Since November 2011, we have been forced to respond to AMR’s decision to file for Chapter 11 bankruptcy protection. This is obviously not the first time that an airline used bankruptcy to abrogate labor agreements. Managements at United, America West, US Airways, Northwest Airlines, Continental, Frontier, and Delta have all taken labor unions to federal bankruptcy court to break promises on pensions, slash wages, cut benefits, and outsource work. Labor has been blamed for the industry’s woes for many years. We all know that management at airlines have a long history of using labor as a scapegoat to cover their own failures. As long as the bankruptcy laws exist in their present form, unions and their members will continue to get hammered and no work group has escaped this process without significant and unfair sacrifice. . With this in mind, the TWU-ATD leadership wanted to spend some time to review how the TWU 2012 M&R agreement compared to others negotiated under the 1113c bankruptcy process.
United and AMFA
United (UAL) was in particularly bad financial shape already before the tragic events of 9/11. All the unions on the property had participated in a heavily leveraged buyout and UAL had very little left to borrow against. When the bankruptcy (BK) process started, UAL’s M&R employees were represented by the IAM. The M&R membership voted down a proposed agreement negotiated by the IAM to avoid bankruptcy. After the Company filed for Chapter 11, the IAM continued to negotiate with UAL under bankruptcy law and was forced to sign on to a much worse M&R agreement than the rejected proposal. This proposal included cuts in pay and premiums, retiree medical, and substantial modification of outsourcing restrictions. AMFA decertified the IAM immediately after these concessions were approved. Two years later the Company filed for further relief in Bankruptcy Court and AMFA agreed to an additional 3.9% in pay cuts, further relaxation of restrictions against outsourcing (including the elimination of the IAM’s restrictions against foreign maintenance), termination of the defined benefit pension plan, as well as other benefit concessions. The contract provided for increases of a 7.5% after the pay cut over the term of the 6.7 year contract. In the end over 7,300 M&R members lost their jobs during the course of the UAL bankruptcy (60% headcount reduction) with no early out package.
US Airways and the IAM
The IAM represents the M&R employees at US Airways and the company went through two BK’s prior to September 2005 and its merger with America West. M&R suffered two pay cuts of 6.8% and 8.0%, off of rates that were near the bottom of the industry, as well as benefit cuts and termination of the pension plan. All 757, 767, and A330 heavy airframe overhaul was outsourced, all facilities work except for three stations was outsourced. After these cuts there was an 8% raise over the term of the 7.5-year contract. There with a loss of 1,500 M&R jobs (30% headcount reduction) with no early out.
Northwest and AMFA
What happened at Northwest (NWA) was an epic disaster for M&R. NWA prepared for a strike by training scabs at various private facilities and then sought a release from the NMB shortly after the amendable date of its agreement with AMFA. AMFA concurred in the request and struck at the end of the cooling off period. NWA filed for bankruptcy shortly afterwards. When the strike ended, AMFA signed on to a back to work agreement in which NWA M&R suffered 25.7% pay cut, outsourcing was unlimited with all overhaul and all but two line stations outsourced. All facilities, ground support, and cleaning functions were also outsourced. The pension plan was frozen and many other retiree benefits were eliminated. The AMFA represented workforce had been reduced from 10,000 at the time AMFA negotiated its first contract with NWA to approximately 4200 at the time of the strike. By the time of NWA’s merger with Delta there were less than 1,000 AMFA represented mechanics on NWA property.
Delta with no union for M&R
Delta (DAL) also filed BK at the same time NWA did, but since M&R employees had no representation management was free to do what they wanted. Wages were cut by at least 20% and all airframe overhaul was outsourced. There was no early out for the thousands who lost their jobs. DAL has since entered into a joint venture with Aeromexico to add heavy airframe maintenance capacity to cover all DAL wide-body aircraft in addition to all narrow-body work.
American and the TWU
In 2011 American (AAL) became the last legacy airline to enter BK. The TWU had already made significant concessions out of bankruptcy in 2003, but not with respect to outsourcing or pension. The TWU knew it was faced with a very difficult negotiations process in BK since almost all TWU labor groups, the APA, and the APFA had all been involved in normal negotiations for over five years with little progress. AMR demanded very severe changes to the TWU M&R labor agreement and argued to the court that its commitment to in house overhaul was a major competitive disadvantage. AAL wanted to outsource up to 45% of maintenance spend on top of that work which was already outsourced (approximately 10%), terminate the pension plan and turn it over to the PBGC as at UAL, and provide no buy out for the 4,500 that would lose their jobs.
The TWU negotiated for months and after two rejected contracts, reached an agreement. In contrast to other unions, the TWU succeeded, in:
1) Retaining significant limits on outsourcing, capping it at 35% of labor and material spend (the most accurate measure of jobs lost due to outsourcing);
2) Freezing rather than terminating the pension with all accrued benefits preserved with no reduction;
3) Job cuts were initially reduced below 2,300, and with the early out package of up to $39,500 for each employee leaving voluntarily, the final job losses were less than 400, and;
4) A 6 year contract with a provision to open two years early, and a union/industry first automatic wage adjustment requiring pay to snap up to industry standard by 2015. This wage adjustment will provide M&R members with significant pay raises on top of the 15% negotiated during the 6 year term of the contract. No union, not AMFA, the IBT, or the IAM has negotiated raises of 15% plus an industry standard wage adjustment on top in an agreement inside or outside BK except the TWU.
By any objective standard, these terms, however difficult, are better than any negotiated in bankruptcy for a mechanic and related group since 9/11. More jobs, preservation of existing pension benefits, the lowest outsourcing in the industry, and pay raises two times that secured by other unions dealing with bankruptcy. Our members deserve better than what the Company has offered, but our Union has clearly made the best of a bad situation.