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TheStreet Open House

AMR Pilot Leader Bates Held an Impossible Job

Stocks in this article: AAMRQ.PKDALJBLULCCUAL

DALLAS ( TheStreet) -- The surprise is not that Dave Bates stepped down as president of the pilots union at American (AAMRQ.PK) last week, but rather that he lasted for two years.

Bates resigned under pressure on Thursday, after pilots voted to reject a tentative contract offer he had backed.

"I thought it was the best deal we could get," he said Sunday, in an exclusive interview. "When the members decisively rejected that, they were voting for a change of direction.

"I thought it was best to step down and let (union leaders) select someone who more accurately reflects what the members wanted," he said. "I didn't want a divisive battle."

Few jobs are more difficult than leading an airline union down the concessionary path that bankruptcy demands. In general, union leaders who manage this task are quickly cast aside, although some do manage to make it to the end of the bankruptcy process.

Bates was a leader who realized that a union succeeds only if the company employing its members also succeeds. His predecessor, by contrast, reveled in an adversarial relationship and eschewed compromise and, as a result, failed to accomplish anything at all.

The future seemed promising when Bates took over as president of the Allied Pilots Association in July 2010. "I came in with the intent to return our pilots to where we needed to be in the industry," Bates said. "I never wavered from that until American filed for bankruptcy."

Unfortunately, even then, American was losing money and spiraling towards bankruptcy. As a result, "we could never come together," Bates said. "The agreement we were offered was not one I was going to bring to members."

In October 2011, the airline publicly announced a contract offer, but the chance of approval was so slight that the union did not call for a vote. As Dallas Morning News American beat reporter Terry Maxon wrote at the time, "We may be at the point now where management has gone as far as it can with a deal that doesn't go nearly far enough for the pilots to approve."

Soon after the contract effort failed, American sought bankruptcy protection. In bankruptcy, a company can impose a contract. "In bankruptcy things are taken away from you by the force of law," Bates said. "Under these conditions, the job of a union leader is to protect as much of our contract agreement as possible."

APA negotiators nevertheless reached a deal with pay raises and job protection and work rules that three years later would have brought American pilots to a contract indexed to Delta (DAL), United (UAL) and US Airways (LCC) contracts. Negatives included a B-scale for the Airbus A319, a six-year term, outsourcing and extensive code-sharing, but, Bates said, "We did far better than any other pilot group has done in bankruptcy."

Moreover, Bates took a bold step, negotiating an alternate deal with US Airways (LCC) with better job protections, work rules, and medical coverage, and also indexed to industry standards.

Bates saw the AMR agreement as the best way to get to the US Airways deal, as well as a fallback if that did not work out. "It was bad, but it gave us 13.5% of the company (in stock), it had industry indexing, it had pay raises, and it had significant improvements over American's last term sheet," he said. Now, it seems likely AMR creditors will get the stock that would have gone to AMR pilots.

Bates also worked with US Airways pilots on details of a joint contract. Here too, he showed his willingness to work with all parties. Because American has about 8,000 pilots and US Airways has 4,300, a joint contract does not formally require full cooperation. But that is what Bates sought. It was a far cry from the style of "Mad Dog" Dubinsky, the onetime United pilot leader, who sought payment from US Airways pilots in return for working with them during negotiations on a United/US Airways merger in 2000.

The 61% of AMR pilots who voted against the tentative contract had a variety of objections. Some appear to think a better deal can be had in bankruptcy court. Some believed the contract was simply too hideous to approve. Some may have thought rejection was the best way to assure that CEO Tom Horton does not run post-bankruptcy American. Some thought the contract enabled AMR to turn over too much domestic flying to JetBlue (JBLU) and other partners. Many distrust union leadership, which narrowly endorsed the contract.

In other words, leadership endorsed the contract and when it didn't pass the manager was fired. This is why people are always saying that life imitates baseball.

Again, ousting pilot union presidents is not unique to AMR. In the early 2000s, the president of the US Airways chapter of the Air Line Pilots Association was Bill Pollock. The airline went through two bankruptcies and pilots made concessions in both, mostly in the second.

Pollock saw his job as protecting pilots while, at the same time, enabling the airline's survival. During the second bankruptcy, survival was not assured, and no clear path through bankruptcy existed because US Airways, even the second time, went before other carriers. Pilots made very significant pay and pension concessions, more than any other pilots have made.

Needless to say, Pollock was ousted as union president soon after he saved US Airways, and he returned to flying, as Bates will do.

Sometimes, I hear of US Airways pilots who refuse to fly as first officer on Pollock's flights. And I think, if it wasn't for Bill Pollock, they probably would not be flying at all.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

>To follow the writer on Twitter, go to http://twitter.com/tedreednc.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

>To follow the writer on Twitter, go to http://twitter.com/tedreednc.

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