(MoneyWatch) Labor strife between American Airlines and its pilots is grounding flights and angering passengers affected by flight cancellations and delays.
The bankrupt carrier says it has had to cancel hundreds of flights because of an increase in the number of pilots calling in sick. The pilots, angry over a contract imposed on them cutting their pay and benefits, also appear to be causing problems when they do show up. In the last month, four times as many flights as usual have been cancelled for maintenance issues resulting from last-minute plane inspections ordered by pilots.
Ray Neidl, an analyst with Maxim Group, wrote in a report that the pilots were the most important labor group at American, and that a deal with them was crucial. He said:
We were surprised that the membership voted down the contract offer since it included a large equity offering. As a result of this disagreement AMR has had to cancel a number of flights in the past week due to what appears to be individual pilot actions of calling in sick or increasing reports of maintenance deficiencies forcing flight delays or cancellations.
As a result, almost half of American's flights were delayed on Monday and Tuesday.
Wednesday, American Airlines sent a letter to the Allied Pilots Association, threatening legal action if the company is forced to continue cancellations due to the increase in pilot sick calls and maintenance requests. The pilots' union denies its members are deliberately delaying flights, insisting that they are reporting to work as usual and that the inspections are necessary for flight safety.
"The pilots gain nothing by going on strike but they gain a lot by slowing down operations," said Peter Greenberg, travel editor for CBS News. "A slowdown causes a lot more customer dissatisfaction." A union spokesman denies that there is an organized slowdown.
Whatever is disrupting American's flight schedule, the slowdown may be doing more damage to the airline than a strike threatened earlier this month by pilots. Although a work stoppage would shut down the entire airline, it would at least allow passengers make alternative travel plans. By contrast, the recent spate of unpredictable cancellations makes planning difficult and often leaves passengers hanging.The conflict between the airline and its pilots stems from a dispute over a new contract. American filed for bankruptcy protection last November mainly to reduce its labor costs. Since then, the relationship between American and its employees has rapidly deteriorated.
In April, all three of American unions, including flight attendants and mechanics, publicly endorsed a merger with US Airways (LCC) as a way of showing their dislike of company management. The airline subsequently threatened workers with drastic cuts in pay and benefits unless they agreed to a new contract. Flight attendants and mechanics accepted the concessions. While agreeing to American's terms, those unions also passed resolutions publicly stating their lack of confidence in the airline's leadership.
The pilots had been expected to follow the other labor groups and sign a contract, but they rejected a deal last month. After that, a Federal bankruptcy judge allowed the airline to scrap its pilots contract and unilaterally impose new pay and work terms.
Still, American's pilots have a strong negotiating position. American must exit bankruptcy before it can merge with US Airways. The smaller US Airways has long been interested in buying American. Ever the airline went into bankruptcy investors have been pressuring AMR to pursue a merger.
Emerging from bankruptcy will be much harder and more expensive for American without contracts with all of the company's union groups.
"No company trying to emerge from bankruptcy can do it without an approved reorganization plan approved first by the creditors committee and then the judge overseeing the case," said Greenberg. "Without signed contracts, the airline is left only with vague estimates of costs."
The pilots union appears to be angling for more than just better terms for its members. Any agreement between the two sides will require the pilots to accept substantial pay cuts. So the union may be trying to make sure that USAirway's executives and not American's are in charge if the two companies do merge.
The Allied Pilots Association, the union for American's 10,000 pilots, says it has received a request from the airline to resume contract negotiations and that it was interested in pursuing this, So far no talks have been scheduled. Until the two sides do reach an agreement, more passengers will likely be taking their business to other carriers.