SWAPA/FAPA Negotiations - for the record
08-14-2009, 01:24 PM
#1
Don't want to participate
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Joined APC: Jul 2005
Position: 737 Left Seat
Posts: 1,016
SWAPA/FAPA Negotiations - for the record
No further comment, there has been a lot of speculation, but here is what happened from the viewpoint of SWAPA, and what was offered in an abbreviated negotiations timeframe:
STRAIGHT TALK FROM YOUR PRESIDENT
There are not many weeks like this one at SWAPA. It actually began last weekend when we had discussions with the Company about the "labor contingency" provision the Company was going to place in their binding proposal to acquire Frontier. Apparently Southwest advisors came to the same conclusion that our legal team did that the labor contingency could prove to be a stumbling block moving forward. We were advised that at Gary Kelly's direction that the contingency would remain in the bid in spite of recommendations to remove it. That set the stage for the week.
On Monday the Company made public their binding proposal. The $170 million bid was substantially higher than the placeholder "bid" of $113.6 million submitted previously. While the $170m bid looks significantly higher, it included $40m to reject the leases of 11 Frontier aircraft. On a net basis the SWA bid increased the payout to the unsecured creditors from .087 cents on the dollar to .12 cents. There were two bidders who would then enter the auction for Frontier, SWA and Republic. The auction was to begin on Tuesday but was delayed until Thursday to give all parties ample opportunity to review the Southwest bid. On Tuesday it became apparent that the labor contingency was a major sticking point for Frontier management and counsel who oversee the bankruptcy auction. As a reminder the purpose of a labor contingency was to take the possibility of binding arbitration out of play. In order to satisfy Frontier management/counsel it became necessary to reach an Agreement in Principle (AIP) on a Seniority List Integration (SLI) before the auction was to begin on Thursday. With that news SWAPA began an earnest effort to get a deal done. Our M&A team was in Washington and we hurriedly got them back to DAL for bargaining Wednesday afternoon. The FAPA M&A team was set to fly to DAL as well arriving about the same time. We scheduled bargaining to begin at 1700 CDT.
After our M&A team was in the air headed to DAL FAPA informed SWAPA that their complete team would be unable to get to DAL due to members spread around the country and thus they would not be traveling to DAL. We immediately began setting up a video/audio forum for bargaining still set to begin at 1700 CDT. SWAPA was ready to go at 1700. Just prior to 1700 we were advised that FAPA would not be ready due to their President being unavailable due to his participation in meetings in NY as a member of the unsecured creditors committee. Rather than begin negotiations with the FAPA M&A team, FAPA chose to delay the beginning of bargaining until 1930 CDT until their President was available. We had a deadline of midnight EDT to reach an agreement. So we were down to 3 ½ hours of bargaining time to reach a deal. These type negotiations typically take weeks if not months to conclude. The two M&A teams exchanged several proposals and approaching midnight EDT we concluded our meeting without agreement and agreed to talk on Thursday morning to continue bargaining during the auction process. SWAPA reached out several times on Thursday to FAPA but we never heard back from their team to continue bargaining.
At the conclusion of bargaining we were in agreement on several issues but remained far apart on a combined seniority list. FAPA's position opening was for relative seniority with yet to be determined variable. In pure relative seniority integration you would see 1 Frontier pilot placed between every 10 Southwest pilots all the way down to the bottom of the new combined list. SWAPA's position Wednesday night when we broke was placing the Frontier pilots on the bottom of our list with several positives. The Frontier pilots would be trip pay protected at their CBA book rates plus any percentage increases negotiated in the SWAPA section 6 until the SWAPA rates were higher. This would have resulted in over a 40% increase in pay for most Frontier F/O's. Some would have been even higher. Additionally, we were willing to accept all Frontier pilots on the combined list including all furloughed pilots plus we would allocate 75% of the seats in the new SWA DEN domicile for 3 years following the fence agreement termination. Our proposal satisfied 3 out of 4 of the FAPA identified needs to reach an agreement. Their needs were job protection, pay protection, domicile protection and seat protection. In summary, the FAPA proposal would be a windfall for the FAPA pilots at the expense of the SWAPA pilots. Clearly, we were not willing to go anywhere near that position. Unfortunately we were never able to resume bargaining towards an agreement before the auction concluded. I'm have my doubts whether FAPA had any intention of ever reaching an agreement, especially when we had taken binding arbitration out of the mix with the contingency language.
At the conclusion of the auction Republic's bid was deemed "highest and best" by Frontier management. Republic revised its original offer to forgo its bankruptcy claim of $150m which put significantly more money in the pockets of the unsecured creditors (above what Southwest was offering) plus increased the other creditors take. The Republic bid apparently increased the money to the unsecured creditors above what Southwest was proposing initially. I do not know what Southwest's follow on bid was but I do know that Frontier management/counsel deemed the bid unacceptable in part due to the labor contingency provision. I can assure you that your Association did everything possible to try and reach agreement with FAPA. This chapter is now closed but the book on Frontier is not. They have an immense challenge ahead as employees will want their bankruptcy concessions returned and rightly so. Frontier has touted 8 months of profitability stating that they are a new carrier. Unfortunately that profitability has come on the backs of Frontier employees. It will be an interesting watch as they integrate with Republic. I do not expect Southwest Airlines to sit still in DEN.
While some will view Southwest losing the bid for Frontier as a failure, I view it much differently. While I am disappointed it didn't happen, I am very pleased that our CEO Gary Kelly not only placed the labor contingency in the bid but did not remove it even in the face of significant pressure to do so. Gary's commitment to our pilots and fellow employees will long be remembered. I would be willing to bet that there is not one CEO in our industry who would have made the commitment he did. I called Gary last night to personally thank him and he shared a closing thought that I agree with..."it was not meant to be". We wish the pilots of Frontier nothing but the best going forward and we will continue our long standing relationship with them. They certainly have their work cut out for them with a SLI looming with Republic.
And from the SWAPA M&A Committee:
Fellow SWAPA pilots,
We are very disappointed the FAPA pilots decided to turn down our SLI offer, and equally as disappointed in the Company's loss in the auction process. It appears that in addition to the labor clause, Republic significantly increased their monetary offer, causing Frontier to go with Republic. Our attorneys in Washington D.C. describe a bankruptcy auction like a "Turkish Rug Bizarre" and there were many mitigating factors which influenced the final decision. Certainly Republic's notable increase in their monetary offer had significant weight on the final decision.
To outline our last offer to the FAPA pilots, we had offered the following:
1. Adding FAPA pilots to the bottom of our Master Seniority List
2. Snap up to the greater of pre-concessionary FAPA pay rates (10% increase) or SWAPA F/O pay rates
3. Indexing pay raises to our Section 6 increases through the fence period
4. Denver Domicile protections for 3 years after the fence agreement
Their counter offer was essentially numbers 2 through 4 plus relative seniority (top to bottom of our list) less a factor of 'X' which they never defined - plus the following:
1. 100% Denver Domicile protection forever
2. $3000/month furlough pay for all of their furloughees forever
3. Health benefits for all furloughees forever (SWAPA values a family of four cobra rate at $1,000/month)
They made no concessions from their offer.
Considering the looming Company-induced deadline of midnight and the vast differences in offers, very little movement was made on either side. Without more time, our differences were just too vast. Our assessment of their offer was essentially "You want all your seniority at our pay rates and benefits." This wouldn't be a win for our pilot group. As such, we left our last offer on the table. At the 11th hour, the Company told us that they would go ahead with the auction and leave the labor contingency in place.
They weren't confident of their success at the auction considering the "negative value" the labor contingency was causing at the legal level, but SWA was committed to our pilots' best interests.
SWAPA did not hear from FAPA at all on Thursday except that they acknowledged some of our communication we forwarded to them. SWAPA made multiple attempts to contact FAPA on Thursday, but FAPA did not return messages or make any further attempt to bargain. Thursday night, the bid was awarded to Republic.
STRAIGHT TALK FROM YOUR PRESIDENT
There are not many weeks like this one at SWAPA. It actually began last weekend when we had discussions with the Company about the "labor contingency" provision the Company was going to place in their binding proposal to acquire Frontier. Apparently Southwest advisors came to the same conclusion that our legal team did that the labor contingency could prove to be a stumbling block moving forward. We were advised that at Gary Kelly's direction that the contingency would remain in the bid in spite of recommendations to remove it. That set the stage for the week.
On Monday the Company made public their binding proposal. The $170 million bid was substantially higher than the placeholder "bid" of $113.6 million submitted previously. While the $170m bid looks significantly higher, it included $40m to reject the leases of 11 Frontier aircraft. On a net basis the SWA bid increased the payout to the unsecured creditors from .087 cents on the dollar to .12 cents. There were two bidders who would then enter the auction for Frontier, SWA and Republic. The auction was to begin on Tuesday but was delayed until Thursday to give all parties ample opportunity to review the Southwest bid. On Tuesday it became apparent that the labor contingency was a major sticking point for Frontier management and counsel who oversee the bankruptcy auction. As a reminder the purpose of a labor contingency was to take the possibility of binding arbitration out of play. In order to satisfy Frontier management/counsel it became necessary to reach an Agreement in Principle (AIP) on a Seniority List Integration (SLI) before the auction was to begin on Thursday. With that news SWAPA began an earnest effort to get a deal done. Our M&A team was in Washington and we hurriedly got them back to DAL for bargaining Wednesday afternoon. The FAPA M&A team was set to fly to DAL as well arriving about the same time. We scheduled bargaining to begin at 1700 CDT.
After our M&A team was in the air headed to DAL FAPA informed SWAPA that their complete team would be unable to get to DAL due to members spread around the country and thus they would not be traveling to DAL. We immediately began setting up a video/audio forum for bargaining still set to begin at 1700 CDT. SWAPA was ready to go at 1700. Just prior to 1700 we were advised that FAPA would not be ready due to their President being unavailable due to his participation in meetings in NY as a member of the unsecured creditors committee. Rather than begin negotiations with the FAPA M&A team, FAPA chose to delay the beginning of bargaining until 1930 CDT until their President was available. We had a deadline of midnight EDT to reach an agreement. So we were down to 3 ½ hours of bargaining time to reach a deal. These type negotiations typically take weeks if not months to conclude. The two M&A teams exchanged several proposals and approaching midnight EDT we concluded our meeting without agreement and agreed to talk on Thursday morning to continue bargaining during the auction process. SWAPA reached out several times on Thursday to FAPA but we never heard back from their team to continue bargaining.
At the conclusion of bargaining we were in agreement on several issues but remained far apart on a combined seniority list. FAPA's position opening was for relative seniority with yet to be determined variable. In pure relative seniority integration you would see 1 Frontier pilot placed between every 10 Southwest pilots all the way down to the bottom of the new combined list. SWAPA's position Wednesday night when we broke was placing the Frontier pilots on the bottom of our list with several positives. The Frontier pilots would be trip pay protected at their CBA book rates plus any percentage increases negotiated in the SWAPA section 6 until the SWAPA rates were higher. This would have resulted in over a 40% increase in pay for most Frontier F/O's. Some would have been even higher. Additionally, we were willing to accept all Frontier pilots on the combined list including all furloughed pilots plus we would allocate 75% of the seats in the new SWA DEN domicile for 3 years following the fence agreement termination. Our proposal satisfied 3 out of 4 of the FAPA identified needs to reach an agreement. Their needs were job protection, pay protection, domicile protection and seat protection. In summary, the FAPA proposal would be a windfall for the FAPA pilots at the expense of the SWAPA pilots. Clearly, we were not willing to go anywhere near that position. Unfortunately we were never able to resume bargaining towards an agreement before the auction concluded. I'm have my doubts whether FAPA had any intention of ever reaching an agreement, especially when we had taken binding arbitration out of the mix with the contingency language.
At the conclusion of the auction Republic's bid was deemed "highest and best" by Frontier management. Republic revised its original offer to forgo its bankruptcy claim of $150m which put significantly more money in the pockets of the unsecured creditors (above what Southwest was offering) plus increased the other creditors take. The Republic bid apparently increased the money to the unsecured creditors above what Southwest was proposing initially. I do not know what Southwest's follow on bid was but I do know that Frontier management/counsel deemed the bid unacceptable in part due to the labor contingency provision. I can assure you that your Association did everything possible to try and reach agreement with FAPA. This chapter is now closed but the book on Frontier is not. They have an immense challenge ahead as employees will want their bankruptcy concessions returned and rightly so. Frontier has touted 8 months of profitability stating that they are a new carrier. Unfortunately that profitability has come on the backs of Frontier employees. It will be an interesting watch as they integrate with Republic. I do not expect Southwest Airlines to sit still in DEN.
While some will view Southwest losing the bid for Frontier as a failure, I view it much differently. While I am disappointed it didn't happen, I am very pleased that our CEO Gary Kelly not only placed the labor contingency in the bid but did not remove it even in the face of significant pressure to do so. Gary's commitment to our pilots and fellow employees will long be remembered. I would be willing to bet that there is not one CEO in our industry who would have made the commitment he did. I called Gary last night to personally thank him and he shared a closing thought that I agree with..."it was not meant to be". We wish the pilots of Frontier nothing but the best going forward and we will continue our long standing relationship with them. They certainly have their work cut out for them with a SLI looming with Republic.
And from the SWAPA M&A Committee:
Fellow SWAPA pilots,
We are very disappointed the FAPA pilots decided to turn down our SLI offer, and equally as disappointed in the Company's loss in the auction process. It appears that in addition to the labor clause, Republic significantly increased their monetary offer, causing Frontier to go with Republic. Our attorneys in Washington D.C. describe a bankruptcy auction like a "Turkish Rug Bizarre" and there were many mitigating factors which influenced the final decision. Certainly Republic's notable increase in their monetary offer had significant weight on the final decision.
To outline our last offer to the FAPA pilots, we had offered the following:
1. Adding FAPA pilots to the bottom of our Master Seniority List
2. Snap up to the greater of pre-concessionary FAPA pay rates (10% increase) or SWAPA F/O pay rates
3. Indexing pay raises to our Section 6 increases through the fence period
4. Denver Domicile protections for 3 years after the fence agreement
Their counter offer was essentially numbers 2 through 4 plus relative seniority (top to bottom of our list) less a factor of 'X' which they never defined - plus the following:
1. 100% Denver Domicile protection forever
2. $3000/month furlough pay for all of their furloughees forever
3. Health benefits for all furloughees forever (SWAPA values a family of four cobra rate at $1,000/month)
They made no concessions from their offer.
Considering the looming Company-induced deadline of midnight and the vast differences in offers, very little movement was made on either side. Without more time, our differences were just too vast. Our assessment of their offer was essentially "You want all your seniority at our pay rates and benefits." This wouldn't be a win for our pilot group. As such, we left our last offer on the table. At the 11th hour, the Company told us that they would go ahead with the auction and leave the labor contingency in place.
They weren't confident of their success at the auction considering the "negative value" the labor contingency was causing at the legal level, but SWA was committed to our pilots' best interests.
SWAPA did not hear from FAPA at all on Thursday except that they acknowledged some of our communication we forwarded to them. SWAPA made multiple attempts to contact FAPA on Thursday, but FAPA did not return messages or make any further attempt to bargain. Thursday night, the bid was awarded to Republic.
08-14-2009, 02:56 PM
#4
On Reserve
Joined APC: Aug 2009
Posts: 19
The box of doughnuts in the crew lounge from the ramp and a card signed by the ramp crew expressing their gratitude spoke for itself. Most likely SWA would want the ramp agents to be stapled to the bottom of the SWA ramp agents master seniority list. Certainly some would be furloughed due to your bump and flush philosophy.
I am still curious why no one would answer my original question:
Question for SWA pilots: About a year ago I spoke to a SWA pilot about mergers, and he insisted that any airline SWA purchased, all pilots would be stapled to the bottom of the list. So I asked the question: Do you mean to tell me that hypothetically speaking if SWA purchased American Airlines, SWAPA would require a B-777 captain to be reserve B-737 FO? He did not give me an answer. Would any SWA pilot provide an answer and/or what criteria should be used for a staple vs a "1 for x" integration method?
Or does every SWA employee think they are superior?
I am still curious why no one would answer my original question:
Question for SWA pilots: About a year ago I spoke to a SWA pilot about mergers, and he insisted that any airline SWA purchased, all pilots would be stapled to the bottom of the list. So I asked the question: Do you mean to tell me that hypothetically speaking if SWA purchased American Airlines, SWAPA would require a B-777 captain to be reserve B-737 FO? He did not give me an answer. Would any SWA pilot provide an answer and/or what criteria should be used for a staple vs a "1 for x" integration method?
Or does every SWA employee think they are superior?
08-14-2009, 03:10 PM
#5
APC co-founder
Joined APC: Feb 2005
Position: B777
Posts: 5,853
Originally Posted by BusSkyflyer
I am still curious why no one would answer my original question:
Question for SWA pilots: About a year ago I spoke to a SWA pilot about mergers, and he insisted that any airline SWA purchased, all pilots would be stapled to the bottom of the list. So I asked the question: Do you mean to tell me that hypothetically speaking if SWA purchased American Airlines, SWAPA would require a B-777 captain to be reserve B-737 FO? He did not give me an answer. Would any SWA pilot provide an answer and/or what criteria should be used for a staple vs a "1 for x" integration method?
Or does every SWA employee think they are superior?
As for your second question, just to be clear SWA and SWAPA are two different entities. SWAPA advocated a position and SWA management listened. To me that's one of the more remarkable and commendable take-aways from the past week.
08-14-2009, 03:13 PM
#6
Line Holder
Joined APC: Jul 2008
Posts: 56
Don't forget this is SWAPA's VIEW! There are 3 sides to every story! I'm waiting for my husband to get home to see if FAPA has sent out a letter laying out their side of the story.
I think the pilots should be able to view the actual proposals from both sides. After all, they are trusting their careers to the BODs of their union.
I think the pilots should be able to view the actual proposals from both sides. After all, they are trusting their careers to the BODs of their union.
08-14-2009, 03:15 PM
#8
Don't want to participate
Thread Starter
Joined APC: Jul 2005
Position: 737 Left Seat
Posts: 1,016
Originally Posted by thepilotswife
Don't forget this is SWAPA's VIEW! There are 3 sides to every story! I'm waiting for my husband to get home to see if FAPA has sent out a letter laying out their side of the story.
I think the pilots should be able to view the actual proposals from both sides. After all, they are trusting their careers to the BODs of their union.
I think the pilots should be able to view the actual proposals from both sides. After all, they are trusting their careers to the BODs of their union.
08-14-2009, 03:19 PM
#9
Gets Weekends Off
Joined APC: Jul 2007
Position: B-737 FO
Posts: 112
Originally Posted by LuvJockey
Their counter offer was essentially numbers 2 through 4 plus relative seniority (top to bottom of our list) less a factor of 'X' which they never defined - plus the following:
1. 100% Denver Domicile protection forever
2. $3000/month furlough pay for all of their furloughees forever
3. Health benefits for all furloughees forever (SWAPA values a family of four cobra rate at $1,000/month)
They made no concessions from their offer.
I read this today in the SWAPA update and was blown away. FAPA's counter offer was ridiculous. I can't imagine any Frontier pilot would have expected what FAPA was demanding. I think FAPA has definitely done a disservice to its pilots. In the end, I guess this deal wasn't meant to be. Time will obviously tell if this decision was a prudent one for them. Best of luck to the F9 family. You're gonna need it.
Patch
08-14-2009, 03:20 PM
#10
Gets Weekends Off
Joined APC: Mar 2006
Posts: 3,333
BusFlyer - not a SWA pilot but I too am curious... Would you please specify your scenario a little more?
Are you talking about one airline simply buying another airline or one airline buying out a bankrupt airline? I have no dog in this fight but don't you think the answer might be different depending on the specifics?
For example, this "auction" that just happened - would it have been feasible for another entity to bid for lets say airplanes only? Or the gate leases, etc? This was not a merger, this was an auction, correct?
Are you talking about one airline simply buying another airline or one airline buying out a bankrupt airline? I have no dog in this fight but don't you think the answer might be different depending on the specifics?
For example, this "auction" that just happened - would it have been feasible for another entity to bid for lets say airplanes only? Or the gate leases, etc? This was not a merger, this was an auction, correct?
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