What is Preventing American’s Mechanics and Rampers From Having a Joint Contract

American, Labor Relations

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.

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17 comments on “What is Preventing American’s Mechanics and Rampers From Having a Joint Contract

  1. That list of demands (with way too many “not open for discussion) is not a good look, and I consider myself to be relatively pro-union. It’s just not realistic to demand that your employer provide the very-best wages, and benefits, and retirement plan, and be prevented from doing anything at all to keep labor costs down.

  2. “John says he ‘absolutely totally believes [American] to be our enemy’…”

    And Delta gets slammed for encouraging its employees to remain union-free so that it can keep this kind of animus out of its company?

  3. The second the “Association” traded scope (working each other’s metal) for cash, they lost their leverage.

    Samuelson for his part seems to not understand the nuances of the RLA compared to other labor law.

    Should be an interesting summer…

  4. Cranky,
    1. Has there ever been a time where two unions were representing the same group?
    2. How have mechanics jobs evolved over the past decade?
    3. Do either of these two unions represent the mechanics in Brazil (or elsewhere)?
    4. Can the union members actually go on strike?

    1. Evil Bob – 1. I’m not sure specifically, but I would imagine it has happened 2. I don’t know the answer to that 3. No 4. Only if the NMB releases them to do so – American is so big now that I can’t imagine a world where they would be allowed to do it – there would likely be a Presidential Emergency Board and it wouldn’t be allowed

  5. You have several conflicting principles that will not easily be resolved and will likely only be broken via a major work action or company restructuring.
    1. some unions are fighting for future jobs while the company is trying to eliminate their overstaffed/inefficient model but protecting current jobs.
    2. some unions and their workers want to preserve a benefits-rich environment while others want higher base compensation;
    3. AA still bears marks of previous mergers; attempting to finalize mergers via labor negotiations is certain to alienate a certain percentage of the workforce.
    4. AA’s compensation is being pulled by other airlines since AA is neither industry-leading in unit revenues or costs; AA employees will always be looking at other airlines and, in some cases, other unionized non-airline workgroups that are better compensated – even as AA touts its position as the world’s largest airline and its leadership talks about how profitable the company will be in the future.

    Arbitration and mediation can’t resolve these basic philosophical differences. The RLA does not provide any “hard” deadline to reach closure so many of the issues will remain as conflicts or will be resolve only in crisis.

  6. I have never understood the desire to be industry leading in pay and benefits when AA is not industry leading in margins

  7. Hey Cranky,
    Remember when you parroted Paker’s and Kirby’s contention that “the merger will solve both companies’ labor issues” when they were wresting control of AA for previous management? I do.

      1. I think there’s 3 fundamental disconnects at play:

        1) Union leadership desires vs union member desires – the union leadership between the IAM and TWU doesn’t have a clear set of needs in the contract. They want everything and that just is not plausible (see PanAm for what will happen). In addition, they didn’t show their membership what AA offered or what they countered with until AA pressured them by releasing the actual proposed contract first. My guess is that they didn’t want the union members pushing for a vote and they are still scared of it.

        2) The union repeatedly states that AA makes enough money. That just is not true – AA has lower margins than all legacy carriers. And labor is one of the most significant parts of the costs. AA has to be able to outsource more to be able to compete with a non unionized Delta or United (which already had its own battle with its unions).

        3) American leadership seems to have given up too much upfront. They gave mid contract wage increases, improved holiday pay, and other things, but IMO should have held off to use this as bargaining chips. I guess they might say that it makes AA look better vs the unions but unless AA is trying to get union membership to rout the leadership at the unions and force a vote from inside, its not really effective.

        I get that unions as organizations want to preserve union jobs so that they can keep their dues up and keep organized labor relevant, but in the next 25 years, automation will make a compelling argument to reduce labor costs and offshore more work.

        1. AA’s financial struggles aren’t because they have higher costs than DL and UA, it’s because they have lower unit revenues. DL has long been perceived as a premium carrier, and UA has been slowly moving that direction since their leadership change in 2015. Meanwhile AA seems to actively try to harm their brand. They have the worst on-time performance, they’ve pushed the densest coach configurations, they’ve completely stripped IFE, and their staff at every level seems so apathetic. All of this leads to people refusing to pay any sort of premium to fly AA over NK and F9, where some are willing to pay more for DL or UA.

  8. One of the big issues for all of us is the high cost of healthcare (not merely health insurance, which simply reflects the underlying costs). Healthcare in the U.S. costs about 40% more than it does in virtually every other industrialized country. It takes up about 18% of our GDP versus about 11% elsewhere. These high costs are a millstone to the economy and are much of the reason why employee pay hasn’t gone up as much as some would like.

    1. If only there were some sort of solution to deal with the exorbitant cost of healthcare in the US…

    2. Exactly! The fact that Americans have to rely on their employer for health insurance essentially entraps people in their positions and limits opportunity.

  9. I just think it is time for AA management to be removed. Ignoring this problem, the airline is just a mess. Their operations are a mess.

    Due to location and status I had only flown AA for several years but my last 2 flights haven been on Delta despite requiring a connect. More pleasant people, live tv, very nice lounges and better aircraft condition.

    AA inability to be honest on delays (no delay despite past boarding time), and constant excuse making finally got to me. When you have to hear GAs complain no one tells them anything timely you have to wonder WTF is going on. They need significant leadership changes.

  10. So these work groups want ‘industry leading’ pay and benefits? To get that, they start a slowdown, which will only send the company into even more of a tailspin financially, operationally, and destroy public perception. It’s a vicious cycle, with constantly diminishing margins. This means the company isn’t ‘industry leading’ by any metric (let’s put aside that they haven’t really been at all since Parker took over). So where are these pay and benefits going to come from if AA cannot compete with and excel among its industry peers?

    I would hope they are smart enough to see the long-term picture, but something tells me they are not…

  11. Clearly American is trying to shove a crap contract down their throats and when they should strike and shut them down.

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