics and related employees and the maintenance stock clerks, are voting on revised offers. The vote concludes at 11:59 p.m. Tuesday.
Union leaders
Meanwhile, the presidents of some union locals have put out their own video and sent letters to members spelling out the reasons members should vote no on the six-year agreement.
“Some are saying that if we vote this down, there will be massive job losses,” wrote Bob Owens, president of TWU’s New York mechanics’ local, “and yes, over the next several years, that’s probably true. But the same is true if we vote yes.”
“Either way it won’t happen next month, or even next year,” Owens wrote. “It will take time, and as time goes on, attrition will eat up most of the reductions. If we vote yes, we give them six years to outsource as much as they can while we stay at the bottom of the industry.”
Gary Peterson, president of the TWU’s Dallas/Fort Worth mechanics’ local, told members in a July 19 letter why they needed to vote down the offer.
“Now is not the time to give up, but rather it is time to dig in further for what we deserve comparative to the industry,” he wrote, adding “Remember, that no deal is better than a bad deal.”
Peterson’s letter prompted an unusual response Wednesday from a top TWU official who disputed his conclusions.
As Levine did in her video, TWU international representative Donald Videtich said labor talks in bankruptcy are “far different” that traditional labor talks.
“Your failure to understand this threatens to expose our members to the far greater concessions which will inevitably be imposed in the event our contract is abrogated if the membership follows your advice,” Videtich wrote.
The what-ifs
A key question, of course, is whether American will indeed throw out its labor contracts if Lane grants the carrier’s motion, despite Friday’s tough talk by vice president of flight John Hale and an airline spokesman. Asked about it last week, American chairman and chief executive Tom Horton shrugged off the question.
“I’m not going to comment on it. We’ve been so focused, at the company and I think the unions, too, on trying to get to consensual agreements after many years of trying and now in the construct of bankruptcy have reached those. I think the focus should be on ratification and moving the company forward,” he said.
The decision from Lane is scheduled to come by Aug. 15, a week after both the TWU and the APA count their votes. However, with the flight attendants voting past that date, he may delay his decision, as he did several times earlier this summer.
At road shows to explain the contract, members are peppering union officials with a lot of what-ifs: What if we turn it down? What if we approve it and we’re not successful in merging with US Airways Inc. (as all three unions have endorsed)? What if the company rejects our contracts?
The effort to sell the contract was undercut by a letter from a Los Angeles-based pilot late last week that indicated the airline was eager for a deal and would negotiate a better one if the current offer is voted down.
Bates, who is voting for the APA’s proposed contract, acknowledges that it is not the deal pilots would want.
“There are a lot of things in this tentative agreement that pilots aren’t happy with, [that] they consider very distasteful. There’s this tendency to want to vote no because you don’t like it. But then, you’re not going to get something better, you’re going to get something worse if you do vote no,” he said.
While Glading hasn’t told flight attendants to vote for the agreement, she’s told them why they should.
One, rejecting the vote opens the likelihood that American will throw out the contract, she said. In addition, settling the labor issues is the best way to move onto the next step, which she and the other union leaders hope is a merger with US Airways.
“Am I voting yes? Absolutely,” she said. “Do I want to see this accepted? Yeah, I do. I really think that’s going to be the best path for us.”
