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Why American Can Avoid a TWU Strike

Stocks in this article: AMR

In Fort Worth, workers and managers were constantly in joint meetings. Working together, they came up with strategies like making parts in-house instead of buying from outside vendors. They figured out a way to place engines on hydraulic lifts in a pit, then move them up and down, so that seated mechanics could work on them, improving efficiency and reducing injuries. They decided to deliver cabin-ready oxygen masks to airplanes, rather than to take them out for maintenance and hope they would be returned on schedule.

As it turned out, the financial goals were not entirely met. The carrier said it reached goals of $500 million in Tulsa and $150 million in Kansas City, but has not reached the $400 million goal at Fort Worth or the $95 million goal for the line maintenance department. Still, the cooperation has enabled American to remain an industry leader in performing its maintenance in the U.S. rather than overseas.

"We set ourselves as the gold standard of the industry regarding efforts to achieve enhanced efficiencies and savings and to maintain work in-house and to draw work back in," Conley said. "Maintenance was the most highly visible, but we also did it in fleet service.

"It's to everyone's advantage to have a collaborative relationship," Conley added. Asked if the cooperative spirit still pervades, he responded: "I couldn't say 'it still pervades' as a blanket comment. It depends on who you ask." However, bonuses to American managers, after the TWU made concessions worth $620 million annually, as well as the intensifying contract talks, have gnawed at the cooperative spirit.

Without question, negotiations have reached a critical juncture. The parties have agreed on a half dozen issues, but compensation and pension benefits are still on the table, and some remaining issues are "must-haves" for the union. For instance, Conley said, "They have proposed outsourcing day cabin cleaning, (but) we are not of the frame of mind that will allow us to jettison 800 to 1,000 jobs." The TWU also wants to retain its defined benefit pension plan for current beneficiaries. The two sides have discussed offering 401(k) plans to new hires, but those talks broke down. Additionally, American wants a change in retiree medical benefits and wants more flying for regional partners including American Eagle.

American has emphasized the positive aspects of its labor talks, because it does not want to scare off potential passengers -- and because it needs a deal. "American Airlines' relationship with the Transport Workers Union remains strong and positive," said airline spokeswoman Missy Latham. "Negotiations are separate from operations and we continue to cooperate with one another." As aviation consultant Mike Boyd has said, "the TWU is one of the most rational, forward-thinking unions out there, and yet they are at the end of their rope -- American management has to address that."

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

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