It's No Dream Contract, But It Beats A Strike

Why American's pilots are heading toward settlement

It won't be pretty, and it probably won't be quick. But in the end, pilots at AMR Corp.'s American Airlines Inc. are likely to approve a new contract, even though it falls well short of their demands. The Allied Pilots Assn.'s board sidestepped a vote on Mar. 22, insisting that final contract language be in hand first. But sources on both sides predict that the accord will pass when the APA directors meet on Apr. 3.

American's pilots have good reason to settle this time and avoid a walkout like the one that briefly shut down the nation's No.2 carrier on Feb. 15. For starters, if they reject this deal, Congress may impose a less favorable one. The Presidential Emergency Board Clinton appointed after the strike recommended a deal that the union values at 5% less than the new one.

HIGHER BAR. Another key factor: Union President James G. Sovich and all five members of the union's negotiating committee are solidly behind the contract. Indeed, in a conciliatory move on Mar. 25, the union agreed to wait 30 days before striking if the board or the members turn down the deal. "It's black-and-white the best contract in the industry," says Brian A. Mayhew, chairman of the negotiating team and a hard-liner who had fought the first contract, which was negotiated last September. That deal was rejected by more than 60% of the rank and file on Jan. 8.

The union can claim victory on the pay front, where it has set a higher bar for everyone in the industry. Leaders figure they squeezed about $180 million--or 43%--more than the rejected deal from a company that said there was no more to give. "What American has to hope for is everybody else [in the industry] gets a deal that's as bad or worse," says BT Securities Corp. analyst Vivian Lee. On the other hand, productivity gains should soften the blow for American and hold labor-cost increases below inflation, says Adam Blumenthal, a financial consultant for the pilots. American sources call the deal, which includes a 9% pay raise--in four yearly increments--"marginally" more expensive than the last.

Still, the new deal won't pass without a fight. It doesn't grant pilots' main demand: that they be allowed to fly the new generation of small jets that parent AMR wants to introduce in its Eagle commuter operations. Eagle pilots earn less and belong to a different union. Under the proposed contract, AMR wins the right to use Eagle pilots to fly the small jets, following the pattern already established in the industry.

Union negotiators argue, however, that while they didn't win on the small-jet issue, they wrung as many promises out of American as possible. For instance, the proposed pact places a limit on the routes that Eagle can fly with the 50-to-70-seat jets, including a 550-mile average flight length. And further to allay fears that AMR will use the regional jets--and Eagle pilots--to replace big jets, the company promised to cut one Eagle jet for every two big jets if the American big-jet fleet falls below 628 planes.

AT THE TOP. The pact also offers a novel form of job security. Some Eagle regional jet pilots may be bumped by American pilots if the main airline furloughs workers. In return, Eagle pilots get first dibs on half the new jobs at American.

APA critics contend the job-security provisions are just window dressing. They "will not protect our flying. They will only serve to reduce the magnitude of the [job] loss," predicts union board member Dan Carey, chairman of the union's New York unit.

Still, the no votes are likely to be in the minority. Most members will probably be happy to settle for a contract that would put American pilots at the top of the industry pay heap and eliminate a detested two-tier wage system that pays less to new pilots. And the small-jet threat is still just a threat, while the reality of a costly strike hit home--briefly--in February. For better or worse, both sides may finally grab this deal as the best they can get.

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