US Airways Union Says Raid Halted Progress on New Contract

CHARLOTTE, N.C. ( TheStreet) -- When the International Brotherhood of Teamsters announced two months ago that it would seek to raid US Airways ( LCC) mechanics and related workers, the incumbent International Association of Machinists was understandably displeased.

Not only was the IAM in danger of losing 3,500 members as well as hundreds of inactive members, but also the union was two years along the road to negotiating a new contract for the group and the talks had to be suspended. "We were at the end game," said IAM spokesman Joe Tiberi. "It had taken us two years to get to that point. We had asked for a release from the National Mediation Board. I don't know when or if (the board) would have acted on that request, because that is when everything stalled."

The new contract was to be, and still may be, the second contract the IAM has negotiated at US Airways since the 2005 merger with America West. Until a merger with American Airlines ( AAMRQ.PK) became likely, no other major union at the carrier had negotiated a contract following the merger.

Voting in the mechanics and related workers representation election begins today, with ballots to be counted on August 12. Ironically, a week ago, on July 1, mechanics received a 3% raise, as a result of the contract the IAM negotiated in 2009. That followed a 3% raise that took effect on July 1, 2012, seven months after the existing contract became amendable on Jan. 1, 2012.

If the Teamsters win, Tiberi said, it would take months to restart contract talks. Bill Wise, a union negotiator and president of IAM Charlotte Local 1725, said the airline and the IAM have reached tentative agreements on about 85% of contract issues, although key economic issues, including wages and retirement pay, are still to be negotiated. "We pretty much got derailed with the Teamster raid," Wise said.

As a starting point, the company proposed a 3% raise on the day of signing and a 2% raise eighteen months later. In response, the IAM proposed wage increases of approximately 13% over two years as well as increased pay for mechanic licenses. The proposals are short-term because the pending merger would bring new negotiations on a joint contract. Top-scale US Airways mechanics with ten years on the job currently earn about $68,000 annually.

The Teamsters question whether 85% of a new contract has been negotiated. "The biggest part of the new contract was economics--returning concessionary items lost during the bankruptcy years both in pay and work rules," said Teamster spokesman Galen Munroe. "Based on the IAM's own employee updates and the company response to the IAM's demands, both sides were worlds apart in this area of the contract."

Moreover, Munroe said, there is no reason to believe a change of representation would lead to any significant delay. "The IAM started negotiating a new contract with our group in February, 2011, eleven months prior to the amendable date," he said. "Those talks only stopped after our representational filing May 7, 2013. So if you look at the IAM's track record of over two years of negotiating a new contract, you can see they couldn't deliver.

"Once we are certified as the new union representing this group we will immediately begin the process of securing a contract for the maintenance & related employees of US Airways," he said. "We will pick up where the IAM left off in negotiations and will schedule dates with the company as soon as possible."

While the pace of contract talks is important, the key issue in this election may involve pension benefits, especially given that the workforce is aging because layoffs during the century's first decade, when US Airways endured two bankruptcies, primarily impacted younger workers. Many of the workers are in their 40s or 50s.

IAM members benefit from membership in a financially strong union-run pension fund. IAM members, also including fleet service workers, are the only US Airways workers, and among the few workers in the airline industry, with a defined benefit pension plan.

With the stock market rising, the IAM fund's assets recently exceeded $10 billion for the first time. The IAM has proposed a 14% increase in the airline's pension contribution to $2.40 per hour, which would enable a monthly pension payout of $100 per year for fully vested workers.

If the Teamsters win, future payments to the IAM pension fund would be halted and workers would join a new Teamster-administered plan. The IBT has not specified which of its many plans would be open to US Airways mechanics. But Munroe said mechanics would be offered multiple options from among hundreds of Teamster-backed defined benefit plans. "The Teamsters have a powerful record of negotiating safe, secure pensions for employees, including airline members," he said. The new plan would have to be approved by the airline.

The largest Teamster pension plan, the Central States Fund, has been in the news because it is significantly underfunded. By contrast, the IAM National Pension Fund, the fifth-largest multi-employer pension fund in the U.S, is funded at 106%. But Monroe said that contrast is irrelevant. "Despite the many successful funds the Teamsters have, the IAM chooses to highlight the Central States Fund, a fund which is not on the table for these workers," he said.

It isn't even certain the IAM could maintain its plan at a merged airline, Munroe said, noting: "The IAM likes to say their plan is automatic, but they would have to negotiate a new plan for the workers at the combined American."

Wise said continued future accrual in the plan is guaranteed if the workers remain in the IAM. Historically, the IAM has fought to protect the plan. In July 2005, with United ( UAL) in bankruptcy, about 16,000 agents, ramp workers and stock clerks, represented by the IAM, approved a new contract that included wage and benefit concessions but still enabled them to be the only United workers to retain a defined benefit pension plan.

"United was getting ready to abrogate the old contract," says Robert Roach, then IAM general vice president. "They were afraid of what the other unions would say if we had a pension plan and the others did not. But we told them we must have the pension plan or we would shut the airline down."

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

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