I went through the short but tortured history of American’s negotiations with its mechanics and rampers yesterday, so today let’s get into exactly what is holding things back. In short… everything.

Ok, it’s not really everything, but there are big issues that are preventing a contract from being agreed upon. Identifying those issues is not easy. After all, it’s a large diverse workforce with different factions caring about different things. (Not that this is an uncommon issue in many negotiations, but having two unions involved certainly makes things more difficult.)

After speaking with TWU President John Samuelsen, it seems he is most focused on scope (keeping jobs in the US with American employees). But others seem more concerned about benefits. Looking broadly within The Association — which you’ll recall from yesterday is the joint negotiating arm powered by both the pre-merger US Airways IAM union and the pre-merger American TWU union — there seems to be a variety of things that matter.

While the airline has been more reserved in how it speaks about the negotiations — it effectively just says it’s offering an industry-leading contract and hopes to have it settled — the unions have been more animated. John effectively likened this fight to a “battle for working Americans.” He says it goes beyond just American’s workforce and is really a fight against corporate greed by a blue collar workforce that makes the American (the country, not the airline) economy run.

That sort of lofty rhetoric may whip some into a frenzy, but it’s really just indicative of a negotiation gone wrong… and it’s not helpful. But it doesn’t stop there. John says he “absolutely totally believes [American] to be our enemy,” and he uses CEO Doug Parker’s words against the airline. If American is never going to lose money again, as Doug claimed in 2017, then why can’t it afford to dramatically increase wages/benefits and guarantee jobs? After all, John says they were told by Doug that they would get an industry-leading contract. And he says what American is putting out there isn’t industry-leading.

That last part is of serious concern. The two sides can’t seem to agree on what the other side’s proposal will even mean in practice. American says it’s industry-leading. The unions say it’s not. Those are broad strokes, but let’s look specifically at one issue with the mechanics to show exactly what I’m talking about.

Line Maintenance Jobs in South America

As mentioned, scope seems to be the main issue for John and the TWU leadership, and it should be important. Job security is always top of mind for union members. In a moment of levity, John even noted that he believes “if [American] back off their demands on scope everything else would fall into place.” You can read the scope proposals from both sides here.

American says it will guarantee a job to anyone who has one on the date of signing (and in the same location), but the unions want more protection for the jobs themselves, not just people in them currently. From American’s perspective, it doesn’t currently seem particularly interested in outsourcing significantly more aircraft maintenance work, but it is looking to move some work outside the US. This has turned into a major point of contention.

For example, American wants to do more line maintenance work in Brazil while airplanes are sitting there on long layovers between flights. (Deep Latin America is unique in that flights both ways need to operate overnight to be commercially viable, so planes sit on the ground for a long time.) American already has a maintenance base there, and the work is done by American employees (so, not outsourcing), but these employees aren’t union members in the US. In its proposal, American says it will limit line maintenance work done outside the US to no more than 12 percent of total line maintenance hours. The Association proposes a 7 percent cap. (Remember, this isn’t all new work. American already does some work off-shore and that would fall under this cap as well.)

You’d think this would be something that could be resolved. It’s not that far off, right? But it’s hard to understand how to fix it when each side interprets the result in radically different ways. American seems to indicate that this wouldn’t have a significant impact on jobs in the US. The TWU says otherwise.

John says that American’s proposal will result in 4,000 aircraft mechanic jobs leaving the US. As I understand it, American has about 12,500 mechanics represented by The Association today, so I can’t fathom how a third of those jobs will end up being lost through American’s proposal considering the protections that are in place. These protections may be weaker than the unions like (aren’t they always?), but the intention can’t be to make them THAT weak. There is a disconnect here somewhere.

If there is math that supports the 4,000 job loss assertion, then this should be an easy fix. American doesn’t seem to be trying to outsource a third of its mechanic jobs, and it should ensure that the language is there to back that up… if that truly isn’t its intention. But if that were the issue, this probably would have been done.

At the same time, the unions need to make sure they are accurately representing what the contract means, and not just trying to scare members into a fight.

Beyond Scope

Scope is John’s big concern, but there are others. I never heard back from the IAM (legacy US Airways) despite multiple attempts, but I would bet they likely have more concerns about preserving the superior medical and retirement plans their members enjoy today than scope, which is already less restrictive in the IAM contract.

Back in March, The Association posted on its website a list of the big issues that were outstanding. Here is that image:

Since this was from March, it’s not completely accurate. For example, the wages piece has been revised upward by the company to take into account the new Southwest agreement. But you get the gist.

While John says he “fully understands we can’t get everything we want,” this proposal certainly is asking for it. And the public communication makes it sound like there is little room to negotiate.

For example, also in March, The Association posted this:

The Association made it clear that we were willing to negotiate on every aspect of the contract, but we were not going to negotiate concessions on healthcare, Scope, retirement and other areas that are LESS THAN WHAT WE ARE STARTING WITH – WHAT WE HAVE TODAY!

There appears to be a baseline requirement that in every single area, The Association will settle for nothing less than the best benefit in each category between the two contracts. (Or in some cases, it has to be industry-leading, above either of the current contracts.) Anything that doesn’t meet that standard is considered a concession. If the private stance differs from the public one, then fine. (And John’s admission this if scope is resolved the rest will follow would indicate that may be the case.) But this isn’t the kind of stance that’s going to result in an agreement.

Just how far apart are they? Well, outside of scope which we’ve already discussed, here’s what I believe American is thinking.

• My understanding is that American is offering to match Southwest rates, but it isn’t offering industry-leading profit-sharing since it doesn’t have that for anyone in the company as a philsophy. And while increases during the contract are part of the deal, I imagine an annual reset based on competition isn’t in the cards.
• Like every other company, American wants to get away from defined benefit pensions and move to defined contributions. I can’t imagine a world where American agrees to continue a defined benefit plan on the legacy US Airways side (the only one that has it) and extend it to the whole Association workforce. Instead, it’ll offer to contribute more to a defined contribution plan.
• American doesn’t want to offer the rich US Airways medical plans. It wants them to take the medical plans that all the other groups at American have.
• Regarding retiree medical benefits, I think it’s safe to assume American doesn’t want to pay for that “bridge,” but I expect this is something that can be resolved if everything else is agreed upon.

A Way Forward?

The Association has said repeatedly that the company is refusing to negotiate, but I’ve heard the same from people on the other side as well. So far, National Mediation Board-aided negotiations haven’t produced any results, and no further talks are scheduled. So we have an impasse.

Something like arbitration (binding or not) would help, but that requires both sides to agree on it. Another option might be to just let the membership vote. This doesn’t usually go well for the company if the union’s negotiating committee doesn’t endorse a deal, but it might at least help get a better sense of what it is that needs to change to get the membership behind a plan. That being said, I haven’t seen any indication that any of this is likely.

In the meantime, nothing is happening. All the scheduled mediation sessions are done, and the rhetoric is getting uglier. Will that force management to cave? It’s hard to imagine. Will labor give in? The increasing rhetoric — let alone the alleged slowdown — says otherwise. Getting to a contract requires a collaborative approach, and there doesn’t appear to be any movement toward making that happen.