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More Labor Troubles at American Airlines

American Airlines has done it wrong. Unlike the other three big carriers that have profit-sharing plans with their employees, AA management has taken an us-versus-you approach that has alienated workers.
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American Airlines has done it wrong. Unlike the other three big carriers that have profit-sharing plans with their employees, AA management has taken an us-versus-you approach that has alienated workers. Worse, the chief negotiator for the flight attendants has contributed to the problem due to potential conflict of interest issues.

Since 2003 the American Airlines (AA) flight attendants union, the Association of Professional Flight Attendants (APFA), has been forced into labor contacts that have forfeited annual wages and benefits totaling $535 million. First, there was the 2003 $340 million annual giveback followed by another $195 million annually as part of accepting the 2011 American Airlines the LBFO (Last Best and Final Offer) in the bankruptcy. American Airlines was able to exit bankruptcy after it agreed to merge with U.S. Airways.

On November 9, AA flight attendants, by 16 votes, surprisingly rejected the "Tentative Agreement," a contract that had been in various stages of negotiation for over two years. This contract was a derivative of the "Conditional Labor Agreement" (CLA). Post-bankruptcy, AFPA president Laura Glading began a series of clandestine meetings with AA CEO Doug Parker and President Scott Kirby. The ostensible goal for Ms. Glading was to recapture much of the over $4 billion in previous forgone compensations. The "Tentative Agreement" ostensibly would have recouped an annual $193 million but that was spread over the combined 25,000 U.S. Air and American flight attendants, not just the 16,000 from American Airlines. With no statistical backup, flight attendants were told that if they rejected the "Tentative Agreement" they would be forced into arbitration and would receive $82 million annually less than the "Tentative Agreement". If this was really true, why did workers reject this contract?

At a recent meeting with employees CEO Parker was queried on the lack of a profit sharing clause in the "Tentative Agreement." He tersely replied: "It's just not the right way to pay 100,000 employees that don't have that much impact on the daily profits."

After deserved criticism, Mr. Parker has issued a lame clarification to disentangle from what are his true feelings. Parker: "I did say those words but I certainly wasn't suggesting that our employees don't have a big impact on profits." HUH?

It is indeed flight attendants, pilots, mechanics, and ticket agents who are the profit engines of any airline. Paradoxically, the Airline Deregulation Act of 1978 has left our country with less competition than ever before. Instead of creating more choice as intentioned, the top four major airlines (UAL, AA, SWA, DAL) now control 90 percent of domestic air travel. They basically enjoy virtual monopoly powers in their respective hubs. American Airlines will be profitable no matter who is at the helm. This structural dysfunction suggests it would take little more than trained monkey to run any of these airline boardrooms.

The other three major airlines have profit sharing. Why did Laura Glading readily give that up? Under the near monopoly structure referred to above, airlines will make billions and be much, much less cyclical than in the past. The one true chance for labor to do well would be profit sharing. Why did she agree to binding arbitration, taking away the one true labor hammer, to strike? Flight attendants I have spoken to tell me details are scant as to why they are being told they will get $82 million less annually in arbitration. All tell me they have lost confidence in Ms. Glading and do not think she represents their best interests.

Is Laura Glading too close to management? Her cousin Tom is treasurer at American Airlines. Did she just get snookered in these negotiations or is she just not that bright? She was chief APFA negotiator in 2003 and became president in 2008 so she presided over both economic cataclysms and has never done anything with a positive monetary outcome for her membership. She clearly was not adversarial enough. Meanwhile, say no prayers for CEO Doug Parker. His board bestowed upon him $20.9 million for 2013 compensation.

So now, theoretically at least, American flight attendants will head to arbitration where the standard will be a comparable deal to that of United and Delta Airlines. It is not the end of the world, but serious questions remain about the leadership of Laura Glading.