Airline Mergers Could Raise Fares in '07

Even if the leaders of United and Continental agree to merge their airlines, the hard work of combining two work forces with different unions and conflicting interests will remain.

The history of the airline industry is littered with cases in which peace in the boardroom was followed by rancor among co-workers at 30,000 feet.

It's been nearly six years since American Airlines' parent bought Trans World Airlines, but TWA flight attendants are still so mad about their treatment by new colleagues that they picketed outside the American union hall this fall.

Most merger-related disputes are about job security in the heavily unionized industry.

The TWA flight attendants lost their jobs after 9-11 because the American attendants' union stripped them of seniority. In 1999, American's pilots staged a sickout that canceled more than 6,000 flights to protest the acquisition of Reno Air - they feared losing assignments to the lower-paid pilots from the smaller carrier.

Employees at UAL Corp.'s United Airlines and Continental Airlines Inc. were buzzing about the merger talk Wednesday.

Workers at both carriers have taken pay cuts since 2001, but the slashing was far worse at United, which entered bankruptcy protection. United terminated its pension plans; Continental did not.

"Now those people could be working side by side. How do you meld happy employees with unhappy ones?" said a veteran Continental flight attendant, who spoke on condition of anonymity because she said her job could be threatened.

But optimists said the two carriers have complementary route structures - United is strong on the West Coast, across the Pacific and in European hubs; Continental is big in other European markets, Latin America and the Northeast. That would suggest few layoffs, other than in redundant layers of management.

Robert Roach Jr., general vice president of the machinists' union, which represents the flight attendants at Houston-based Continental, even suggested that United's flight attendants might regain lost pension benefits.

Flight attendants at Elk Grove Village, Ill.-based United are represented by a different union, the Association of Flight Attendants. Continental's mechanics are represented by the Teamsters, while their counterparts at United are represented by the Aircraft Mechanics Fraternal Association.

The Continental mechanics may be wary of letting themselves be represented by AMFA, which led a disastrous 2005 strike at Northwest Airways Corp. But federal law makes it risky for two unions to hold a showdown election. If neither gets 50 percent support from all eligible voters, including laid-off workers who might not bother to vote, both unions would be decertified.

Fearing that outcome, the Teamsters and the Communications Workers of America agreed in September to share representation of customer-service agents at the merged US Airways and America West.

Neil Bernstein, a law professor at Washington University in St. Louis and an expert on the federal law that governs labor relations in the airline industry, said he's never heard of an impasse between unions killing a merger because one side usually gives up. That's essentially what happened to the TWA flight attendants.

"They folded," Bernstein said. "There were a lot of unhappy members. The mergers go through, but the tensions remain between the two work forces. It never goes smoothly."

United's labor situation has been prickly under Chief Executive Glenn Tilton, who was at the helm when workers were forced to endure layoffs and two rounds of pay cuts in bankruptcy.

Many employees also remain angry about the lucrative compensation received by top management when the airline exited Chapter 11 last February. Tilton was granted shares worth nearly $25 million at Wednesday's closing price, plus stock options worth another $6 million.

Some pilots have worn buttons reading, "United pilots have 40/40 vision," referring to pay raises given Tilton and Chief Operating Officer Pete McDonald. The pilots union said last week it is forming a "strike preparation committee" as a way of protesting the disparity between management and employee pay.

The airline's flight attendants union issued a statement expressing "severe reservations" about a merger.

"United Airlines is run by the same management that took hundreds of millions of dollars in bonuses and stock for themselves paid with employee sacrifices of pay, pensions and health care," said Greg Davidowitch, head of the United branch of the Association of Flight Attendants. "There is no trust for these so-called leaders and no confidence in where they might lead us."

United's labor situation "is problematic," said Darrell Jenkins, a consultant to many airlines. "That's going to have to be handled."

Continental has done a better job of weathering the industry slump that began in early 2001 and was deepened by the terror attacks that year. Still, the company cut thousands of jobs, and just last year it pushed workers to take another $500 million in annual wage and benefit concessions.

While the industry is heavily unionized, there are pockets of nonunion workers. They are at most risk in a merger because a lack of representation, said James C. Little, international president of the Transport Workers Union.

In a novel organizing campaign in October, Little's union tried to convince Continental's baggage handlers and cargo agents that joining TWU would protect their jobs in a merger.

Rumors of a deal with United were already swirling. But the company downplayed the merger talk, and the workers voted narrowly to remain nonunion.

Little said the result might have been different if the election were held this week.

___

Associated Press Business Writer Dave Carpenter in Chicago contributed to this report.


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