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By SUSAN CAREY
The rocky process of integrating United Airlines and Continental Airlines took an important step forward Friday when the company and its two pilot groups agreed to the outlines of a single labor contract.
United Continental Holdings Inc., UAL +0.55% formed by a 2010 merger, and its various unions have been working for months to choose which unions will represent which employee groups and then striking separate collective-bargaining agreements as a prelude to negotiating combined labor deals.
Joint contracts are needed for the workers to agree to single seniority lists, which would allow the airline to mix and match crews and aircraft and more efficiently assign mechanics, ramp workers and customer-service agents. Without that flexibility, United Continental won't be able to achieve the cost savings and revenue benefits envisioned in the merger, which created the world's largest airline.
Typically, pilots go first. But the talks between United Continental and the Air Line Pilots Association union, which represents both subsidiaries' aviators, have rolled on for nearly two years, recently with federal mediation. In April, the pilots asked the National Mediation Board, the agency that oversees labor relations in the airline and railroad industries, to declare the talks at an impasse.
That decision could open the way for the pilots to go on strike, and in June the pilots voted to support a strike if allowed by the mediation board. But the board instead called for more negotiations. And this week, the parties reached an agreement on all the major economic provisions of a tentative agreement, according to a bulletin late Thursday from both pilot leaders. Terms weren't disclosed.
While some work remains to resolve smaller issues, the major push will involve putting the agreement into definitive contract terms and presenting it to the leadership councils of both ALPA branches for their separate approvals. Once that occurs, the accord would be put to a membership ratification vote.
Union leaders and negotiators "are as anxious as you are to end this roller-coaster ride of contract negotiations," said the bulletin from Capt. Jay Pierce, chairman of the Continental pilot group, and his United counterpart, Capt. Jay Heppner. "We will continue to work tirelessly to complete this process."
United's 5,600 active pilots are working under a labor agreement that dates back to when United Airlines was in bankruptcy-court protection from 2002 to 2006. The 4,400 Continental pilots made concessions outside of bankruptcy in the middle of that decade. Both groups want raises and other improved terms, a goal that took on new urgency when Delta Air Lines Inc. DAL +0.65% reached an industry-leading contract with its ALPA-represented pilots in May, after a scant two months of negotiations. The accord was ratified in late June.
Jeff Smisek, United Continental's chief executive, said in a memo to his pilots in May that the Delta pilot agreement "raises the market pay for commercial airline pilots, and effectively sets a new competitive standard for pilot pay." He pledged that the company would be responsive to the Delta terms "and will need to adjust our current contract proposal to be competitive."
Capt. Pierce, Continental's union chief, said in an interview Friday that the new Delta deal "had a significant and positive effect on our contract. It is fair to say [ours] is on par with Delta from a pay-rate perspective." He also said the Delta pilots' decision to let their airline contract more, larger regional jets to fly with its commuter affiliates in return for other benefits set a precedent in the industry. United pilots succeeded, in their provisional deal, "in protecting our pilots and recapturing jobs," Capt. Pierce said, "while providing the company flexibility to compete."
If all goes well, Capt. Pierce said, the new contract could be in place by the middle or end of this year's fourth quarter. But once the contract language is set in about six weeks, he said, the union branches will start negotiating a single seniority list. That list dictates which aircraft types the pilots fly and by definition their pay rates, which routes and schedules they can bid for, and when they can take vacation. ALPA has agreed to submit the matter to binding arbitration if the two groups can't agree on their own. Ostensibly, a single list could emerge by next spring, Capt. Pierce said.
Once that issue is resolved, United Continental will be able to assign a former United pilot to fly a Continental plane and vice versa, instead of keeping the pilots and aircraft segregated. Fred Abbott, United Continental's senior vice president for flight operations, on Friday called the agreement in principle "an important step forward for our company."
Chicago-based United Continental has been hit by various computer glitches in its integration process, which also is incurring hundreds of millions of dollars in one-time integration charges in its quarterly results. Its operational performance has suffered and consumer complaints have soared as the company works through the myriad changes required to harmonize the two subsidiaries. In the June quarter, United Continental's net income declined 37% from the prior-year quarter and its unit revenue gain was just 3%, well below the industry average.
On the earnings call, Mr. Smisek apologized for the airline's poor performance and called the quarter "a time of transition…We have much work left to do." Getting a deal with the pilots is a step in the right direction.
Corrections & Amplifications
United Continental Holdings said two pilot groups agreed in principle on a labor contract for the carrier's 10,000 active aviators. An earlier version of this article said the number was 11,000.
Write to Susan Carey at [email protected]
The rocky process of integrating United Airlines and Continental Airlines took an important step forward Friday when the company and its two pilot groups agreed to the outlines of a single labor contract.
United Continental Holdings Inc., UAL +0.55% formed by a 2010 merger, and its various unions have been working for months to choose which unions will represent which employee groups and then striking separate collective-bargaining agreements as a prelude to negotiating combined labor deals.
Joint contracts are needed for the workers to agree to single seniority lists, which would allow the airline to mix and match crews and aircraft and more efficiently assign mechanics, ramp workers and customer-service agents. Without that flexibility, United Continental won't be able to achieve the cost savings and revenue benefits envisioned in the merger, which created the world's largest airline.
Typically, pilots go first. But the talks between United Continental and the Air Line Pilots Association union, which represents both subsidiaries' aviators, have rolled on for nearly two years, recently with federal mediation. In April, the pilots asked the National Mediation Board, the agency that oversees labor relations in the airline and railroad industries, to declare the talks at an impasse.
That decision could open the way for the pilots to go on strike, and in June the pilots voted to support a strike if allowed by the mediation board. But the board instead called for more negotiations. And this week, the parties reached an agreement on all the major economic provisions of a tentative agreement, according to a bulletin late Thursday from both pilot leaders. Terms weren't disclosed.
While some work remains to resolve smaller issues, the major push will involve putting the agreement into definitive contract terms and presenting it to the leadership councils of both ALPA branches for their separate approvals. Once that occurs, the accord would be put to a membership ratification vote.
Union leaders and negotiators "are as anxious as you are to end this roller-coaster ride of contract negotiations," said the bulletin from Capt. Jay Pierce, chairman of the Continental pilot group, and his United counterpart, Capt. Jay Heppner. "We will continue to work tirelessly to complete this process."
United's 5,600 active pilots are working under a labor agreement that dates back to when United Airlines was in bankruptcy-court protection from 2002 to 2006. The 4,400 Continental pilots made concessions outside of bankruptcy in the middle of that decade. Both groups want raises and other improved terms, a goal that took on new urgency when Delta Air Lines Inc. DAL +0.65% reached an industry-leading contract with its ALPA-represented pilots in May, after a scant two months of negotiations. The accord was ratified in late June.
Jeff Smisek, United Continental's chief executive, said in a memo to his pilots in May that the Delta pilot agreement "raises the market pay for commercial airline pilots, and effectively sets a new competitive standard for pilot pay." He pledged that the company would be responsive to the Delta terms "and will need to adjust our current contract proposal to be competitive."
Capt. Pierce, Continental's union chief, said in an interview Friday that the new Delta deal "had a significant and positive effect on our contract. It is fair to say [ours] is on par with Delta from a pay-rate perspective." He also said the Delta pilots' decision to let their airline contract more, larger regional jets to fly with its commuter affiliates in return for other benefits set a precedent in the industry. United pilots succeeded, in their provisional deal, "in protecting our pilots and recapturing jobs," Capt. Pierce said, "while providing the company flexibility to compete."
If all goes well, Capt. Pierce said, the new contract could be in place by the middle or end of this year's fourth quarter. But once the contract language is set in about six weeks, he said, the union branches will start negotiating a single seniority list. That list dictates which aircraft types the pilots fly and by definition their pay rates, which routes and schedules they can bid for, and when they can take vacation. ALPA has agreed to submit the matter to binding arbitration if the two groups can't agree on their own. Ostensibly, a single list could emerge by next spring, Capt. Pierce said.
Once that issue is resolved, United Continental will be able to assign a former United pilot to fly a Continental plane and vice versa, instead of keeping the pilots and aircraft segregated. Fred Abbott, United Continental's senior vice president for flight operations, on Friday called the agreement in principle "an important step forward for our company."
Chicago-based United Continental has been hit by various computer glitches in its integration process, which also is incurring hundreds of millions of dollars in one-time integration charges in its quarterly results. Its operational performance has suffered and consumer complaints have soared as the company works through the myriad changes required to harmonize the two subsidiaries. In the June quarter, United Continental's net income declined 37% from the prior-year quarter and its unit revenue gain was just 3%, well below the industry average.
On the earnings call, Mr. Smisek apologized for the airline's poor performance and called the quarter "a time of transition…We have much work left to do." Getting a deal with the pilots is a step in the right direction.
Corrections & Amplifications
United Continental Holdings said two pilot groups agreed in principle on a labor contract for the carrier's 10,000 active aviators. An earlier version of this article said the number was 11,000.
Write to Susan Carey at [email protected]
