Citing dismal prospects for the airline industry, leaders of American Airlines' pilots union voted Wednesday to begin preliminary talks on contract changes that would help the carrier become more efficient.
The move comes just 2 1/2 years after unions agreed to $1.6 billion in concessions, a decision that allowed American to elude bankruptcy. At the time, labor leaders hoped that the new six-year contracts, which deeply cut wages and benefits, would help the airline regain profitability.
But since then, a sharp increase in fuel prices and intensified competition have erased most of the gains from cheaper labor agreements and pushed several of American's competitors into bankruptcy. Union leaders hope that a new round of contract changes will allow the airline to save money with more flexibility in scheduling and managing pilots.
"We have enough data to recognize that absent a corporate restructuring, what we're doing is not sustainable," said Ralph Hunter, an American pilot who heads the Allied Pilots Association.
The union's board of directors voted 12-6 to approve a resolution directing Hunter to begin talks on contract changes with management and other stakeholders. The union represents 13,000 American pilots, who must ultimately vote on any changes.
"The membership will have the final say on this," Hunter said after the vote. He said it is too early to know how long negotiations might take or when a vote might take place.
Hunter was adamant that any changes will not include more cuts in salaries or benefits, or additional layoffs.
But tightened work rules could have a significant effect on many pilots' quality of life, requiring more hours at work and flight times that are less convenient.
Changes could also hamper the career aspirations of some younger pilots, who might see promotions to longer routes and larger aircraft -- which also have higher pay -- come more slowly.
The board also approved a resolution stating that other stakeholders, including vendors, bondholders and management, must join labor in making sacrifices to help restore the airline to profitability. And board members endorsed a finding that concluded that American's financial performance is unlikely to improve over the long term without restructuring.
Gerard Arpey, speaking at a news conference before the union vote, said that he remains committed to working with labor to solve the company's problems.
"We've been working very hard to make the unions our partners in business," Arpey said.
Wednesday's vote was the culmination of an information campaign driven by Hunter and other union leaders. For weeks, Hunter has been warning members that the airline's financial situation is precarious and that pilots must jettison decades-long practices that have make the carrier unproductive.
"This is our airline, and for many of us, our last planned stop before retirement," he said in a letter to pilots this week. "We believe it is high time to take control of our fate instead of waiting for fate to control us."
American has lost $7.5 billion since 2000, and during that time has seen four major competitors -- United Airlines, US Airways, Delta Air Lines and Northwest Airlines -- file for bankruptcy protection. US Airways recently left bankruptcy via a merger with America West Airlines.
The airline is forecast to lose hundreds of millions more this fiscal year, despite a resurgence of travel demand this summer.
Delta and Northwest have both sought to cut labor contracts in bankruptcy court in recent weeks. And Northwest recently announced a plan to outsource some flight-attendant jobs.
That has many labor leaders fearful that American could eventually be forced into bankruptcy, where contracts could be slashed by a judge without union approval.
Hunter hopes that by opening talks now, they can keep American out of bankruptcy and avoid the frantic, last-minute negotiations that characterized the 2003 concessions. At that time, new contracts were approved just as American lawyers prepared to file for Chapter 11 bankruptcy protection from creditors.
Hunter and other union leaders have spent a substantial amount of time with airline executives during the past year, being briefed on the company's finances and participating in strategy sessions. Labor officials and management have also worked together to lobby Congress on pension-law changes.
And the unions have recently worked with airline executives on a joint project to measure all aspects of American's operations against the industry's top performers.
The union has brought in some hired guns to help with the discussions. Hunter recently hired Drew Keith, an industry consultant and former chief financial officer of Kitty Hawk, a cargo airline based at Dallas/Fort Worth Airport, to analyze American's finances. The union also hired a second consultant, Airline Capital Associations, to prepare an independent report on the company's condition.
The union has also retained law firm Steptoe and Johnson for advice on contractual issues related to American's restructuring.
"We have done our homework, and we will continue to explore our options," Hunter told pilots in his letter.
But not all pilots are convinced that the time is right to reopen their labor agreement.
"This is my fifth anniversary of being on the [union] board, and during that time, this is single-handedly the dumbest piece of legislation we've produced," said Sam Mayer, an American pilot who heads the union's New York chapter and voted against the resolution. "It sends the wrong message to the company and the wrong message to our members."
Mayer points to some recent trends, including an increase in airline revenues and a retreat in oil prices, that he says indicate that American can turn around without more labor cuts.
He also pointed to a recent forecast by airline analyst Jamie Baker of JP Morgan Securities that the airline will turn a profit next year.
"I think its way too early to go out there and say that things are unsustainable," he said.
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