American Airlines' Bankruptcy as Union Negotiating Strategy

While there’s lots of noise today about American Airlines finally filing for bankruptcy, as an extension of its 2009 turnaround plan (oh, and its $30 BILLION in debt), there’s a lot less noise about how Chapter 11 is also a strategy for its ongoing union negotiations.

American has an extremely heavy payroll load, essentially. It keeps more than 22 maintenance employees per plane, for instance; compare that to Delta’s 12 or JetBlue’s 3.4 or Northwest’s .8. (Eek, .8?) And American’s maintenance is significantly less outsourced than other airlines. American actually employs nearly 15,000 maintenance people; JetBlue employs 471.

As of a few months back, American Airlines still had more than 800 pilots out on furlough; now it’s about 650. Another 800+ have been recalled from furlough and have chosen to defer. (You can only defer your recall once!) American has between 8000 and 10,000 pilots, depending on how you count the furloughed, those not recalled and those on military leave (fascinatingly, a few hundred pilots).

So, naturally, everyone looks to the employee costs for a solution to bankruptcy.

This is when everyone flashbacks to 2003 — when every other major airline declared bankruptcy or consolidated in the post-9/11 period. American threatened bankruptcy and the unions, including attendants, agreed to “six-year pay cuts of between 16 and 23 percent, along with 6,900 layoffs.” That’s a massive concession for a union to make — the job of a union is to protect jobs!

But even as they were voting on that, the airline was secretly “setting aside $41 million for a special executive pension plan in a trust that would be protected from creditors in the event of bankruptcy.” Everyone rightly flipped out, and the flight attendants’ union told them to stuff it, rescinding their offer of “$10 billion in wage concessions over six years.”

Unions were willing to cooperate and they got duped. Why would they stand for it again? Flight attendants and mechanics have been working without a contract since 2008. Meanwhile, in 2010, the top two execs of American Airlines made a combined $9 million.