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American Airlines Merger Faces Multiple Labor Obstacles

Stocks in this article: AAL

CHARLOTTE, N.C.(TheStreet) -- American Airlines (AAL) CEO Doug Parker worked closely with the carrier's three major unions in order to ensure a merger with US Airways, an adroit strategy that played a major role in gaining the backing of Wall Street and the airline's creditors.

But the three major unions at US Airways were, to one extent or another, left out of the process. Eventually, US Airways flight attendants backed the merger, pilots sort of backed the merger, and mechanics and fleet service workers didn't back the merger at all.

Now, with the merger complete, the task of putting together the six principal labor unions will pose a challenge as US Airways workers, most of whom have worked under bankruptcy contracts for the past eight years, become more involved.

"They are passing this merger off as one where all the employees are happy and are all sitting around the table singing Kumbaya," said Bill Wise, president of Charlotte Local 1725 of the International Association of Machinists, which represents the airline's mechanics and fleet service workers. "That's not the case at all."

"To gain support from the American employee groups, Doug Parker waited until American all but emptied out the employees' wallets, then he rode in on a white horse," Wise said.

Wise said American is offering contract parity with other major airlines in the future, but noted: "We are the largest airline in the world. We should be setting the standard. We shouldn't be (behind) anybody."

The IAM has been negotiating mechanics' and fleet service workers' contracts since a year before existing contracts became amendable Jan. 1, 2012. The union, the largest at US Airways, represents about 3,500 mechanics and 5,800 fleet service workers.

Meanwhile, the two flight attendants unions, Association of Flight Attendants at US Airways and Association of Professional Flight Attendants, are already locked in a bitter public battle that seems likely to lead to a representation election.

At the US Airline Pilots Association, a bitter seniority dispute has divided pilots ever since the 2005 merger between US Airways and America West. The merger with American brought a plan to settle the seniority dispute under the 2007 McCaskill-Bond statute, which stipulates that seniority integration issues be resolved through negotiations and, if those fail, through binding arbitration.

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