American was, for many years, a bankruptcy waiting to happen. They pushed it off and pushed it off while they lost money and their competitors drove down costs through what Donald Trump refers to as “the Chapters.”
They lost control of the process though and wound up being taken over by US Airways rather than emerging independent. Time and again American management expressed a desire to emerge independent and then consider any merger.
For all the time American spent waiting to enter Chapter 11, they still had plenty of cash on hand and an ability to meet their creditor obligations — though not a long run likelihood of returning to profitability.
One irony is that if they had waited longer they probably could have emerged independent. A year or so longer and the would have been in bankruptcy while fuel prices were dropping, they would have turned profitable and legacy management might have remained in place.
American Airlines Boeing 787
However, three things happened:
- Doug Parker and Scott Kirby got the American Airlines unions on board for a merger. And while it held out the possibility of better labor relations for legacy US Airways, since those employees would be getting raises to bring them up to American Airlines wages, it struck me odd that American’s unions would think US Airways history would lead to labor peace.
- In the summer of 2012 I saw a merger as highly likely because of US Airways’ willingness to overpay. All of a sudden even equity holders would get something out of bankruptcy. Instead of the originally proposed 50-50 deal they were dickering about what amount over 70% American Airlines stakeholders would get in the combined company.
- American Airlines pilots began a sick out in September 2012. Once the pilots decided former CEO Tom Horton had to go, it was likely the end of his tenure one way or another.
Hanger on the edge of DFW Airport
So we got a merger, or rather acquisition of American inside of bankruptcy by US Airways. And it didn’t lead to labor peace.
In the fall American’s flight attendants went to war with each other. But what really matters for an airline to remain operational are its pilots. Pilots can bring an airline to its knees in a way that flight attendants cannot.
Various American Airlines aircraft, 2013
American Airlines Group Inc.’s pilots union, an early backer of the carrier’s merger with US Airways, blasted the return of “toxic” labor relations, a substandard product and violations of their contract.
American executives can no longer rely on the excuse that they need more time to bring everything into order since the two companies merged in December 2013, the Allied Pilots Association board of directors said in a March 4 letter to Chief Executive Officer Doug Parker. Many of the airline’s middle managers are “misaligned” with Parker’s call at a recent leadership conference for better labor relations that will bring all employees in line with a push to make American the best airline, the letter said.
…“The pilots of American Airlines will not remain silent as we witness the rebirth of the toxic culture we fought so hard to eradicate,” the APA letter said.
“The new American Airlines product is outright embarrassing and we’re tired of apologizing to our passengers,” it read. “We hear from many valuable corporate clients and premiere status passengers that the product is not what they’ve come to expect from American Airlines.”
When US Airways and America West merged, the airline faced contentious labor integration issues. The pilots in particular never formally got to a new contract with merged senior list. For them, the merger with American Airlines presented a final opportunity not just for increased pay but for finally overcoming the wounds the US Airways and America West pilots inflicted on each other.
America West and US Airways pilots were both represented by the same umbrella union organization. As such, they had a built-in mechanism for determining how the senior lists of the two airlines would be integrated.
US Airways had gone through two bankruptcies. It was judged to be a ‘failed carrier.’ As a result, US Airways furloughed pilots were supposed to go to the bottom of the seniority list at the merged airline for re-hire, and the arbitrator’s decision on seniority was to keep relative seniority positions intact rather than sort one list based on date of hire (which would have privileged US Airways pilots).
However US Airways was also the larger of the two airlines, and there were more US Airways pilots than America West pilots. As a result, they were able to break off and form their own union — whose purpose was to privilege US Airways pilots over their America West brethren. In effect, the purpose was to overturn the arbitration decision that put US Airways pilots at the bottom of merged seniority.
Usually a union’s purpose is to extract as much as possible from the employer. This, instead, was a Monty Python Life of Brian moment. The pilots fought each other instead of
the Romans management.
Without the ability to agree on final merged terms between the airlines, all the old America West terms remained in place for the America West pilots. For instance, America West pilots continued to pay a monthly fee to access their crew scheduling system. It’s the kind of sore thumb item that the airline was willing to give back on, but only as part of a final joint contract. These kinds of thorns remained, because the pilots could never get together on merged seniority.
American Airbus A319
In the process of integrating with American, you really have three pilot groups and not just two that are coming together as part of the new single airline. The bitterness amongst the pilots even leaks out in online wars, editing Wikipedia pages. For instance, as of this writing the US Airline Pilots Association page intoductory section includes,
On August 5, 2013, USAPA’s founder, former President and Vice-President Michael J. Cleary, threatened legal action against USAPA alleging it is using his trademark without his permission. Because of this action, Usapians are commonly referred to as Former Union Known as USAPA Profiteers (FUKUP’s).
The hope of course was that the merger with American meant the past squabbling would become more or less irrelevant.
But now it involves friction with former American Airlines pilots too, it would seem.
For their part, American Airlines isn’t squabbling back. They aren’t willing to fight publicly with their pilots, which seems smart. Instead, they’re saying ‘we get it, we’re working on it.’
American executives are “well aware” that a cultural change is needed, company spokesman Casey Norton said in an interview Sunday. At recent meetings in Dallas, Parker told thousands of managers that the airline must take better care of its employees as part of taking care of customers.
“It’s all about getting middle management to listen to front line employees and place value in the feedback they give us, because we are intent on making American a fantastic place to work,” he said.
…APA is “exactly right” to raise the issues in its letter, Norton said. “These are all things that are incredibly important to us. We’re only two years into a five-year integration. Nothing is going as fast as we’re wanting.”