American Airlines' Surprise Labor Issues Again Complicate a Merger

NEW YORK ( TheStreet) -- An unanticipated labor clash once again is complicating life for the management team of  American Airlines ( AAL) , which had hoped that its second major merger in eight years could be viewed as labor friendly.

Like the 2005 merger between America West and US Airways, which also installed Doug Parker's management team at a bigger airline, the 2013 merger between US Airways and American began with high hopes, economic promise and broad support among employees.

American Airlines crew workers rejects union contract; watch the video below for details:

Must Read: As American Flight Attendants Vote, Charlotte Is a Wild Card

In the former case, a controversial pilot seniority ruling became a lingering sore on an otherwise successful merger. Now, the flight attendants at combined American/US Airways have created complications by narrowly rejecting what has been billed as an industry leading contract. In the vote, counted Sunday, 8,196 flight attendants opposed the contract. Just 16 fewer supported it.

Since the vote, flight attendant pages on Facebook have been filled with divisive posts. Referring to the 16-vote gap, one contract backer wrote: "Those 16 people should be shot." An opponent wrote: "The 'new American' looks like it is going to have the same contentious relationship with management as the old American."

Often in the labor history of airlines, the rejection of a contract offer, especially in a close vote, is followed by a second vote on a slightly revised contract offer. In a recent example, it took three votes before the existing US Airways flight attendant contract was approved in 2013.

However, in this case the two sides had agreed that the next step, if the contract were rejected, was arbitration, where the outcome must conform to industry standard. The Association of Professional Flight Attendants has said that will reduce the contract's value by $81 million. Arbitration begins Dec. 3.

"Like many of you, I was devastated by the results of the TA balloting today," said APFA President Laura Glading, in an email to members Sunday night. "It is extremely disappointing to see the improvements our membership was set to receive rejected by such a narrow margin."

"The negotiations protocol agreement (NPA) requires that we submit the outstanding contractual issues to binding arbitration," Glading wrote.

"This week, the joint negotiating committee will begin preparing the case we will present to the arbitration panel," she continued. "Although the NPA limits the value of the arbitration award to 'market-based in the aggregate,' our team is going to do everything possible to protect our work group."

 Aviation consultant Bob Mann said negative fallout from the voting may be limited because "the workout, if the TA was turned down, was described beforehand and is well-choreographed."

Must Read: What Really Happened in the 1993 American Air Flight Attendants Strike

That differs from the follow-up to the 2007 pilot seniority ruling. In that case, US Airways pilots voted to leave the Air Line Pilots Association and formed a new union. A series of court cases followed. Today, eight years after the merger, pilots from America West and US Airways retain separate seniority lists. "The problem then was that no clear path was delineated," Mann said.

Mann said a big problem is that American management will begin pilot contract talks this week, and also faces flight attendant arbitration. "They expected to have a deal done with the flight attendants before moving on to the pilots," he said. "Now they will be stretched on resources."

Jason Goldberg, an American pilot and principal in The Leading Edge consulting firm, said flight attendants concerns included the lack of profit-sharing in their contract, given the carrier's recent record profits.
Asked why Miami and New York flight attendants were most opposed, he said, "They tend to be more militant bases, the (base leaders) were not huge fans of the TA and they were effective in convincing flight attendants that arbitration would be no worse."

Goldberg compared the contract rejection to flight attendants' rejection of a 1993 contract, which led to a pre-Thanksgiving strike when Bob Crandall was American CEO.

"Crandall's people assured him the flight attendants would not go on strike," he said. "But that's not what happened. Parker and his team are pretty savvy when it comes to labor, but sometimes it's hard to predict what labor is going to do."

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

To contact this writer, click here.

Follow @tedreednc


At the time of publication, the author held no positions in any of the stocks mentioned. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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