Letter from union to AA pilots:
It was announced this morning that the three unions at American Airlines—Allied Pilots Association, Transport Workers Union and Association of Professional Flight Attendants, representing a total of 55,000 front-line employees—have agreed to support US Airways’ bid for a merger between American Airlines and US Airways. This endeavor has been underway for many months and your APA leadership has been in direct discussions with the senior leadership at US Airways since early March. In this letter, I want to explain why APA decided to support a merger, how the process came about, what the new American Airlines would look like, and provide a brief overview of what APA has already negotiated as the framework of a new collective bargaining agreement.
AMR’s Business Plan
The APA leadership does not believe that AMR’s business plan will produce an airline that is viable long term. I’ll just summarize with this: while AMR’s network and route structure have withered during the past decade, those at United and Delta have grown larger and stronger, resulting in the steady defection of American Airlines’ corporate accounts and vital high-value customers. A big component of AMR’s plan for restructuring is to force massive concessions on unionized employees to reduce them to below-market compensation. Another primary element is to rework the “Cornerstone” plan to try to bring in additional revenue by down-gauging AMR’s fleet and through dramatically expanded domestic code sharing. Combined with the substantially increased productivity management seeks and the large-scale outsourcing of pilot jobs that management envisions, the result would be a major loss of pilot jobs at American Airlines. The effects would be catastrophic, including further stagnation for a pilot group that has already suffered from the industry’s longest time to upgrade to captain.
Management has told us that we should be excited because AMR has ordered new aircraft and has options to purchase more. New aircraft orders — which primarily will go toward replacing our fuel-guzzling S80 fleet — do not constitute job security for our pilots. Most of the Wall Street analysts view American Airlines management’s efforts to achieve network parity with Delta and United as “too little, too late.” The same analysts also believe any such effort would probably destabilize an industry that has finally gained some meaningful degree of pricing power. We also need to be mindful of the fact that management intends to impose regional airline pay rates on large numbers of new Airbus aircraft—not an especially appealing prospect. So exactly how do pilots benefit from being displaced into much lower-paying equipment?
Management’s Vision for a New Pilot Contract
Based on management’s actions to date, their vision—quite simply—consists of rejecting our contract entirely. They are on the Harvey Miller high-speed train to terminate our contract in bankruptcy court (Miller was Frank Lorenzo’s lawyer at Continental and Eastern. He is now AMR’s lead restructuring attorney). Management has made no moves at the table that suggest any interest in trying to arrive at a consensual agreement. While APA has taken the high road and made every effort to negotiate in good faith, management has shown beyond a shadow of a doubt they’re not interested in reciprocating.
The New American Airlines
First and foremost, the combined carrier will be branded American Airlines, based in Fort Worth Texas and headquartered at CentrePort. It will be comparable in size and scope to Delta and United, with a robust domestic network capable of supporting significant international expansion. American Airlines’ relationship with oneworld will be maintained and strengthened. All of American Airlines’ aircraft orders with Boeing and Airbus will proceed. The former US Airways route system will be realigned with the American Airlines system to add more cities, more markets and better frequencies. The new American Airlines, under a lean, energetic and highly capable management team, will be able to compete on an equal footing to win back high-value customers. On the East Coast, which is the largest and most lucrative airline market in the world, American Airlines will go from No. 5 to a strong No. 1. In the Midwest, we will go from No. 4 to No. 1. In Miami, our dominance to South America will be enhanced by stronger East Coast traffic flows. For the first time in years, American Airlines will be in a position of strength in Chicago.
How Did We Get Here?
As your APA leadership has been emphasizing for some time, we are committed to evaluating all available alternatives to AMR management’s restructuring plan in an effort to provide a better outcome for our pilots. US Airways’ senior management has made no secret of their desire to further the process of industry consolidation by joining with American Airlines. For many months, a team from US Airways has been making presentations to various Wall Street analysts and investors, including one of APA’s advisers. After being briefed on the substance of the US Airways presentation, I initiated a dialogue with that airline’s leadership, which resulted in a series of meetings beginning last month. Their vision was compelling. Shortly thereafter, the APA Board of Directors was briefed and they gave a “thumbs up” to continue exploring a potential merger.
When it started becoming clear that a merger with US Airways was a superior alternative to AMR’s stand-alone plan—and with the support from the APA Board of Directors—we assembled a team to begin substantive discussions with the senior leadership at US Airways. Accompanying me to Phoenix for those discussions were members of the APA Negotiating, Scope, Industry Analysis, Technical Analysis and Contingency Committees, as well APA’s General Counsel, bankruptcy counsel and a delegation from investment adviser Lazard. At this point, US Airways began discussions with the leadership at APFA and TWU, which had begun to evaluate this alternative course of action.
Working with US Airways, APA was able to achieve in just over a week far more than we had been able to achieve in more than five years of trying to bargain with AMR management. Our interaction with US Airways was in stark contrast to what we have been experiencing with AMR. We dealt directly with the people whose jobs are to run an airline. Many of the talks consisted of president-to-president interaction. In accordance with the APA Constitution and Bylaws, there were always two members of the APA Negotiating Committee present during these negotiations. Completely absent from the discussion were the posturing and game-playing that characterizes the approach AMR management takes when dealing with us.
Returning from Phoenix, we had accomplished a great deal toward constructing a framework for an agreement, but we still had several important unresolved issues to address. We convened a special APA Board of Directors meeting and the Board remained in session as the unresolved issues were negotiated. The APA Board of Directors then spent several days carefully studying and evaluating the plan of reorganization agreement. Upon the closeout of the last remaining issues, the APA Board of Directors voted unanimously to support the framework for a new CBA.
Continued in next post...