arbitration proceedings before the mccaskill-bond board of arbitration

367 Pages·2016·2.63 MB·English

ARBITRATION PROCEEDINGS BEFORE THE MCCASKILL-BOND
BOARD OF ARBITRATION

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In the Matter of the Seniority Integration Involving
Pilots of
NEW AMERICAN AIRLINES

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BOARD OF ARBITRATION

Dana Edward Eischen
Ira F. Jaffe
M. David Vaughn

APPEARANCES

AMERICAN AIRLINES: O’MELVENY & MYERS LLP
By: Robert A. Siegel, Esq.
Tristan Morales, Esq.

Paul D. Jones, Esq.
Senior VP and General Counsel

APA: JAMES & HOFFMAN, P.C.
By: Steven K. Hoffman, Esq.
Edgar N. James, Esq.
Daniel M. Rosenthal, Esq.
Mark R. Myers, Esq., Attorney, APA

AAPSIC: ALLISON SLUTSKY & KENNEDY, P.C.
By: Wesley A. Kennedy, Esq.
Ryan M. Thoma, Esq.

EPSIC: BAPTISTE & WILDER, P.C.
By: William R. Wilder, Esq.
Roland P. Wilder, Jr., Esq.

WPSIC: BREDHOFF & KAISER, P.L.L.C.
By: Jeffrey R. Freund, Esq.
Roger Pollak, Esq.
Joshua B. Shiffrin, Esq.

ASU ALUMNI LAW GROUP
By: Marty Harper, Esq.
Kelly J. Flood, Esq.
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I. PRELIMINARY STATEMENT

This arbitration concerns the creation of a single integrated seniority list (“ISL”)
for the pilots of the New American Airlines following the merger of American Airlines
(“American”) and US Airways (“US Air”). At the present time, the pilots of US Air are
divided into two groups: legacy US Air pilots (“East Pilots”) and legacy America West
Pilots (“West Pilots”). For reasons discussed below, prior to the merger of American
and US Air, the East Pilots and West Pilots were unsuccessful in their efforts following
the 2005 merger of US Air and America West to achieve a single ISL covering all of the
merged US Air’s flying.
The interests of the three pilot groups were represented respectively by separate
American, East, and West Merger Committees created by the Allied Pilots Association
(“APA”), the certified bargaining representative for all three pilot groups following the
merger of American and US Air.
A. Procedures
Evidentiary hearings were held in Washington, D.C. during the period September
29, 2015-January 15 2016, at which the respective Committees were represented by
Counsel and offered full opportunity to submit oral and documentary evidence,
including direct testimony and expert opinions, all subject to cross-examination and
rebuttal. The evidentiary record was closed following receipt of the stenographic
transcript and post-hearing briefs dated March 28, 2016. Thereafter, the Arbitration
Board convened in Executive Session and, after careful consideration of the record and
extensive consultation, we render this Opinion and Award. The Technical Assistance
Team (“TAT”) created jointly by the Committees provided this Board with expert
technological help by performing numerous calculations at our direction and verifying
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the mathematical accuracy of the outputs. We express our sincere gratitude for that
invaluable assistance, but emphasize that the role of TAT was limited only to those
described calculations.
B. Decisional Standards and Guidelines
This arbitration was conducted in accordance with the requirements of the 2007
McCaskill-Bond amendments to the Transportation Act, 45 U.S.C. §42112. That statute
applies the Allegheny-Mohawk Labor Protective Provisions (“LPPs”) (59 CAB 19,
Appendix B, 45, 1972) to transactions involving two or more air carriers resulting in the
combination of crafts or classes under the Railway Labor Act (45 U.S.C. § 151, et seq).1
The two directly applicable Allegheny-Mohawk LLPs, §§ 3 and 13, require
integration of the respective seniority lists by the merged carrier, in a “fair and equitable
manner”; through a dispute resolution process of negotiations and mediation
culminating, if necessary, in arbitration. (59 CAB 19, Appendix B, 45, 1972):
* * *
Section 3.

Insofar as the merger affects the seniority rights of the carriers’ employees,
provisions shall be made for the integration of seniority lists in a fair and
equitable manner, including, where applicable, agreement through collective
bargaining between the carriers and the representatives of the employees
affected. In the event of failure to agree, the dispute may be submitted by either
party for adjustment in accordance with section 13.

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1 Between 1972 and the passage of the Airline Deregulation Act of 1978, the CAB used the
Allegheny-Mohawk LPPs as the standard set of provisions in airline mergers. When
deregulation became imminent, the CAB began deferring labor protection issues to collective
bargaining, unless there were “special circumstances” or the CAB determined that LPPs were
“necessary to prevent labor strife that would disrupt the nation’s air transportation systems.”
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Section 13.

(a) In the event that any dispute or controversy (except as to matters arising
under section 9) arises with respect to the protections provided herein which
cannot be settle by the parties within 20 days after the controversy arises, it may
be refined by any party to an arbitrator selected from a panel of seven names
furnished by the National Mediation Board for consideration and determination.
The parties shall select the arbitrator from such panel by alternatively striking
names until only one remains, and he shall serve as arbitrator. Expedited
hearings and decisions will be expected, and a decision shall be rendered within
90 days after the controversy arises, unless an extension of time it is mutually
agreeable to all parties. The salary and expenses of the arbitrator shall be borne
equally by the carrier and (i) the organization or organizations representing
employee or employees or (ii) if unrepresented, the employee or employees or
group or groups of employees. The decision of the arbitrator shall be final and
binding on the parties.

(b) The above condition shall not apply if the parties by mutual agreement
determine that an alternative method for dispute settlement or an alternative
procedure for selection of an arbitrator is appropriate in their particular dispute.
No party shall be excused from complying with the above condition by reason of
having suggested an alternative method or procedure unless and until that
alternative method or procedure shall have been agreed to by all parties.

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By incorporating Sections 3 and 13 of the Allegheny-Mohawk LPPs, McCaskill-
Bond establishes the duty of the surviving or combined carrier and the representatives
of its employees to provide the fair and equitable seniority list integration process.
Aside from stating that “fair and equitable” processes include “agreement through
collective bargaining” between the carriers and the representatives of the employees
affected, neither the LPPs themselves nor CAB interpretations of them provide any
specific criteria for what constitutes a “fair and equitable” integration process.
However, the CAB has acknowledged the reality that “no single way could be devised
that would meet all situations. Whatever the method used ... some employees will be
disadvantaged and some will gain.” See National Airlines Acquisition, Arbitration
Board, 97 C.A.B. 570, 572 (1982). Thus, in this case, three separate and distinct
Seniority Integration Committees, each representing a separate cadre of the APA-
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represented pilots now employed by New American Airlines, presented the Board with
competing proposals for the integration of the pilots covered by this arbitration.
At all times pertinent to this case, the pilots employed by American have been
represented for purposes of collective bargaining by the APA, under terms and
conditions of employment set forth in various collectively bargained agreements
(“CBAs”) between APA and AA. Effective, September 16, 2014, the APA was certified by
the National Mediation Board as the single representative of all American Airlines
pilots, including the former US Air pilots who are now employed by the post-merger
“New American Airlines.” Prior to that date, the representation status of pilots employed
by the former US Air was quite a bit more complicated.

II. THE PRE-MERGER CARRIERS
American Airlines Group, Inc. is an airline holding company headquartered in
Fort Worth, Texas. It was formed December 9, 2013, in the merger of AMR
Corporation, the parent company of American Airlines, and US Airways Group, the
parent company of US Airways. As of December 9, 2013, both American and US
Airways were mainline carriers with long histories as end products of previous mergers
and other transactions. Each of these mainline carriers had several hubs and multiple
domiciles, with networks that provided domestic and international service on both
narrow-body and wide-body aircraft. America West Holdings Corporation was an
Arizona-based company whose primary holding was America West Airlines. Prior to its
2005 merger with legacy US Airways (East”), America West (“West”) was a domestic
carrier operating primarily narrow-body aircraft focused on the Western United States,
with limited overseas operations such as service from Phoenix to Hawaii.
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American Airlines
The Aviation Corporation was formed in 1929 for the purpose of acquiring scores
of small regional airmail aviation companies to form a new national passenger carrier.
Some 82 such companies, including Charles Lindbergh’s Robertson Aircraft
Corporation of Missouri, were incorporated into American Airways, Inc. Other acquired
companies included Southern Air Transport in Texas, Southern Air Fast Express (SAFE)
in the western United States and Universal Aviation in the Midwest (which operated a
transcontinental air/rail route in 1929), Thompson Aeronautical Services (which
operated a Detroit-Cleveland route beginning in 1929), and Colonial Air Transport.
Renamed American Airlines, Inc. in 1934, the newly formed carrier operated a
transcontinental route network serving 72 cities, mostly in the Northeastern,
Midwestern, and Southwestern United States. American gained its first Caribbean
routes through a merger with Trans Caribbean Airways in 1970. It expanded those
routes throughout the early 70s and acquired other Caribbean routes in the 70’s and
80’s from Pan American, Eastern and Braniff. Over the next several decades, American
developed extensive international service to Europe, primarily through London’s
Heathrow. In 1984, American introduced the American Eagle system, a network of
regional airlines offering service from small communities to large cities through
connections to and from American Airlines hubs in Chicago, New York, Dallas-Fort
Worth, Los Angeles and Miami. In addition, American acquired and merged the assets
and routes of four other carriers: American/TCA (1974); American/AirCal (1987);
American/Reno Air (1999); and American/TWA (2001).
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TWA and American Airlines
In early 2001, TWA, then in bankruptcy, and American Airlines entered into an
agreement under which American purchased TWA’s assets. ALPA represented TWA’s
pilots, and the TWA/ALPA CBA required “the fair and equitable seniority integration of
employees in the event of a merger or acquisition of TWA.” The American/APA CBA
required pilots from an acquired carrier to be placed at the bottom of the American
seniority list. American offered to hire nearly all of TWA’s union-represented
employees, but only if the TWA ALPA-MEC waived their scope and successorship
provisions, including the seniority integration provision. Initially, ALPA refused to
agree to this request. After TWA moved to reject its CBA with ALPA under § 1113(c) of
the Bankruptcy Code, the ALPA MEC consented to the waiver, in exchange for various
alternative protections, and the deal closed on April 10, 2001.
As an inducement for the waiver, American agreed that it would use its
“reasonable best efforts” with APA to secure a fair and equitable process for seniority
integration of the American and TWA pilots. After several months of unsuccessful
negotiations between APA and the TWA-ALPA MEC, APA and American Airlines
executed an agreement on November 8, 2001. That agreement imposed the default
seniority integration formula on slightly more than half of the former TWA pilots, giving
them American seniority dates of April 10, 2001, while the remainder were placed
higher on the list. A few months later, the NMB found that American and TWA were
sufficiently integrated to be a single employer for collective bargaining purposes, with
APA as the representative.
As of December 2013, American Airlines was a mainline “legacy” airline, with an
extensive domestic and international route structure, numerous hubs, and a varied fleet
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of narrow-body, small wide-body and large wide-body aircraft. AMR Corporation, the
parent company of American Airlines and American Eagle Airlines was headquartered
at DFW International Airport.
US Airways
US Airways began in 1939 with All American Aviation Inc., a Pittsburgh-
headquartered airmail carrier serving the Ohio River valley. In 1949 the company
switched from airmail to passenger service and was renamed Allegheny Airlines. After
absorbing Lake Central Airlines in 1968 and Mohawk Airlines2 in 1972, Allegheny
developed into one of the largest mainline air carriers in the northeastern United States.
Following the passage of the 1978 Airline Deregulation Act, Allegheny changed its name
to US Air and expanded its route network into the southeastern United States.
By 2002, the Company was a wholly owned subsidiary of US Airways Group, Inc.,
along with three wholly owned regional air carriers: Allegheny Airlines, Piedmont
Airlines, and PSA. US Airways group completed the purchases of San Diego–based
Pacific Southwest Airlines (PSA) in 1988 and Winston-Salem–based Piedmont in 1989.
The PSA acquisition gave US Air hub presence on the West Coast, while the Piedmont
acquisition gave US Air additional East Coast hubs in Baltimore and Charlotte. In the
early 1990s, US Air expanded its service to Europe with wide-body service to London,
Paris and Frankfurt from its four primary US hubs.
In early 1997, US Air changed its name to US Airways and consolidated its
headquarters in Arlington, Virginia, near DCA, with Pittsburgh International Airport
serving as its maintenance and operations headquarters. It also invested in a new

2 The CAB’s approval of that merger was conditioned upon the Allegheny-Mohawk LLPs that
eventually came to govern this McCaskill-Bond ISL arbitration.
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terminal at its hub in Pittsburgh, purchased the remains of Trump Shuttle and, through
the end of the decade, expanded its flying to Europe. US Airways also began providing
regional jet and turbo-prop aircraft service between smaller communities and its hubs
by contracts with subsidiary airlines. The network of wholly owned subsidiaries and
affiliated regional carriers comprised US Airways Express, which flew with the US
Airways banner and logo and also used the Company’s code for listing their flights in
computerized reservations systems3. Via these code-sharing agreements, the US
Airways Express “participating affiliate carriers” fed additional passengers to hubs in the
US Airways system.
US Airways’ Mid-Atlantic Division
In the wake of the precipitous decline of airline business following 9/11, US
Airways and ALPA reached a Restructuring Agreement (“RA”) in late Summer 2002.
The RA lowered pilot costs, created employment opportunities, and extended the 1998
CBA to December 31, 2008. Among other new provisions were Scope Rule amendments
that, in return for preferential hiring of imminently furloughed pilots into vacancies at
the regional carriers, allowed increased utilization of regional subsidiaries and affiliates
(“US Air Express”) to fly greater numbers of small jets (“SJs”) to feed the Company’s
system.
In addition, the RA also provided for the creation of a new US Airways regional
carrier named Mid-Atlantic Airways (“MDA”). Under the terms of the RA, any pilots
who were furloughed from the Company and flew for MDA would not receive any
longevity credit for pay and benefit purposes under the 1998 Agreement, as amended by

3 By use of this “code-sharing,” connecting flights appeared to be online connections rather than
to interline connections and were displayed more favorably in reservations systems.
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the RA, for their MDA service time. The terms of the RA also made it clear that
furloughed US Airways pilots could bypass MDA vacancy offers without forfeiting their
recall rights under the amended and extended 1998 CBA. The 1998 Agreement as
amended by the RA and various letters of agreement, including Letter 84, infra, was
referenced by the Company and ALPA as the “Mainline Agreement.”
For a number of reasons, primarily the Company’s late-2002 bankruptcy, MDA
was brought into being as a new division within US Airways Group and not as the
originally contemplated wholly-owned subsidiary of the Company. The applicable
provision of “Letter 84”, dated December 13, 2002, reads as follows:
The Company may operate MDA as a separate division within mainline - US
Airways, Inc. with such operation limited to Large SJs. Wages, benefits and work
rules will match the AA Eagle pilots’ agreement, (except that the following
provisions of the Agreement, as amended by the Restructuring Agreement and
this Letter of Agreement, will apply: Sections 1, 19, 20, 21, 25, and 29, and the
Accelerated Arbitration of Selected Cases Letter of Agreement), beginning with
the AA Eagle wage rates in effect on January 1, 2003.4

In March of 2005, the Company announced the sale of the MDA aircraft to
Republic Airlines, but winding down the operation and transferring all the aircraft took
another two months. The last MDA flights operated on May 28, 2006 and, effective May
31, 2006, all remaining MDA pilots were furloughed. When the Company declined to
credit MDA pilots with longevity for their MDA Service, ALPA filed a grievance in May
2007. Grievance No. MEC 07-05-05 (Denial of Longevity Pay) was ultimately arbitrated
before a System Board of Adjustment chaired by Arbitrator Gerald Wallin.
By decision dated February 22, 2012, the System Board denied that grievance,
with a majority opinion reading, in parts most pertinent, as follows:

4 MDA flying time is thus at least conceptually differentiated from time flown by a furloughed
US Airways pilot in a job at one of the wholly-owned subsidiaries of US Airways or code-share
US Air Express subcontractor affiliate under the US Airways “Jets for Jobs” program.