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AMR/US Airways Deal Faces Pilot Seniority Hassles

Stocks in this article: AAMRQ.PK LCC

CHARLOTTE, N.C. ( TheStreet) -- The odds may appear to favor a merger between AMR (AAMRQ.PK) and US Airways (LCC), but that isn't to say that a merger would provide an easy solution to the accompanying pilot seniority integration problems.

In fact, it is difficult to imagine more complexities than those involved in integrating two pilot groups from two different unions, each of which includes angry minorities of pilots who have filed lawsuits contesting the seniority practices pursued in two previous mergers.

In 2001, American merged with TWA. The TWA pilots, who felt they were badly treated in the subsequent seniority integration, have continued to object in various forums. In 2005, US Airways merged with America West. An arbitrator issued a controversial seniority ruling so troubling to the majority of the pilots that rather than implement it, they left one union and formed another. That resulted in a series of suits.

If American and US Airways do merge, it is likely that the Allied Pilots Association, which represents about 8,000 American pilots, would survive. The U.S. Airline Pilots Association represents about 4,300 US Airways pilots. So far, the two unions have worked closely to encourage a merger and to mitigate potential problems.

APA President Dave Bates told reporters in Charlotte last month that seniority integration in a merger between American/US Airways would include temporary "fences" to protect pilots who fly desirable routes from losing them to other, more senior pilots as a result of the merger. In general, he said, seniority integration would be governed by the 2007 McCaskill-Bond statute, which stipulates that seniority integration issues be resolved through negotiations and, if that fails, through binding arbitration.

"We will try to negotiate," Bates said.

Eric Ferguson, a leader of the America West pilots, said it is fine to refer to McCaskill-Bond as a solution, but almost the exact same process was already followed after the 2005 merger. The two pilot groups, generally referred to as coming from "the East" and "the West," failed to negotiate a seniority deal and so referred the issue to an arbitrator they jointly selected.

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