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Atlas Air, Pilots Union Don't Appear To Let Contract Talks Go Gently Into That Good Night


There is a chance that cargo airline Atlas Air Worldwide Holdings, Inc. (NYSE: AAWW) and its nearly 1,800 unionized pilots will hunker down around a bargaining table over the next few weeks or months and hammer out a contract to end a contract impasse well into its third year. Judging by the commentary from both sides, however, it doesn't look likely.

No sooner had the word gone out on August 26 that Arbitrator George Nicolau had denied the pilots' request to force direct bargaining and instead issued an award for an arbitrated settlement than both sides cranked up their grievance machines. The pilots, represented by International Brotherhood of Teamsters union Local 1224, vowed to keep fighting for what they said was a contract that meets industry standards. Capt. Robert Kirchner, who heads the council representing Atlas' pilots, said in an August 27 interview that the members' overwhelming reaction is to "stay the course" and not cave in to a sub-standard contract. 

Atlas' pilots have long alleged that they make about one-third less than pilots at other cargo airlines who operate the same aircraft type. They also contend that pilots are overworked, understaffed and are victimized by poor scheduling and by management's failure to grasp how its operations have changed over the years from an emphasis on flying heavy international cargo to serving the high-pressure and demanding e-commerce market.

Management sought a favorable award from the arbitrator knowing that an arbitrated settlement rarely benefits airline labor, according to the union. The local has acknowledged that Nicolau's decision puts it at a disadvantage. Yet it remains defiant.

"If Atlas thinks it is going to jam this down our throats, it will lose," Kirchner told FreightWaves late last week before the arbitrator's award was announced.

Atlas, meanwhile, sounded anything but conciliatory for a company that had notched an important legal victory. "It is now clearly established that the union's behavior has contributed directly to the delay in securing a new contract. Importantly, had the union adhered to their contractual and legal obligations, a new contract would have been finalized by now," the company said in a statement following Nicolau's award.

In its August 26 statement, Atlas said it "stands ready to accelerate" the pace of talks once the union presents a comprehensive economic proposal and, more importantly, a pilot seniority list within 45 days that integrates Atlas pilots with the 300 or so unionized pilots of Southern Air, a cargo and charter carrier which Atlas acquired in January 2016 that still operates separately under its own federal airworthiness certificate. The receipt of an integrated seniority list is critical to starting the clock that moves the contract process forward. Depending on the source, the two sides have are about one-third to one-half of the way through arriving at an agreement; Atlas says it's the former, while the union says the parties are about one-third to 40 percent of the way through.

The union has known about the seniority list requirement since it was first informed of the merger, Atlas said in its statement. "Union leaders represent both pilot groups and can assemble the list, but have admitted in legal proceedings to withholding it for maximum leverage," the company added.

The Teamsters said the 45-day deadline is impossible to meet. The protocol involves multiple steps to complete, it contended. Any errors that result in a pilot being placed in an incorrect position on the list could cost that pilot thousands of dollars in foregone wages, and lead to a lawsuit against the Teamsters. Merging the seniority lists would take at least 90 days, in his words, "to do it right." 

The union said previously that it would furnish a seniority list once a contract was agreed to and ratified, and Atlas and Southern flight operations were placed under one airworthiness certificate from the federal government. The arbitrator's award effectively moots that request, though.

Under the Railway Labor Act (RLA), the 1926 federal law governing labor relations in the airline and railroad industries, contracts do not expire. Rather, they become "amendable." The law makes it extremely difficult for workers to strike or for management to impose a lockout. The idea behind the many hoops is to keep the two critical industries operating and both sides bargaining. The Atlas contract with its pilots became amendable in 2016.

Tensions flared anew a couple of weeks ago when a federal appeals court upheld a lower court decision enjoining the pilots from engaging in work slowdowns, taking excessive sick days on short notice, and refusing to work overtime shifts. Atlas had sought the lower court injunction after failing to convince the union to change its behavior, which the company said was aimed at pressuring it to cave on contract talks. Atlas then reported subpar second-quarter results, which it blamed in part on labor-related disruptions that it did not publicly elaborate upon.

As both sides bicker and dicker, the company's customers are watching with increasing antsiness, knowing the clock is ticking down towards the start of peak season when reliable air operations will be critical to meeting delivery commitments. The biggest concern is whether Atlas, which the union has said is suffering from pilot attrition, will have sufficient labor to meet its obligations. Amazon.com, Inc. (NASDAQ: AMZN), which uses about 20 percent of Atlas' 127-plane fleet, took the rare step a few days ago of issuing a statement excoriating both sides for being unwilling to "work towards a reasonable compromise. This is contrary to the interests of Atlas, the pilots, and the customers they both serve. We have an obligation to deliver to our customers, and so do they."

Citing Atlas' data, the union said that the carrier has lost 168 pilots through July 2019, after losing 277 pilots in 2018, 198 in 2017, and 100 pilots in 2016. Retirements during those years typically account for about 35 of those departures, according to Kirchner. Through the first seven months, Atlas recruited 341 pilots, the union said, again citing carrier data. Of those, about 204 were hired, the union said.

Kirchner said it is impossible to determine how many of the 204 hires were part of the 168 that departed. He claimed, however, that those who left had significant tenure with Atlas.

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