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The JCBA and Seniority List Integration Process

By Rob Hebinck, DEN C33 F/O Representative

From a historical perspective, the UAL pilots are (once again) in bold, new, and uncharted territory in the airline industry- the merger of two large airlines in the industry’s post-“lost decade.” For decades, the forces of regulation, unionized labor groups, and government anti-trust concerns (to name a few) blocked what many analysts considered the inevitable evolutionary fate of the airline industry- consolidation into a few large mega-carriers. With the tide of globalization rising steadily, the consolidation game of mega-merger musical chairs began in earnest. We first saw the US Air with AWA merger for fitness, and then the DAL with NWA and the UAL with CAL mergers for domination.

For most of the mergers of the past, the integration of the pilots at merging airlines involved a two step process in which the pilot groups first integrated their seniority lists (usually by arbitration), and then negotiated a Joint Collective Bargaining Agreement (JCBA). This two-step model worked with varying success until the first real mega-merger occurred in 2005 with US Air + AWA. In that case, one side found the arbitrated Integrated Seniority List (ISL) so distasteful that it blocked the negotiation of a JCBA as a means of overturning the ISL. The US Air contingent held the JCBA “hostage” in order to influence (in this case overturn) the ISL decision. The arbitrator rendered an ISL decision in May 2007, and the two pilot groups never achieved a JCBA. In April 2008, the pilot groups (voting together under NMB rules) rejected ALPA and voted for representation by USAPA. Now more than five years later, that airline is not fully merged, and both pilot groups continue to work under two of the worse bankruptcy contracts in the industry.

In the face of this debacle, interested parties in the industry- not just pilots, but senior management, analysts, and financiers- reexamined the role of pilots in the merger process, and tried to develop a better model. First, most realized that pilots should receive a substantial share of the merger benefits to recognize the key role they play in the merger process. Second (and important to this discussion), ALPA re-examined the traditional SLI-then-JCBA model with the intent to avoid another US Air debacle. Many believed that a “dual path” approach to the SLI and JCBA processes would facilitate the best result- i.e. a new contract that recognizes the critical role that pilots play in a merger, and an ISL that both pilot groups accept because they accepted the fairness of the SLI process. This idea was not meant to intermingle the two issues during a merger, but rather by dual tracking the SLI and JCBA process neither could be used as leverage against or to influence the other. Specifically, to avoid what occurred in the past, one pilot group could not hold a JCBA as hostage against (in their minds) an undesirable ISL.

As mega-merger mania reached a feverish pitch in late 2007, these issues were foremost in the minds of all the airline industry’s principle decision makers. Seeking the advantage of first-mover, DAL and NWA agreed to merge in early 2008. The corporations, however, would not proceed until they ensured the support of their pilot groups and their commitment to a smooth integration process so that the merged airline could take immediate advantage of merger synergies and assure Wall Street that the merger would be successful. To achieve this, the corporations withheld announcing a merger while the DAL and NWA pilots and company negotiators engaged in months of negotiations to produce a consensual “package deal” that included both an ISL and JCBA. Ultimately, however, this effort failed over the ISL issue. The two pilot groups could not achieve a consensual list.

At that point, the DAL pilots made the decision that the merger was too important to fail, and decided to support and facilitate the merger under certain conditions. Namely, the DAL pilots and DAL Corporation agreed to a significant contractual improvement for the DAL pilots and an equity stake in the new company in exchange for their support of the merger (LOA 19). The pilots agreed to facilitate the merger by waiving scope clauses that would allow extensive code-sharing between the two companies after merger announcement date (MAD) and during the merger transition process. The DAL pilots also assured the company that they would continue to work with the NWA pilots to produce a truly merged pilot group, and later kept to that commitment by signing a unique “Process Agreement” with the NWA pilots that ensured 1) that a JCBA would be promptly negotiated and 2) only after it was ratified would the SLI process proceed to an expedited arbitration (assuming the pilot groups were not successful in negotiating a consensual list). With LOA 19 in hand, DAL and NWA announced their merger in April 2008. Ultimately, the DAL CBA, along with the improvements of LOA 19, and a few changes agreed to with the NWA pilots, became the merged pilot group’s JCBA, and both pilot groups ratified that agreement in August 2008. The two pilot groups then again tried to negotiate a merged SLI, again failed, and the arbitration panel rendered its decision in December 2008 pursuant to the terms of the Process Agreement.

In the wake of these two mergers- one viewed as successful and the other not- ALPA again rewrote its Merger and Fragmentation Policy language (MFP) in 2009. The 2009 version contains some important differences worth noting, even for those who find a policy language discussion morosely boring. In some instances, policy language is very important, and this is one of those cases.

In general, the current language spends more effort discussing the principles that facilitate a successful merger. For example, the policy rests on a number of premises, including:

A successful merger requires the full support of ALPA MEC and Local Council leadership for its implementation.

ALPA members will be kept informed and up to date through responsible communications, and an environment developed to foster unity and strength in negotiating the JCBA.

Unity of purpose, based on close cooperation among Joint Negotiating Committee (JNC) members and between the participating MECs, is essential to bringing about a work force that will obtain benefit from the merger through successful negotiations.

The new language also strongly encourages a JCBA-then-SLI process when it states:

Negotiating sessions should be scheduled consistent with the high priority goal of concluding the JCBA prior to the date for conclusion of the seniority list integration process.

The policy intends to achieve a JCBA first that pilots will ratify and, assuming significant contractual improvements, ease any discomfort from or fallout after the ISL process. Supposedly, this puts the horse back in front of the cart, and prevents one party from holding the JCBA hostage against an unsatisfactory ISL. To help guarantee JCBA success, the new MFP language includes a dispute resolution process in case the pilot groups reach an impasse during JCBA negotiations. That process includes a number of mediation steps, but if those do not succeed, the Policy ultimately prescribes that ALPA’s “Executive Council may direct additional action to be taken with respect to negotiations.”

In summary, ALPA’s Merger and Fragmentation Policy emphasizes the importance of responsible leadership by the MECs, encourages a JCBA-first then SLI-second process, and provides the Executive Council with authority to resolve a bargaining impasse between the two MEC’s negotiators. In May 2010, the UAL and CAL pilots ventured into the new realm of mega-mergers with this new policy language to guide them. The two parties quickly agreed to a “Protocol Agreement” (much like DAL and NWA’s “Process Agreement”) that essentially reinforced the JCBA-first model by providing that the JCBA must be achieved prior to even beginning the SLI process. The two JNCs negotiated both an Expense LOA and a “Transition and Process Agreement”, and alacriously agreed to every section of a JCBA to proposal. Every section, that is, except one of critical importance- the pilots’ pay rates.

One circumstance not specifically addressed in the new ALPA Merger Policy language is the unintended consequences of the JCBA-first model. Specifically, this model creates the temptation for those overseeing the JCBA to insert parameters that they believe may be useful later in the SLI process. The decision makers might, for example, favor some parameter in the JCBA because they believe it will help sustain an argument presented in the event of SLI arbitration. This temptation is particularly keen with regard to different pay rates for different aircraft and arguments or conclusions about the proper categorization of aircraft types for status and category ratios based upon those pay rates. Despite not addressing this issue in their Process Agreement, the DAL and NWA pilots found it advisable to “carve out” JCBA pay rate issues from the SLI process, and did so with a separate agreement. In this short and to the point side-letter, the two sides agreed that any discussions, proposals, or agreements regarding pay rates in the JCBA negotiations (including the JCBA itself) cannot be used in the SLI process to argue that one aircraft is the equivalent of another. The technical language states:

The Delta and Northwest MECs and their respective representatives agree that any discussions, written or oral proposals or agreements, or other communications of any kind (including any documents, exhibits and data) between or among Delta, ALPA, the Delta MEC and the NWA MEC and their representatives, employees or counsel regarding pay rates on any aircraft type shall not be used nor in any way referred to either directly or indirectly in any seniority list integration negotiation, mediation or arbitration proceeding between the pilot groups for the purpose of attempting to demonstrate that one or more aircraft type(s) should be considered or not considered the substantial equivalent of any other aircraft type(s).

This agreement facilitated an expeditious JCBA negotiation and satisfied any concerns over SLI influences.

With the above historical facts in hand, it is time to examine where the current UAL + CAL mega-merger stands in the JCBA and SLI process.

During the current fast paced negotiations, the JNC failed to reach a consensus on a pay rate proposal. In many respects, this roadblock is a culture issue between the two pilot groups. The UAL Pilots traditionally worked under pay-rates that were based upon a “pay to productivity” model. This tradition dates back decades in the airline industry, and originates from a 1934 decision regarding pilot pay rates under the old Civil Aviation Board (CAB) jurisdiction. This article does not intend to argue the merits of this system or others, but merely to note our contract history, and it is true that pay to productivity is the industry’s as well as UAL’s tradition. The UAL pilots often relate pay banding with their 2003 concessionary contract, and most do not regard pay banding as a contractual improvement. When the UAL MEC surveyed its pilots in 2008 in anticipation of section 6 negotiations (i.e. before the merger announcement), most pilots preferred that we un-band the pay rates in the next contract. Some local surveys (such as Denver C33’s survey) asked the same question and received a similar response. The UAL negotiating process has a clear procedure- based upon these surveys, local council resolutions, as well as other feedback and insight, the UAL MEC gives direction to its negotiating committee. The MEC gives direction through resolutions, and these Negotiating Committee (NC) resolutions are often “off the record” for obvious reasons. Regarding the current contract, the MEC received pilot guidance on dozens of issues (e.g. change the egregious 2.8 hours per day for vacation language, change the reassignment rules, etc.), and the Negotiating Committee resolutions include guidance on each of these issues. One of these many resolutions includes our pilots’ desire, as stated in the extensive surveys, to un-band the banded pay rates. This is the guidance from our pilots.

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