Air & Transportation International Air & Transportation S a f e t y B a r Association Law Reporter

ISSUE APR 2 0 1 8 President’s Messageb y J i m W a l d o n

Our 2018 IATSBA conference is traditions and camaraderie reign, just around the corner. Thanks to Tony the Club’s timeless elegance and INSIDE THIS ISSUE Jobe and to our Board Members we atmosphere are complimented have an incredible agenda lined up. with fine dining, delightful PAGE TWO We are excited about the conference. accommodations, an exceptional President’s Message Please join us May 16 - 20, 2018 in library and special events Jim Waldon Washington DC as we celebrate the designed to benefit all members. National Transportation Safety Board’s PAGE THREE 50th anniversary. FAA Chief Counsel We will be presenting this year’s Editor’s Column Charles Tripp and NTSB Chief Counsel winners of the Joseph T. Nall award Greg Reigel Kathleen Silbaugh are just a few of at the gala dinner. Every year we our esteemed speakers from both the present a Joseph T. Nall Safety Award PAGE FIVE government and private sectors. to a person or team of persons who Overturning Alaska have made a significant contribution to Guides Thanks to a few of our veteran aviation safety during his/her, or their Gary B. Garofalo & Jason members our Gala Dinner will be lifetime. I am happy to announce this E. Maddux held Friday evening, May 18 at the years’ recipients are the Honorable prestigious Army and Navy Club in Robert Sumwalt, NTSB Chairman, and PAGE EIGHT Washington DC. The following is an Honorable Christopher Hart, Member Professional Liability excerpt from their website: NTSB. Insurance Roger Hillman Where Traditions and Spring Conference Sponsors Camaraderie Reign We are excited about our PAGE TEN The Army and Navy Club has conference sponsors this year. US Airways: 1998-2008 been a prestigious home away Already the following firms and other Jeffery Small from home for the most illustrious companies have agreed to sponsor names in America’s military and our conference political history. The Club is a PAGE TWENTY-THREE private, members only, Five Star Holland and Knight IATSBA Conference Platinum Club on Washington, UPS Agenda DC’s historic Farragut Square. Federal Express Valued by members as a Paramount Law Group, PLLC PAGE TWENTY-EIGHT distinguished landmark where Kriendler & Kriendler IATSBA Conference conitnued on page 4... Sponsors

PAGE TWENTY-NINE IATSBA Membership Application JIM WALDON is a national aviation attorney. His practice focuses on aircraft transactions and regulatory matters. He is currently the managing partner at Paramount Law Group, an aviation law firm based in Seattle, Washington. Prior to founding Paramount, Jim worked as an aviation attorney at Lane Powell, Mokulele , PAGE and at TWA. 02 Editor’s Column b y Greg Reigel

Spring has finally arrived for won’t want to miss. Gary Garofalo and most of our members, including those Jason Maddux discuss the “Alaska in Minnesota, who received a “kick in Guides Case” and impact of the FAA’s the you know where” April snowstorm use of interpretations to side-step that dumped approximately 17” of the the rulemaking requirements of the white stuff on the Minneapolis-St. Paul Administrative Procedures Act. area. But here in Texas we have been enjoying spring for a while now. No, I Jim Hillman highlights the role do not miss those Minnesota winters. insurance may play during mediation GREG REIGEL is a At all. of a professional liability (e.g. medical, partner with the law firm legal, etc.) case and some of the of Shackelford, Bowen, McKinley and Norton, And with the arrival of spring you issues with which counsel in those LLP in Dallas, Texas. are also receiving this latest edition of cases should be familiar. And Jeffrey He has more than two the International Air and Transportation Small recaps the roller-coaster ride the decades of experience Safety Bar Association’s Reporter. Our US Airways pilots endured during the GARYworking HALBERT with airlines, is a charter partner companies, with the law fixed firm spring conference in Washington, D.C. tumultuous time from 1997 to 2008 Hollandbase & operators,Knight. He worksairports, out is just around the corner and to get you and the recurring issues they faced. repair stations, pilots, of their Washington, D.C. office ready for the conference, this issue of and mechanics, is a member ofand the other firm’s Aviationaviation and Transportation businesses Law the Reporter has a variety of articles I If you are still on the fence Practicein Teams. aircraft Gary purchaseserved in know you will find interesting. regarding attending the spring and sale transactions, the United States Air Force as a conference, in this issue you will find jet instructorregulatory pilot for compliance five years beforeincluding attending hazmat law school and at Our outgoing President, Jim the spring conference agenda and the Universitydrug and of alcohol Texas. testing,He then Waldon, provides us with a recap of speakers list. Once you read through contract negotiation, served as an Air Force Judge recent IATSBA events and activities. the anticipated presentations, I think Advocateairport forgrant almost assurances, twenty yearsairport before retiring leasing, in the aircraft grade He also gives us a sneak-peak at you will agree that this conference of Colonel.related Gary next agreements, joined the what you can expect at our upcoming has something for everyone, and then wet leasing, dry leasing, National Transportation Safety conference on May 16-20, which you some. BoardFAA (NTSB) certificate as its Generaland civil Counselpenalty where actions he served and for five generalyears before aviation joining Holland and & Knight.business law matters. National Officers Greg also has extensive President Jim Waldon Seattle, Washington experience teaching Executive Vice President James Rodriguez Washington, DC the next generation Member at Large Tony B. Jobe Madisonville, Louisiana of aviation and legal Secretary John Yodice Frederick, Maryland professionals including Treasurer Ray Speciale Frederick, Maryland in such courses as Membership Chairman Matt Robinson Denver, Colorado aviation law, aviation transactions, aviation Emerging Leaders Chairman Sean Barry New York, New York security, business law FAA Liason Linda Modestino Oklahoma City, Oklahoma and trial advocacy. Greg Immediate Past President Justin Green New York, New York holds a commercial pilot Regional Vice Presidents certificate (single-engine Alaskan Brent Cole Anchorage, Alaska land, single-sea and multi-engine land) with Central Elizabeth Vasseur-Browne Kansas City, Missouri an instrument rating. Eastern Jeffrey Small Coraopolis, Pennsylvania Great Lakes Brett Venhuizen Grand Forks, North Dakota New England Paul Lange Stratford, Connecticut PAGEPAGE Northwest Scott Brooksby Portland, Oregan Southern Wayne Ferrell Jackson, Mississippi 03 Southwest Mitch Llewellyn Ft. Smith, Arkansas Western Pacific John T. Van Geffen San Francisco, California Editor’s Column ...continued

As with each issue, I am Finally, if you would like to thankful to the contributors who have submit an article or if you have an stepped up to share their experiences announcement, news, a press release and expertise with our members. But or an event you would like to share having said that, I will once again pen with other IATSBA members, please my request for articles and content that send me the details so we can include would be interesting and useful to our your information in the Reporter. members for future issues. We need your help and contributions to make I hope you enjoy this edition of the Reporter the valuable member the Reporter. benefit I hope it is.

President’s Message ...continued

Tripp Scott Scholarship Program AOPA We presented a scholarship Schulte Booth award at the SMU Air Law Symposium The Aviation Law Firm in Dallas last month. Vincent Lesch, The Law Offices of Tony B. Jobe our membership director presented Avialex Law Group LLP the award.

Thank you to our sponsors! Many of you have been helpful Please contact me if you would like to in our efforts listed above. Thank you! sponsor our conference. If anyone else is interested in joining and/or being active with us, please visit IATSBA Social at NBAA in Las Vegas IATSBA.org. We are a great group of We had a great turnout last aviation law practitioners and we would October at the NBAA Conference love to have you join us. in Las Vegas at our IATSBA social. PAGE Thank you to all who attended. Jim Waldon, President, IATSBA 04 Overturning Alaska

Guidesb y G a r y B . G a r o f a l o & Jason E. Massux

If your office is anything like ours, That was the state of the law until the “Alaska Guides Case” is mentioned 1998 when the FAA published a “Notice JASON E. MADDUX is frequently and is highly revered. More to Operators” in the Federal Register a principal at Garofalo officially known asAlaska Professional “announc[ing] that Alaskan guides Goerlich Hainbach PC. His Hunters Association v. FAA, 144 F.3d who transport customers by aircraft practice encompasses a broad range of regulatory 1030 (DC Cir. ’99), the Alaska Guides to and from sites where they provide issues affecting domestic Case confirmed the view of the District guide services, with transportation and foreign commercial of Columbia Circuit Court of Appeals included in the package price of the and business aviation operators. He also that “[w]hen an agency has given its trip, henceforth must comply with the assists clients with regulation a definitive interpretation, regulations of parts 119, 121 and 135, aircraft transactions and and later significantly revises that as applicable.” Id. at 1033. Specifically, conducting due diligence for aviation asset interpretation, the agency has in effect “[i]n the future the FAA would treat transactions. He holds a amended its rule, something it may these guides as commercial operators private pilot certificate. not accomplish without notice and or air carriers, transporting passengers comment.” Id. at 1034. In other words, for compensation or hire.” Id. for an agency to change an existing, definitive interpretation of its own rules, The Alaska Professional the agency must conduct a rulemaking Hunters Association and two Alaskan under the Administrative Procedures guide pilots petitioned the D.C. Court Act (“APA”). of Appeals to review the FAA’s Notice to Operators. Upon review, the DC The “Alaska Guides Case” Circuit followed its reasoning in a line concerned Alaskan lodges that offered of cases dating to 1997’s Paralyzed air transportation to and from their Veterans of Am. v. D.C. Arena L.P., remote locations, as well as side trips, 117 F.3d 579, and concluded, “[i]f FAA GARY B. GAROFALO is for the same flat fee that also included now wishes to apply those regulations a principal of Garofalo food, lodging, and guide services to these individuals, it must give them Goerlich Hainbach PC. for hunting and fishing. Since 1973, an opportunity to comment before He has over 50 years of experience advising the Federal Aviation Administration’s doing so. The Notice to Operators was clients in aviation (“FAA”) Alaska Region “consistently published without notice and comment regulatory and aircraft advised guide pilots that they were not and it is therefore invalid.” Id. at 1036. transactional matters. He has served on FAA governed by regulations dealing with rulemaking committees commercial pilots.” Id. at 1031. This For nearly 16 years, to the and NBAA industry meant, among other things, the guide aviation law practitioner, the Alaska committees. He also was a founding member of pilots did not have to hold air carrier or Guides Case represented a decisive what is now IATSBA. He commercial pilot certificates issued by victory by the little guy against the is a licensed and active the FAA. The lodges also did not have big bad, overbearing federal agency. private pilot. to hold air carrier certificates. Though FAA, like any federal agency, PAGE is accorded great deference when 05 Overturning Alaska Guides ...continued

interpreting its governing statute and of Labor’s favor on other grounds, implementing regulations, according the D.C. Circuit Court of Appeals to the D.C. Circuit Court of Appeals, if reversed citing the Paralyzed Veterans the FAA wants to change an existing, precedent. The D.C. Circuit Court of definitive interpretation, it must do Appeals “concluded that the 2010 so through notice and comment Administrator’s Interpretation had to rulemaking. Unfortunately for the be vacated” because a notice-and- Alaska guide pilots, that all changed in comment rulemaking had not been March 2015 when the U.S. Supreme used to overturn the prior, conflicting Court decided Perez v. Mortgage interpretation. Id. at 1206. Bankers Association, 135 S.Ct. 1199 (2015). Enter the Supreme Court, which disagreed. After confirming Mortgage Bankers Association that the Department of Labor’s 2010 concerned the Department of Labor’s interpretation was an interpretative rule classification of mortgage-loan under the APA versus a legislative rule, officers. In 2006, the Department of the Court held that “§ 4 [of the APA] Labor “issued an opinion letter finding specifically exempts interpretative that mortgage-loan officers fell within rules from the notice-and-comment the administrative exemption under” its requirements that apply to legislative current regulations, meaning mortgage- rules.” Id. As such, the doctrine loan officers were not subject to the Fair established by the D.C. Court of Labor Standards Act’s minimum wage Appeals in the Paralyzed Veterans line and maximum hour requirements. of cases, including the Alaska Guides Mortgage Bankers Association, 135 Case, “is contrary to the clear text of S.Ct. at 1205. However, in 2010, the the APA’s rulemaking provisions, and Department of Labor issued a new it improperly imposes on agencies interpretation withdrawing the 2006 an obligation beyond the maximum interpretation and concluding that procedural requirements specified in mortgage-loan officers do not qualify the APA.” Id. Moreover, “[b]ecause an for the administrative exemption, i.e. agency is not required to use notice- they were subject to the Fair Labor and-comment procedures to issue an Standards Act’s minimum wage and initial interpretive rule, it is also not maximum hour requirements. required to use those procedures when it amends or repeals that interpretive The Mortgage Banker rule.” Id. As such, the Department of Association (MBA) challenged the new Labor’s 2010 interpretation was validly interpretation before the District Court adopted. PAGE of the District of Columbia. Though the 06 District Court ruled in the Department Overturning Alaska Guides ...continued

It is unclear what, if any, action Flight Standards Service, from FAA ever took in response to the Alaska Rebecca MacPherson, Assistant Chief Guides Case, though Congress may Counsel for Regulations (Mar. 30, have tied the FAA’s hands. Section 2011). At the same time, the FAA has 732 of the Wendell H. Ford Aviation published proposed interpretations Investment and Reform Act for the and requested comments when there 21st Century required Alaska guide will be a conflict between a prior pilot operations be regulated under and a proposed interpretation. See 14 CFR Part 91. That legislation Interpretation of Flight Time Limitations, also directed the FAA to conduct a 80 Fed.Reg. 19251 (Apr. 10, 2015) rulemaking codifying that requirement and Letter to Aaron Enzer from Lorelei along with a few specifics enumerated Peter, Acting Assistant Chief Counsel in the legislation. for Regulations (Aug. 24, 2015).

Interestingly, an item currently It also is unclear what actions appears in the FAA’s regulatory agenda the FAA will take regarding Alaska titled “Regulation of Flight Operations guide pilots in response to the Supreme Conducted by Alaska Guide Pilots,” Court ruling. With the above long-term which states it is in response to this rulemaking in progress, our guess is statutory directive. Though that law precious little. Whether the FAA does went into effect in April 2000, the FAA or does not, without the Alaska Guides did not initiate the rulemaking process Case being mentioned at least once a until May 2010 and according to the week, our office will never be the same. regulatory agenda, has made no progress since then. The FAA may turn its attention to this project someday.

The overturning of the Alaska Guides Case may have no practical impact on how the FAA conducts business. In other contexts, the FAA has not adhered to the Alaska Guides precedent in the first instance. For example, the FAA Chief Counsel has issued an interpretation overturning a prior interpretation by the same office or a regional counsel’s office without providing notice and comment. PAGE See Memorandum to John Duncan, 07 Manager, Air Transportation Division, Professional Liability Insurance b y : Roger Hillman

INSURANCE: THE ELEPHANT IN THE ROOM IN PROFESSIONAL LIABILITY MEDIATION

In the preparation for and provide that, if the insured refuses to participation in mediation, it is consent to a settlement acceptable to imperative that counsel, both the claimant and found reasonable by for plaintiffs and defendants, be the carrier, the coverage going forward conscious of the critical role insurance shall be limited to the amount of the has in resolving any liability matter. proposed settlement and defense Personal (e.g. auto, homeowners) and expenses incurred to that date. commercial (e.g. CGL, professional liability) insurance policies impose on Settlement of a professional the insurer the “duty to defend” any suit liability matter has consequences or claim under the policy. Coextensive for the defendant well beyond the with this is the carrier’s right to control depletion of his or her insurance this defense including the decision to policy limits and a damaged ego. In settle which rests exclusively with the the case of a healthcare provider, any carrier. such settlement must be reported to the National Practitioner Data The exceptions to this exclusive Bank (“NPDB”). This is a Federal right to settle are professional liability clearinghouse that maintains policies (medical, legal). These information (to a great extent negative policies universally include a “consent information) on healthcare practitioners, ROGER HILLMAN is an to settle” clause, which provides including malpractice verdicts and attorney at Paramount that the carrier will not settle any suit settlements. The NPDB is accessed Law Group, PLLC in or claim without the consent of the whenever a practitioner applies for Seattle, WA. After over ten years as Senior Vice insured. This often results in personal employment, credentials, preferred President of Claims for counsel for the insured participating in provider status, and professional three national insurance the mediation, even if insurance limits liability insurance. In addition, a report carriers, he resumed his litigation practice in aren’t at play. Policies differ on the to the NPDB is, in turn, reported to the the Northwest. Roger treatment of a settlement that the carrier applicable state licensing authority. In concentrates his practice finds reasonable and warranted but to many states, including Washington, on health care and insurance matters, while which the insured refuses to consent. this report triggers, at a minimum, a also handling aviation Some policies allow the carrier to settle disciplinary investigation. Any of these litigation. without the insured’s consent, if it finds could result in a significant negative said consent to be “unreasonably” impact on the practitioner. PAGE withheld. Other policies may also 08 Professional Liability Insurance ...continued

While the consequences Such a policy adds another wrinkle of a liability settlement on other to mediation. In a high value case, in professionals (lawyers, accountants, which demand is at or above policy etc.) are not as draconian as on limits, by not settling, thus requiring the healthcare professionals, they still defense to continue to incur legal fees may be substantial. Such settlements, and costs, plaintiff must be cognizant whether of a suit or a claim, should that the funds being spent going (must) be disclosed to potential forward reduce the amount available employers and insurers. This albatross for settlement. In other words, he or will follow the professional throughout she is spending “his or her own money.” her or his career. Awareness and consideration of Many professional liability these factors going into the mediation policies are “self-reducing”; i.e. of a professional liability claim or defense costs are included in, rather suit will increase the prospects for a than above and beyond, policy limits. successful resolution.

PAGE 09 US Airways: 1998-2008 b y : Jeffery Small

This article traces the events experienced by the US Airways pilots during the period from 1998 to 2008. From optimisim with new management, and the pormise of major expansion followed by 9/11 and the events that resulted - two bankruptcies, the loss of their pension plan and constant demands for concessions to keep the company in business, and then a merger and eventual decertification of their union. The decade was quite a turbulent period for the pilots employed by US Airways. COLLECTIVE BARGAINING AND LABOR RELATIONS UNDER THE RAILWAY LABOR ACT: THE TUMULTUOUS DECADE OF THE US AIRWAYS PILOTS FROM 1998-20081

1 Any opinions expressed in this article are those of the author only and are not to be attributed to the author’s former employer, the Air Line Pilots Association.

I. A Brief History of the Carrier Wolf had been president of Continental US Airways was founded in Airlines, Republic Airlines, Tiger 1939 as . In 1949 International and . He the company switched from airmail had successfully managed the merger to passenger service and became or sale of Republic, Tiger and United. . The absorbed In early 1997 US Air changed its Lake Central and (in name to US Airways and adopted new 1968 and 1972 respectively) to become corporate branding to identify itself as a major regional carrier headquartered a major domestic and international in Pittsburgh, Pennsylvania. In 1979 airline. Allegheny Airlines changed its name to

JEFFERY SMALL serves as US Air. The company began expansion In 1997 the US Airways pilots the Eastern Regional Vice efforts beyond the northeastern achieved significant gains in wages President of the IATSBA. region, completing purchases of and benefits in their new collective During the period covered by this article he was the Pacific in 1988 and bargaining agreement (the “CBA”) with ALPA MEC Coordinator in 1989. In 1992 the carrier. The CBA was designed to (senior attorney) for the US Air began operation of the former bring the US Airways pilots’ wages and US Airways pilots. when it purchased a productivity to “parity plus one percent” 40% stake in the company. (In 1997 with the other major carriers (American, US Airways bought the remainder of Delta, Northwest and United). The the Trump Shuttle and merged the pilots achieved major gains in the operations into US Airways on July 1, new contract, including adding 2000.) industry leading widebody pay rates in PAGE anticipation of acquiring the equipment. In 1996 Stephen Wolf and Concurrently, management embarked 10 Rakesh Gangwal joined the company. on a massive expansion program. The US Airways: 1998-2008 c o n t i n u e d

largest purchase of equipment by any to feed the carrier. (The other carrier was announced: 400 Airbus major carriers had realized this need A320 aircraft were to be acquired by and were establishing small jet systems US Airways. (120 firm orders were to feed their mainline operations.) US placed at that time.) By early 1998 Airways was limited by the contract US Airways was positioned to become language carried forward from the old one of the major world airlines. regional agreement, which allowed only minimal code sharing and use of The management team of Steven small jets under the US Airways livery. Wolf and Rakesh Gangwal originally Over the next decade management planned to sell the airline. However, continually attempted to obtain when it became apparent that no additional rights to use small jets in buyers were interested they attempted the US Airways system. This demand to expand and manage the carrier. became a constant issue between the pilots and management since the pilots II. Recurring Issues During the saw the use of small jets, especially Decade: those flown by commuter airlines, as a serious threat to their job security. A. The Company was not the right size. C. The Fundamental Changes US Airways was not the proper Caused by 9/11. size to effectively compete. The US Airways was the first airline company had outgrown its regional affected by the profound changes in the roots. With the acquisition of Piedmont airline industry caused by the events and PSA, US Airways had a national of 9/11. The fact that the carrier had presence. However, it was not the a dominant presence in the northeast proper size to compete with United, and the closing of Washington National American, or Delta. Since it did not Airport, where US Airways was the have an international route structure largest carrier, caused an immediate it also was not well positioned to crisis for the carrier. For the carrier to compete with Northwest or Continental survive, major changes needed to be Airlines. This was the challenge faced made to the carrier’s cost structure. by the new management in 1998. After it became apparent that the sale D. Labor was the “weakest of the carrier or merger with another link” in the carrier’s cost structure. carrier was not possible vigorous After 9/11 huge concessions expansion was undertaken to address were asked of the labor groups since this problem. labor was the most significant area of cost that could be cut. The other B. The Need for Small Jets. major costs of running the airline had In the negotiations that led to the very limited potential for savings. Fuel, PAGE signing of the 1997 CBA the company airline maintenance and acquisition, 11 failed to anticipate its need for small jets US Airways: 1998-2008 c o n t i n u e d

landing fees and the like had limited G. The 2005 Merger with potential for reduction. led to the decertification of ALPA as the E. As US Airways situation bargaining agent of the US Airways continued to deteriorate the anger pilots. of the rank and file increased. After the two bankruptcies, the When the initial concessions loss of the pilots’ pension and the other proved inadequate to return the concessions the US Airways pilots company to profitability, additional were already dissatisfied with their concessions became necessary. The union, the Air Line Pilots Association line pilots became more frustrated as (“ALPA”). When the merged seniority management demanded additional list (arbitrated under the ALPA Merger give backs. One difficulty was the Policy) was released, the US Airways union leadership’s limited ability to fully junior first officers, feeling that their communicate the significance of the seniority rights were unjustly diminished company’s financial problems since under the arbitrator’s award, led a they were bound by confidentially revolt against their union. Ultimately, agreements. In addition, some union ALPA was decertified and the US leaders refused to acknowledge the Airline Pilots Association (“USAPA”) depth of the company’s difficulties. This became the pilots’ bargaining agent. caused many of the line pilots to refuse The stated goal of USAPA was to to believe that additional concessions avoid implementation of the arbitrated were necessary for the company to seniority list. continue in business. By the time the company contemplated a second III. Chronological Sequence of bankruptcy filing the union leaders who Events—1998-2008 controlled a majority of the votes on the union’s governing body, the Master 1998-1999 Optimism with New Executive Council (the “MEC”), refused Management to support management’s demands. The pilots of US Airways were optimistic. A new management had F. The Pilots Seniority arrived. ALPA had just completed Dilemma. negotiations of the new contract, Fearing the demise of the effective on December 4, 1997, company, many pilots considered which improved working conditions leaving US Airways. However, signing and promised parity with the major on with another carrier meant being carriers. Management had vigorous placed at the bottom of that carrier’s expansion plans. Expansion meant seniority list. Of course, furloughed new vacancies and upward mobility pilots had no choice. Nonetheless, for the pilots. No one knew that 1999 many pilots who had jobs at US would be the last profitable year for the PAGE Airways decided to leave the employ company until 2006. Between 1995 of the company since they feared and 1999 the company had reported 12 possible liquidation of the airline. approximately $2 billion in profits. US Airways: 1998-2008 c o n t i n u e d

The future looked bright with new job On July 27 an announcement opportunities as expansion began. was made that the United merger had been terminated. It was stated 2000 The Company realizes the need that regulatory issues had caused the for small jets and tries to merge deal to collapse. Also, it appeared The company’s need for that United’s offer to buy the stock of additional feed from small jets was US Airways at $51 a share was too partially remedied when Letter of generous. Agreement 79 was signed. That agreement expanded the permissible On August 15 President Rakesh number of Small Jets (“SJs”) that Gangwal announced a new plan for could be flown under the US Airways US Airways. It appeared that the livery by 35. In exchange for parity expansion plans may have been too review modifications and increases in optimistic. And since the company the minimum growth commitment, the had planned to merge with United, company could use SJs having up to little attention had been paid to the 50 seats. deteriorating competitive position of the carrier while the merger was pending. On May 24, 2000, a merger Thus, Plan “B” was Announced by between US Airways and United President Gangwal: The airline would Airlines was announced. United be downsized with SJs flown on the offered to pay $51 a share for US mainline. Airways stock, substantially above market value. All labor negotiations On September 11 the terrorist ceased, with merger issues taking attacks occurred, with all commercial priority. Management became aviation operations suspended for “singularly focused” on consummating two days and Reagan National Airport the merger. During the next year the (“DCA”) closed to all air traffic. Phased company lost competitive position in reopening of DCA did not begin until key markets as it devoted resources to October 4, 2001. Although 9/11 the merger. The company reported a created a crisis for all US commercial loss of $165 million for the year. airlines it was devastating for US Airways. The shutdown of DCA hit 2001 Abandonment of UA merger, US Airways hardest since the carrier retrenchment and 9/11 accounted for 43% of the DCA flights Under the 1997 CBA the US prior to 9/11 and DCA was one of the Airways pilots would be brought to wage carrier’s major hubs. parity with the major carriers. When the first parity review was completed, On November 27 President the US Airways pilots received an Gangwal resigned and received a adjustment increasing hourly rates by multimillion dollar severance package. PAGE 16.99% effective May 1, 2001. The company reported a loss of 13 $2.1 billion for the year. US Airways: 1998-2008 c o n t i n u e d

2002 Urgent need for employee The total package negotiated with concessions to stay in business; ALPA granted the company 85% of its first Restructuring Agreement is request­-approximately $465 million in negotiated—company declares yearly concessions for 6 ½ years. bankruptcy CEO Wolf personally conducted On August 8, 2002 the ratification road shows announcing the need for vote was completed with pilots voting employee concessions. To continue in favor by 75%-24%. On August in business, the Company needed to 11, 2002 Restructuring Agreement I achieve major cost reductions from became effective, retroactive to July 1, its labor groups to secure a loan from 2002, upon signing by ALPA President the Airline Transportation Stabilization Capt. Woerth. Board (“ATSB”). On August 11 the company filed On March 7, President Wolf for bankruptcy protection. announced his resignation. He also received a multimillion dollar severance On October 30, 2002 the package. On March 11 David Siegel company informed the MEC that became the new CEO and brought a restructuring concessions were not new management team with him. adequate because of revenue shortfall and additional yearly concessions of On May 1 the second parity $400 million were needed - one half to review pursuant to the CBA was come from labor. completed and the pilots received a 16.07% increase in hourly pay rates On November 7, 2002 the effective May 1, 2002. However, MEC passed resolutions authorizing later in May the company unveiled its additional SJ relief and continued Restructuring Plan in a meeting with discussion of company’s needs for all the carrier’s unions. On May 21 concessions. the company met with ALPA; explains details of restructuring demands for Following further intense pilot group. Over $500 million in pilot negotiations, on December 13, concessions are needed. The Union’s 2002 the MEC ratified Restructuring governing body, the MEC authorizes Agreement II authorizing additional Restructuring Negotiations. productivity and wage concessions valued at $101 million yearly and After a month of intense additional pension concessions valued negotiations, on July 13, 2002 the MEC at $78 million yearly. agreed to send out the company’s “final offer” to pilots for ratification. 2003 Termination of Pilots’ Pension The company wanted an agreement Plan, War, New Investments PAGE with the pilots in the hope that the allow company to exit bankruptcy other employee groups would then In January 2003 the company 14 also agree to its concession demands. received its second conditional loan US Airways: 1998-2008 c o n t i n u e d

approval from ATSB. On January 30, $1 billion) company emerged from 2003 the company announced that it bankruptcy. must terminate Pilots’ Defined Benefit Pension Plan (the “Plan”) to obtain the April 4, 2003: David G. Bronner, ATSB loan and then issued a “Notice RSA Chief, becomes Board Chairman of Intent to Terminate” to all Plan participants. May 12, 2003: Having obtained additional flexibility to fly SJs under In February 2003 ALPA filed a the US Airways livery the company formal objection in the bankruptcy court announced order for 85 EMB-170 opposing the company’s proposed aircraft to be flown by Mid Atlantic termination of the Plan. Airways (“MDA”), a division of US Airways. Flying the aircraft as a division On March 1, 2003 the bankruptcy of the company allowed operation of court ruled that the company’s request the aircraft at a lower cost since the to terminate the Plan is permissible mainline contract did not apply. under ERISA and further held that the question of whether termination December 16, 2003: The is permitted under the CBA must relationship between management be decided by the System Board of and ALPA was deteriorating; MEC Adjustment, not the bankruptcy court. Chairman called for removal of The court also ruled that the company company CEO David Siegel. could enter a follow-on Defined Contribution Plan (the “DC Plan”). The company ended the year with an operating loss of $250.5 million; March 19, 2003: Bombing however, due to the reorganization net of Iraq began; Company reported income was listed as $1,460.9 million. bookings down 40%. Nonetheless, the year-end auditor’s report stated the company’s situation March 22, 2003: MEC agreed “raises substantial doubt about its to follow-on DC Plan and contractual ability to continue as a going concern.” modifications; ALPA withdrew its opposition to termination of pension 2004 Management changes, plan. additional concessions needed, company again files for bankruptcy March 28, 2003: Pension February 20, 2004: David Benefit Guarantee Corporation Bronner and Bruce Lakefield (from (“PBGC”) approved Pilots’ Modified RSA) spoke to the MEC in Charlotte. DC Plan. MEC passed a resolution stating that the Association will “participate in the March 31, 2003: Through creation of a plan to return US Airways PAGE an investment from the Retirement to profitability.” Systems of Alabama (RSA) of $240 15 million and ATSB loan funds (total of US Airways: 1998-2008 c o n t i n u e d

March 12, 2004: US Airways for $295 million in additional yearly Group reached agreement to repay cost reductions from the pilot group. $250 million of the $1 billion loan (90% guaranteed to the ATSB); the amount June 10, 2004: Transformation owed to ATSB was reduced by $225 negotiations commenced between the million. company and ALPA with presentation of Association’s Transformation April 2004: MDA began revenue Program Term Sheet. flying of EMB-170 aircraft as a division of US Airways. Initial positions were September 6, 2004: filled by US Airways pilots furloughed Transformation negotiations concluded from the mainline. with presentation of company’s last proposal to the MEC. MEC, by roll call April 9, 2004: MEC removed vote, refused to send out proposal for Chairman and Vice-Chairman of membership ratification. Negotiations Negotiating Committee; the two other terminated. A second bankruptcy members resigned on April 12. New appeared to be imminent. Negotiating Committee took office and its first task was to present the September 12, 2004: The Consolidated Small Jet Agreement company filed for bankruptcy (“LOA 91”, negotiated by the previous protection. committee) to the membership for ratification. September 23, 2004: Negotiations resumed in bankruptcy. April 19, 2004: CEO David Siegel resigned and received a October 1, 2004: Tentative multimillion dollar severance package. Agreement reached by pilots’ Bruce Lakefield was appointed as Negotiating Committee and the CEO. CFO Neal Cohen resigned company; the resulting Transformation effective May 3, 2000 and received Plan cuts the company’s costs by an multimillion dollar severance package. average of $367.4 million annually over Dave Davis was then named CFO. 5 years. The Agreement, negotiated in bankruptcy, resulted in greater May 10, 2004: LOA 91 was concessions by the pilots than were ratified by 76%-24%. It replaced all proposed by the company prior to the relevant SJ agreements and granted September 12 bankruptcy filing. additional flexibility to the company in case it became necessary to sell the October 21, 2004: MDA aircraft or entire operation to Transformation Plan (“LOA 93”) was raise cash. ratified 58%-42%. In addition to other concessions, LOA 93 allowed larger PAGE May 17, 2004: The company SJs to be deployed at MDA (EMB- presented US Airways Transformation 190s) and other express carriers (CRJ- 16 Plan Pilot Cost Target to ALPA calling 900s). US Airways: 1998-2008 c o n t i n u e d

October 25, 2004: CFO Dave Corporation which would create the Davis resigned. sixth largest US carrier by capacity. The company stated the merger would 2005 Other US Airways Unions create the “First nationwide full service participate in cost savings, MDA is low-cost airline.” $1.5 billion was sold to raise cash, America West raised to finance the deal. Douglas merger is announced, US Airways Parker, President of America West is able to exit bankruptcy as a “low Airlines, would become President and cost carrier” CEO of the new entity. January 5, 2005: Flight Attendants ratified cost savings July 22, 2005: America West agreement. and US Airways received ATSB approval for merger. January 6, 2005: Bankruptcy Judge Stephen Mitchell approved July 23, 2005: America West the motion to terminate the IAM and US Airways merger cleared labor contract and approved a Department of Justice review. request to terminate the machinists and flight attendants pension plans. August 2, 2005: MEC voted to Concessionary agreements were also accept the profit sharing plan offered reached with other labor groups. under the company’s proposed Plan of Reorganization pursuant to LOA 93. January 13, 2005: US Airways and ATSB reached agreement that September 2005: US Airways provided operating cash through June and America West pilots, through a 30th. combined negotiating committee, finalized negotiation of the terms of a January 21, 2005: IAM ratified Transition Agreement. The Agreement the concessionary agreement. stated that the pilot groups would remain separate and covered by March 14, 2005: MDA was sold their employment agreements until to Wexford-Republic Holdings. The the “Operational Pilot Integration” transaction included a $125 million was completed. ALPA agreed not capital investment in US Airways by object to the Company’s Plan of Wexford and purchased options for Reorganization. The parties also MDA to include gates and slots for agreed that the company would obtain $110 million (within bankruptcy at EMB-190 equipment (large SJs) and US Airways’ option) or $58 million for fly the aircraft on the mainline. MDA outside of bankruptcy. Existing jet service agreement would apply to September 14, 2005: The Republic. Transition Agreement was approved PAGE May 19, 2005: A merger was by US Airways management and by announced between US Airways the US Airways MEC and the America 17 Group and West MEC. (The EMB-190 portion US Airways: 1998-2008 c o n t i n u e d

of the transition agreement was others were closed except for economic submitted for membership ratification; issues. the EMB-190 portion of the agreement was ratified by the pilots on October 1, 2006 Recalls begin, the Company 2005.) finally becomes profitable again, another attempt at a merger, and September 16, 2005: US Intra Union Issues Surface Airways Plan of Reorganization January 2, 2006: Through received Bankruptcy court approval. an alternate strike process George Nicolau was proposed by US Airways September 21, 2005: Purchase Merger Committee and accepted by of MDA was completed by Republic. America West Merger Committee as the arbitrator for the seniority September 27, 2005: US integration arbitration with America Airways exited bankruptcy; US Airways West, if necessary. Group finalized the transaction enabling America West and US Airways to begin February 10, 2006: US Airways operating under US Airways Group. announced recall of 55 furloughed The new US Airways began trading pilots. on the New York Stock Exchange as “LCC” (Low Cost Carrier). February 14, 2006: US Airways announced recall of approximately 400 October 24, 2005: ALPA flight attendants. Executive Council adopted resolution establishing the Policy Initiation Date Week of April 9, 2006: AAA and for the US Airways-America West AWA Merger Committees met pursuant merger, which started the formal policy to ALPA Merger Policy. Negotiations for merging the pilot groups of the two ended in September 2006. No carriers in accordance with the ALPA Agreement on an integrated seniority Merger Policy. list was reached. Issues related to the relative seniority of the pilot groups November 15, 2005: The (US Airways had a senior workforce US Airways and America West Joint and 1,750 pilots on furlough when the Negotiating Committee (the “JNC”) merger was announced while America and US Airways management began West has a relatively junior workforce negotiations over a joint contract. and was hiring) made voluntary agreement to a merged seniority list December 12, 2005: The JNC extremely difficult. reported brisk progress on closing administrative sections of the joint May 9, 2006: US Airways Group PAGE agreement (non-economic issues) to reported first quarter profit of $64 PAGE their MECs. Tentative agreements million. CEO Parker stated “looking 18 were reached in 10 sections and 4 forward we anticipate a very strong US Airways: 1998-2008 c o n t i n u e d

spring and summer and now expect to January 31, 2007: US Airways be profitable for the full year 2006.” abandoned its bid for Delta. CEO expressed his disappointment May 27, 2006: MDA operated with the Delta Creditors Committee, its final flight as a division of US stating the US Airways proposal would Airways. Furlough letters were sent have provided more value to Delta’s to 123 remaining MDA pilots. (The unsecured creditors than the Delta MDA operation started revenue stand-alone plan, but “it is now clear flights on April 4, 2004, with 365 that there will not be an opportunity pilots serving MDA. 66,153 flights with the Committee to move forward in were flown from April 4, 2004 until a timely or productive manner and as a May 27, 2006, carrying more than 3.3 result, we have withdrawn our offer.” million passengers.) Republic Airlines assumed control of all MDA assets. May 3, 2007: Arbitrator Nicolau released the seniority award. The November 15, 2006: US combined list was composed of a Airways proposed a merger with Delta series of ratios based on the number in a deal valued at approximately $8 of positions each pilot group had in billion in cash and stock. various categories as of 1/1/07. The most senior 517 East pilots were December 5, 2006 through placed above all the West pilots. Pilots January 26, 2007: Seniority arbitration were placed on the seniority list based hearings between the US Airways on whether they were active on the pilots and the America West pilots date the merger was announced. This commenced before Arbitrator Nicolau resulted in a West pilot with a hire date and two pilot neutrals from other ALPA of April 2005 being placed senior to a carriers. furloughed East pilot with a hire date of July 1988, a 17-year disparity. (The 2006: For the year 2006 US 1,750 East pilots who were on furlough Airways reported a profit of $303 when the merger was announced were million—the first annual profit since placed on the list as junior to the most 1999. junior West pilot who was active on that date). However, by the time that the 2007 The Proposed merger with seniority award was issued, more than Delta is abandoned, the result of the 300 East pilots had been recalled from merger arbitration between the US furlough and were in active status.1 Airways and America West pilots

creates a firestorm among the US 1 One of the Pilot Neutral members of the arbitration Airways pilots board submitted a dissenting opinion. He disagreed with the placement of the US Airways pilots who were on January 10, 2007: US Airways furlough at the date of the announcement of the merger, stating that most had been offered recall because of the PAGE raised its bid for Delta. enormous attrition on the East, and that their extensive service prior to being furloughed justified placing them 19 higher on the merged list. US Airways: 1998-2008 c o n t i n u e d

May 6, 2007: The seniority the efforts of the rival union to collect award caused a huge backlash among authorization cards. the US Airways pilots, especially the junior pilots who believed that they June 26, 2007: The US Airways had lost their seniority rights. The US MEC filed a lawsuit in the Superior Court Airways MEC passed a resolution of the District of Columbia against the requesting that the ALPA Executive America West MEC seeking to vacate Council receive a presentation from the Nicolau award. In addition, The the US Airways Merger Committee ALPA Executive Council established demonstrating “the invalidity of the the “Rice Committee” chaired by First Nicolau Award.” Vice President Paul Rice to work with both sides to assist in finding May 8, 2007: Negotiations for “practical solutions” which would the joint contract had continued since promote mutual career protections November 2005, after initial Tentative and improved pay, benefits, work Agreements were reached but made rules and job security. The Rice little progress; the company made its Committee held meetings through first economic proposal. Proposed September 2007 but was unable to pay rates were based on 3% increases resolve the issues. over then current America West rates. August 15, 2007: The US May 24, 2007: The ALPA Airways MEC withdrew its committee Executive Council received a members from joint contract presentation from US Airways and negotiations, stating that pay rate parity America West merger representatives. with West pilots must be granted before Action was deferred until another any further joint contract negotiations Executive Council meeting could be may be conducted. During the 1 ½ held in June 2007. years of JNC negotiations agreement was reached in only 12 of the 30 June 2007: USAPA, a rival sections and major issues such as union created by dissatisfied US scope protections and all significant Airways pilots, established a website economic issues remained open. and began collecting authorization Without the US Airways members, the cards requesting that the National joint contract negotiations were halted. Mediation Board (“NMB”) held a That action also gave USAPA more representation election to decertify time to collect authorization cards. ALPA and designate USAPA as the bargaining agent of the US Airways September 20, 2007: ALPA’s pilots. The stated goal of USAPA Executive Council found no basis was to void the Nicolau arbitration to set aside the seniority arbitration award and recognize the seniority award and concluded that no evidence PAGE rights of the US Airways pilots. With of impropriety or failure to follow ALPA the growing dissatisfaction with ALPA Merger Policy had been presented. 20 many union officials actively supported ALPA was required to submit the award US Airways: 1998-2008 c o n t i n u e d

to management and defend the award. was justified and would continue.

November 13, 2007: USAPA April 17, 2008: The NMB filed cards with the NMB requesting announced the results of the election. an election as the bargaining 5,238 pilots were eligible to vote. representative of the US Airways pilots. 4,977 votes were cast: 2,723 votes for USAPA (54.7%) and 2,254 votes 2008 The decertification of ALPA for ALPA (43.3%). On April 18 USAPA January 31, 2008: A was certified as the bargaining agent “Lock Down” was requested by of the US Airways pilots. ALPA President Prater and pilot representatives from US Airways and Postscript: The Seniority Integration America West began talks at a remote Issues were finally resolved only location (Aspen Conference Center at after the merger with American Wye River, Maryland) to discuss the Airlines issues separating the pilot groups. The Until the merger with American goal was to produce a comprehensive Airlines US Airways continued to contract counterproposal for both run separate pilot operations since MECs to review. Any comprehensive a merged seniority list between the proposal must adequately address former US Airways and America seniority implementation issues and all West pilots did not exist. Years of open joint negotiating issues for both litigation followed between the pilots. pilot groups. Talks concluded with no In February 2013, resolution on February 7th. and US Airways announced plans to merge. This rendered the seniority February 19, 2008: The NMB integration issues between the former authorized a representation election, US Airways Pilots and the former to be held from March 20 to April 17, America West pilots essentially moot 2008. since an integrated seniority list between the American pilots and both February 29, 2008: ALPA US Airways pilot groups would now be President John Prater requested that necessary. On April 8, 2015, a single US Airways Council 41 be placed operating certificate was issued by the into trusteeship since the Council FAA; US Airways officially became part 41 representatives were actively of American Airlines. supporting USAPA. The seniority integration issues On March 3 the ALPA Executive were concluded on September 6, 2016 Council met and approved the by a Board of Arbitration composed emergency trusteeship. of three eminent labor arbitrators. The arbitration was conducted in PAGE On March 28 the Executive accordance with the Allegheny-Mohalk Board held another special meeting Labor Protective Provisions which 21 and concluded that the trusteeship require integration of the seniority US Airways: 1998-2008 c o n t i n u e d

lists by a merged carrier in a “fair and Without the contributions of the pilots equitable manner”. The interests of the the company would surely have been three pilot groups were represented. forced to liquidate rather than survive Each group presented the Arbitration the two bankruptcies. The company Board with its competing proposal for came to the pilots first when it needed integration of the pilots. concessions knowing that the other employee groups would likely follow. The Arbitration Board concluded that all the pilot groups had experienced But the pilots (and to a large improved career expectations because extent the other employees) paid a of the merger, although the former heavy price for their jobs. In many US Airways pilots were the greater cases by 2008 they were earning only beneficiary. The Board also found that one half of what they had been earning the Nicolau Award, which was based on in 1998. Their working conditions were facts that existed in 2005 (and issued worse. Their pensions were gone. And in 2007) would not serve as a basis the optimism of 1998 was replaced by for its award since many changes had constant fear that their company would occurred since then. Instead the Board not survive during the dark days of this developed a hybrid methodology to decade. integrate the three groups in a fair and equitable manner. It concluded that As the challenges of survival the best way to accomplish that goal of the company continued the union was a methodology which weighted a became the bearer of the bad news pilot’s longevity at 15% and weighted a regarding the health of the company. pilot’s category and status at 85%. The ALPA became the vessel for the integrated seniority list was developed growing dissatisfaction of the pilots. on that basis. Certain conditions Add to that the perception that the and restrictions were added by the seniority rights of the US Airways pilots Board, for example, to honor protected were compromised by the arbitration positions reserved for the former TWA integration award of Arbitrator Nicolau, pilots in a previous agreement with issued under ALPA merger policy, and American and to ensure that flying the it is no surprise that the dissatisfaction large equipment would continue to be led to decertification of ALPA as the US equitably shared between the former Airways bargaining agent. US Airways and American pilots until December 31, 2020. However, the decade ended on a positive note for the US Airways IV. Conclusion pilots. With the America West merger The US Airways pilots were on and lower costs US Airways emerged a continuous roller coaster ride from as a formidable competitor well 1998 to 2008 and beyond. In fact, positioned to survive. And finally, the PAGE the continuous litigation regarding the American Airlines merger appears to integrated seniority list continued the ensure a bright future for the former 22 bumpy ride for another eight years. US Airways employees. PAGE 23 PAGE 24 PAGE 25 PAGE 26 PAGE 27 THANK YOU TO THIS YEAR’S SPONSORS:

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