By Mitchell Schnurman
mschnurman@ star-telegram.com
Little things say a lot, especially about American Airlines' bankruptcy.
It wasn't enough that the Allied Pilots Association would reject a contract offer with job security, pension protection, annual raises and a signing bonus. Negotiators also wanted management to eat some humble pie.
After leaving for lunch on a Friday in mid-November, they didn't bother to return to the negotiating table -- and notified their counterparts with a text message. A few days later, after passing on the contract, they said they'd take a much-needed break for the week of Thanksgiving.
Well, no need to rush the talks now. While the union rested, American executives worked through the holiday and weekend, so parent company AMR could file for Chapter 11 on Tuesday.
The union snubs probably won't be mentioned in the legal papers, but they're telling: American's future was dangling by a thread, banking on an 11th-hour contract with the pilots union, and negotiators were still playing petty games.
A couple of times in the past two months, a deal appeared to be close. Once, it got sidetracked after a new demand that traveling pilots be guaranteed hotel rooms away from ice machines. Another time, they insisted that a pilot base remain open in San Francisco.
Hey, you can ask for anything in a negotiation, but those were scary signs. Either the union didn't appreciate the urgency of the moment or its internal politics couldn't be tamed. At the end of the day, the pilots union fatally overplayed its hand.
It sent a message that there wasn't a labor deal to be made. After five years of negotiations, the AMR board of directors had to conclude that time wasn't the problem.
Six months from now, they could still be talking about hotel upgrades, and American would be a lot closer to broke.Most other work groups at American didn't do any better in labor negotiations. The flight attendants have been stuck about three-quarters of the way through a new contract, and mechanics overwhelmingly rejected a tentative agreement last year.
This is the most baffling question in American's saga: Why did unions continually reject contracts that offered an immediate upside and were vastly superior to what they're likely to get in bankruptcy?
Common sense simply didn't prevail.
As Gordon Bethune, former CEO of Continental Airlines, told CNBC: "This is the inevitability of an irrational workforce."
Many workers at American remain angry about the concessions they made in 2003, believing that they gave enough already. Others complain about bonuses paid to senior executives, no matter what the explanation.
But American has lost more than $12 billion in the past decade, and that's not sustainable. It has an $800 million disadvantage on labor costs, and there was no finessing that albatross any longer.
Each of American's legacy competitors has been through Chapter 11, and they're profitable now. But before they reorganized, many airline unions forced their companies into bankruptcy, despite the brutal changes it would bring.
Maybe that's the nature of the beast. Union leaders often reach a breakthrough, but they're unable to bring along their negotiating boards or the rank and file.
In short, it's politics. The same problem has surfaced repeatedly with Congress, most recently with attempts to cut the deficit. Somewhere along the line, the issues get personal and positions harden.
Whatever the reason, union leaders at American have failed their members, in the same way that CEO Gerard Arpey failed his shareholders. This day could have been avoided -- or at least delayed -- if new contracts had been adopted quickly and the global economy had cooperated.
Tom Horton, promoted to chairman and CEO on Tuesday, said it would be business as usual for American customers. That won't be the case for American employees.
Thousands will lose their jobs, if other airline bankruptcies are a guide. The court and creditors will demand that American get competitive in every part of its business, and that will affect pay and benefits for everyone. A big share of jobs in maintenance and fleet service could end up being outsourced.
Facilities will be closed and routes dropped, and some communities will suffer. Eventually, American will be a smaller but perhaps stronger airline.
For people on the front lines, it will be a couple of painful years. In a letter to employees, Horton said that American's labor cost gap was "a situation that had to change, one way or another."
It's going to be the hard way.
Mitchell Schnurman's column appears Sundays and Wednesdays.817-390-7821Twitter @mitchschnurman
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