ARW Fastread Banner

 

March 23, 2018

 

ARW Negotiations: Where We’ve Been, Where We’re Going, and Our Options

 

On March 18-20, 2018 the Air Wisconsin MEC held its spring meeting in Minneapolis. The most urgent matter on the meeting agenda was to chart our path forward with Section 6 contract negotiations. In this message we will (1) summarize the information the MEC received this week from the Negotiating Committee, MEC Officers, ALPA staff and others; (2) outline the options available to the MEC for possible actions to bring negotiations to a conclusion; and (3) explain the reasoning behind the MEC’s decision. As a reminder, a table showing the bargaining positions of the parties is attached.

 

Cutting to the chase, after lengthy discussion and analysis, the MEC has decided to continue mediated negotiations, provided the federal mediator schedules one or more additional mediation sessions in the near future. The mediator has tentatively scheduled one additional session, to be held April 25 - 27 in Phoenix. In this message we will give you more detail on the status of negotiations up to this point, our potential courses of action, and why the MEC chose the course that it did.

 

Although we placed the MEC decision at the top, don’t think this is business as usual. We know from the recent polling that the pilot group has high expectations and demands action. After seven and one-half years, everyone the MEC, the federal mediator, and the Company, to some extent—understands that this hyper-extended round of Section 6 negotiations must be concluded promptly with a new contract.  However, because of Air Wisconsin’s smaller scale operation and the limitations of management’s flexibility and overall financial capability, this round of Section 6 will result in a TA that offers only modest increases. Even so, the Company can and must do better than its September 25 offer.

 

We ask that you take the time to fully digest the information provided below so you will have the same general understanding of the variables in play as does the MEC. In addition to this email, we will be sending a hard copy to each pilot address so that you and your families can go over it at your leisure.

 

A.        Information Provided to the MEC

 

1.    Polling Results

 

              Mr. Phil Comstock, the experienced pollster hired by ALPA and the MEC, briefed the MEC on the results of the January 9–February 6, 2018 MEC poll, as well as his analysis. The MEC also reviewed the complete results in hard copy at the MEC meeting.

 

     Mr. Comstock is very pleased with the strong level of participation exhibited by the pilot group. The high level of participation means that the results are scientifically accurate.

 

              Although we won’t quote Mr. Comstock’s confidential comments, the poll results are not difficult to summarize:

 

·      The pilot group as a whole is extremely dissatisfied with the current stalemate in negotiations;

·      pilots strongly feel that they deserve more than the Company is offering; and

·      the ARW pilots are also much more militant today than in the past.

 

While we rarely quote numbers from confidential poll results, we can disclose that pilot expectations for a date of signing wage rate increase are now in the double digits. This is much higher than the average of responses from the poll conducted in the spring of 2017.

 

              Significantly, pilots strongly favor new wage rate increases more than retention bonuses, though many pilots expect both. The preference for wage rate increases is not surprising given the new standard set by the Endeavor extension, which was ratified by the EDV pilot group last November.

 

              Another major takeaway is that a large minority of pilots will “walk away” from Air Wisconsin in the near term if there are not significant and major increases in the economic sections of the next contract. The same “walk away” will happen if these improvements do not happen soon. This walk away is not a work stoppage — the poll makes it clear that pilots will take other jobs in the industry when possible or they will begin an active job search.

             

2.        Negotiating Committee Report

 

              During the meeting, Negotiating Committee Chairman Bob Burgess provided a full report on the changing landscape since the last MEC meeting in October 2017. As you recall, the Company made its last offer to the Negotiating Committee in Chicago on September 25, 2017. This was the first, and to date, the only significant offer of Section 3 Compensation that has been presented to the Negotiating Committee in seven years of bargaining, except for the new hire and retention bonuses of LOA 37. Nevertheless, last October, the Negotiating Committee and the MEC considered the offer insufficient and inadequate. This conclusion was reinforced by the poll results. The Company offered a five-year agreement with no new money in the fourth and fifth years of the proposed agreement (but the October 1st 1.5% annual increases would continue). The Company offer does not contain any new wage rate increases, only bonus payments that average approximately $2,600.

 

A COMPARISON OF TABLE POSITIONS

ALPA

8/30/2017

 

Air Wisconsin

9/25/2017

Per Diem

Per Diem

12/01/2018

$1.85 / $1.90

2020 (DOS + 2 years)

 

$1.95 / $2.00

12/01/2020

$1.95 / $2.05

12/01/2022

$2.05 / $2.15

Supplemental Payments

50/50 401(k) Split

Supplemental Payments

50/50 401(k) Split

10/01/2018

$6,000 (pilots hired prior to 12/01/2016)

12/31/2018 (or 650 pilots;)

$2,472 (pilots hired prior to 12/01/2016)

10/01/2019

$6,000 (pilots hired prior to 12/01/2016)

12/31/2019 (or 700 pilots)

$2,642 (pilots hired prior to 12/01/2016)

12/31/2020 (or 750 pilots)

$2,805 (pilots hired prior to 12/01/2016)

Wage Rate Increases

Signing Bonus

1/01/2020

1.0%

3/15/2018

$1,000 (all pilots as of 9/25/2017)

1/01/2021

1.0%

1/01/2022

1.0%

Duration

Duration

5 years

5 years

Five-Year Cost Range

Five-Year Cost Range

$8.92m - $10.19m

$3.47m - $3.86m

Average Cost Per Year

Average Cost Per Year

$1.76m - $2.04m

$.69m - $.77m

 

     At the same time, during the September mediation in Chicago the federal mediator signaled that the NMB would not be scheduling additional mediation sessions if an agreement was not reached at that session. Of course, no agreement was reached. The tentatively scheduled April 25-27, 2018 mediation session that was recently offered by the federal mediator assumes that the parties will attempt to close the gap between their respective last offers.

 

In November 2017, Company representatives inquired of the mediator about the status of the Company offer. A conference call was set up and NC Chairman Burgess explained to the Company representatives that its offer is inadequate. The Company responded, is the offer rejected? ALPA’s answer was that the offer would be rejected by ALPA’s counteroffer, which is the norm in collective bargaining. The counter, we explained, would come after the publication of the Wiss-key and the completion of MEC polling of the pilot group in the new year.

 

              Then, in December 2017, comments were made by a Company representative in ground school regarding contract duration, and this led to an inquiry by the mediator to the Company. The inquiry verified that the Company would at least consider a CBA duration of fewer than the five years discussed in Chicago. This brief exchange has been the only communication (indirect or direct) with the Company on any substantive issue subject to contract negotiations since last October. In January, NC Chairman Bob Burgess asked Bob Frisch for bargaining dates for ALPA to present its counter offer. Frisch responded that the Company had no available dates in February or early March. On February 1, the mediator tentatively set a mediation session for April 25-27. Subsequently, the Company did verify it is available to meet in April as requested by the mediator.

 

              NC Chairman Bob Burgess also advised the MEC that his assessment is that the Company is preoccupied with the transition to United flying and negotiations with the other labor groups at Air Wisconsin. The Company also may have the wrong-headed belief that a new CBA with significant increases would not make a difference in pilot retention. The polling results show otherwise; if expectations were met, many pilots could see themselves staying five years or more, but without a new contract, a significant number of pilots across all seniority ranges would accelerate their search for a new job. Chairman Burgess also reported that the continued assistance of the federal mediator will be necessary to close a deal in the near term.

 

B.        The Options Available to the MEC

 

       Three options, or broad avenues of action, were considered by the MEC:

 

1.        To continue with mediated negotiations until an agreement is reached or the process breaks down entirely, or

 

2.        Seek the authorization necessary for a legal strike, prepare for a strike, and execute a legal work stoppage until an agreement is reached if and when the National Mediation Board authorized us to do so, or

 

3.    A catch-all avenue of either sending out the Company offer for ratification ballot or continuing with the status quo, i.e., an open Section 6 under the status quo contract and no foreseeable prospect for a near-term agreement. This is the “attrition” option. Another option has been suggested by the mediator: Interest arbitration of agreed open issues.

 

       The MEC considered the pros and cons of each avenue. Let’s discuss them in reverse order.

 

Option 3: The catch-all option.

 

       There are really no “pros” to the idea of sending out the Company offer of September 25, 2017 for ratification ballot. The MEC and the Negotiating Committee have already decisively rejected this idea and the polling results show that a TA, based on the offer, would be overwhelmingly rejected by a membership ballot.

 

       The avenue of continuing with the status quo has the benefits of keeping the medical insurance plan and 25% premium share intact and continuing the 1.5% annual increases indefinitely. This avenue would also allow for the chance that Air Wisconsin’s financial health and place in the industry improve to the point that pilot expectations might be met. More realistically, a continuing status quo, as revealed by the polling, would likely result in high attrition rates among the “middle range” longevity pilots. This attrition would not be promoted by the union — polling clearly shows that this would be the result of individual pilots making proactive decisions about their pilot careers. The “cons” to the status quo avenue are that continuing the status quo will likely endanger the future of the Company because individual pilots will vote with their feet and leave the airline.

 

       Another negative to the status quo avenue is that it does not put the money that is currently on the table in the pilots’ pockets in the near term, and it could be a very long time before the Company becomes more forthcoming. The status quo allows the Company to keep whatever funds it has budgeted that would be devoted to a pilot contract. Finally, sitting back and doing nothing is just not part of our pilot DNA.

 

       Another option in the catch-all category is one suggested by the mediator. The parties would submit the open issues to an arbitrator for a final decision —this is would be binding interest arbitration, as opposed to the familiar grievance arbitration. Both ALPA and the Company have independently rejected this suggestion in the past, as each party does not want to give a third party complete control over the outcome.

 

       The “pro” for the pilots is that the arbitrator could possibly rule in ALPA’s favor, although it is impossible to predict whether the gain would be greater than the outcome available in mediated negotiations. By its nature, arbitration is not an option that could result in an Endeavor-style leap in wage rates.

 

       There are many “cons” to this option. The arbitrator’s ruling would be final and binding with no appeal. An agreed Arbitration Agreement between Air Wisconsin and ALPA would be necessary which would be difficult and time consuming to negotiate. The arbitration process would be lengthy and expensive. There would be no possibility of a membership ballot as the arbitrator’s ruling would be final. Federal mediation is a far superior method of voluntary contract settlement.

 

       Option 2: The legal strike option.

 

A legal strike would obviously be the most emotionally satisfying avenue. This would involve setting a date for a strike authorization ballot and weeks of advance communication about what it means to strike under the Railway Labor Act. It would also involve a request to and approval from the NMB for a “release” to begin a legal strike after a 30-day “cooling off” period. There is no guarantee that the NMB would agree to our request.

 

The “pros” to this avenue are that it puts continuing pressure on the Company to make a new offer or face the possible shut down of airline operations.

 

The “cons” include that no new money is reaching pilots for what could be an extended period of time in exchange for the high risk that a significant monetary reward could be realized. If a legal strike occurs, we cannot assume that it would be over in a day or a week. A prolonged legal strike could harm individual pilot finances and endanger our relationship with United. At the same time, the “walk away” preference of many pilots means that they may never return to Air Wisconsin.

 

Finally, as previously mentioned, release for a legal strike depends on supportive action by the NMB and as a practical matter, the White House — an uncertain proposition in the current political environment. Thus, waiting for a release could possibly result in extending the status quo for an undetermined period.

 

       Option 1: The option of continuing with mediated negotiations.

 

The “pros” of this option include that the tentatively scheduled April mediation session (if finalized) would be an opportunity to present ALPA’s counter to the Company’s September 25 offer and to close a contract with gains that exceed the Company’s September 25, 2017 offer. A ratified CBA would protect the insurance plans, 25% pilot premium share, and the October 1 wage rate increases for the agreed duration of the contract and into the next status quo period. This option also provides an opportunity to negotiate for wage rate increases in lieu of retention type bonuses. Aside from putting money in pilots’ pockets, this option avoids the extended uncertainty of the current status quo or the legal strike option. On the other hand, if this option of continued mediation eventually fails, we would always have the ability to revert to Option 2 and consider a legal strike. Also, a two- or three-year duration CBA would restart the clock on the next Section 6 notice earlier than the Company’s proposed five-year duration.

 

The main “con” to the continued mediation option is that it is nearly impossible to satisfy pilot pay expectations as revealed by the poll results. It may be possible to win a small wage rate increase. However, double digit increases, or even half of that, are not possible given the Company’s consistent bargaining position over seven years. Beyond that is the realization that the Company either lacks the resources or the preference for doing what it takes to keep pace with the rate of change in the industry. In mediation under the RLA, the parties are expected to move towards each other’s bargaining positions. If you will refer to the table of bargaining positions earlier in this letter, this means that the Company is expected to move towards the ALPA position and we are expected to move towards the Company position. Pilot expectations and the Endeavor extension are not by themselves a justification for moving the other direction. It is only when outside events actually effect the outlook at Air Wisconsin that our bargaining position is enhanced.

 

A related and significant downside to this avenue is the possibility that the membership would reject a tentative agreement for the second time. This would result in a situation similar to the extended status quo option, i.e. the status quo would remain in place but with no new money for the pilot group. The attrition or “walk away” scenario would then come into play.

 

The MEC’s Decision

 

Negotiating Committee Chairman Bob Burgess explained to the MEC that continuing with mediation is the best course to achieve near-term success while avoiding the lengthy and uncertain process of pursuing authority for a legal strike. Mediation gives the pilot group the opportunity to capture limited, but definitive, wage gains as quickly as possible. The legal strike option could, and more than likely would, be pursued if mediation fails.

 

The MEC unanimously agreed to support Captain Burgess’s recommendation and continue with mediation. Based on the limited options available to the group, doing so is in the best interests of the pilot group as a whole.

 

The MEC and Negotiating Committee is aware that this decision may not be popular with the entire group. It has become clear that Air Wisconsin will not quickly evolve into the kind of industry-leading carrier the pilots seek. The cards we have been dealt include management’s apparent limited capability to achieve growth and keep up with the pilot wage gains experienced by other pilot groups.

 

It would be easier for us to tell you that we will be able to achieve the double-digit pay increases you have told us in the poll that you expect and deserve. But the reality of our airline, its seven-year history of bargaining, and its finances are far different. It is our responsibility as your elected leadership to tell you the cold, hard facts and then strive to attain the best contract possible based on that financial reality. We believe continuing with mediation is our best way to do that, and this will be our path going forward.

 

Your ARW MEC and Negotiating Committee