US Airways Dividend Miles (Pre-FlightFund Merger) - Talks break down between US Airways and its pilots

From: http://www.post-gazette.com/pg/04236/366301.stm

Talks break down between US Airways and its pilots
Monday, August 23, 2004

By Dan Fitzpatrick, Pittsburgh Post-Gazette

Critical concessionary talks between US Airways and its pilots union broke off Sunday without an agreement, with the airline claiming a "substantial gap" between the pilots' proposal and the $295 million in annual savings being requested by US Airways.

The company, perhaps as a last resort, provided the pilot negotiators with a new proposal that meets the carrier's needs and asked that it be given to the pilots' 12-man governing body, the Master Executive Council. The council plans to meet Wednesday to review the proposal and "determine what further actions should be taken," pilot spokesman Jack Stephan told 3,000 US Airways pilots early this morning via a recorded telephone message.

The fact that the weekend passed without a new cost-cutting agreement is a setback for the nation's seventh-largest airline, which is asking all its labor groups for $800 million in cuts by mid-September to avoid a second descent into bankruptcy. It originally asked for talks to end Friday but continued to meet Saturday and Sunday in Arlington, Va., hoping a new accord with the pilots would put pressure on the flight attendants, passenger service workers and machinists.

Despite the fact that management and union negotiators ended more than two and half months of talks without an agreement yesterday, the pilots' governing council could still decide at Wednesday's meeting to send the company's last proposal out for a vote of the pilots' rank and file. But such a move might not be endorsed by five pilot representatives from Pittsburgh, Philadelphia and Boston, who effectively control the votes of the union council and believe union leaders have negotiated away too much in years' past.

I don't get it. Can someone with some real insight on this please help me to understand this... Given the choice of no job vs same job with reduced pay they would choose the former? Where are all these pilots going to work after U goes under?

I don't get it. Can someone with some real insight on this please help me to understand this... Given the choice of no job vs same job with reduced pay they would choose the former? Where are all these pilots going to work after U goes under?

I think at some point, the employee, whether it be FA/pilot/CSR/mechanic/etc, has to say "enough is enough". If they have to take pay and benefit cut after pay and benefit cut and the company is still losing tons of $$$$$, perhaps it's the management and business plan that are to blame and there's nothing that will make this thing work, short of working for free. All the crapola that has come out over the years from the cast of incompetent management U has had, is simply putting lipstick on a pig. As for who the pilots are going to work for, there's always starting at the bottom with an LCC. There'll be tremendous traffic increases at the other airlines once (and if) U liquidates with corresponding hiring increases (or recalls from furlough in the case of the legacy carriers). Better to get a lower salary at a well run airline than constantly worry about whether you'll be getting a paycheck next month. I know that's easy for me to say because I don't work for U, but my wife used to, so I have fairly intimate knowledge about what it's like to work for a company where your pay and benefits are constantly being cut while the execs are making out like bandits. :(

I don't get it. Can someone with some real insight on this please help me to understand this... Given the choice of no job vs same job with reduced pay they would choose the former? Where are all these pilots going to work after U goes under?

I am not directly involved in the U drama but do have some insights as I have been following the situation closely...

If U/ALPA, who has had a history of bending over to give management what they want the last couple of years, has found management's proposal to be this onerous, I believe it means U management really isn't serious about making U survive. They are planning to bring it into Ch.11 and therefore almost certainly liquidation, and they want to be able to blame the unions and show the judge that they "tried" to negotiate. I assume Bronner's comments last week basically saying his U investment was a mistake and he is not willing to throw good money after bad have already been discussed somewhere here. His candor was very revealing to those who were paying attention.

Of course SOME concessions is better than ending up with no job at all. But with what U management seems to want to impose, the result would quite literally be such poor wages and working conditions that U employees could get a better deal somewhere else, without all the hassle of being away from home so much (in the case of pilots and F/As).

It is important to remember that for the U pilots, this is more than simply "no job vs same job with reduced pay." That may have worked with Round I of concessions... or maybe even Round II... possibly Round III (when the U pilots lost their pensions). But now we are talking Round IV, and if they agree to that, with this track record, Rounds V and VI are probably just around the corner too. Everybody has their breaking point, and apparently we have reached it for the U pilots.

The U pilots have consistently led the way with givebacks to enable the company to survive this long. I have to say this breakdown in talks surprised me, as I expected them to give again for the general principle you stated. Given their willingness to work with management in the past and given that they have more at stake than any other work group, this must mean management was unwilling to negotiate anything realistic. It also means that they have virtually no chance of reaching any sort of agreement with AFA or IAM, who have taken even more of a hard-line stance towards concessions than ALPA.

To say this does not bode well for U is an understatement.

It's the pension.

The pilot group at U is quite senior, and most of them would probably work for B6 or HP rates/workrules. They won't have the followon DC pension touched, especially after what happened in the first Chapter 11 filing.

I don't blame them. For many, that's the key to being able to retire at all.

The negotiations are interesting. The pilots have expressed a willingness to compromise and have made a proposal containing some significant concessions, but that fell far short of what the company sought. The company made a counter-proposal last week that was arguably bigger cuts than the original posture. When the unions didn't move significantly, the company essentially gave the same proposal as pretty much a take it or leave it deal.

The pilots union now has to decide if they want to pass the proposal along for a vote to the rank and file or not. Early indications are that they will not or that it would not pass if they did.

Given that the pilots were (and always are historically) the union most amenable to compromise, this suggests that one of the following is true:

1) The company is playing hard-ball because they think that the pilots will cave and will give them everything they want. Once the pilots cave, they will go after the other unions. I find this scenario unlikely, because it seems so unlikely to work that I would hope they would have a better plan.

2) The company simply doesn't believe that the deals that the unions are willing to agree to would permit them to continue to operate. This isn't so much a plan, as that they are stuck between a rock and hard place. This is a worst-case scenario and will probably result in Chapter 7 and the end of the airline. I find this scenario plausible.

3) The company is convinced that the unions will never willingly agree to contracts that are sufficiently competitive. This entire "negotiation" has been an attempt to establish a set-up for the Chapter 11 bankruptcy to follow. They hope to obtain huge cuts via the court -- there are some complicated rules governing bankruptcy (S.1113 and the like) that only permit them to re-open their collective bargaining agreements if they are unable to obtain new contracts via negotiation. In this scenario, they have been perparing for bankruptcy and reorganization all along. In my view, this is the most likely scenario, although one that is very dangerous. It would require significant preparation, some luck and lots of risk. The existing creditors would need to be involved and carefully managed and there is no way to predict exactly what the bankruptcy court will do. RSA is not in a very good position in this scenario because their entire investment is at risk. I think it could only work if RSA is willing to put even more money into the reorganization contigent upon new labor deals. If it was my money, I wouldn't do it -- but I wouldn't have come to the rescue in the first place. I actually am coming to believe that some variation of this is the most probable scenario.

I know that very often there are 11th hour deals....but now I am getting nervous.

In CH11, what can they unilaterally do to the labor contracts? Can they get most of what they want?

I know that very often there are 11th hour deals....but now I am getting nervous.

In CH11, what can they unilaterally do to the labor contracts? Can they get most of what they want?

Thanks to good 'ole Frank Lorenzo (and a few others) BK no longer allows the at will termination of union contracts. There is a checklist of activities that the bankrupt party must go through before the court will allow for the abrogation of collective bargaining agreements.

I think this news indicates we might be seeing the CCY battle plan here - current planning is to get what can be got out of Ch. 7 by the current management/lead creditors. Only a complete roll over by the unions are going to save the show.

ALPA and IAM are not talking after basically being told take it or leave it (or more appropriately - take it or lose it - ALL). Whether they come around centers on whether these work groups feel there is a future for US even with them rolling over.

It will be an interesting next 60 days on this forum.

this looks bad. really bad.

3) The company is convinced that the unions will never willingly agree to contracts that are sufficiently competitive. This entire "negotiation" has been an attempt to establish a set-up for the Chapter 11 bankruptcy to follow. They hope to obtain huge cuts via the court -- there are some complicated rules governing bankruptcy (S.1113 and the like) that only permit them to re-open their collective bargaining agreements if they are unable to obtain new contracts via negotiation. In this scenario, they have been perparing for bankruptcy and reorganization all along. In my view, this is the most likely scenario, although one that is very dangerous. It would require significant preparation, some luck and lots of risk. The existing creditors would need to be involved and carefully managed and there is no way to predict exactly what the bankruptcy court will do. RSA is not in a very good position in this scenario because their entire investment is at risk. I think it could only work if RSA is willing to put even more money into the reorganization contigent upon new labor deals. If it was my money, I wouldn't do it -- but I wouldn't have come to the rescue in the first place. I actually am coming to believe that some variation of this is the most probable scenario.


Excellent analysis of the law and quite an intriquing proposition you present. However, the airline workers might strike over pursuing this route and the airline could shut down in that fashion, as well.

However, it may well be that this is the only way for that airline to turn a profit and for Bronner to recoup his investment. After all, US Air did report a profit in the second quarter using the new fare structure, so Bronner may invest more $$ if in the end, he thinks that he may end up with a LCC that actually can turn a profit.

It is a very high stakes kind of gamble, but one that seems to be emblematic of Bronner's investment strategy.


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Addendum: Spoke to wife who is knowledgeable in BKR matters. If the company decides to take that route, not only is it a high stakes gamble, but it is also one that will be decided quite soon.

There are specific time limitations for convening a hearing on just such a motion, and althugh there may be some delay, generally, the hearing is no longer than 45 days after the motion has been filed with the court. Therefore, it would be a Hail Mary pass for everyone for it they had not been able to reach an agreement prior to bankruptcy, and while in bankruptcy proceedings -- which could be longer than one might think -- then the parties would have very little time to either come to an agreement or let the court decide what to do.

Even if the court allows them to terminate those union agreements, there is no guarrantee that they will have enought of a work force to fly the airline, or whatever it is going to be named.

So, in the end, it really would be a type of Hail Mary maneuver.

So, in the end, it really would be a type of Hail Mary maneuver.

very much so. IF they reach the courtroom door this time, there's no reason to believe the creditors (many having been haircutted once already) will be in the mood to play cooperatively. Without that cooperative attitude, the odds of liquidation are immense-- or of shutdown by death-of-a-thousand cuts... aircraft repossessions etc.