Pilots Union Decision To Impact AA Bankruptcy
DALLAS (CBSDFW.COM) - All eyes are on the Allied Pilots Association's board of directors on Wednesday. They are deciding whether to send American Airlines' best and last offer to its members, the pilots, to vote on later this summer, or reject the airline's offer outright.
Retired airline executive Mark Drusch said, "This is critical. This is really a key development."
After years of bitter disagreements between the pilots and airline management, there was a key breakthrough last week. While the pilots rejected American's offer last Wednesday, the board and airline management asked the bankruptcy judge in New York last Friday to delay his decision by one week, on whether to throw out all of the airline's labor contracts, as American had requested. The judge agreed.
The pilots union board of directors said that they needed more time to study American's offer.
Drusch, who is a former executive at Delta and Continental Airlines, said that the pilots union board is under a lot of pressure Wednesday to do the right thing. He said that he would be surprised if the board rejects the contract offer without having members vote on it themselves.
The most likely scenarios, Drusch said, are for the board to send it to the members.
"It's a tricky thing for the board," Drusch explained. "The board has to determine, 'Do I send this with my support to the membership?' Do they not support it and send it to membership, and say, 'Look, we don't support it, but we want you to make the decision?'"
Drusch said that he was at Continental during the two times it went through a bankruptcy. Those filings, plus Delta's bankruptcy, he said, were far different from American's filing, because labor was on the same side as the airline management. In American's case, Drusch said, "We've never seen this with a U.S. airline before. It is unprecedented. It is a major company going through something that hasn't happened before, where labor has more control, or emphasis, or impact on a reorganization than heretofore."
Also impacting American's bankruptcy is US Airways' continued pursuit to merge with the Fort Worth based carrier. American has said that it is open to a merger, but has been laser-focused on emerging through bankruptcy as a standalone airline.
Unhappy with American's first contract offer during the bankruptcy, the pilots, the Transport Workers Union and Association of Professional Flight Attendants have already struck an informal deal with US Airways, should it merge with American.
"No major airline bankrutpcy has had a situation where there was a competing bid that was viable, and that was being entertained by the major labor groups," Drusch said. "The unions are uniquely able to play two parties against each other -- the American Airlines management and the suitors at US Airways -- so they have leverage."
The stakes are high for the unions, but perhaps higher for American. "It's a very big deal," Drusch said, "because it really sets the deal for which way the bankruptcy is going to go."
If the pilots union board rejects American's contract outright, then, Drusch said, "If the pilots reject this, then American has a whole bunch of problems in front of them, specifically driven by the US Airways offer in the wings. It will probably lead the union to engage in even deeper, more advanced discussions with US Airways."
As CBS 11 News reported last week, US Airways agreed to slash the pilots compensation by $240 million. That is far lower than American's first proposal of $370 million in cuts. But American's last offer, last week, called for $315 million in cuts.
Despite American's claim that it wasn't changing its last offer, Drusch believes that the airline has improved its offer since then. American's proposal included nearly 15 percent in salary increases over a six-year period, and would freeze the pilots' pensions rather than terminate them. American also proposed giving the pilots a stake in the new airline that emerges from bankruptcy.
US Airways has not included such a provision in its original deal with the unions, but experts say that could change.
If the pilots board does send the airline's contract to its members, there will be a six-week process to educate the pilots and have them vote on the offer.
The judge has already agreed to an August 8 deadline. If the pilots union as a whole approves the contract, Drusch said, that will be a major success for American.
"A management-labor agreement will really accelerate the bankruptcy right now, there's no doubt about it," he said. "And the sooner American can exit bankruptcy, the sooner they can go about their business." That would include any potential mergers.
The big announcement by the pilots union comes as the flight attendants and the mechanics will be heading back to the bargaining table.
Both the flight attendants and mechanics will meet separately with airline management between July 3 and July 5. But if the pilots union board rejects its contract, then experts believe that the meetings with the two others unions could be moot.
While flight attendants and mechanics have not reached an agreement, five of the seven units of the Transport Workers Union have agreed to a deal with the airline, and they are continuing talks this week.
Drusch said that, if the pilots do vote on a contract, it could have a major impact on the other unions.
"The pilots lead in many ways," Drusch said, "because they're the most difficult labor force to replace, and they're the most highly paid. They also tend to have the most organization around their position."
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