American to pay pilots' union millions
By David Koenig, AP Business Writer | April 16, 2004
FORT WORTH, Texas -- An arbitrator has ordered American Airlines to pay $23.2 million to its pilots' union in a dispute over shifting flights to commuter subsidiaries, another setback to the world's largest carrier, which is trying to recover from three years of mounting losses.
American's pilots have long tried to block the company's efforts to save money by adding flights on its regional commuter subsidiaries, which use lower-paid pilots.
The financial impact of the decision was unclear, however. A spokesman for the Allied Pilots Association said the union was considering ways of settling the case without cash changing hands.
The ruling is the latest to result from a series of confrontations between American and its unions. A federal judge ordered the pilots' union to pay a $45.5 million penalty to the airline after an illegal sickout in 1999.
In the current case, an arbitrator ruled that American had improperly subcontracted regional flights to two commuter carriers that it acquired with the purchase of bankrupt Trans World Airlines in 2001.
The Allied Pilots Association complained that Fort Worth-based American was trying to circumvent a provision in a 1997 labor contract designed to protects its members' jobs. The union said the provision let the company use commuter airlines to feed passengers to American but not as a substitute for American flights that use APA pilots.
"This is significant -- it means jobs," said Gregg Overman, a spokesman for the pilots union. "There's a real interest that the commuter side doesn't grow at the expense of the mainline."
Overman said union leaders were discussing what form the settlement -- slightly more than $2,200 for each of the union's 10,500 active members -- would take.
"I don't think we're going to take it in cash," he said. The union may instead ask American to make up the difference by relaxing contract restrictions imposed last year, when the company cut pay and benefits sharply to avoid bankruptcy.
American on Friday defended its actions but said it would not appeal the arbitrator's ruling.
"We made business decisions that we believed fully complied with (the contract) at a critical time in our history," said Sonja Whitemon, an airline spokeswoman.
Whitemon said the issue was resolved in negotiations last year, when American's unions agreed to huge wage and benefit concessions rather than force the carrier into bankruptcy. She said the airline doesn't believe that a cash award is warranted but would try to "improve our relationship with the APA."
The dispute between American and its pilots centered on the way the company labeled flights operated by two regional carriers, Trans States Airlines and Chautauqua Airlines, that flew from TWA's old hub in St. Louis.
Instead of flying under American's code, the two began using a different code in 2002, which meant those flights didn't count toward the limited number of flights that American could operate on its American Eagle commuter airline.
The union said the maneuver let American boost the number of flights on its commuter carriers, which reduced the number of American flights and led to additional pilot layoffs at the big airline.
American stopped the practice last year.
The arbitrator, Stephen B. Goldberg, also agreed with a separate union complaint that American falsely inflated the number of commuter flights after the terror attacks of Sept. 11, 2001. The union said American added commuter flights because it knew that the number of those flights would be frozen when the company began laying off American Airlines pilots in October 2001.
Goldberg ruled that the airline owed pilots the amount of money they would have been paid for the flying that was improperly diverted to the commuter carriers.
The arbitrator reached his findings in October but ordered both sides to keep the ruling confidential until he determined American's penalty, which he did Thursday. The award was reported in the Fort Worth Star-Telegram.
Shares of American's parent, AMR Corp., fell 2 cents, to close at $12.38, Friday on the New York Stock Exchange.
