February 15, 1999
American Airlines resumed normal service after a week-long pilot "sickout", when a federal judge threatened to fine the union $10 million. Phil Ponce and guests discuss the dispute.
PHIL PONCE: Over the last two days, hundreds of American Airline pilots ended their sick-out and were back on the job, this after a federal judge found their union in contempt, and threatened it with a $10 million fine. Over the weekend, Union President Rich Lavoy used a taped statement to urge the pilots to obey the judge's order to go back to work.
RICH LAVOY: We need to get this airline back up and running at full capacity and we need to do so quickly. Please clear the sick list immediately and resume your normal schedule.
PHIL PONCE: The request followed an angry decision by U.S. District Judge Joe Kendall, who wrote: "Unfortunately, the radical element that appears to be in control of the Allied Pilots Association seems determined to fly American Airlines into the side of the mountain, taking themselves, the Company, their co-workers and their customers with them."
|They disrupted travel.|
PHIL PONCE: American says at the peak of the dispute, which started on February 6th, nearly 2,500 of its 9,400 pilots called in sick. As a result, the nation's second largest airline has canceled about 6,000 flights. That disrupted travel for more than half a million people, and may cost American at least $50 million. As airport monitors read "canceled," exasperated passengers began to voice their anger at the pilots.
SHAWN PATTON: I blame the pilots. It seems to me they were very selfish and then causes problems for everybody else: The gate agents, the passengers, even the baggage handlers. It just causes them all the headaches because the pilots, you know, didn't think something was fair. So, I don't think they were very considerate of the rest of the American Airlines staff either or the passengers.
WOMAN: The flights at 3:00 And 5:00 are still up on the board, as on time, but, you know, (coughing sarcastically), the pilot could get very sick by 2 o'clock. Apparently, something's going around.
PHIL PONCE: The dispute dates back to December, when American, aiming to expand its presence in the West, bought Reno Air. The pilots started the sick-out because they didn't like the way Reno Air and its pilots were to be integrated into American. The union wanted immediate pay raises for the Reno pilots to bring them up to what American pilots earn. That would about double the average Reno salary of $75,000 a year. And the union wanted existing American pilots to get immediate promotions based on the new expanded work force. But the airline wanted to make those changes over the course of 12 to 18 months, a timetable the union said violated their contract. The company disagreed, and said it is pushing for short-term resolution.
DONALD CARTY, President, AMR Corp.: It's always been our plan to integrate, and it has always been our plan to integrate quickly.
PHIL PONCE: A hearing is set for Wednesday to determine how much to fine the union and its leaders on the finding of contempt. Meanwhile, the two sides continue negotiations.
|What is motivating them?|
PHIL PONCE: Joining me now are Aaron Gellman, director of the transportation center at Northwestern University -- it conducts research on transportation issues; and Michael Boyd, president of the Boyd Group, an aviation consulting firm based in Denver. Gentlemen, welcome.
PHIL PONCE: Mr. Boyd, some of the American Airline pilots make upwards of $250,000 a year. They hold jobs that a lot of people hold in very high regard. What was motivating them? Tell us more about why they did this.
MICHAEL BOYD, Aviation Consultant: Well, whether they're minimum wage or whether they're making $200,000 a year, it's a non-sequitir to the issue at hand. Their feeling is that the contract reads that if AMR buys another airline, those pilots will come under their contract, under their seniority list, and I think that's why the walkout or the "sickout" took place. Focusing on how much money they make isn't really the issue.
PHIL PONCE: Mr. Boyd, why was it so important when the integration between the two companies took is to take place? Why is that so important?
MICHAEL BOYD: Well, I think it goes to the very heart of why you have a union in the first place. It's called class and craft. If Ford Motor Company bought a factory and told the UAW they weren't going to staff it with UAW people, there would be a major problem. It's the same thing here. We're talking about farming out work or a fear of farming out work or a c-scale. And that goes back to the negotiations two years ago.
PHIL PONCE: Sorry, a c-scale? What did you just say - a c-scale?
MICHAEL BOYD: A c-scale, which is a much lower pay scale for the pilots that are actually flying Reno flights, but owned by American. They should be -- up in the pilots' mind -- up to American's pay scale.
PHIL PONCE: Mr. Gellman, Professor Gellman, were the pilots justified?
AARON GELLMAN, Northwestern University Transportation Center: I think not. The history of transportation certainly suggests when you're going to merge two transportation companies, you do it carefully, therefore with slowly. The term deliberate speed is not a bad one. And I think twelve to eighteen months to integrate these two airlines is a reasonable period of time. And I think the impatience of the pilots is unconscionable. Worse, more than that, it does give rise to the question as to what the real agenda of the renegade pilots happened to be. And I suspect it was a test of wills between themselves, on the one hand, and the new CEO and his team at American who have done a lot to, we thought, to heal the previous problems at American. But apparently you can't do enough for some of the people there, some of the pilots. And I think that their behavior is unconscionable, as the judge found, and I certainly hope the judge will levy a big fine, because for one thing, it will certainly make the pilots who did fly rather angry to have to pay part of the bill for those that didn't. And I think that will be a healthy thing for American and for the industry.
|Bumbled into a minefield.|
PHIL PONCE: Mr. Boyd, how about that? Was what the pilots did unconscionable in your opinion and how about the issue of the real agenda? Was it a test of wills to test the new management team at American?
MICHAEL BOYD: I don't think so. I think this is a minefield that everybody bumbled into. First of all, they had no business buying Reno Air. That was a really dumb move; it doesn't bring anything to American's party. What it's basically done is bought them a few more airplanes, but nothing else American really needed. Why they bought it I don't know.
AARON GELLMAN: That's absurd.
MICHAEL BOYD: No I don't think so.
AARON GELLMAN: I'll tell you why.
MICHAEL BESCHLOSS: Let me finish.
PHIL PONCE: Professor Gellman, let Mr. Boyd finish. And I promise to get back to you right away, sir.
AARON GELLMAN: Sure.
MICHAEL BOYD: First of all, the route system that Reno has is nothing that American Airlines needs. When you look at their fleets, American will end up with a net 17 or 18 airplanes out of the whole picture. So, I mean, I don't know why they did it. But the reality is if the contract states clearly that all pilots flying for AMR -
PHIL PONCE: AMR being the parent company of American Airlines.
MICHAEL BOYD: The parent company -- under their current contract will be on the seniority list. That's what it says. I have no problem with being very careful when you merge an airline into another. You can't do it in 20 minutes. But the reality is if the contract states that, I think you have to stick to that contract or work it out. And as it stands now, American Airlines has bumbled into a giant, probably $200 million loss between the buying of this airline and the losses due to the slowdown.
PHIL PONCE: Big loss for American Airlines worth it, Professor Gellman?
AARON GELLMAN: First of all, I don't know what the loss is and I don't think Mr. Boyd does either. But I find it very unbelievable that a consultant in Denver -- and I was a consultant for many years myself in the airline industry -- that you would presume to know what was best for American Airlines' management. They deemed this the best course to reestablish a significant presence for American on the West Coast. And if the -
MICHAEL BOYD: That could be like in California too.
AARON GELLMAN: If the pilots had a better idea of how the establish a presence for American, a bigger presence on the West Coast, I'm sure that had they come forward with that idea, it would have been at least listened to. But management has to have the right to manage. Let pilots fly, let management manage. And it's almost that simple in, in situation.
PHIL PONCE: Mr. Boyd, that simple?
MICHAEL BOYD: No, I think he's entirely right, the last part there, management does have the right to manage. And that's not argued here. But management also and pilots also have to adhere to the contracts they sign. The other thing, too, is - you know -- we're pretty good at analysis here and very bluntly, I think this will turn out in terms of a presence on with the West Coast very similar to what took place with Air California. When the dust settles, you're not going to have much left to show for what they bought with Reno. And they paid $120 million for Reno, lost another $50 or $60 million with the slowdown. So, the total cost will be close to $200 million. And I don't think American will have anything to show for it. So, the reality is I think it's an issue of getting together with management and labor and working this out. American knew this could take place when they bought Reno.
|The level of trust.|
PHIL PONCE: Professor Gellman, how would you access the level of trust or mistrust between the two sides?
AARON GELLMAN: Well, I think there are certainly people in the pilots' side who don't get along well with management, whether it's an issue of trust or not, who apparently they would be satisfied with nothing more than turning over the airline for them to run: Whereas there are many, many reasonable people flying for American as well. And that's one of the reasons I'd like to see the judge levy the fine, because I think it would separate the two from -- the two groups from each other and that would be, I think, a healthy thing in the long run. By the way, there are plenty of people who have analyzed the Reno acquisition who come to a very different view than does Mr. Boyd.
MICHAEL BOYD: That's right, and I think they're wrong.
AARON GELLMAN: Well, they're wrong, you're right. Okay.
MICHAEL BOYD: As you are, sir.
AARON GELLMAN: Fine. Time will tell. I do not believe this was foreseeable. I think this came out of left field. By the way, I think it is important to recognize that when the pilots initially started the sickout, they said they were concern about the welfare of their brethren at Reno. In fact, at the same time they were telling their own members -- the pilots' union was telling its leadership, was telling the members that the Reno pilots had to go at the bottom of the seniority list, rather than be merged in on the basis of the date of seniority. And if that is looking out for the welfare of Reno's pilot, if that isn't being grossly selfish, I don't know what is.
PHIL PONCE: Mr. Boyd, was there an element of self-interest on the part of the existing American Airlines pilots?
MICHAEL BOYD: Of course, there always is. I wouldn't argue with the doctor on that part of it. But the reality here is I think there's this argument that it's a small group of radicals who have done.
PHIL PONCE: That's what the judge said. The judge used the term radical element in control of the union. Your reaction to that?
MICHAEL BOYD: I think the judge had a hair trigger and really wanted to launch a missile. The reality here is I don't believe that it is radical. When you have 2,500 out of 9,000 pilots calling in sick, that's kind of grassroots. And these aren't people that are disaffected against their airline. I think it's a much more grassroots thing than a couple of radicals sitting down in Arlington, Texas, handling these people like Mark Metz. So I think it's much more deeper than the doctor would indicate.
AARON GELLMAN: Well, let me make one other point. The airlines pilots have to understand this is an industry -- since deregulation -- that is more like other industries than ever, that is, it is subject to the whims of the economy; it is subject to the whims of competition in ways they did not know about prior to 1980 when deregulation came in the United States. Now, remember that the fourth quarter was not the greatest quarter the airlines ever had. The first three-quarters were superb. There will be times when the airlines are less profitable, rather than more. The airline pilots seem to be locked -- at American, at least, on the notion that when times are good, they get more; when times are not so good, they don't get less. And I think that that's something that has to change, and I don't know how it's going to get changed.
PHIL PONCE: Mr. Boyd, are the pilots -- are the pilots unlike other labor groups? What is different about pilots as a union as opposed to what we consider more conventional kinds of rank and file labor unions?
MICHAEL BOYD: Well, you're dealing with a group of relatively highly educated people, highly technically qualified people. When that airplane leaves the gate, the captain is control of maybe $100 million worth of equipment and the lives of maybe two, three hundred people. So you're dealing with a different level of person. This isn't a shop worker.
PHIL PONCE: Different level of confidence ego, and that sort of thing?
MICHAEL BOYD: I think so. Absolutely. You're dealing with -- they say they only work 14 days a month or whatever -- these guys, you know, they do work very hard. And the reality is what we're paying them for, why they make the big bucks is so when the motor falls off the airplane, they know what to do to get it down safely. And we're paying for those skills. And I think all the stuff about good times pay more, bad times they don't, that has nothing to do with it. That's not even germane to this Reno Air thing. Right now the Reno Air thing has to do with a contract that says if you buy an airline, they'll come under the APA seniority list. I didn't write it. They wrote it -- they agreed it to. And frankly, that's the main issue here. All the other issues about pay and their psyche and all that aren't even germane to this.
PHIL PONCE: Professor Gellman, let me ask you a final question. Does the -- do the special skills that pilots have, do the special responsibilities in some way entitle them to special clout?
AARON GELLMAN: I think there's no doubt it's a highly skilled job and they do have a lot of responsibility, but no more so than a lot of other people in the economy. For example, the most dangerous parts of flight, as the --
Mr. Boyd certainly would know, they're in landing and takeoff. The highest paid pilots make very few landings and takeoffs each month. Whereas the people who fly for the commuters, for example, are constantly going up and down and even those who fly things like Southwest, they're in much more jeopardy, if you will let me use that word, than are the pilots that fly the longest, highest paying flights. So I don't think that we really have a rational system. What we need to do, in my opinion, is get people paid based on seniority, regardless of what they fly, test them for what they fly best, put them on that type of equipment for their careers subject to technological change, and not have a constant jumping up to other equipment based strictly on seniority where the new equipment that they go on to pays more. I think that's no longer a rational basis for dealing with pilots' wages and working conditions and I think it should be changed. But sure, there are plenty of skills.
One of the reasons airlines are frightened about confronting pilots too much is that every day about 80 percent of the net asset value of a typical scheduled airline in the United States is in the hands of pilots. They're called airplanes. They control them. They can treat them gently or they can treat them roughly. It's in their ability to do that. And you don't want to rile the pilots too much. There has to be some understanding between management and labor, but labor also has to understand that there have been airlines in this country since deregulation whose demise was largely laid at the doorstep of pilots, and that pilots should be careful and take a long view to recognize that they are part of a team and not on the outside looking in. They're on the inside, and they've got to recognize their long-term interest and not just their short-term interest.
PHIL PONCE: Well, gentlemen, that's all the time we have. Professor Gellman, Mr. Boyd, I thank you both very much.