The bigwigs have decided the merger terms, but now American Airlines and US Airways unions will jockey over its ramifications on the ground.
Bankruptcy courts and federal antitrust regulators, assuming those processes go smoothly on their own, will be just the beginning of a potentially arduous process that will yield the new American Airlines, its 900 routes and 120,000 employees.
And for the 6,200 employees at the American Airlines maintenance base in Tulsa, there will be months and years of uncertainty over job security, wages and benefits as they negotiate and discover exactly how this new company will act and compete.
“These processes take on a life of their own,” said Bill Swelbar, an airline researcher from the Massachusetts Institute of Technology’s International Center for Air Transportation and a director for Hawaiian Airlines.
“What is at the core is how quickly a merged company can reach a new bargaining agreement for the employee groups, and that isn’t always easy.”
Just over three weeks ago American Airlines and US Airways reshaped the air-travel industry by agreeing to an estimated $11 billion merger to create the world’s largest air carrier after more than a year of painful bankruptcy reorganization for AMR Corp.
Even though US Airways catered to mechanics, pilots and flight attendants and gave incentives toward supporting the merger, those deals don’t guarantee a smooth transition into the new American Airlines Group Inc. for anyone involved.
Employee groups and industry analysts are just getting a glimpse past the red tape toward the merger six months from now to get an idea of how dozens of work groups will start to operate as a single carrier.
American Airlines’ ground workers and maintenance employees under the Transport Workers Union have begun to examine how the wages, health care, vacation and other benefits compare to their counterparts at US Airways.
Once the merger closes — predicted to happen in the third quarter of 2013 — work groups at both companies will pick a bargaining representative to try to “harmonize” contracts between workers.
Even the issue of union representation is unclear as groups on both sides said they plan to make their case with workers — and two other unions have been actively courting mechanics and maintenance workers at both companies.
Work groups then have a limited time to work out differences before being sent to binding arbitration, which analysts, union representatives and company officials say all sides will try to avoid.
‘Bigger pot out there’
Swelbar said workers at both airlines have benefits and salaries lower than those at other leading airlines, especially United Airlines, which doesn’t have a unionized maintenance force.
John Hewitt, chairman of maintenance for TWU’s Local 514, said the goal will be to take the best from the contracts for mechanics at both American and US Airways and bring them together, but there are wide differences in some areas.
The average maintenance worker at American Airlines made just a few dollars less than their counterpart at US Airways in 2011, according to the Airline Data Project. Those figures line up closely with figures provided by the Transport Workers Union.
But American Airlines workers will get a 4.3 percent pay raise when the merger goes through as part of a January agreement with US Airways that gave union support to the merger.
The collective bargaining agreement ratified by American ground and maintenance workers in August gives a 15 percent wage increase over six years to mechanics and 10.5 percent to stock clerks.
Local 514 president Sam Cirri, who leads representation for mechanics in Tulsa, said there are some other issues with overtime, vacation pay and health benefits that are different, but it may take months to sort out the advantages in the lengthy contracts at each company.
And the contract for 4,800 maintenance workers at US Airways is murkier because they have been trying to negotiate a new contract with their company for two years.
Their contract expired a year ago, but the work group will get 3 percent pay raises this year and next if there isn’t a new contract signed.
Mechanics and ground workers at US Airways have been frustrated that a new contract hasn’t been the main focus of their company while CEO Doug Parker spent time and resources pursuing a merger with American Airlines, said Tom Higginbotham, International Association of Machinists District 142 president.
Now with a bigger company and a larger revenue stream, Higginbotham said they are hoping to get a better contract out of management.
“We know that the company’s revenue stream has not been as large as other carriers, and we took some concessions because of that,” he said. “But now there is a bigger pot out there.”
Higginbotham said they still hope to get a deal done long before the merger and the group is meeting with US Airways negotiators this week to work on a contract.
But Higginbotham said the biggest issue on the table will be job security for workers at US Airways bases in Pittsburg, Charlotte, Kansas City and Phoenix.
He said there are fears that the larger company looking for efficiency will cut long-standing maintenance bases.
“Again you put two companies together even though the facilities aren’t in the same cities, the work can be moved somewhere else,” he said.
Shortly after the merger, Parker said maintenance bases are secure for the near future, but he couldn’t speculate on the company’s long-term plans.
‘We are optimistic’
US Airways mechanics and ground workers also still have an active pension plan, compared to a plan for their peers at American that was frozen in bankruptcy negotiations.
TWU officials have said they don’t plan to pursue the US Airways pension because many of their workers wouldn’t be able to earn enough after the merger to make a significant contribution by the time they retire.
But they will be looking for other ways to make up for it, such as the 4.8 percent equity stake they negotiated with the new company.
Then the companies will start to negotiate with workers the potentially divisive issue of integrating seniority, which can still create enmity between the company and work groups despite being subject to federal labor rules, said Bob Mann, an airline consult for R.W. Mann & Co. Inc. and a former executive at American Airlines.
“It is a very difficult, dangerous balancing equation,” he said.
American Airlines workers have agreed to a seniority list based on date of hire into a classification. US Airways mechanics, pilots and flight attendants have no such agreement and could push for different criteria if they feel the aren’t being treated fairly during negotiations, Mann said.
Meanwhile 8,000 pilots for American Airlines are looking beyond their recently signed agreement to a future that puts their compensation on par with their peers at other industry leading carriers.
“What both parties (American and US Airways pilots) want to see is that we are brought up to industry standards on wages, health care and benefits,” said Tom Hoban, spokesman for the Allied Pilots Association, which represents the 8,000 American Airlines pilots. “We’ve had a 20-year civil war with management. Right now we are optimistic. They seem open, and the difference right now is that they are approachable.”
What’s ahead for American Airlines and US Airways
US Airways CEO Doug Parker expects the new American Airlines Group Inc. to finish the merger in the third quarter of this year, but there is still a lot of work left before they can be considered one company. Here’s a look at what’s ahead.
March 27: Judge Sean Lane will hold a hearing on the merger proposal and could OK the plan as part of bankruptcy reorganization.
August: Analysts expects the Department of Justice to finish its anti-trust review around this time.
September: Merger of US Airways and American Airlines anticipated to finish before the end of this month.
Within one to three months of merger: Unions ask National Mediation Board for a single carrier determination. Employees then select union representation before talks on a joint contract with American Airlines.
Within 18 to 24 months of merger: FAA expected to grant single operating certificate, meaning company and operations are fully merged.
Kyle Arnold 918-581-8380