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Arbitrator Denies Atlas Air's Pilots Bid To Negotiate; Imposes Arbitrated Settlement


In a legal victory for cargo airline Atlas Air Worldwide Holdings, Inc., (NASDAQ: AAWW) an arbitrator late August 26 denied Atlas' pilots request to negotiate their next contract and instead imposed an arbitrated contract process.

The award by George Nicolau, who has long experience in arbitrating airline disputes, was what Atlas sought. (The company did not immediately respond to a request for comment on the award.) The carrier has said the long-stalled talks could move forward once the carriers' pilots submitted a merged seniority list of pilots at Atlas and at Southern Air, a cargo carrier which Atlas acquired in early 2016 but which has yet to be integrated. The two carriers operate separately under their respective federal airworthiness certificates.

"The reality is that the union leaders have significant control over the timing of the new contract for our pilots," the company said in an August 23 statement. "In connection with Atlas Air's pending merger with Southern Air, the union need only tender the company an integrated seniority list, which would start the clock on a contractually defined period of bargaining after which any unresolved issues would be submitted" for arbitration.

Teamsters union Local 1224, which represents nearly 1,800 Atlas pilots, said it would be happy to furnish a merged list once pilots vote on and ratify a contract proposal and the two federal airworthiness certificates are combined. Southern has about 300 pilots.

In an August 23 phone interview, Capt. Robert Kirchner, who heads the council representing Atlas' pilots, said he expected Nicolau to reject straight bargaining in favor of an arbitrated settlement. In the interview, Kirchner said producing merged seniority lists prior to a contract being voted on and ratified gives Atlas too much leverage over the livelihoods of the combined pilot workforces.

Arbitrated settlements rarely end well for airline labor, Kirchner said. A similar scenario played out in the 2009-2011 timeframe when a settlement was imposed on pilots of Atlas and Polar Air Cargo, which Atlas acquired in 2001, he said. Then, the pilots agreed to Atlas' demands for work-rule changes in return for better pay and, perhaps more important, job security. Management's promises were never kept, he said.

Kirchner also expressed concern that discussions could now drag on for an indefinite period. Under the current contract, the two sides have nine months to bring a settlement forward for arbitration, he said. If that fails to occur, the dispute is turned over to another arbitrator, who would not be operating under a timetable or deadline. Two peak shipping seasons – 2019 and 2020 – could pass before a contract is arbitrated and takes effect, he said.

In the interview, Kirchner acknowledged that the union was behind the legal eight-ball, and that he was hoping for an "epiphany" at Atlas that would compel management to bargain in earnest. Currently, the two sides meet 3.5 days out of a month – they are meeting this week in Virginia – but only about four hours of that time is spent in serious bargaining, Kirchner said.

The parties are about one-third to 40 percent through the process, and Kirchner said a contract could be hammered out in three weeks if they met every day. The pilots' priority is job security, Kirchner said.

Atlas recently posted subpar second-quarter results that it blamed in part on labor-related disruptions. A federal appeals court upheld a lower court decision enjoining the pilots from engaging in disruptions such as taking excessive sick days and refusing to work overtime, actions that management said were undermining its operations. Pilots have charged Atlas with deliberately understaffing its pilot rolls, overworking and underpaying its crews, and failing to understand the changes in flying demands triggered by e-commerce delivery requirements.

E-commerce is a new phenomenon for a company like Atlas, which has spent most of its history flying heavy international cargoes for airlines, freight forwarders and big shippers. It allocates about 20 percent of its 127-plane fleet to Amazon Air, a unit of e-tailing giant Amazon.com, Inc. (NASDAQ: AMZN)

In an August 26 statement, the union local said it "will pursue all remaining legal options to avoid a contract that is resolved by an arbitrator and that robs pilots of their right to vote on it and ratify as needed. Noting that the impasse, which has lasted more than three years, is taking its toll on the pilots, the company's operations and finances, and investors' patience, the union local said Atlas must do right by all invested parties – current pilots, future pilots and investors – and settle a fair, industry-standard contract now." 

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