Skift Take

With airborne seats, sickouts, delayed flights, and angry bondholders at the gates, a pilots' strike is almost a dream come true for AMR brass. At least they'll know what to expect if the vote is "yes."

American Airlines pilots this week are expected to authorize their union to call a strike, but the union says it may decide to keep the vote secret for now.

The airline’s 8,000 pilots have been casting votes on authorization for a month, escalating a long-running labor dispute that has already created serious flight delays at the nation’s No.3 carrier and a public relations nightmare for its bankrupt parent AMR Corp.

In a letter to American Airlines employees, Chief Executive Thomas Horton said the Allied Pilots Association has agreed to immediately resume negotiations and the negotiating teams are scheduled to meet beginning this week.

“I remain optimistic that we can work collaboratively toward reaching our goal of a consensual and constructive agreement,” Horton said.

After the voting deadline passes at noon central time on Wednesday (1 p.m. EDT), the union might not immediately release the results, and instead use them as a negotiating card in talks with the airline, Tom Hoban, a spokesman for the Allied Pilots Association, said on Tuesday.

Holding the strike vote results secret is especially likely if the National Mediation Board declares an impasse in the negotiations and imposes a 30-day cooling-off period on the parties.

“Historically, we’ve held on to the vote and used it during the 30-day cooling off period,” Hoban said. “Our board of directors will make the decision on that.”

Even if the pilots vote to walk out, a work stoppage would be weeks off and far from certain. Federal law makes it difficult for airline unions to strike, and the White House can intervene to stop a strike in the interests of U.S. commerce.

“Whether they would actually go out on strike is a different question,” said Scott Hamilton, an aerospace analyst at Leeham Co. in Seattle.

The airline says a walkout would be illegal. The union disputes that. “We believe we’ve got a right to strike,” Hoban said.

Still, the threat of a walkout would likely be the final straw for many of the airline’s long-suffering passengers.

Litany of disruptions

In recent weeks, they have endured a litany of disruptions linked to the labor unrest, including a 30-hour ordeal on a Paris-to-New York flight memorialized by the novelist Gary Shteyngart in a piece in the New York Times last Sunday. The union has said it is not authorizing those actions.

Analysts say it is only a matter of time before the serial woes begin to have a serious impact on the struggling airline’s bottom line – if they have not done so already.

“Anecdotes become financial reality very quickly in this business,” said Richard Aboulafia, an aviation analyst at the Teal Group in Fairfax, Virginia.

“When you get well-known novelists writing op-ed pieces to the New York Times describing how horrible it was to fly on you, you’ve hit a tipping point of mass consumer discontent – which means it’s already translating into a revenue problem.”

Some say if the uncertainty surrounding the airline fails to lift soon, American may suffer the same death spiral that sent Eastern Airlines, a once iconic U.S. carrier, to the corporate graveyard two decades ago after a similar showdown with pilots.

“They really, really need to get in front of this,” Aboulafia said. “Serious labor disruptions like this can drive an airline into the financial ground.”

Bruce Hicks, the airline’s spokesman, says the pilots’ campaign “is inflicting economic damage on the company, frustrating and alienating our customers, and driving unnecessary work and significant stress for other employees.”

But American refuses to quantify the effect the disruptions are having on its sales and profitability.

The airline acknowledges, however, that it cut capacity for October and is spending extra cash to increase staffing to re-accommodate passengers affected by the pilots’ tactics, which have included extra safety checks, slow taxiing and late-filed maintenance writes-ups that caused delayed takeoffs and missed connections.

Meanwhile, the Federal Aviation Administration is investigating two incidents in which seats came loose on two separate American Airlines flights, on Saturday and Monday.

The agency is still determining what caused the seats to come loose, but early indications show both jets had recently undergone maintenance “during which the seats had been removed and re-installed.”

American Airlines also is logging considerable flight delays and cancellations, topping the list of such problems for any airline operating in the U.S. for the past week and past 30 days, according to industry research site

On Tuesday, just 72 percent of 1,007 American Airlines flights tracked by the site arrived on time. That compares with 88 percent on-time arrivals for United Airlines and 90 percent for Delta Airlines.

The airline is trying to counter those dismal figures with better service.

Rose Wylie, the manager of Travel 100 Group in Kenilworth, Illinois, a travel agency on Chicago’s North Shore that works with American Airlines a lot, gives the carrier high marks for trying to help customers. But she says many of the itinerary changes the airline has asked customers to accept have required maximum flexibility and involved “drastic inconvenience.”

As a result, she says “People are hesitating to book on American. Absolutely.”


American Airlines faces other problems beyond a strike. Holders of $450 million in AMR bonds are arguing in court that the airline is not adequately maintaining 143 jets that are used as collateral for their bonds.

U.S. Bank, the agent for the bondholders, says the jets would fetch just $501 million if it seized and sold the planes. That’s barely above the $491 million in principal and interest that it says bondholders are owed. US Bank wants AMR to bolster safeguards for the bonds under bankruptcy rules designed to protect secured creditors from declines in the value of collateral.

American Airlines says that under AMR’s appraisal the planes are worth nearly double what the bondholders are owed, and it says there has been no change in the maintenance policy of the airline.

“The aircraft are being maintained in compliance with all applicable FAA regulations,” said Sean Collins, an airline spokesman.

One analyst said it was unlikely a judge would allow the bank to repossess the airplanes, noting that with $5.8 billion in cash and short-term investments on its balance sheet, the airline is positioned to make good on the bonds.

On the positive side, the airline won court approval last week to pay for another group of bondholders to perform due diligence on the company in advance of giving it a possible equity infusion. The goal would be to help it emerge from bankruptcy as a standalone company.

Reporting by James B. Kelleher in Chicago and Alwyn Scott in New York; additional reporting by Sakthi Prasad in Bangalore; Editing by Tim Dobbyn and Ryan Woo. Copyright (2012) Thomson Reuters.


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Tags: american airlines, labor

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