American Airlines Pilots Union Rejects Contract – Is this One Step Closer to Merger?

Labor negotiations within American Airlines may provide a clue as to the Air Carrier’s future.  A clue that may be quite valuable to companies who are doing business with the the air carrier.

American airlines is in bankruptcy proceedings as it attempts to reorganize.  A part of that reorganization includes striking new deals with the unions that represent the air carrier’s employees.  These deals are very important.  Even though the bankruptcy court can modify the agreements without a union vote, union support of the air carrier is considered important to its continued viability and therefore is important to the ultimate decisions made by the bankruptcy court.  American Airlines has said that they do not want to consider a merger until after they are out of bankruptcy; USAirways would like to emerge as a “white knight” that would purchase American out of bankruptcy.

US Airways has already promised American’s unions better terms and conditions than American is offering them in the proposed contracts.  In exchange, the Allied Pilots Association, the Association of Professional Flight Attendants and the Transport Workers Union had all agreed to support a merger between USAirways and American.

Thus, when American presented the Pilots union with a contract offer, the Air Carrier’s management had their work cut out for them to convince the pilots to accept it.

APA President David Bates had supported the measure and lobbied hard for it.  But in what appears to have been a referendum on the current America Airlines leadership, the union rejected the contract offer.  The pilot’s union rejected the proposed contract by a vote of 4,600 to 2,935.  The mechanic’s union narrowly approved their contract.

Two related reasons offered by pilots for voting against the contract were frustration with management, and a perception that ratifying the contract would strengthen management’s hand with respect to merger (or non-merger) decisions.

In the wake of the defeat of the contract, Bates has resigned his position within the union leadership.  Unsurprisingly, his replacement, Keith Wilson, supports a merger.

ASA members supporting American Airlines, US Airways, or both, will want to follow this story closely, as a merger could upset existing supply expectations, as the two seek to reduce redundancies.

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About Jason Dickstein
Mr. Dickstein is the President of the Washington Aviation Group, a Washington, DC-based aviation law firm. He represents several aviation trade associations, including the Aviation Suppliers Association, the Aircraft Electronics Association, the Aircraft Fleet Recycling Association and the Modification and Replacement Parts Association.

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