United Air Workers Face Biggest Pension Default in U.S. History

A sudden storm that had blown into the Bay Area the night before broke just as unexpectedly on April 28, less than an hour before a spirited rally against pension cuts and concessions at United Airlines took place at San Francisco International Airport.

It was a grassroots effort sponsored by the Aircraft Mechanics Fraternal Association (AMFA), and some 150 mechanics and other workers, mainly rank-and-file members of the Machinists union (IAM), lined the street in front of United Airlines' maintenance base.

With handmade signs that said "U.S. Government: Hands Off My Pension" and "No Pay Cuts to Fund Mismanagement," the workers enjoyed broad support from carloads of flight attendants, baggage handlers, customer service agents, and other workers who honked and waved enthusiastically.

It was a rare moment of public unity for airline workers, the first in San Francisco since January, when mechanics rejected the company's proposed $96 million in annual five-year concessions and voted by 85 percent to strike. Stunned, United scrambled for a court order imposing temporary cuts through the end of May and have been in negotiations with the union since.

Mechanics remain the only workers to reject cuts since restructuring of the industry began in September 2001--and still are the only group to ever reject concessions during an airline bankruptcy.

Just days before the rally, United Airlines and the Pension Benefit Guarantee Corporation, the government agency that backs up private pension plans, had made the surprise announcement that they had cut a deal to terminate all employee pension plans. The deal will save the company $645 million over five years. In exchange, the PBGC will receive $1.5 billion in United’s convertible notes (bonds issued to pay off debts).

NO INPUT FROM THE UNION

AMFA had bargained in good faith, but United and the PBGC forged their sweetheart deal behind closed doors with no input from the union. Worse still, United and the PBGC fixed the termination date three days shy of a scheduled payment into the pension fund and banned workers from negotiating a new defined-benefit pension plan for 10 years.

The PBGC and United presented their deal to the bankruptcy court on May 10, where the judge ruled in United’s favor. It was history: the biggest U.S. corporate pension default ever.

But it wasn’t enough. United wanted $96 million more in concessions, such as cuts to sick time and holiday pay and giving management the authority to outsource the work of computer technicians and utility workers. AMFA negotiators reached a tentative agreement on concessions May 16; members have until the end of May to accept or reject.

MEMBERS REACT

Days before the April 28 rally, at a meeting of shop representatives—stewards for AMFA—members expressed outrage. One shop rep said 42 mechanics on his crew of 57 told him they would walk out if the company imposed its terms.

“They’re cooking us slow. There will be more to come,” said one. “We struck for a paid lunch!” said another, emphasizing how much higher the stakes are now than in 1979 when mechanics last staged a walkout, one that lasted 58 days.

MIXED REACTION

But when asked directly if mechanics would risk throwing United into Chapter 7 bankruptcy—liquidation—by striking, the response was mixed. United officials have said a strike would put an end to the company. One shop rep said emphatically, “If the president of the local came to us and told us to walk, everybody would walk. ”

The May 16 tentative agreement offers United the $96 million in cuts the company was demanding, but it improves job protections for mechanics. This is a critical issue, since more than half of United’s mechanics have been laid off since September 2001. Much of their work has been outsourced to non-union third-party vendors in right-to-work states and overseas.

The negotiators also mitigated some damage by cutting items outside the traditional wage-and-work-rule formula.

For example, the union wanted to completely eliminate mechanic participation in the company’s Success Sharing program. For mechanics the program had been of little benefit. While the average mechanic received a five percent bonus through the program this year, the average executive reaped upwards of 40 percent—with United’s Tilton taking 48 percent on top of his regular salary.

Adding to employee ire, United’s workers had been breaking all kinds of production records, yet the folks getting the biggest bonuses had yet to come up with a viable business plan to present to the bankruptcy court, almost two and a half years after filing Chapter 11.

While the union didn’t completely eliminate participation in Success Sharing, it did cut it down to 1 percent. Despite some improvements, the repackaged deal includes new language that could haunt AMFA and its members in the long term by committing workers to help cut jobs. The new agreement says employees “agree to fully participate in lean management and cooperate in implementing, executing, and maintaining Lean initiatives and goals.”

Still others talked about how many mechanics are looking for jobs elsewhere. One rep from the landing gear shop said four mechanics from his area have quit in the past month. And while company officials have told the union the attrition rate for mechanics is about nine percent, some in the union think it is higher.

Shop reps also said many members did not understand their role in a democratic union and are not preparing to mobilize. Despite great effort by AMFA officers to involve members, general membership meetings sometimes do not make a quorum, and participation in elections and referendums remains universally low. “We’re so ingrained with being told what to do,” lamented a components shop rep.

UP TO MEMBERS

AMFA officers do not give members recommendations on negotiated agreements. Leaders have said they will honor the will of members should they vote down the tentative contract, but in the end, the AMFA constitution gives final say to National Director O.V. Delle-Femine, who has the power to call a strike or not.

“We believe we have a right to strike,” said AMFA Local 9 President Joe Prisco. “But part of our tradition of not making a recommendation is also our Achilles heel,” he added, acknowledging that the practice binds the hands of leaders, keeping them from recommending a more decisive course.

Should AMFA strike, the stakes would be huge. A strike could bring down the oldest and second-largest airline in the United States. And it could cost the union one-third of its membership.

Since United mechanics are the first group of workers at a bankrupt airline to reject changes to their contract (AMFA members voted down a concessionary agreement in January), there is no legal precedent outlining what happens next. In normal negotiations, airline workers bargain under the Railway Labor Act (RLA), which prevents them from striking until they exhaust the RLA process. RLA negotiations for airline unions take on average 18 months to complete.

The current negotiations are in the domain of the bankruptcy court, but United says a strike would be illegal because it violates the RLA. AMFA disagrees and argues that since mechanics are not in negotiations governed by the RLA, they have a right to walk if the company changes their contract without their consent.

It is possible that mechanics will strike for a day or two, until the company gets the court to intervene. But with the potential power of the government and the legal system on United’s side, a strike could prove difficult. And if members vote the contract down, the question remains: will AMFA’s leadership back a strike?

HUGE STAKES

Should AMFA strike, the stakes are huge, since United mechanics make up more than a third of the union’s members. United CEO Glenn Tilton has said any disruption of service would mean the liquidation of the airline.

AMFA would lose a large section of its base and also risk bringing down the oldest and second-largest airline in the United States, something that likely won’t sit well with other unions in the industry.

On the prospect of United going under, Prisco is more pensive.

“Some would say this is preferred because at least the other airlines would be spared more concessions. I look at it more along craft lines,” he says. “AMFA will survive, but will not thrive. By that I mean AMFA will be unable to be effective until it participates in the changes the industry is undergoing. If United survives without liquidation and this work is shifted away from AMFA's control it will go to a third party, thus speeding the shift to outside [nonunion] vendors.”

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“There are currently no airlines left in the world that do all of their own maintenance in house. They all shift and share the specialized areas and it is a growing trend,” continues Prisco. “Those that get in the market, manage wisely, have labor that is skilled and motivated, will do well. Those that do not…well history will write them a nice epitaph and pass them by.”

Jennifer Biddle is a laid-off aircraft mechanic from United Airlines and Alaska Airlines, both AMFA-represented carriers.

AMFA Surrendered

Jennifer Biddle's article on mechanics at United Airlines is factually inaccurate and politically wrong.

The article falsely hypes AMFA as the only union to reject concessions. On the contrary, while the Machinists (IAM) consistently refused to even discuss an agreement until pensions were guaranteed, AMFA leaders proposed two settlements which surrendered pensions to the Pension Benefit Guarantee Corporation (PBGC). The first agreement, in January 2005, was rejected by the membership.

Biddle's article does, however, expose the deep demoralization among the AMFA ranks. Biddle complained of AMFA members questioning their ability to strike, their low attendance at meetings, and their sparse participation in elections.

The demoralization was further revealed on May 31 when an AMFA majority approved an agreement turning over their pensions to the PBGC, a devastating betrayal of 7,500 active members and several thousand retirees.

But Biddle faults the workers. She favorably mentions an AMFA shop floor rep who "said many members did not understand their role in a democratic union and are not preparing to mobilize." Yet she is quite impressed with AMFA leaders’ "great effort...to involve members."

How about Biddle, and Labor Notes, taking some of the blame? How about facing up to your own incredibly wrong-headed political mistake of misinterpreting the longstanding, high-pitched anger of mechanics against the IAM as a sure sign of political militancy?

Aimless, confused, and often misdirected resentment against a decade of concessions at United Airlines was not sufficient political justification to split the ranks of labor [when AMFA convinced UAL mechanics to leave the IAM], especially on the eve of a major assault on the workforce.

The isolation of mechanics was made worse because of AMFA's craft-union taunts about the unskilled workers 'holding us back."

This elitist craft-union prejudice crept into Biddle's article. She refers not once to the “unskilled” cabin cleaners section of AMFA. It's all about the mechanics.

The troublesome second-class “unskilled” members of AMFA won't matter after May 31; all cabin cleaners will be contracted out per the new agreement.

Where mechanics feel isolated and powerless in the fight against UAL’s termination of our pensions and other contract rights, IAM members are emboldened. A huge IAM strike vote was held in May that included record participation. The IAM also organized union allies throughout the United States and the world who were pledged to recognize our strike.

We would have been stronger had the mechanics stayed in the IAM and raised their concerns inside the union. Those who would have been interested in making the IAM more responsive to the membership and more militant against the carriers would have found allies. Instead, they selected a course that caused deep division.

Concessions All Around

I must admit I find it highly amusing that Carl Finamore, a Machinist union (IAM) official, would not see the irony in talking about the “elitist craft-union prejudice” of mechanics when the mechanics union was the only one to formally notify IAM, Pilot (ALPA) and Flight Attendant (AFA) leaders that their members would honor the picket lines of all work groups should the others strike.

The Airline Mechanics Fraternal Association (AMFA) , of course, received a cold shoulder from the other unions and received no such reciprocal guarantee.

However that did not deter AMFA members and officials from organizing across work groups to protest pension and contract cuts, breathing some life into that famous quotation of Eugene Debs, one AMFA Local 9 proudly displayed on their website for a month before the settlement: “Solidarity is not a matter of sentiment but a fact, cold and impassive as the granite foundations of a skyscraper.”

What did your local do Mr. Finamore to build that kind of solidarity between rank-and-file union members?

More to the point, the main difference between IAM concessions and AMFA concessions is that AMFA called them for what they were: concessions.

The IAM Negotiating Committee on the other hand unanimously agreed to sell a “Yes” vote to its members, promoting the IAM National Pension Plan as the key element in their “successful” bargaining strategy.

You tell me: do your members know there is a regulation in the IAM National Pension Plan that suspends pensions to retirees who go back to work? With United employee health care costs on the rise due to previous IAM givebacks, how are your members going to be able to retire without working to cover those costs? Do your members know that the IAM National Pension Plan trustees control how much pay out goes to retirees? Or, that as a multiemployer plan, their IAM pension will cap at little over $12,000 for 30 years of service should the plan fail and the government take over?

Nevermind that the IAM gave up its defined benefit plan to begin with and falsely claims a “No” vote means its members would become at will employees. AMFA on the other hand made sure its members knew United could only impose what had already been submitted to the court.

In other words, the worst thing you could say about AMFA is that it was honest about the consequences of a yes or a no vote.

Despite what you may think, the only purpose of my article is to show the difficult choices that lay before a particular section of workers (and by the way, in airline lingo utility workers are cleaners)—as well as the potential for unity between all workers in the airlines. This is why the article starts with a description of a rally of rank and file IAM and AMFA members and ends with the beginning of a discussion about Lean.

Perhaps as important, the article shows that AMFA is a union built on democratic principles. This means that officials do not recommend “yes” or “no” votes on elections, referendums or negotiated settlements. At all the internal meetings I attended leading up to the final vote, not one union official promoted a “yes” or a “no” vote, not even AMFA’s National Director O.V. Delle-Femine. The choice—and the potential sacrifice with or without a strike—was really that of the members, as it should be.

AMFA’s stance on democracy is one Debs would have agreed with. After all it was Debs who said, “I never had much faith in leaders. Give me the rank and file every day in the week. I would be ashamed to admit that I had risen from the ranks. When I rise it will be with the ranks, and not from the ranks.”