To Strike or Not To Strike: That is the Question

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With due respect to William Shakespeare, the AMR labor management turntable is spinning faster and faster for American Airlines’ pilots and management. External and internal accelerators are propelling both pilots and management into a precipitous downward spiral.

In the current Kabuki taking place at American Airlines, AMR has historically not shown itself to be a stellar example of cutting-edge labor relations. Likewise, Allied Pilots’ Association has frequently quickly and forcefully pointed out how inept American’s managers are at the simple task of running the airline on a profitable basis.

Certainly, a well-documented history exists wherein very ugly relationships have been forged by outrageous examples of labor and management malfeasance at American Airlines. Over American’s 75-year-history, rank-and-file employees consistently view management as inept; while AMR leadership have not generally held their organized employees in high regard.

In 2003, a labor management meltdown occurred when then president, Don Carty convinced the organized workgroups to agree to significant concessionary working agreements. Pilots, Flight Attendants, Machinists and Ground Personnel collectively agreed to reduce labor costs – both direct and indirect – upwards of 30%. Concurrent with, or immediately following, those agreements being ratified, Don Carty and the AMR board of directors all received substantial performance-based bonus payments. The outrage expressed by the collective employee groups was sufficient for Mr. Carty and several board members to tender their resignations.

With those events as a painted backdrop over the past ten years, the represented employee groups have viewed subsequent management with distain and mistrust. Eight years after Don Carty’s departure, Gerald Arpy declared AMR and it’s subsidiaries to be bankrupt. Concurrent with Mr. Arpy’s bankruptcy announcement, he also announced he would immediately resign – once again, causing employee groups to believe the leadership at AMR could not complete the simplest of tasks.

After the dust cleared from the bankruptcy overture, intuitively, American’s bargaining units sensed they would be asked, or forced, to take new reductions in compensation and benefits. From an industrial psychology point of view, Arpy had led the employees to believe that AMR would be the only legacy carrier1 who would not need to seek protection under the bankruptcy code. Embedded in that assumption was an unstated, but widely held expectation that “everything was going to work out… and that eventually, all, or most, of the 2003 concessions would be reversed through growth and eventual profits.”

AMR employees collectively held a sanguine view and belief that American Airlines was a cut above the rest of the legacy carriers. The rampant mergers largely enforced this belief and acquisitions across the airline industry – Northwest became Delta Airlines and Continental has become United Airlines. American had been strong enough to stand alone as a beacon that the competition could only look up to with respect and hopeful admiration. Through the bankruptcy, that beacon was extinguished, perhaps permanently in November of 2011.

Subsequent to the bankruptcy filings, organized labor-groups at American Airlines inexorably began to shift their focus from, “… We’re going to get back what we gave up in 2003…” to, “… What do we need to do to hang on to what we’ve got… ” to, “… How do we survive…” to, “… Can we survive?”

Within the Railway Labor Act, labor contracts never expire (unlike labor contracts under the National Labor Relations Act). Airline and rail contracts simply become “amendable” on a date certain. Airline labor contracts, even though they have run their course, remain in place. This anomaly means all the existing terms and conditions in the now-amendable contract remain in full force and effect until a new labor agreement has been negotiated and ratified. In a steady growth aviation climate, this situation generally works more favorably for management and less favorably for the unions. Costs and budgets tend to be fixed and/or easily quantified. In a down turned economy, this contractual stability tends to work much better for unions and their collective bargaining units. In particular, wage and benefits remain fixed even when industry economic conditions are in turmoil.

This “contracts remain in place” aspect tends to put AMR and it’s bankruptcy- driven cost-cutting efforts at a significant disadvantage. Conversely, labor groups instinctively know the best action to take is to do nothing; drag out the negotiations for as long as possible. Practically, the longer the collective bargaining units hold out, the longer their existing pay and benefit packages remain in place. By law, nothing can change without benefit of negotiation; i.e., pension plans, training assignments, additional vacation days or improved personal leave packages will occur on the pre-determined future date(s) as spelled out in the collective agreements.

The Railway Labor Act does provide a very limited option to open some, or all, of the collective bargaining agreement under Section 6 of the Act. However, this option can only be triggered when a significant change has happened within the airline, i.e., pending merger or acquisition, wholesale divestiture of routes, gates or equipment. Bankruptcy, in and of itself, is not generally held as sufficient reason to trigger a Section 6 Opener. Also, generally, request to open an existing contract under Section 6 of the Railway Labor Act must be agreed to by both parties – labor and management. Furthermore, the Railway Labor Act generally precludes either side from forcing the other side to “open” an
existing labor agreement, i.e., start new negotiations. Notwithstanding that preclusion, management may try to compel labor to come to the bargaining table; tone-deaf labor negotiators and leadership usually receive their arguments.

Even threats of the potential dismantling of a portion or section of the airline operation usually will often not cause the rank-and-file membership to rush to the negotiation table. Unfortunately, because of poor labor relations environment within American Airlines, and in particular, the reasonably fresh memories of the 2003 “Employee Concessions versus Executive Bonus” fiasco, labor solidarity and hubris became entrenched, alive and very well-fed.

Much of what was publically stated by the unions often was discounted as simply another version of union whining and baseless rhetoric. However, in this case, the union “rhetoric” was largely based on fact. The collective reflection and feeling among all the bargaining unit employee groups was, “Fool me once shame on you… fool me twice, shame on me…” The employees simply had gone through a metamorphous wherein they began to see themselves as battle-scarred survivors in a highly contentious labor management battle.

More reasonable and sane members of the collective bargaining units might voice concerns about “Killing the Goose which Lays the Golden Egg”. But the union leadership seemed to have such mistrust of American Airlines leadership ability they were simply unable to hear the minority voices of those union members who wanted to “meet and confer” with management.

Typically, in this very unstable labor-management environment, these deep-seated feelings against management did not dissipate like a dying summer thunderstorm. They continued to fester and build to the extent that a toxic and potentially explosive formulation coalesced just below the surface. In the minds of many of bargaining unit employees, existed a well-formed and pervasive thought: “I don’t care if I end up loosing my livelihood; I will never knuckle under to management again.” While most managers within the American Airlines organization may think the union was just “whistling in the dark” – a show of bravery despite one’s fears – others in management held on to the strong corporate misbelief that, under duress, most of the employees would eventually “come around.”

Most likely, American Airline managers, particularly those charged with the responsibility to “bring labor costs into line”, knew their task was aptly described by Sisyphus of Corinth with the perpetual rock-rolling exercise. Experienced labor managers at AMR knew there was little, or no, likelihood of opening an existing, in-place contract at this time. Notwithstanding those assumptions, a few managers still attempted to maintain an open dialog with the five unions on the property at American Airlines and American Eagle. While no one will admit that those conversations were being held, both parties respective view was that in all likelihood, these “talks” would continue to be unproductive.

In the last ninety days, all of the bargaining units at American Airlines have opened their contracts under Section 6 of the Railway Labor Act and auspices of the National Mediation Board. With the exception of the pilots’ union, each of these bargaining units commenced negotiations, and reached agreements that were ratified in record-time. To some degree, the overhanging precipice of the existing bankruptcy propelled the rapidity with which these agreements were being reached. Only the pilots’ union held on to the long-standing airline labor negotiation practice of holding tight.

Clearly, the pilots union was not aware, nor had they given any consideration to the tremendous potential losses associated with “doing nothing”.

As AMR attempted to use the considerable clout of the bankruptcy process to minimize the impact of the pilot’s existing labor agreement, these corporate actions only seemed to stiffen the backs of the pilots – a resolve that said, “We’ll not be fooled again.” Most likely, the Allied Pilots Association was operating on the basic assumption that the bankruptcy process could not ever result in the dismantling or abrogation of their in-place and existing working agreement. The pilots continued to be inured when American filed petitions in court to terminate their existing working agreement.

The Allied Pilots Association leadership showed no change of heart; a very strong cohesion seemed to be strongly in-place within the APA workings. When federal bankruptcy court Judge Lane rejected American’s request to terminate the pilot collective bargaining agreement, most would believe that the Allied Pilots Association reaction was one of feeling validated, emboldened and essentially bullet proof.

When American announced they were going to return to court again and try one more time to have the existing pilot working agreement nullified or otherwise disassembled, the pilots responded viscerally; American had played the quintessential bankruptcy trump card. The pilot group decided to ramp up the negotiation dance by threatening to go on strike, work to the rule, or stage a walkout.

American quickly and publically responded with a public relations piece which said the threat of a potential strike was, on its face, illegal and was not authorized or sanctioned by the National Mediation Board. The NMB is the federal agency that has sole control over airline and rail bargaining processes, including negotiation, mediation, arbitration proffers, release from mediation, and request for presidential board. Without a release from the clutches of the National Mediation Board, no strike was possible. Other than direct negotiations, neither American Airlines nor the Allied Pilots Association had completed the necessary and sequential steps that might ultimately allow or authorize either side to impose financial or economic sanctions or penalties against the other.

However, American had one “silver bullet” left in their kit: abrogation of the existing pilot labor agreement. Though rebuffed once, the court did indicate it would consider, and then make a decision on, the second American labor petition by September 5, 2012. True to the court’s word, a decision was reached, which effectively cancelled the existing labor agreement between the pilots and American Airlines. One can only imagine how stunned the individual pilots, as well as the APA leadership must have felt on, or about, September 6, 2012.

As recently as September 14, 2012, American announced the implementation schedules of the new contracts for Flight Attendants, Machinists and Ground Personnel. Conspicuous by its absence was any mention of how the pilot population would be impacted by the court’s decision. Because of the bankruptcy court’s decision, no clarity exists regarding the terms and conditions found the pilots’ now defunct labor agreement. Looming questions now stand unanswered regarding how the airline and pilots will operate the carrier on a day-to-day basis.

Under the legal framework within the National Mediation Board, highly orchestrated and mandated steps must be taken in an arcane but rigorous process before any represented employee group can go on strike or attempt to effect economic penalties or hardships on their employer. Any such attempt, which does not fall within the National Mediation Board dicta most often is held by local state courts as being an illegal work stoppage. In most cases, employers will seek, and are usually awarded injunctive relief –a temporary, or permanent restraining order which forces the employees back to work. Of course, these court orders never consider the unbridled anger, depression and resentment from the impacted work force.

Does it make sense for American Airlines (through the courts) to force pilots to fly their aircraft when the pilots do not want to do so?

Enter US Airways

Every labor contract contains a specific clause having to do with the scope of work covered in that agreement. Within the airline industry, the “Scope” clause defines who will fly the carrier’s aircraft. Given the instability of the airline industry since deregulation in 1978, scope language has often been the most contentious and hardest fought at the bargaining table.

In particular, almost all scope clauses now attempt to address murky issues that are embedded in potential mergers, acquisitions and bankruptcies. The negotiators often fail in their attempts to identify and define who will be the “new” owner in this unstable deregulated airline universe. When threatened with a merger, acquisition or new “partnership” every labor union and their legal counsel rush to their contract looking for anything which will provide protection and maintain the status quo of their in-place collective bargaining agreement, as defined in the Railway Labor Act.

One significant and pivotal component of these acquisitions is that almost all of acquired, or acquiring airlines was covered under an Air Line Pilots Association (ALPA) collective bargaining agreement. Like all their merger partners, American Airline pilots were also represented by ALPA until 1964, when American’s pilots decided they wanted to become independent from ALPA and the AFL/CIO. At their request, the National Mediation Board certified the Allied Pilots Association (APA) as the only recognized bargaining unit for American Airline pilots.

Likewise, US Airways pilots were also represented by ALPA until and after their merger with AmericaWest. Subsequent to that merger, US Airways pilots are now represented by USAPA – US Airline Pilot Association; also a stand-alone entity.

In the case of American and a possible acquisition by, or merger with, US Airways, the pilots at US Air will be represented by USAPA, while the pilots at American will continue to be represented by their own stand-alone union, the Allied Pilots Association.

While it may be premature to speculate about USAPA’s role in that potential merger or acquisition, it is clear USAPA will side with the pilots of US Airways. This single issue has tremendous impact on many significant areas of the US Airways pilot contract. In particular, the significance of some form of integration of American Airline pilot’s seniority lists with the pilots at US Airways is staggering. Historically, when an airline is acquired, the acquiring airline controls the seniority integration issues. When American Airlines acquired Trans World Airlines out of a creditor-forced bankruptcy in 2001, all the TWA employees were essentially “stapled” to the bottom of the existing American Airline employee contracts; meaning a 25-year-seniority flight attendant could easily be behind an American Airline flight attendant with one or two years of service.

This fact is not insignificant. The US Airways pilots, as represented by USAPA, will protect their seniority system and will openly and very intentionally resist any attempt to “merge” the American and US Airways seniority lists. Given that USAPA resistance regarding integration of the two contracts, the American Airline pilots are truly between the proverbial rock and a hard place. If the pilots stay with American, i.e., accept the post-bankruptcy imposed terms and conditions; they may have some small assurance their relative seniority positions will not change. However, if AMR decides to sell the assets and debts to US Airways, the pilots, flight attendants, machinists and ground personnel will have precious little to say about their seniority concerns

However, it they opt for, and reluctantly accept the US Airways stated intentions to acquire the assets of American Airlines, including unionized and non-union employees, there can no hope that their relative seniority positions will be maintained. Clearly, the US Airways pilots will exert substantial pressure on US Airways management to preserve and protect the seniority rights of the current, on-board US Airways pilots. Likewise, the integration of flight attendant, machinists and ground personnel will also need to be implemented. It is interesting to note that US Airways CEO Doug Parker apparently has been very creative by getting a vote of support from the flight attendant, machinists and ground personnel workers prior to an actual commencement of acquisition or merger discussions with AMR.

While the American Airline pilots have supported the possible acquisition of American’s assets by US Airways, there is no assurance that an easy and reasonable agreement can be reached regarding pilot seniority integration between the two carriers.

This situation was made much more unstable because of the Judge Lane’s effective dissection of the Allied Pilot Association working agreement.

In either case, the American Airline pilots are left with, at best, a Hobson’s Choice. Neither choice can have much of a positive outcome. To many, the best choice may be an early, and possibly, unintended retirement. From American Airlines point of view, early unplanned retirements offers some labor cost relief – the most senior and thus the more expensive pilots leave the payroll, to be replaced with newer workers as substantially lower hourly rates of pay.

These US Airways / AMR acquisition-coalitions have no standing with the National Mediation Board – these are no more than a non-binding “vote” of confidence in the current US Airways acquisition scheme. To further compound the instability within the collective bargaining ranks at American, the flight attendants, machinists and ground personnel recently ratified new concession-filled labor agreements with American. What will happen to those agreements if US Airways becomes the new owner, partner, survivor or holds controlling interest in AMR, American Airlines and American Eagle? Aviation- focused law firms, forensic accountants, airline consultants and the federal courts all will have a specific part to play at this aero-drama unfolds.

The AMR playing field is littered with amended agreements, side-letters and recent federal bankruptcy courts’ dismantling of the existing labor agreements between the pilots as represented by APA and American Airlines. The significance of this most recent court decision cannot be minimized or marginalized.

From the perspective of the pilots’ union, the rank and file membership have quickly gone from a position of relative strength, i.e., existing contract in place, no need to negotiate, maintaining the status quo was the best and only alternative to negotiating with the company. With the stroke of Judge Lane’s pen, all of those options have been terminated. The pilots have no alternative but to accept new terms and conditions outlined and imposed by AMR. Without doubt, if the pilots at American Airlines attempt a work stoppage or wildcat strike, the courts will quickly intervene in the pilot action through injunctive action. Should APA and its represented employees ignore the courts’ injunction – either permanent or temporary – union leaders could easily find themselves incarcerated for as long as the court-determined illegal strike lasts.

Over the weekend of September 21-24, American Airline pilots and other employee groups have staged informational picketing. While these employees try to create an impression that a strike or other work action is eminent, in actuality, nothing can come from this. If the pilots do attempt to slow the operation through the excessive use of sick leave or insist that every federally mandated operational concern is complied with, American Airlines may seek injunctive relief.

At best, the pilots at American Airlines, as represented by the Allied Pilots’ Association are akin to a tethered and aging toothless Pit Bull – filled with snap and snarl, but with no real ability to create any additional damage to the already weakened and sickly American Airlines.