Archive for August, 2012
Earlier this week the members of the Allied Pilots Association (APA) overwhelmingly rejected American Airlines last best contract offer, throwing their situation and the reorganization of AMR Corpopration into uncharted areas where no one quite knows what to expect next.
American’s initial offer to the APA several months ago called for layoffs, reduction of benefits, cutbacks in pay for the pilots. AA later made their last best offer which said there would be no layoffs, a 13% pay increase over the next 5 years, and the union would get an equity stake in the newly reorganized AMR Corporation. APA leadership immediately rejected it. However, the next day they asked the bankruptcy court for time to review it and, a few days later, narrowly approved it. When the time came for members to vote 61% of those voting said no to the offer. The main reasons given for the rejection were that it was too long a contract (6 years), pilots brought in to fly the new narrow-body aircraft (A-319) would be paid less than other pilots, and finally, years of bad will between the union and the corporation also played a major role. As a result of the vote, Union President David Bates said in a letter to the pilots on Thursday that he agreed to step down late on Wednesday at the request of the board of the Allied Pilots Association.
So what happens now? As we used to say, that is the $64,000 question.
Without a contract with the pilots union, it becomes more difficult for AMR to tell the bankruptcy judge that they have a solid plan in place for reorganization. How will the judge react to that? We’ll know when he makes his ruling on August 15. He could grant the airline additional time to reach an agreement with the union, or he could say they have had enough time and it did not work. At this point he could ask for others (such as other airlines or creditors) to present their proposals on how to reorganize the company.
He also has the power to negate the current pilots contract and put American’s original proposal into place. No bankruptcy judge has ever negated a pilots contract, but it is an option for him.
The flight attendants union is voting on AA’s final offer to them, we should know the results in approximately 10 days. All of the other major unions, except the pilots, have voted to accept AA’s proposals. Three unions (Allied Pilots Association, the Transport Workers Union and Association of Professional Flight Attendants) have also voted to accept a proposal from US Airways for a merger between the two airlines.
By rejecting AMR’s last best offer, the APA has taken a tremendous gamble.
They are gambling that the bankruptcy judge does not negate their contract and force them to accept a more onerous offer from AA.
They are gambling that American Airlines will not survive as a stand-alone airline.
They are gambling that AA will be forced to merge with another as yet un-named airline. While US Air has been most vocal in expressing its desire to merge with AA, it has not, as of this date, signed the Non-Disclosure Agreement (NDA) that AA sent to it and all other airlines last week. I received a letter from a member of the APA stating that they had been told that AA planned to merge with Jet Blue.
They are gambling that this new -un-named airline will give them a better deal than they would get from AA. Can they get a better deal from a combined US Air / American Airlines? It’s worth pointing out that the flight attendants and US Airways pilots have not had new contracts since the 2005 merger of US Airways and America West. The dispute centers on integrating the seniority lists. So, US Airways has had seven years to combine the pilots from US Air and American West into one union group, and has still not succeeded. IF I were a member of the APA, I don’t believe that would fill me with confidence or make me anxious to join the fray.
Some may say that I am not an APA member and do not have access to all the information that they had prior to the vote. That would be a correct statement. But I’d reply that union management did have access to that information and did vote to accept AA’s offer.
We’re now going into a grey area where no one can yet say for sure what will happen. The APA took a huge gamble by rejecting the contract. Were they incredibly bold or absurdly stupid? Time will tell if they made the right move or not.
Disclaimer: I own stock in AMR Corporation, American Airlines’ parent company. Total value of my holdings is less than $80.
For the past several years, American Airlines’ advertising slogan has been “We know why you fly.” To be honest, it never excited me very much. And given how long it has been since I have seen an AA commercial, maybe they have retired that slogan.
Last week AA came out with a stunning video entitled “I Believe in American.” It features both American employees and passengers and I really like it — I’m just not sure who the target audience is. It has not gone viral on the internet, less than 14,000 views on You Tube as of August 5, and at 3 minutes it is too long to be a television commercial. Perhaps this was done to motivate AA employees as the company goes through reorganization. I don’t know.
But I do have a suggestion as to where they should show this outstanding video: on every AA flight. Passengers currently see a video that says “We know you have a choice when flying, thank you for flying American,” followed by many AA employees saying “Thank you for flying American.” Nice thought, but the video is getting old — replace it with this one.
There is a new American Airlines: they need to show their number one asset, their passengers, this story of the new American Airlines.