American Air Tries Charm Offensive as Pilot Contract Talks Begin

NEW YORK ( TheStreet) -- Trying to do a major airline merger that is labor friendly is a big challenge, something the American Airlines (AAL) management team relearns each day.

Obviously, an effort to provide flight attendants at the merged American/US Airways with an "industry leading" contract did not go as planned. Rather, in a ratification election, the proposed contract lost by one-tenth of 1% of the vote. The chatter following Sunday's vote count has been bitterly divisive.

Nevertheless, on Tuesday the former management team of America West -- which began in 2004 to openly chase mergers and now runs American, the world's largest airline -- was at it again, kicking off the most important labor negotiations it has ever faced with an opening charm offensive.

Formal contract talks with the Allied Pilots Association, which represents 15,000 American pilots, begin Wednesday. The airline submitted a proposed agreement along with a letter from President Scott Kirby, who said he has backed down from one of the airline's primary goals, a request to add five seats to large regional jets flown by affiliated carriers.

"We have excluded that request, even though we believe it is in the company's best interest, in an effort to build much needed trust into our labor-management relations at the new American," Kirby wrote.

Kirby said adding five seats to 76-seat regional jets would bring more passengers into the hubs where American feeds the mainline flights flown by APA members.

But Kirby noted he has spent a lot of time with pilots recently, explaining his views. In that process, he saw up close that "the pilots of American do not fully trust management." He said he understands why mistrust exists at both American and US Airways. "We want to change that perception and the entire leadership team at AA is working very hard to do so," he wrote.

Besides abandoning the change in the scope clause, the contract offer gives American pilots "the highest pay rates among our large, network peers, and does so well before anyone could have contemplated," Kirby said. He sees the offer "as a sign of good faith to demonstrate the trust we want to build."

A response late Tuesday from APA President Keith Wilson was non-committal. "The proposals appear incomplete, as they do not address many of APA's quality-of-life-related negotiating priorities," Wilson said in a prepared statement. Pilot leaders were scheduled to meet Wednesday to discuss their next step.

In 2004, the America West management team began its public merger quest by trying to acquire Indianapolis-based ATA. It worked with the ATA chapter of the Air Line Pilots Association to offer more jobs than competing bids would have.

When that deal fell through, Eric Engdahl, ATA's ALPA president, declared: "We're furious that ATA's aircraft lessors apparently refused to cooperate with America West, even though the AWA plan was the best one to keep all of ATA's airplanes flying."

Next step for the America West merger machine was US Airways. A merger occurred in 2005. America West was a small company with a lot of close management/labor contact, but the model was a bit tougher to implement at US Airways, which was twice the size of America West.

After the merger, a controversial seniority arbitration divided the pilots -- and delayed a contract for years. The delay with the pilots, and then two unsuccessful contract votes, delayed a flight attendant contract for years.

The International Association of Machinists, the largest US Airways union, got its initial post-merger contract quickly enough, but delay in signing a second contract meant that when the US Airways unions were encouraged to get out and show support for the American merger the IAM sat it out.

It has always seemed that American CEO Doug Parker and Kirby want to work with labor, but have never gotten exactly the results they envisioned. Nevertheless, the big three American labor unions went to bat for them in the effort to take over management of American.

Now, management wants to reward labor for its efforts. But that is proving to be a bit more complicated than it might have seemed. 

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

To contact this writer, click here.

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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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