CHARLOTTE, N.C. ( TheStreet) -- The pilot seniority ruling in the merger of United ( UAL - Get Report) and Continental Airlines, reached last week, reflects the impact of the controversial 2007 seniority ruling in the merger between US Airways ( LCC) and America West.

As a result of that ruling by arbitrator George Nicolau, major changes were made to the Air Line Pilots Association seniority integration policy in 2009. "The evolution of ALPA merger policy including, most importantly, the modifications following George Nicolau's award in the America West-US Airways case, is central to the resolution of this case," the three United/Continental arbitrators said in the ruling they issued.

"The most significant change in the policy, particularly in light of the decision that prompted the revision, was the express addition of 'longevity,'" or pilot tenure at a merged airline, as a factor in seniority list integrations, the ruling said.

In the 57-page ruling, the arbitrators concluded that longevity should account for 35% of the seniority list placement in the United/Continental case, while "status and category," which refers to a pilot's rank as captain or first officer and to aircraft type, would count for 65%. A copy of the ruling was obtained by TheStreet. A spokesman for the United pilots didn't return phone calls.

The arbitrators considered arguments by merger committees from the two pilot unions. Ironically, each four-member merger committee included one member who was a "pilot neutral," participating with Nicolau in deciding the US Airways case.

The finding tilts strongly toward the proposal made by United pilots, who had wanted to equally consider longevity as well as "status and category," while the Continental pilots' proposal would have considered primarily status, grouping all captains together and all first officers together, without considering the category of aircraft. Also, the Continental proposal would have given mainline pilots credit for time spent at affiliated regional airlines.

Arbitrators make it clear they found the United case to be more reasonable and more conciliatory. In one section, they quote the United group as decrying "unreasonable posturing" fueled by "unrealistic expectations." The arbitrators found that "the primary failing of the Continental proposal's use of only {status}, to the virtual exclusion of all other merger policy factors, is that it unfairly, inequitably and disproportionately benefits one pilot group to the consequent detriment of the other."

The problem with the Nicolau Award, according to the United arbitrators, is that it was based on the ALPA merger policy in place at the time. That policy did not include longevity, which was in fact removed largely because United pilots were concerned that they would lose out to more senior US Airways pilots in a proposed merger in 2000.

In the future, three factors are to be considered in seniority list integrations involving ALPA carriers. The three are career expectations, longevity and "status and category." They are to be considered "in no particular order and with no particular weight," the new ALPA policy said.

In the US Airways case, the Nicolau ruling generally reflected an effort to blend two pilot groups while maintaining pre-merger relative seniority. But "the pushback and uproar created an environment that was ultimately highly detrimental to ALPA and, unhappily, for the America West and US Airways pilots," the United ruling said. Those pilots "are still suffering the toxic effects," it said.

The impact of the United ruling on the pending seniority list integration between American ( AAMRQ) and US Airways, if that merger occurs, is unclear. Arbitration could rely partially on the precedent set in the United/Continental case, although the Allied Pilots Association and the US Airline Pilots Association have no obligation to follow the lead of a third union. In fact, USAPA spokesman James Ray said arbitration may not be necessary.

"If the merger goes forward, both sides are hopeful we can reach a satisfactory conclusion regarding our seniority integration without going to arbitration," Ray said. "We think it's a real possibility (because) both parties realize the importance of working together for the common good. As history has shown us, when you go through arbitration, you lose control of your destiny by placing your future in someone else's hand."

Mark Burman, a spokesman for the America West pilots, said the United list, "in the end, looks far more like the Nicolau Award than it does anything else" because it is based largely on "status and category."

"The only difference between the two arbitrations is the change in ALPA merger policy which occurred in 2009," he Burman. "Longevity is now a factor. Otherwise, each case turns on its own facts, (so) this award gives positively no basis for USAPA to claim any sort of victory, as the opposite is true."

The US Airways ruling was reached in binding arbitration after both sides approved Nicolau's selection. Its most controversial component placed a 56-year-old pilot with 17 years at US Airways, who was never laid off, behind a 35-year-old America West pilot with a few months on the job. In hundreds of similar cases, "east" pilots with 15 or more years at the carrier went behind "west" pilots with just a few years.

Nicolau, according to sources, was miffed by the refusal of some US Airways union leaders to back off their uncompromising support for a "date of hire" list, which he had no intention of implementing. Afterward, many US Airways pilots felt so disenfranchised by the list that they voted to leave ALPA after 57 years and to create a new union. America West pilots, in a minority, were dragged along.

While the impact of the Nicolau ruling is disparaged in the United ruling, Nicolau himself is referenced respectfully if not reverentially. In fact, the arbitrators declare that "George Nicolau's four basic verities of integrated seniority list arbitration are as apt and vital today as they were nearly a quarter of a century ago," and then list them: "Each case turns on its own facts; the objective is to make the integration fair and equitable; the proposals advanced by those in contest rarely meet that standards; and the end result, no matter how crafted, never commands universal acceptance."

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

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