In The Matter Of: PREMERGER PILOTS OF CONTINENTAL v. PREMERGER PILOTS OF UNITED
SENIORITY INTEGRATION Vol. 7 May 12, 2013
Original File 0512131aalpa01.txt Min-U-Script® 1544
BEFORE THE ARBITRATION BOARD
ARBITRATORS DANA E. EISCHEN, ROGER P. KAPLAN, AND DENNIS R. NOLAN ------x In the matter of the seniority : integration between : THE PRE-MERGER PILOTS OF : CONTINENTAL AIRLINES :
AND :
THE PRE-MERGER PILOTS OF : UNITED AIRLINES : ------: In re: SENIORITY LIST INTEGRATION: ------x
VOLUME 7
MAY 12, 2013
The hearing in the above-entitled matter recommenced on the 12th day of May, 2013, at 9:04 a.m., at The Mandarin Oriental Hotel, Gallery Room, 1330 Maryland Avenue, SW, Washington DC 20024.
BEFORE: ARBITRATOR DANA E. EISCHEN, CHAIRMAN ARBITRATOR ROGER P. KAPLAN ARBITRATOR DENNIS R. NOLAN
Inabnet Court Reporting (703) 331-0212 1545
1
2 ON BEHALF OF THE PRE-MERGER PILOTS OF
4 DANIEL M. KATZ, ESQ.
5 Katz & Ranzman, P.C.
6 4530 Wisconsin Avenue, NW, Suite 250
7 Washington, DC 20018
8 (202) 659-1799
10 ON BEHALF OF THE PRE-MERGER PILOTS OF
11 UNITED AIRLINES:
12 JEFFREY R. FREUND, ESQ.
13 ROGER POLLAK, ESQ.
14 OSVALDO VAZQUEZ, ESQ.
15 Bredhoff & Kaiser, PLLC
16 805 Fifteenth Street, NW
17 Washington, DC 20005
18 (202) 842-2600
20
21
22
Inabnet Court Reporting (703) 331-0212 1546
1
2 ALSO PRESENT:
3 GREG SHOEMAKER, ESQ. - CAL
4 GRANT MULKEY, ESQ. - CAL
5 CAPTAIN JIM BRUCIA - CAL
6 CAPTAIN TONY MONTALTO - CAL
7 CAPTAIN SCOTT BUTCHER - CAL
8 FIRST OFFICER NEAL SCHWARTZ - CAL
9 CAPTAIN WILLIAM BALES - UAL
10 CAPTAIN STEPHEN GILLEN - UAL
11 FIRST OFFICER DAN MADRUGA - UAL
12 FIRST OFFICER JEFFREY RUARK - UAL
13 COURT REPORTER: JOSEPH INABNET
14 INABNET COURT REPORTING (ICR)
15 9250 Mosby Street, Suite 201
16 Manassas, Virginia 20110
17 (703) 331-0212
19
20
21
22
Inabnet Court Reporting (703) 331-0212 1547
1
2 WITNESSES
3 DANIEL AKINS:
4 Direct examination by Mr. Pollak 1549
5 Cross-examination by Mr. Katz 1682
6 DAVID SMITH:
7 Direct examination by Mr. Freund 1691
8 Cross-examination by Mr. Katz 1738
9 KIRK KOENIG:
10 Direct examination by Mr. Vazquez 1760
11 Cross-examination by Mr. Katz 1792
12 DANIEL MADRUGA:
13 Direct examination by Mr. Freund 1826
14 E X H I B I T S
15 EXHIBIT MARKED AND ADMITTED
16 UAL Akins, Pages 1 through 89 1548
17 UAL Smith, Tabs 1 through 13 1696
18 UAL Koenig, Tabs 1 through 4 1762
19 CAL X-9 1797
20 CAL X-10 1817
21
22
Inabnet Court Reporting (703) 331-0212 1548
1 P R O C E E D I N G S
2 ARBITRATOR EISCHEN: At the outset, let's
3 say thanks and sorry to all the moms that are here
4 today.
5 Happy Mother's Day.
6 MS. RANZMAN: Thank you.
7 ARBITRATOR EISCHEN: Back off the record.
8 (A discussion was held off the record, and United
9 Akins Exhibit, Pages 1 through 89, were marked for
10 identification and received into evidence.)
11 MR. POLLAK: Good morning.
12 The United pilots are going to call Daniel
13 W. Akins to the stand.
14 Good morning, Dan.
15 THE WITNESS: Good morning.
16 MR. POLLAK: Dan's resume can be found at
17 the outset of his exhibit book.
18 Dan is familiar with Dan.
19 MR. KATZ: Can I?
20 MR. POLLAK: Sure.
21 MR. KATZ: While he's straightening that
22 out, I think that since we have so many Dans in the
Inabnet Court Reporting (703) 331-0212 1549
1 room, including Dan Madruga, that we are just
2 Mr. Akins and Mr. Katz, here.
3 ARBITRATOR EISCHEN: All right.
4 MR. KATZ: The record will be clearer if
5 we do it that way.
6 ARBITRATOR EISCHEN: Yeah.
7 That's a good point.
8 Thereupon,
9 DANIEL W. AKINS
10 Called for examination by counsel for the
11 United Pilots, having been duly sworn, was examined
12 and testified as follows:
13 DIRECT EXAMINATION
14 BY MR. POLLAK:
15 Q So, Dan, I'm going to call you Mr. Akins.
16 Tough to do after all these years.
17 A See how long that lasts.
18 Q Yes.
19 MR. POLLAK: Mr. Akins' resume is at the
20 outset of this exhibit book. He has testified in a
21 number of these seniority integration proceedings.
22 He has actually done work for counsel on both sides.
Inabnet Court Reporting (703) 331-0212 1550
1 He is an expert of airline economics,
2 pilot negotiations, pilot compensation.
3 We're going to proffer him to discuss some
4 of those subjects today as an expert. And I
5 understand from -- that Mr. Katz will stipulate to
6 Dan's role as an expert on these subjects in this
7 proceeding.
8 MR. KATZ: What subjects was that?
9 MR. POLLAK: Airline economics, pilot
10 negotiations, and pilot compensation.
11 MR. KATZ: No objection.
12 ARBITRATOR EISCHEN: Thank you.
13 Good morning, Mr. Akins.
14 MR. POLLAK: Does the Panel have any
15 questions about Mr. Akins' qualifications?
16 ARBITRATOR EISCHEN: Gentleman?
17 (Panel replied no.)
18 BY MR. POLLAK:
19 Q Mr. Akins, this part is going to be the
20 most difficult piece of this. All right.
21 Mr. Akins, have you prepared some
22 materials to discuss with the Panel today?
Inabnet Court Reporting (703) 331-0212 1551
1 A Yes, I have.
2 Q And do you want to summarize the three
3 areas that you're going to testify about?
4 A I want to talk about, essentially, three
5 subjects.
6 The first of which is pilot compensation
7 and what sort of constitutes pilot compensation, how
8 it's measured, how companies view pilot
9 compensation, which includes other things besides
10 wages.
11 Pilot contracts are thick for a reason.
12 The wage piece is a couple of pages.
13 The second part is to discuss the
14 operation retirement of B-737s by both United and
15 Continental and the subsequent flying of B-737s
16 after the merger.
17 The third part is just an overview of
18 international operations from each carrier trying to
19 put a little more formalized notes on what Mo
20 discussed yesterday about the differences in flying
21 between the companies.
22 You can see that in reflected on maps, but
Inabnet Court Reporting (703) 331-0212 1552
1 you can also see it reflected in the types of
2 equipment that were operated on those routes.
3 And that's the third part of my testimony
4 today.
5 Q All right. Mr. Akins, in your exhibit
6 book, I believe the pages are divided into three
7 parts for the three subjects that you referenced.
8 And then the pages are numbered basically
9 1 through 89, and we will refer to them in the
10 record that way as page 1 or page 5 and so on.
11 Mr. Akins, can you turn to page 4?
12 And it's the first section of your
13 material on compensation about pay per pilot.
14 A Yes. It's a standard analytical device to
15 look at the rank of pilot pay on the average per
16 pilot head.
17 The information can be derived from the
18 Form 41 statistics collected by the Department of
19 Transportation.
20 Q What does the table on page 4 show?
21 A It's a snapshot of 2009, the last full
22 year before the merger took place.
Inabnet Court Reporting (703) 331-0212 1553
1 And it shows what was pretty consistent in
2 pilot pay during this time, that Southwest was the
3 highest average paid pilot group.
4 And that the network carriers were sort of
5 just below Southwest, including Continental at
6 150,000, you will note, in the blue bars, United at
7 125,000, and then the low-cost carriers on the
8 right-hand side with lower compensation.
9 This chart is reflective of a number of
10 things, not just the wage scale, the composition of
11 the pilot group, whether they were senior or junior
12 on that wage scale, whether they flew widebody or
13 narrowbody equipment, how many hours they worked,
14 and so forth.
15 So this is generally the lay of the land
16 for pilot pay for about the last five years in 2010
17 back to 2005.
18 Q Mr. Akins, if there was a difference in
19 the number of hours that one group flew versus
20 another, would that show up here as resulting in
21 higher pay for the pilot group that worked more
22 hours?
Inabnet Court Reporting (703) 331-0212 1554
1 A All things being equal, more hours would
2 mean more average pay per pilot.
3 And I think it should be pointed out that
4 this is average for everybody. You can't divide by
5 Captains or First Officers or reserves.
6 This is the average of the total pilot
7 group.
8 Q All right. As you go through the pages,
9 just note which page you're on, please.
10 A Sure. Page 5 is a similar type of
11 analysis.
12 And I think it bears some explaining that
13 the Form 41 information that describes pilot
14 compensation in general has five buckets of pay.
15 And this is available for all carriers,
16 large -- most of the largest carriers, wages,
17 benefits and pensions, taxes, personnel expenses,
18 which includes per diem and hotel expenses or
19 transfers, and then trainees and instructors.
20 So you have got those five buckets.
21 I'm going to look today at two of those
22 buckets because I think they directly reflect the
Inabnet Court Reporting (703) 331-0212 1555
1 benefit that are accrued in the contract.
2 I'm not going to look at per diem because
3 it's mixed up in a category that is hard to sort it
4 out. But I think in terms of the view that I bring
5 to negotiations is that benefits are an important
6 part of the pilot contract, and they measure the
7 value that companies pay for the benefits in the
8 market that the pilots would otherwise not have
9 advantage of.
10 Q Do you want to say a couple more words
11 about the tradeoff between -- I know you'll return
12 to that, but the tradeoff between wage compensation
13 and other forms of compensation?
14 A Sure. Generally, there's attention in
15 pilot and other employee groups' contracts about
16 where the Company places the money in a contract.
17 And again, as I mentioned, several pages
18 that usually describe employee compensation,
19 employee wages, are but ones --
20 (Sneeze Interruption.)
21 MR. POLLAK: Apparently it's us, Ellen.
22 THE WITNESS: Are but one piece of the
Inabnet Court Reporting (703) 331-0212 1556
1 pie.
2 That piece -- if you look at pilot
3 contracts and other union contracts, there are
4 several hundred pages of other things.
5 And those other things are bargained for
6 because they're important to the employees and they
7 cost the Company money.
8 The things that costs the Company money
9 about benefits, there's a direct relationship in
10 negotiations between companies and unions as to
11 where to put the value.
12 You can have very high wages and very low
13 benefits, and have the same cost overall, and the
14 same benefit in general to the pilots as very high
15 benefits and very low wages.
16 So the tradeoff here is a lot of times
17 you'll see companies -- for instance, if you look at
18 this page, Southwest on the previous page, had the
19 highest average wage. And on this page, it has one
20 of the lowest benefits.
21 That's a tradeoff that the Southwest
22 pilots have made in their contract. And I know so
Inabnet Court Reporting (703) 331-0212 1557
1 because I negotiated their last contract.
2 If you look on this page, for United's
3 average benefit per pilot, $50,000 per pilot.
4 United spends somewhere around $300 million on
5 benefits that includes healthcare benefits, defined
6 contribution plans.
7 And Continental spent about $130 million
8 on its pilot benefits. That would equate to about
9 $29,000 per head per pilot.
10 So in my view, you cannot just look at
11 wages and assess the value of a contract to a pilot
12 group. You have to look beyond that.
13 And I'm just looking at these two buckets,
14 not the remaining three buckets I described before.
15 If you go to the next page, page 6, you'll
16 see that when you add together wages and benefits,
17 and sort of level the contracts across where the
18 values lie between those two buckets, you'll see
19 that on the left-hand side, Alaska has the highest
20 benefit per pilot on average of the pilot group
21 contracts.
22 And you'll see Continental in blue, and
Inabnet Court Reporting (703) 331-0212 1558
1 United in red, sort of lined up right next to each
2 other, 179,000 for Continental, 176,000 for United.
3 And the lower cost carriers, AirTran,
4 Frontier on the right-hand side.
5 None of this is surprising to me. This
6 looks consistent with other years.
7 This is sort of the lay of the land in
8 pilot compensation.
9 Q And for this particular view on Slides 4,
10 5, and 6, you used 2009 data in part because the
11 pilot headcount is only available at the end of the
12 year.
13 Did I understand that correctly?
14 A Yes.
15 And I'm sure Mr. Katz will probably jump
16 on this, that there are two sort of time periods in
17 this analysis that reflect pilot pay.
18 This particular period is reflective of
19 the availability of data only by year. Pilot data,
20 head count data, which this is based on, is only
21 available by year.
22 So if I went to the end of 2010, there's
Inabnet Court Reporting (703) 331-0212 1559
1 no way to cut it back to the third quarter because
2 the data is only available in 2010.
3 You'll see in other chart where data are
4 available in the quarters that I ended the third
5 quarter 2010, the time of the effective date of the
6 merger.
7 Q The date that the merger closed?
8 A Yes.
9 Q And, well, let's move on to your next
10 sections.
11 Did you take the analysis another step,
12 Mr. Akins, to try to evaluate how the different
13 airlines compensate their pilots when you sort of
14 adjust for and try and take out of the equation
15 differences in the amounts that they might fly under
16 their respective contracts?
17 A Yes.
18 And the way you do that is look at block
19 hours, pilot block hours. And, again, available
20 from the Form 41 data displayed on page 8.
21 And this shows that of the mainline
22 network carriers, Continental pilots fly more than
Inabnet Court Reporting (703) 331-0212 1560
1 any other mainline carrier on average, at least, in
2 2009.
3 And, again, it's consistent with my views
4 in previous years.
5 And, again, Southwest -- under Southwest,
6 is over 700 hours per pilot. And this drives
7 multiplying the pay per hour times an average of 617
8 block hours per year, and in addition to that,
9 what's called soft time. That's time that's being
10 paid for non-cockpit duties, vacation, sick leave,
11 et cetera, that drive pilot pay.
12 Continental pilots are producing more
13 hours then United pilots or any other network
14 carrier, and there's a reason for that.
15 Q And what can you tell us about the United,
16 American, Delta block hours per pilot and the
17 relationship that might have to their contracts?
18 A Well, generally, again, in negotiations
19 there's attention with companies wanting to have
20 employees maximize their available time for
21 employment.
22 The more standard, more developed
Inabnet Court Reporting (703) 331-0212 1561
1 contracts in the industry, both in the flight
2 attendant world and the pilot world, tend to have a
3 little bit more restrictive work rules that limit
4 the number of hours that companies can schedule them
5 to fly.
6 And you'll see it on the right-hand side
7 that the more robust work rules in the contracts of
8 United, American, and Delta result in somewhat lower
9 block hours per year.
10 Q And would there be a reason why
11 Continental's contract wouldn't have all the same
12 work rules?
13 A Yes. And we'll get to that.
14 Q All right. So, Mr. Akins, how did you
15 adjust down from an annual pay and benefits per
16 pilot to what I call a unit cost review of their pay
17 rate?
18 A I took into account what's available from
19 Form 41, which is total pilot block hours.
20 So in a sense, the first part of this
21 analysis was based on headcount, average heads.
22 This dials in a little bit more to the actual work
Inabnet Court Reporting (703) 331-0212 1562
1 produced by the pilot groups in general.
2 This sheet on Section 9 takes the same
3 compensation that we used in the average head count,
4 and now uses it as a divisor of pilot block hours.
5 So it levels the playing field a little
6 bit more than just plain head counts in that it sort
7 of takes into account the fact that the denominator
8 in this is reflective of the number of hours that
9 are put in to earn that wage.
10 Q And what is a pilot block hour, just to
11 get our definition straight at the start?
12 A The pilot block hours are taken from total
13 aircraft hours in Form 41, and essentially
14 multiplied by two for every carrier to equate for
15 two pilots in the cockpit.
16 Q And on page 9, can you describe this chart
17 in some detail for the Panel, what it's showing?
18 A Right. Again, I think you see sort of the
19 value in the contract on the left-hand side, that
20 Delta has against Southwest here.
21 So Delta flies less hours. Their
22 contract, in this point in time, had a little bit
Inabnet Court Reporting (703) 331-0212 1563
1 less pay than Southwest. But at the end of the day,
2 their wages per block hour, and that is the time
3 that they put in to fly the airplanes, is higher
4 than anybody else.
5 And you'll see Continental and United in
6 the middle, 243 for -- that's $243 per block hour on
7 average, in 2009, for Continental, and 233. So
8 there's about a $10 dollar difference once you take
9 out that deferential for block hours.
10 And you'll see, again, on the right-hand
11 side that Jet Blue, AirTran, Frontier sort of take
12 up the bottom.
13 And then in the left-hand side, you have
14 got the carriers with be more robust contracts on
15 the left-hand side.
16 Q I take it that US Airways' number reflects
17 the fact that their contract rates didn't come up
18 because of what happened on that property?
19 A They have got -- up until the MOU with
20 American, which is their agreement with the pilots
21 to merge with American's pilots, they had very old
22 contracts from early 2000s.
Inabnet Court Reporting (703) 331-0212 1564
1 And so they not only don't have a new
2 contract as of this time, but they have old contract
3 rates.
4 Q And page 10, how does the benefit -- how
5 do the benefit numbers look on the pilot block hour
6 basis in 2009?
7 A Well, again, you'll see a shift.
8 And when you account for the number of
9 block hours worked in the chart, I have taken the
10 average benefit in the same construction that I did
11 in the first section, which was taking total
12 benefits paid by the Company for its pilot groups,
13 and just divided by the number of pilot block hours.
14 And you'll see now a dramatic shift that
15 United is now closer to the top because they have
16 got relatively high benefits and relatively lower
17 block hours.
18 So when you combine those two, you end up
19 shifting to the left.
20 Q And then on page 11, looking at wages and
21 benefits together, per block hour, how do United and
22 Continental stack up?
Inabnet Court Reporting (703) 331-0212 1565
1 A Again, this is simply the combination of
2 the cost's to the Company of wages and benefits to
3 the pilot group divided by the pilot block hours.
4 On this account, it's sort of a more
5 fuller picture, taking into account the number of
6 hours produced by each pilot.
7 United is $326 an hour on average, and
8 Continental is 290. So in terms of my
9 interpretation of the value of the compensation
10 section on these two points, United has got about
11 $36 more per pilot block hour than Continental, as
12 of 2009.
13 And, again, it's consistent with the years
14 prior to that.
15 Q Is it consistent with -- to the extent you
16 could take a swag at it with 2010 -- three quarters
17 of 2010?
18 A Yes. Yes.
19 Q All right. And, Mr. Akins, have you tried
20 to come at the same subject just from a slightly
21 different angle to kind of create a little bit of a
22 360 on this subject in your next section?
Inabnet Court Reporting (703) 331-0212 1566
1 A Yes.
2 I'm trying to now interpret from what's
3 available in Form 41 to the actual contractual pay
4 rates for various piece of equipment flown by both
5 carriers.
6 So up until this point, we have been in a
7 world of the derivation of charts from Form 41
8 filings.
9 Now, I'm going to apply some of the
10 information that's available from Form 41 to the
11 contract on pay rates.
12 And I think it's, you know, fairly
13 standard. In fact, I'm dealing with another group
14 at United right now, that United Airlines itself,
15 their negotiators do this exact thing.
16 They include wages, benefits, and other
17 costs as part of the compensation per hours provided
18 to its employees. And it measures that against the
19 equivalent compensation at American and Delta.
20 So this is not some esoteric exercise.
21 This is actually what's done in negotiations and
22 practice for negotiating contracts.
Inabnet Court Reporting (703) 331-0212 1567
1 Q And why don't you explain what this is on
2 the starting on page 13?
3 A Okay. So if you use the information
4 provide in the sections previous, and you look at
5 the level of benefits to wages, the ratio of
6 benefits to wages, this chart is produced.
7 You can see Alaska has a very high ratio
8 of benefits to wages.
9 United has the second highest ratio.
10 Again, very high benefits level, relatively lower
11 wages, a high relative benefits to wage ratio.
12 And you'll see the more robust contracts,
13 again, on the left-hand side, American, US Airways,
14 Northwest having a little bit higher benefits. And
15 some of the lower cost carriers, Southwest, AirTran,
16 Frontier on the right-hand side flanked by
17 Southwest, with the 19 percent benefits to wages.
18 Q And, Dan, what this really is reflecting
19 is that the value of the pension benefits, the
20 medical benefits, vision, dental, long-term
21 disability, what have you, is a higher value in one
22 contract -- you know, the ones on the left, than it
Inabnet Court Reporting (703) 331-0212 1568
1 is on the right.
2 And so that -- sometimes economists might
3 call that roll up or it's -- you can come up with a
4 percentage relationship to the wages that rolls up
5 to sort of a total --
6 A Right.
7 Q -- hourly rate.
8 Is that --
9 A Yes.
10 And it's the market value that companies
11 provide their employees with benefits that the
12 employees would otherwise have to pay on their own,
13 healthcare benefits and defined contribution pension
14 plan benefits.
15 So if we turn to page 14, I have grouped
16 three different sort of representative aircraft
17 types and the pay rates that are in the contracts,
18 just prior to the merger, the existing contracts,
19 premerger.
20 And you'll see that on the blue side is
21 Continental, and on the red side is United.
22 The ones on the left represent the
Inabnet Court Reporting (703) 331-0212 1569
1 smallest narrowbodies, the 737-300s, the 500s, and
2 the A-319.
3 The middle ones, the 757s, on the right,
4 777s, and 74s. So we have got sort of small,
5 medium, and large equipment types represented here.
6 And the premerger contracts from Continental and
7 United didn't line up exactly in this fashion.
8 There are some 76 grouped with 75s in one
9 contract, and 75s that are on their own with other
10 larger narrowbodies in another contract.
11 So this is a cut of like equipment types
12 just looking at what's in the contract per hour.
13 And this isn't per block hour this is per
14 credit hour. So it's a bigger universe of hours
15 than just block hours.
16 Q These are the wage rates from the
17 contract.
18 A Right. This is Section 3, referred to by
19 ALPA as Section 3, contract wage rates.
20 Q Okay.
21 ARBITRATOR EISCHEN: Just wages.
22 THE WITNESS: Wages, top of scale, this
Inabnet Court Reporting (703) 331-0212 1570
1 equipment type at the time of the merger.
2 BY MR. POLLAK:
3 Q Taken from the United premerger contract
4 and the Continental premerger contract?
5 A Yes.
6 Q And this is reflective of information
7 presented in the Continental pilots' case that their
8 wage rates were higher.
9 A Yes.
10 Q And that's shown here.
11 A And I think it's of note that, if you look
12 at which wage rates were the most different, it's
13 the small narrowbodies of which Continental has the
14 most of.
15 So when you're doing this analysis, you
16 have to keep in mind any kind of weighting or block
17 hour analysis done on the macro level is essentially
18 weighting Continental's narrowbody differential
19 heavier than the widebody differential.
20 Q All right. And, Dan, what have you done
21 on Slide 15?
22 A So Slide 15 is simply putting a proxy
Inabnet Court Reporting (703) 331-0212 1571
1 value, as I said, that United Airlines does in its
2 negotiations with its employees for the benefits
3 cost to the Company per hour.
4 And, again, I mentioned the total combined
5 benefits number for pilots at United today is $400
6 million.
7 That's a fairly significant chunk of money
8 that the Company is providing for its employees, and
9 it's something that pilots bargain for directly.
10 It's not given to them.
11 And so when you look at the adjustments to
12 those wage rates we saw in the previous page, adding
13 in the 40 percent override for United, and putting
14 in the 19 percent override for Continental, you'll
15 see that the tide shifts here.
16 That every single one of United's
17 representative aircraft go above Continental, if you
18 include base wages plus a roll-up for benefits.
19 Q And, Dan, I take it that the differences
20 are significant enough that even if this was -- the
21 40 percent and the 19 percent were off by ten points
22 in either direction, it's not going to change your
Inabnet Court Reporting (703) 331-0212 1572
1 basic analysis about United having superior pay and
2 benefits?
3 A No.
4 Q Combined benefits.
5 A No.
6 Q What do you show on page 16?
7 A Page 16 is essentially the same equipment
8 type buckets, but it's for First Officers.
9 And, again, you'll see that on an
10 equipment basis across the board, Continental's
11 wages are higher at the top of scale for First
12 Officers.
13 First Officer pay is pegged to Captain's
14 pay. So it makes sense that this would also reflect
15 Continental's hourly wage rates being higher for
16 First Officers as well as for Captains.
17 If you turn to the next page, page 17,
18 same type of analysis, again, 40 percent override
19 applied to the United wages to include benefits.
20 And you'll see, again, that now when you
21 look at the value of the contract for its pilots,
22 United premerger had higher wages and benefits by
Inabnet Court Reporting (703) 331-0212 1573
1 about $10 on the narrowbody, and maybe $15 on the
2 large narrowbody, and about $25 on the widebody.
3 So in terms of my valuation of what a
4 contract is worth to an employee, in terms of what
5 United Airlines' valuation in terms of what a
6 contract is worth an employee, this is
7 representative of that value.
8 Q And as a transition to our next subject,
9 this is representative of -- in your opinion, does
10 this represent the superiority of the United
11 premerger contract just on wage and benefit alone?
12 A Yes.
13 And I think, as we can talk in the next
14 section, it's not only reflective of the immediate
15 premerger constituencies in the contract, it's
16 reflective of a long history of negotiations, both
17 companies having gone through Chapter 11, with
18 drastically different results.
19 And this is sort of a reflection of what
20 we're about to get into, which is that Continental's
21 contract, pilot contract, and other contracts, were
22 generally lighter on benefits and work rules than
Inabnet Court Reporting (703) 331-0212 1574
1 carriers who went through bankruptcy and
2 participated in exchange with their companies that
3 Continental's employees were never allowed to do,
4 which is the 1113 process by which companies have to
5 argue in front of a bankruptcy court as to why
6 concessions are needed for the benefit of the
7 corporation.
8 When Continental went through bankruptcy,
9 Mr. Lorenzo, in 1983, had no such overlay on his
10 ability to take away their contract.
11 So these rates, these sort of historical
12 facts lead into the current situation just
13 immediately before bankruptcy as to why contracts
14 look like this.
15 Q And, Dan, turning to page 19.
16 Do you want to talk a little bit about
17 another part of the two carriers' pilot contracts
18 and how they differ?
19 A Right. So we talked about benefits and
20 work rules and wages.
21 And another big chunk of pilot contracts,
22 several hundred pages, have to do with scheduling,
Inabnet Court Reporting (703) 331-0212 1575
1 work rules, et cetera. And they're very important
2 in terms of pilot lifestyle and the kind of things
3 that pilots negotiate.
4 And, again, if companies can have an
5 employee work another hour, that means they need
6 fewer employees on average.
7 So I have been in those calculations.
8 Unfortunately, I have done them numerous
9 times in bankruptcy court. And companies seek to
10 curb work rules to their benefit. Eliminate work
11 rules that would otherwise keep employees from
12 working more hours or being exposed to long
13 uncompensated periods of time when they're on their
14 trips, especially for flight crews.
15 Q And, Dan, is the value of work rules to
16 the pilot group something that's just your view of
17 how pilots might view such things, or do you want to
18 talk about page 20 and what that excerpt is taken
19 from?
20 A Well, I guess, before we turn to page 20,
21 one of the things I didn't mention in the page 19 is
22 that last -- that last piece of page 19, which is
Inabnet Court Reporting (703) 331-0212 1576
1 essentially, in my experience in 1113 negotiations,
2 work rules are much more difficult to obtain than
3 pay.
4 So I have been in the situation dozens of
5 times with work groups bargaining for -- bargaining
6 for advances or bargaining against companies to keep
7 concessions low.
8 And there is a tension between one bucket
9 of money that may make pilots or flight attendants
10 work more hours, and another bucket of money that
11 says you're going to take a pay cut to give us the
12 equivalent savings of making you work more and
13 saving us head count.
14 So at the end of the day, I think,
15 Continental's pilot contract is reflective of that
16 difficulty to get it back in work rules into a
17 contract. And they have been unionized for about 20
18 years at the time of the -- at the time of the
19 merger.
20 They didn't get back into their contract,
21 as you'll see, a lot of the standard work rules that
22 run across the board from carriers like Frontier to
Inabnet Court Reporting (703) 331-0212 1577
1 carriers like Delta. But they had higher average
2 wage.
3 And that's kind of reflective of my belief
4 and my understanding that it's harder to get back
5 work rules than it is to get back wages.
6 And we'll get into that in the sections to
7 the value.
8 Q Dan, I take it implicit in what you just
9 said is that United, although it went through a
10 bankruptcy in the early 2000s, had work rules and
11 kept many of those work rules intact during that --
12 A Right.
13 Q -- 1113 process.
14 A Because their company was not allowed to
15 unilaterally extract them from the contract the way
16 Frank Lorenzo was in 1983.
17 Frank Lorenzo took a 230-page pilot
18 contract and gave them a 30-page memo back on
19 Monday. That's what Continental pilots lived under
20 for about ten years.
21 Q Because there was, at least for a while,
22 no union on the property?
Inabnet Court Reporting (703) 331-0212 1578
1 A There was a union on the property when it
2 happened.
3 There wasn't an 1113 process to prevent
4 the theft of work rules, wages, and benefits from
5 the pilot and other employee groups.
6 That changed in 1984.
7 Q All right.
8 Do you want to turn to page 20 now?
9 A Sure.
10 Q And please -- this is an excerpt from a
11 document.
12 Do you want to describe what that document
13 was and talk about this except?
14 A It was a document that was distributed by
15 the Continental Pilots Negotiating Committee to, I
16 believe, the field, the pilot groups, their rank and
17 file.
18 And in their preliminary talk about
19 negotiations, they provided a number of areas in
20 this document that they wanted to improve on. And
21 the tone in the first part of this discussion was
22 that, as it says in the second sentence, the most
Inabnet Court Reporting (703) 331-0212 1579
1 obvious part of value in a contract is the wage
2 scales contained in Section 3.
3 Section 3 is ALPA code for wage rate
4 tables. Okay.
5 Then it says the rest of the formula is
6 made up in tangible components, such as overrides,
7 red eye differential, increased per diem, et cetera.
8 Those are all sort of clear cut dollars
9 and cents numbers that you can open up a pilot
10 contract and look and see how much money you get for
11 per diem, how much money you get for international
12 override, how much money you get paid at your years
13 of service, and your position, and your aircraft
14 type.
15 Those are all pretty easy to assess by
16 opening up a page and pointing at a number. What's
17 hard to assess is all the things involving
18 scheduling and work rules about your work life.
19 Those things are harder to see a value.
20 And what the Continental negotiation team
21 was describing here is that the first sentence in
22 red says there are also intangible or less easily
Inabnet Court Reporting (703) 331-0212 1580
1 seen aspects of a pilot contract that must also be
2 evaluated when looking at total compensation.
3 These items include soft time paid as a
4 result of trip rigs, base allowance, insurance
5 benefits, retirement, paid time off, et cetera.
6 They say it's normal to look at wage rates
7 first because that's the most important section.
8 Wage rates make up 60 to 75 percent of the cost of a
9 contract.
10 That's where pilots look. That is the big
11 boulder.
12 In this analysis, Continental's
13 Negotiating Committee is informing their pilot group
14 that they're going to start working on other areas,
15 not just wages.
16 They have gotten this information. And
17 their diligence on this suggests from surveys,
18 polls, and other types of conversations with their
19 members that we need to deliver a total economical
20 package, which improves work rules and benefits more
21 than wage rates.
22 So in my mind, Continental's pilot group,
Inabnet Court Reporting (703) 331-0212 1581
1 in 2008 is doing exactly what I thought they would
2 be doing, just trying to improve their work rules
3 since their work rules, as you'll see in several
4 areas, lag in the industry, lag standard contracts.
5 And companies that went through bankruptcy
6 with the ability to protect various sections of
7 their contract, and not just have the company pick
8 and choose what they're going to take.
9 Q Dan, could the negotiations that -- this
10 newsletter that we're talking about conclude before
11 the merger?
12 A No.
13 Q To your knowledge?
14 A No.
15 Q They were concluded at the joint
16 collective bargaining process post merger?
17 A Yes.
18 Q All right. And, Dan, did you prepare some
19 exemplary slides for some major work rule items to
20 show where there were differences between United and
21 Continental, historically and immediately,
22 premerger?
Inabnet Court Reporting (703) 331-0212 1582
1 A Yes.
2 Q And whether those -- how those got
3 resolved in the Joint Collective Bargaining
4 Agreement?
5 A Right.
6 The old dusty boxes that I have in my
7 office from days working at ALPA only went back to
8 1986. So I would like to have gone back to 1983 or
9 '4, but I couldn't find those boxes.
10 So ALPA produced something called the
11 Summary of Agreements. I actually produced that
12 book a few times. And if was sort of a
13 cross-section for a negotiator to look at, what does
14 the industry look like at this point, who has got
15 what, who has got what kind of sick pay benefits,
16 wage rates, et cetera.
17 In each of these charts, I have profiled
18 four or five very significant portions, very costly
19 portions to a Company in terms of work rules.
20 And what I wanted to highlight here is
21 that, for most of the significant work rules where
22 the industry is kind of standardized, unitized to
Inabnet Court Reporting (703) 331-0212 1583
1 one set of numbers, Continental is the outlier.
2 And it's not only true for the pilot
3 groups. It's true for a lot of the other wage
4 groups or work groups, including flight attendants.
5 So of these four or five items, I have
6 taken a snapshot of '86, 2010, and then the picture
7 after the Joint Collective Bargaining Agreement,
8 which is in 2013.
9 The first one is duty time ratio. And
10 there's three sort of important rigs in negotiations
11 for pilots. One is duty time ratio. And one is
12 trip time ratio. And one is a per diem for time
13 away from base.
14 Duty time ratio is essentially
15 guaranteeing that for every two hours a pilot is on
16 duty in a given trip sequence, they're going to get
17 paid at least one hour.
18 So it's beneficial for the pilots and
19 employees because they're not going to have to sit
20 around a lot for uncompensated time.
21 There's an incentive. A penalty, in
22 effect, for the Company to say, If I put you on the
Inabnet Court Reporting (703) 331-0212 1584
1 job for three hours and you have only flown for one
2 hour, I have got to guarantee you more pay than
3 that. I have got to pay you an hour and a half
4 because I have got to pay you essentially for half
5 the time that you're on duty.
6 I can't get away from that.
7 And from a Company scheduling perspective,
8 they have scheduling computers that rationalize
9 flying around the system to make sure that they're
10 employing the pilots or the flight attendants to the
11 degree that this does not kick in, that these are
12 not effective penalties so that they'll make sure
13 their systems, scheduling systems are optimized to
14 the extent that for each pilot and flight attendant
15 that's under these types of rules, they're not going
16 to hit them. They're not going to have to pay a
17 soft time penalty for having someone to sit more
18 than half the time than they're paid.
19 And this is reflective of 1986, the first
20 chart on page 21.
21 Q Dan, if I could interrupt just for a
22 second, Mr. Akins.
Inabnet Court Reporting (703) 331-0212 1585
1 I take it when calculating whether -- when
2 a pilot is to get paid the rates, the hourly rates
3 that you went over earlier, they are paid those
4 block -- from pulling back from the gate to when
5 they come to the gate in the first instance.
6 They get paid for that flight time, not
7 the time in between the flights when maybe they're
8 sitting waiting for their next flight.
9 Is that correct?
10 A That's correct. That's correct.
11 Q And so if, although, they will get per
12 diem for their time away from base; correct?
13 A Yes.
14 Q But if an airline chose to fly somebody
15 to, you know, from New York to Manila and leave them
16 there for three days and then fly them back, they
17 would only receive the hourly wage rate for the
18 flight time.
19 A Right.
20 Q And what you're describing here is -- in
21 these rigs that you're reviewing, are mechanisms
22 that, in part, drive a Company not to sit pilots
Inabnet Court Reporting (703) 331-0212 1586
1 away from base on a mostly unpaid basis.
2 A Yes.
3 Q Unnecessarily.
4 A Yes.
5 And this part of the contract that I have
6 been involved with discussing with companies and
7 negotiating, there not a lot of tension between
8 companies because they view it as an efficiency
9 criteria.
10 But if you do have a lot of people sitting
11 around in airports, as Roger described, you have got
12 more bodies around than you would necessarily need,
13 in general.
14 So it's sort of a two-way street that the
15 companies really don't push back on this. And as
16 you will see, in 1986, US Airways, American, and
17 Piedmont were getting paid a little bit better rigs.
18 Smaller here is better for the pilots.
19 Everybody else is getting paid around two.
20 Continental was at zero. And that's an
21 outlier, and that's a reflection of Mr. Lorenzo and
22 his ability to abrogate the contracts.
Inabnet Court Reporting (703) 331-0212 1587
1 Q Dan, I take it to the extent that between
2 1986 and 2010, which is the next chart, Continental
3 pilots sought to close this gap.
4 Their company did, in fact, push back.
5 A Yes. And they didn't have any ability to
6 close the gap until they got organized later in the
7 '90s.
8 Q Well, even after that -- why don't you
9 turn to page 22?
10 Did they get a duty time rig?
11 A No. They didn't get a duty time rig.
12 But given the tenor of the pilot
13 Negotiating Committee's letter, I would imagine they
14 were seeking a duty rig. They were the outlier in
15 the business and remained the outlier in the
16 business in 2010.
17 And, again, this is not a esoteric sort of
18 side letter in a contract. This is sort of
19 fundamental work rule life as a flight crew member
20 for both pilots and flight attendants in the airline
21 business.
22 This is not a sidebar item.
Inabnet Court Reporting (703) 331-0212 1588
1 Q And on page 23, did the joint Collective
2 Bargaining Agreement that the joint pilot groups
3 negotiated with the post merger United retain the
4 two-for-one duty rig for the joint pilot group?
5 A Yes.
6 And you'll see that, again, there's sort
7 of a standard here, one hour for every -- guaranteed
8 for your pay for every two hours of duty.
9 So we'll get to a different discussion a
10 little bit later.
11 But there is kind of a convergence of
12 labor work rules, labor benefits, labor wage rate
13 that's occurring now in the industry, especially
14 since consolidation has taken hold.
15 Q And, Dan, in your experience -- and I
16 could ask you about any of these particular work
17 rules that you're going to go through here. In
18 negotiations, when pilots are seeking changes like
19 this, for example, to go from a zero to a
20 two-for-one duty time ratio, do they get charged for
21 those sorts of work rule improvements in the
22 compensation package or in the costing of valuing of
Inabnet Court Reporting (703) 331-0212 1589
1 whatever the deal is for a particular round of
2 bargaining?
3 A Yes. Companies' financial advisors
4 generally put a cost on every work rule improvement
5 that pilots seek.
6 So this is one of the several items
7 including wages, benefits, work rules are a part of
8 the total cost to a company, which is why
9 Mr. Lorenzo took these away when he did.
10 If it didn't cost him anything, it would
11 have been in there.
12 Q All right. Dan, starting on 24, why don't
13 you take us through what is a sort of a similar
14 historical analysis on several other work rules?
15 A So this is the -- similar to duty time,
16 this is not trip time, which is entire sequence of
17 duty days.
18 If you're on a three-day or four-day trip,
19 companies will guarantee that you're paid a ratio of
20 generally anywhere from one to three and a half
21 hours to one to four hours. That is, you're going
22 to get paid an hour for every four hours on that
Inabnet Court Reporting (703) 331-0212 1590
1 trip.
2 And, again, the Company's scheduling
3 computer will try and minimize that time, but this
4 drives cost into a contract.
5 And it also protects pilots and flight
6 crew members from having exposure uncompensated sit
7 time.
8 Q And, Dan, is this the -- if you turn to
9 exhibit -- or page 20, for a moment, and look at the
10 first red sentence.
11 A Yes.
12 Q Is this likely to be the trip rig that
13 Continental's Negotiating Committee is referring to
14 in its newsletter?
15 A Right. It's generally considered in a
16 wide bucket of soft time, that is, non block hour
17 soft time.
18 Q And this is sometimes called the trip rig?
19 A Yes.
20 And if you turn to page 25, you'll see
21 that Continental pilots were able to get a trip rig
22 put back into their contract by the year 2010.
Inabnet Court Reporting (703) 331-0212 1591
1 So that in this instance, the Negotiating
2 Committee was able to claw back in prior agreements
3 a trip rig from what was otherwise an outlier in the
4 industry in 1986.
5 When you look at Slide 26, this is the lay
6 of the land today.
7 And, again, I think if you look at sort of
8 a pattern of the charts in 86, the sort of standard
9 deviation, the variation between the high and the
10 lows is pretty wide. There's a lot of carriers, a
11 lot of differential. When you get to 2013, you'll
12 notice it's almost all the same.
13 And that's not by accident.
14 And it's not because ALPA, USAPA, or the
15 other pilot negotiations have centered around this
16 number. It's because there's a convergence of a
17 standardized contract, a lot like in the railroad
18 business.
19 So at the end of deregulation, we have now
20 gotten very few carriers representing a lot of
21 people. And those people are tending to sort of
22 negotiate contracts. And companies are accepting
Inabnet Court Reporting (703) 331-0212 1592
1 contracts that are largely the same on a wide
2 variety of fronts.
3 Q And, Dan, on trip rigs, I take it that the
4 slides show that United and Continental were at one
5 before, and so both pilot groups obtained an
6 improvement on the trip rig on the JCBA.
7 A Yes.
8 On this one, again, lower is better.
9 And 1.35 is better for both than 1.4.
10 It's a tighter rig.
11 Q All right. I take it lower is better
12 unless you have none at all?
13 A Yes.
14 Q On page 26, would you discuss the minimum
15 duty period average?
16 A Sure. This is another concept.
17 It's to say that if you show up for work
18 for a duty period of all the duty periods you have
19 in a given month, or trip sequence, you are going to
20 get a minimum number to hours.
21 You show up in a uniform, you're ready to
22 fly, someone at US Airways is going to get paid a
Inabnet Court Reporting (703) 331-0212 1593
1 minimum of four and a half hours.
2 Even if they flew a half hour in that duty
3 period, on average, of all their duty periods, they
4 have to produce four and a half hours of pay for
5 those average duty periods.
6 You could have a one-hour and an
7 eight-hour duty period. And if you have flown one
8 in eight hours, it covers this. It's not by day.
9 It's by the sequence of average duty periods.
10 If you look across, again, the horizon,
11 pretty important rig in the context of negotiations
12 for flight crews, in 1986. This is reflective,
13 again, of the obligation of the pilots' contract at
14 Continental, which was a very important work rule.
15 And some variation in the number of hours
16 guaranteed per duty period centered around four to
17 five.
18 And as time goes on, in the next page,
19 you'll see in 28, this is a work rule that
20 Continental pilots had yet not reinstated into their
21 contract.
22 So we have now got roughly four carriers,
Inabnet Court Reporting (703) 331-0212 1594
1 five carriers here centered around five with the
2 outlier being Delta.
3 And then you have got, on the next page,
4 on page 29, everybody centered around five except
5 Delta at five and a quarter.
6 And, again, on this one, higher is better.
7 You're guaranteed more hours of pay when
8 you show up for work for the average duty period.
9 Q So, Dan, just to keep the record clear, in
10 2010, Continental in its premerger contract did not
11 have a minimum duty period average?
12 A That's right.
13 Q And in the JCBA, what happened?
14 A The JCBA essentially moved Continental up
15 to the United premerger contract level.
16 So it was a benefit.
17 Q And I take it, Dan, that obviously it's
18 one pilot group under the JCBA.
19 But you have showed them separately to
20 capture what was happening to each pilot group in
21 terms of the change in that group's compensation
22 from the prior slides.
Inabnet Court Reporting (703) 331-0212 1595
1 A Yes.
2 Q Turning to page 30, do you want to discuss
3 the per diem or time away from base?
4 A Sure. The other bucket I talked about
5 that the DOT collects information on, it's contained
6 in the Form 41 pilot schedules. It's under the
7 heading Personnel Expenses. And it includes things
8 like per diem, which is a minimum stipend for every
9 hour that pilots are away from their base.
10 And for most flight crews, it's in excess
11 of 200 hours per month.
12 So that in addition to those rigs that we
13 discussed earlier, these rigs kick in for every hour
14 when you block in, block out for your time away from
15 base.
16 That is an important component.
17 Every flight crew contract that I have
18 come across has a per diem. It's not incentivized
19 to the Company to provide a penalty to keep people
20 at home more. But it's essentially a way for flight
21 crews to get something for their total time away
22 from base.
Inabnet Court Reporting (703) 331-0212 1596
1 And it's a part of contract negotiations.
2 And, again, it's not something that I
3 measured in the previous analysis because it sort of
4 commingled in with -- personnel expenses include
5 transfers from hotels, hotel costs, food at the
6 hotels, if the hotels are providing food for any
7 special function for the pilots.
8 So all sorts of other things.
9 So my rough estimate is that about half of
10 the personnel expense is based on per diem, and the
11 other half is on hotels and other expenses.
12 So that being said, I was -- I wasn't able
13 to capture this.
14 But the differentials here between
15 Continental, United, and other carriers are pretty
16 stark, which, if I had included per diem, and there
17 was some way to get it extracted from Form 41, it
18 would have added to the differential between
19 Continental and United on the benefits and wages
20 piece, not taken away.
21 Q So it would have increased United's total
22 compensation more than Delta pilot -- Continental's
Inabnet Court Reporting (703) 331-0212 1597
1 total compensation?
2 A Yes.
3 So page 30, you know, there's sort of two
4 divisions that apply.
5 Usually, international operations have
6 higher per diem because of the expense of
7 international cities.
8 There's two sections here, domestic and
9 international for each year.
10 So 1986, we first look at the domestic
11 operations, pay for time away from base. The blue
12 bar for Continental is the lowest in the industry.
13 It's a buck.
14 The red bar for United is about industry
15 average, a buck 55.
16 You see a lot of carriers, here, again,
17 that don't exist anymore.
18 Per diem expense per hour on international
19 is reflected on page 31. Again, you'll see that for
20 the majority of carriers, it's a little bit higher
21 for international.
22 Continental is a buck. United is a buck
Inabnet Court Reporting (703) 331-0212 1598
1 55.
2 Q In 1986?
3 A 1986.
4 You go to page 32 and look at 2010,
5 premerger, Continental at a buck 85, equivalent to
6 American, but lower than United by about 15 cents.
7 For domestic, you go to the international
8 operations. United is about 20 cents higher then --
9 Q Page 33?
10 A 33.
11 So in 2010, United is about 20 cents
12 higher per hour away from base than Continental, and
13 US Airways and American are the lowest here in
14 international at $2.
15 Now, we look at 2013.
16 And, again, this is another representation
17 of the convergence of work rules, benefits, and
18 generally wages, as you'll see subsequently, in the
19 pilot -- pilot world in the airline industry.
20 The 2013 rates are representative of the
21 new contracts in the industry, including the JCBA at
22 Continental and United. And the MOU, which will be
Inabnet Court Reporting (703) 331-0212 1599
1 effective sometime probably in early September when
2 American emerges as a partner with US Airways.
3 There's already an agreement for these
4 rates.
5 So this is the new world.
6 This is 2013, $2.10 an hour for domestic.
7 And you'll see, in the next page, around
8 $2.60 for Delta, 2.55 for United and Continental.
9 And most of these contracts pilots have
10 negotiated for increases. So in the future, these
11 numbers are all going to creep up together and get
12 bigger.
13 ARBITRATOR EISCHEN: Off the record.
14 (A discussion was held off the record.)
15 ARBITRATOR EISCHEN: Back on record.
16 BY MR. POLLAK:
17 Q Dan, does page 35, rounding out this part
18 of your discussion, capture the 2013 industry
19 situation for per diem in international operations?
20 A Yes.
21 MR. POLLAK: All right.
22 Thank you.
Inabnet Court Reporting (703) 331-0212 1600
1 ARBITRATOR EISCHEN: Thank you very much.
2 Before we begin the next section of
3 Mr. Akins' presentation, we're going to take a brief
4 recess.
5 (A recess was taken from 9:59 until 10:16.)
6 ARBITRATOR EISCHEN: Back on the record.
7 BY MR. POLLAK:
8 Q Mr. Akins, did you have one more piece of
9 analysis regarding the comparative compensation of
10 the United and Continental pilot group?
11 A Yes.
12 There's a couple of sections left before
13 we get to Section 2, which is the 737 operational
14 analysis.
15 Q So would you turn to page 37, and tell the
16 Panel what that is describing?
17 A Page 37 and page 38 look a lot the same.
18 What I have tried to do is capture sort of
19 the nature of the wage portion of each pilot
20 contract, going back essentially since the beginning
21 of deregulation in the early '80s.
22 Q The wage rate?
Inabnet Court Reporting (703) 331-0212 1601
1 A The wage rate.
2 And you'll see, on the left-hand side on
3 slide 37, this is hourly pay for the top of scale
4 Captain in 1981 --
5 Q For what type of equipment?
6 A -- through 2010 -- for widebody, whatever
7 was the widest widebody, highest paying equipment.
8 If we go back to 1981, there weren't any
9 777s around, so we have to use DC-10s.
10 Q Mr. Akins, are you looking at Slide 38,
11 first?
12 A I'm just generally describing what --
13 Q All right. Let's look at Slide 38, which
14 is the widebody.
15 A Taking a look at Slide 38, on the
16 left-hand side, you'll see that the blue bar
17 represents Continental. The red bar represents
18 United.
19 And this is sort of pre Paul Volker's
20 clawback at a money supply when we put the economy
21 in recession. A lot of inflation coming out of the
22 '70s.
Inabnet Court Reporting (703) 331-0212 1602
1 United pilots and the Continental pilots
2 had pay increases, as you'll see, from that stair
3 step that exists between '81 and around '83, about
4 every six months, pretty big pay increases.
5 In the United contract, I believe at that
6 time, it was 6 percent every six months.
7 And that was sort of a different era than
8 existed after that. And you'll see every time
9 there's a stair step, that's a contractual pay
10 increase across the board for the top-of-scale pilot
11 in the largest widebody equipment that existed on
12 either property.
13 You'll see that big trough in the blue
14 line starting in 1983. And that's the huge
15 reduction in pay rates that were imposed upon the
16 Continental pilots after the Lorenzo bankruptcy in
17 1983.
18 And that lasted essentially until the
19 pilots got organized independently to bargain for
20 wage rates.
21 And you'll see that there was a very large
22 gulf divide between the red line representing United
Inabnet Court Reporting (703) 331-0212 1603
1 and the blue line representing Continental.
2 And that lasted up until about the year
3 2000s, when at that time, Continental pay rates for
4 the largest pieces of equipment were essentially
5 equivalent to United.
6 But you'll note that that says UA ESOP
7 rate. That's the period of time when United
8 actually took a pay cut to buy their company. And
9 so there is a difference between those rates and
10 what they call book rates, which were the rates that
11 were calculated in their retirement benefits, et
12 cetera. So there was a drop in United that's not
13 related to a bankruptcy.
14 It's related to a ESOP buyout, where all
15 employees except flight attendants took a pay cut to
16 fund the purchase of their Company, UAL, Inc.
17 Q But the book pay rates, which were the
18 higher rates at about the level shown in 1994 --
19 A Right.
20 Q -- were still used for some purposes,
21 including defined benefit plan calculation?
22 A That's correct. And you'll also notice
Inabnet Court Reporting (703) 331-0212 1604
1 that the way that Continental and United closed the
2 gap is that United's ESOP brought their pay rates
3 down, and Continental's contract brought their pay
4 rates up, so that at the end of the '90s, for at
5 least widebody equipment, the pay rates are very
6 close together for United and Continental.
7 United bargained a contract, pilots
8 bargained a contract in 2000 that gives them huge
9 increases. You'll see it goes from around an
10 average of 180 to upwards of 250 to $280 an hour for
11 widebody equipment.
12 That lasts until the contract is --
13 there's a concessionary contract as a result of the
14 1113 procedure in the United bankruptcy in 2003.
15 And then there's a secondary tier down,
16 where you see, it's the second 1113, where United
17 pilots were asked to give up an additional amount of
18 concessions later in 2004.
19 You'll also see, right next to that drop
20 in 2004, something called the Continental 2005
21 concessions, where the pay rates of Continental
22 dropped about 9 percent as a result of an internal
Inabnet Court Reporting (703) 331-0212 1605
1 restructuring, a non-bank supervised restructuring
2 that Continental achieved from all their employees,
3 which was about a $500 million concessionary
4 package, including -- part of that included the
5 pilots.
6 So you'll see, United drops once. United
7 drops again. Continental drops once. And then
8 there's some pay increases on both United and
9 Continental pay rates.
10 The point here is that there's sort of a
11 convergence here post restructuring. Both carriers'
12 pilots on the widebody equipment are being paid
13 equivalent, and the last time that happened was at
14 the end of 1999.
15 And so there's a pattern here where United
16 sort of pokes up. Continental gets above United for
17 a short period of time. But largely in the widebody
18 equipment, the pay rates are the same.
19 Q If you look at page 14 in your exhibits,
20 are the rates, Captain rates for widebodies shown
21 there, the rates that are reflected all the way to
22 the right --
Inabnet Court Reporting (703) 331-0212 1606
1 A Yes.
2 Q -- on page 38?
3 A Yes. And you'll see that it's such a
4 small, you know, $1.50 difference that it's barely
5 noticeable on the right-hand side of the graph.
6 One other thing I would like to point out
7 on Slide 38 is that there is something on the
8 right-hand side with the dashed line called the
9 JCBA.
10 These are the new widebody rates
11 collectively negotiated by United and Continental
12 pilots with United Airlines that are effective
13 today.
14 And we'll talk about how those rates sort
15 of look and why they occurred compared to the new
16 contracts in the industry.
17 But compared to the old contracts, you'll
18 notice that that JCBA number, which is a big jump
19 for both pilot group in pay for widebodies, is less
20 than United was getting paid 15 years ago, 14 years
21 ago, back this 2000, 1999.
22 So draw that line across, and you'll see
Inabnet Court Reporting (703) 331-0212 1607
1 that the maximum top-of-scale Captain rates in the
2 JCBA are much higher than today for either carrier,
3 but less than for what United pilots were getting
4 back before 9-11.
5 Q Now, turn back to page -- oh, one more
6 thing on page 38.
7 Mr. Akins, has the actual particular piece
8 of equipment, which was the large widebody piece of
9 equipment, did that change somewhat over the course
10 of years?
11 A Yes. And what I have put here is the
12 largest aircraft type during that contract that was
13 in the pay scale that was active during that
14 contract.
15 There are pay rates for, I believe, the
16 A-380 in the current contract. United doesn't have
17 any orders for A-380s, doesn't operate A-380s, so
18 that rate is higher than what's shown here.
19 This rate is shown as today a 777, 747
20 top-of-scale Captain's rate.
21 Q All right.
22 A And go back, and I'm sorry that I
Inabnet Court Reporting (703) 331-0212 1608
1 transposed these, 37 is the same reflection, just on
2 narrowbodies.
3 And, again, it's starting in 1981, on the
4 left-hand side. We don't have the aircraft that are
5 flown today simply because it's three decades, four
6 decades ago.
7 So we start looking at B-727s, and DC-8s,
8 and sort of the smallest airplane that was operated
9 by the mainline, and then we move it to the
10 right-hand side.
11 And you'll that there is somewhat of a
12 gap, bigger gap between the red and the blue lines.
13 The patterns are similar because contracts
14 negotiated equipment type rates across all equipment
15 types, not just for a particular equipment type.
16 So you'll see the pattern looks the same.
17 But at the end, you'll see that, even after
18 Continental's 2005 concessions and United's second
19 1113 concessions, that that red line representing
20 United, there's a gap there that's sort of more
21 perceivable than widebodies.
22 So there's a bigger gap there.
Inabnet Court Reporting (703) 331-0212 1609
1 Q And would that gap be captured back on
2 page 14, the small narrowbody rates --
3 A Right.
4 Q -- which are more like $11 per?
5 A Yes.
6 Q And, Mr. Akins, for the period prior, how
7 would you characterize the relationship and wage
8 rates for the period prior to the United bankruptcy,
9 again, in 2003?
10 A Well, deep history, you can see the
11 difference between 1983 and 2000 as being reflective
12 of a carrier that didn't go into bankruptcy and
13 didn't have its contract abrogated entirely, and a
14 carrier that had sort of standard ALPA collective
15 bargaining.
16 There was no restructuring.
17 One thing that occurred was the ESOP.
18 And then we have the 2000 contract, which
19 shows that relative historic gap between Continental
20 and United is sort of re-established.
21 There's a big gap there for both widebody
22 and narrowbody.
Inabnet Court Reporting (703) 331-0212 1610
1 And then subsequent to the restructuring
2 at United, and the concessions in 2005 at
3 Continental, the gap gets narrower.
4 Q And, Dan, on page 39, I think you just had
5 a couple of facts about the out-of-bankruptcy
6 restructuring Continental had in the 2004, 2005
7 period?
8 A Right.
9 So in reviewing history -- and history is
10 important because it's bound up in the details of
11 the contract that existed prior to the merger.
12 All the things that were in Continental's
13 contract are sort of based on the bedrock of the
14 Lorenzo bankruptcy, and fixed in pieces and parts as
15 time went on.
16 Continental has restructured before the
17 merger three times, in the early '80s, under
18 Lorenzo, in the early '90s when Gordon Bethune and
19 Bonderman came in, and then once again in 2004 and
20 '05 on a non-bank supervised -- this is not a
21 Chapter 11, but an internal restructuring to cut
22 costs that amounted to about 1.6 billion.
Inabnet Court Reporting (703) 331-0212 1611
1 And the Company's chairman at the time,
2 Gordon Bethune, saw that other carriers were going
3 to bankruptcy and reducing dramatically their wage
4 costs and other costs for their employees.
5 And the internal non-labor restructuring
6 of 1.1 billion was not enough, in their estimation,
7 to cover that gap and to keep the Company
8 competitive.
9 And it says, at the very last sentence
10 here: "While a competitive financial analysis would
11 support our asking for substantially larger
12 reductions, $500 million is the absolutely minimum
13 we need to be a survivor."
14 And that's when from Gordon Bethune, the
15 guy who sort of resurrected Continental back in the
16 '90s. He's now seeing a dramatic need for
17 concessions from its employees, including his
18 pilots.
19 Q And, Dan, flipping back to page 38, that
20 concession, where do you see that?
21 I think you may have already referred to
22 it. Where do you see that on the chart?
Inabnet Court Reporting (703) 331-0212 1612
1 A You can see that little kink down in the
2 blue line for both 37 and 38, which is the 2005
3 concessions.
4 And, you know, in Gordon Bethune's mirror,
5 obviously, for US Airways and United in bankruptcy,
6 and yet to come, Delta and Northwest in bankruptcy.
7 So there was a convergence down that
8 mirrors the convergence up that's occurring today.
9 And it wasn't really reflective of the Company's
10 strengths. It was reflective of an event that had
11 nothing to do with pilot pay or airline -- aircraft,
12 or routes.
13 It was 9-11.
14 So these companies weren't driven into
15 bankruptcy because of their pilot wage rates or
16 their work rules. They were driven into bankruptcy
17 by an exogenous factor, many of which occurred
18 subsequent to 9-11. But most pilot contracts,
19 including United and Continental, lost value going
20 through the mid 2000 period.
21 Q Dan, I think starting at page 41, you have
22 some slides about --
Inabnet Court Reporting (703) 331-0212 1613
1 A Right.
2 Q -- post merger convergence of pay rates,
3 pilot pay rates in the industry.
4 Can you set the stage for those by talking
5 a little bit about pattern bargaining in industry --
6 A Right.
7 Q -- and how whether differences in wage
8 rates have a tendency to endure or to actually go
9 away?
10 A The experience that I have had in
11 collective bargaining for flight crews, including
12 flight attendants and pilots, suggest that companies
13 and employees tend to look both inside their
14 companies as to see what benefits and wage rates
15 other groups, ramp, mechanics, ticket agents were
16 able to get.
17 And then also look at their comparables
18 outside their company.
19 What did flight attendants get at
20 Southwest? How much are pilots at Delta being paid?
21 Back at the end of 1999 and 2000, the sort
22 of standard practice that most pilot groups adhered
Inabnet Court Reporting (703) 331-0212 1614
1 to was the contract that was negotiated by your
2 competitor is your target for your bargaining.
3 Okay?
4 And companies look at that in the same way
5 that they can afford essentially no more or less
6 than their biggest competitors. So that becomes a
7 target. And you'll see that.
8 The 2000 numbers that showed United's
9 pilots jumping up, that was very similar to what's
10 happening today in that they were trying to beat
11 Delta. They were trying to look at the Delta
12 contract that was negotiated immediately prior to
13 the United pilots signing, and they essentially at
14 the end to their contract, wanted to get a little
15 bit ahead of where Delta was.
16 That essentially, Delta, United,
17 Continental, everybody's pay rates for the next five
18 years changed dramatically because of the bankruptcy
19 due to 9-11.
20 Sorry.
21 We see that pattern emerging today.
22 And it's to my great joy and the public's
Inabnet Court Reporting (703) 331-0212 1615
1 benefit, and the pilots' benefit that we have now
2 got a less fractionalized, more concentrated, more
3 level playing field amongst the largest network
4 competitors that are essentially offering their
5 employees the same pay packages, benefit packages,
6 work rule packages across the board for all employee
7 groups.
8 That's what's happening. That's pattern
9 bargaining.
10 It hasn't been in place since 9-11. It's
11 now reemerging.
12 And for the first time in decades, I think
13 the experiment with deregulation that has affected
14 everybody in this room, the flying public, and
15 employees at the airlines in a negative way, that
16 there will be more stability, and companies are not
17 going to compete on the basis of having wage rates
18 differentials, but on what products and service they
19 offer.
20 So I think we're finally over this crazy
21 period, that we have now got a structure since 2000,
22 which started at the structure, that there is going
Inabnet Court Reporting (703) 331-0212 1616
1 to be pattern bargaining. And I have already seen
2 the evidence of pattern bargaining both in the
3 American/US Airways MOU, as well as the new United
4 contract.
5 That Delta set the dot again that very
6 quickly sealed the numbers that United pilots were
7 going to seek.
8 There was a marker out there in the future
9 that the company and the pilots could look to and
10 say, That's what I want.
11 American pilots are going to get, by 2016,
12 the average of United and Delta pay rates for every
13 class of equipment.
14 So we're now going to have that wide swath
15 of low and high hanging fruit squashed down to a
16 bare minimum, which makes it easy for employees,
17 makes it easy for the companies. The boards of
18 directors aren't going to pull their hair out
19 because their employees get paid more or less than
20 someone else.
21 It's sort of like what I view as the
22 railroad industry right now. And that's a good
Inabnet Court Reporting (703) 331-0212 1617
1 thing for employees because there's less variability
2 in negotiations.
3 And we haven't seen this, again, for the
4 last decade.
5 And you'll see in these charts what I have
6 tried to describe on page 41, is what is labeled the
7 old contract. And these, again, are the largest
8 pieces of equipment operated by each of these
9 companies as of June 2012.
10 As of June 2012, you'll see that both
11 American and Delta had much higher pay rates for the
12 top tier of their equipment than either United or
13 Continental, and US Airways had much lower rates.
14 Essentially, this is a 2004 negotiated
15 contract.
16 So if you look at Delta now being the
17 target, which it is, United pilots essentially have
18 matched their new contract in their -- in the United
19 Joint Collective Bargaining Agreement. And American
20 and US Airways are essentially getting, in three
21 years, the weighted average of that.
22 So it's all going to condense essentially
Inabnet Court Reporting (703) 331-0212 1618
1 around the same pay rates for each piece of
2 equipment across the carriers that provide 70
3 percent of the air services in this country.
4 So that's a more stable environment in
5 which to negotiate.
6 It's different than anything that has
7 occurred since 1980, I think, where there aren't a
8 lot of low-cost carriers nipping at mainline
9 carriers' heels in the sense that mainline carriers
10 are now focused on high value big thick spokes and
11 hubs rather than trying to fly against the low-cost
12 carriers, which we discussed yesterday was the
13 reason why there were experiments like Song and
14 MetroJet, Cal Lite, Ted, United Shuttle.
15 All those failed, and they're not
16 interested in that business anymore.
17 And I know that because I went through the
18 bankruptcy committee hearings at American, and that
19 was discussed, that they're not in that business
20 anymore. They're going to go after high value,
21 first class business customers that provide 60 to 80
22 percent of each airline's revenues and only
Inabnet Court Reporting (703) 331-0212 1619
1 represent about ten percent of the traffic.
2 That's the focus.
3 Q Dan, on page 42 and the few slides after,
4 can you describe what your analysis shows in detail
5 about the convergence of pattern -- repatterning of
6 pilots pay?
7 A I guess, the first thing I should say is
8 that the blue here looks more purple, but this is a
9 time series of the pay rates over time.
10 This one happens to be the top-of-scale
11 pay rate for United, Continental, Delta, American,
12 US Airways. And that dashed line is the network,
13 the average of those carriers' top-of-scale pay
14 rate.
15 And you'll see that on the left-hand side,
16 in 2006, these are sort of mostly bankruptcy
17 concessionary contracts, all of which were born in
18 sort of the fire of the mid 2000s.
19 By about 2009 and '10, you start to see
20 that those wage rates all start to move up. And you
21 can see that the Delta is the green line. That's
22 moving up the fastest.
Inabnet Court Reporting (703) 331-0212 1620
1 But that over time, by 2013, '14, and '15,
2 other contracts are now matching and exceeding
3 Delta. Delta's contract is amendable at the end of
4 2015. Those other contracts go beyond. That is the
5 United contract, the joint contract with
6 Continental, the American contract, and the US
7 Airways contract essentially go beyond the point
8 where the Delta contract ends.
9 But in pattern bargaining, these other
10 contracts are now going to set the stage for Delta's
11 next round. That's the pattern that's been
12 re-established.
13 And in my opinion, that's a much better
14 pattern than having a wide variety of pay rates for
15 the competitors because it gives carriers an
16 incentive to take concessions out of contracts to
17 match other companies.
18 So they're going higher, and they're
19 getting narrower in terms of their variation.
20 Q So would it be fair to summarize on 42 for
21 the large widebody aircraft that by the dynamic in
22 the negotiations and contracts was to -- or is that
Inabnet Court Reporting (703) 331-0212 1621
1 a more or less unitary large widebody pay rate
2 emerges by 2016?
3 A Yes.
4 And that's a good thing for all the pilots
5 in this room.
6 The measure of variability shown on the
7 next page, essentially, this is the telltale sign of
8 convergence that there used to be -- you can measure
9 it in terms of dollars per hour, that there was a
10 high degree of variation ranging from 15 to $30 an
11 hour.
12 And as you see, as time goes on, the
13 top-of-scale domestic pay rates for widebody
14 Captains almost is zero.
15 And that's a factor of consolidation, as
16 well as growth that sort of equals each other to a
17 certain point in time out in the future.
18 And you can see by 2017, the difference is
19 de minimus.
20 Q On page 44, have you performed a similar
21 analysis?
22 A Same analysis.
Inabnet Court Reporting (703) 331-0212 1622
1 You'll see the difference between each of
2 the carriers going into 2006, '07, '08, '09, '10.
3 And then after the new contracts are
4 signed in 2012, not only do they go up, but they're
5 converging in the future on a single point.
6 Same analysis on page 45.
7 The difference between the carriers is
8 zero, essentially.
9 Q By 2016 or thereabout.
10 A Right. 46 shows, and this is a little bit
11 busier than the previous charts.
12 And in this chart, you'll see that it
13 looks to me like Delta used Southwest for the
14 narrowbody 737 Captains' rates as the target.
15 You'll see that Southwest is well above
16 the industry. And that's a result of Southwest not
17 going into bankruptcy and not restructuring
18 internally or externally in court.
19 Q Southwest is the yellow line?
20 A Southwest is the orangish, the orange
21 line.
22 Q Orange?
Inabnet Court Reporting (703) 331-0212 1623
1 A And you'll see that the red bar just below
2 it, the sort of maroon looking bar is Delta.
3 And in their contract, they get just above
4 Southwest's existing rates.
5 Now, Southwest pilots currently are trying
6 to look forward to that year and beat Delta.
7 So, again, it's part of this pattern.
8 And the industry here, again, you see US
9 Airways East on the very bottom of the chart in
10 terms of pay rates, and Southwest on the very top of
11 the chart.
12 So you have got a pretty big bound around
13 that middle, US Airways East being about 50 bucks
14 below, and Southwest being about $70 above. That
15 collapses over time to a very narrow pay rate field
16 in the future.
17 Southwest buys AirTran. That takes out
18 the low hanging fruit.
19 US Airways East and West merge with
20 American. Another low hanging fruit to taken out.
21 And you have got Delta setting the rates
22 for the big United contract and the big American
Inabnet Court Reporting (703) 331-0212 1624
1 contract.
2 And all of a sudden, you have got fewer
3 players at a unitary kind of point in time. It
4 turns into a very small variation, as you'll see
5 reflected on page 47.
6 We haven't seen this kind of pattern for
7 at least a decade. And it has reemerged. And in my
8 opinion, it's a good thing.
9 Q Dan, in your opinion, had the Continental
10 United merger not happened, had those airlines
11 stayed separate, would each of them been bargaining
12 to the same pattern that you have shown here on the
13 past several pages?
14 A Yes.
15 They would have attempted to match Delta.
16 And we have a Delta pilot in the room. He
17 is on our team. And they would understand better
18 than I would. But from the outside, Delta put a
19 very aggressive position in their pilot contract by
20 merging earlier than their amendable date.
21 They came out in July of 2012 with these
22 rates that were substantially higher than their
Inabnet Court Reporting (703) 331-0212 1625
1 existing rates. They didn't have to open until
2 January of 2013. They had new contract rate in
3 January 2012.
4 In the post 9-11 period, that has never
5 happened. Okay. So it kind of set the stage
6 earlier so that I think carriers recognized it was
7 time to kind of get back into the position of paying
8 pilots what they're worth and flying the airline to
9 maximize revenue.
10 Q Mr. Akins, were the rates in what became
11 the Joint Collective Bargaining Agreement for United
12 influenced or resolved due to the Delta contract
13 getting resolved?
14 A Yes.
15 After several years of negotiation, United
16 pilots resolved their contract.
17 I wasn't involved in the negotiations, but
18 the pay rates and the increases essentially mirrored
19 Delta, but trailed it by about six months to a year.
20 Q So what were premerger Delta, and --
21 excuse me, United and Continental rates all rise
22 together in the Joint Collective Bargaining
Inabnet Court Reporting (703) 331-0212 1626
1 Agreement to match the Delta rates?
2 A Yes.
3 Q Thank you.
4 Dan, if you could turn to Tab 2 in your
5 book, the new subject.
6 Dan, on page 49, do you want to be begin
7 this discussion, what was -- in 2008 when the
8 industry hit the turbulence that's been much
9 discussed, including by Mo Garfinkle yesterday, did
10 United and Continental both scale back or announce
11 retirements of 737 aircraft?
12 A Yes.
13 Q Why don't you walk us through that?
14 A On page 49 is a summary of what happened
15 in the period of 2008 with United 737 aircraft.
16 The 737-500 aircraft and 737-300 aircraft
17 that were operated by United domestically, were the
18 lowest fuel efficient airplanes in the fleet, and
19 they were also the oldest.
20 In early 2008, when fuel didn't hit the
21 spike that it did in June, but was rising
22 significantly over prior years, Continental had
Inabnet Court Reporting (703) 331-0212 1627
1 decided to retire 30 of its 94 total fleet.
2 Q United?
3 A United. Sorry, decided to retire 30 of
4 its complement of 94 737 aircraft.
5 After the negotiations with Continental
6 fell apart, United decided, in June, to retire all
7 of its 737-300s and 500 airplanes.
8 So there were 94 narrowbody aircraft
9 removed from the domestic market by United
10 voluntarily.
11 The many publicly stated reasons for this
12 are the price of fuel, which had continued to
13 increase by June and was now at $145 a barrel of
14 West Texas crude. The age of the airplane, which
15 was between 17 and 20 years old on average. And the
16 sagging economy as the worldwide economic crisis
17 began to blossom.
18 Q And, Dan, I think you enfired this, but
19 the 737s were used by United in its domestic
20 operations?
21 A Yes.
22 The next slide is simply the statements or
Inabnet Court Reporting (703) 331-0212 1628
1 one of the several statements that United was
2 retiring 100 of its aircraft, including six 747
3 aircraft.
4 And the B-737 were being retired because
5 it's the oldest and least fuel efficient in the
6 fleet.
7 The next page indicates that United wasn't
8 alone. Obviously, fuel prices spiking, you look to
9 the least fuel efficient aircraft in your fleet as
10 the biggest exposure to your cost of fuel. And you
11 also look at the age of those aircraft.
12 So you have got two things going against
13 the 737s, at least the 500s and 300s, bad on fuel
14 and old. And those were ripe for pruning at that
15 time.
16 And then, as we'll see, what was odd was
17 United, unlike other network carriers, didn't have a
18 firm order book, which I believe is related to what
19 Mo talked about yesterday and what Dr. Campbell
20 talked about in the Delta/Northwest pilot
21 integration, that it makes sense for carriers to
22 look at the future complement of aircraft as being
Inabnet Court Reporting (703) 331-0212 1629
1 different based on which merger partner you
2 consolidate with.
3 And that's part of what I think is going
4 on here.
5 United had the wherewithal, as shown by
6 Mr. Garfinkle yesterday, to replace its 737 fleet,
7 but, yet, they didn't. And that was unique amongst
8 network carriers.
9 And it wasn't because of their financial
10 position. I believe it was because of sort of the
11 decision making behind the scenes that was going on
12 at United with Mr. Tilton's view of consolidation in
13 the industry as being inevitable and necessary.
14 Q So, Dan, on page 53, I think you have
15 simply some information to support the age of the
16 aircraft that United removed.
17 A Right. So -- well, on page 51 and 52, I
18 talk about Continental decides to ground 67 737s,
19 and 3,000 jobs are cut.
20 Largely, this is due to the same reasons
21 that United and other carriers grounded their least
22 fuel efficient aircraft, is that fuel was spiking in
Inabnet Court Reporting (703) 331-0212 1630
1 2008. And this announcement comes out a day after
2 United announced.
3 So both carriers are trimming their 737
4 fleets at approximately the same time, at
5 approximately the same volume, percentagewise, in
6 terms of their overall fleet.
7 Q And, Dan, did Continental primarily use
8 737s in its domestic operations?
9 A Yes. Yes. So the Slide 53 comes out of
10 the 10-K immediately prior to 2008.
11 So this is the fleet that existed at the
12 turn of the year 2007, 2008. And you'll see that
13 the two oldest types of equipment are the 737-500s
14 and the 737-300s, which were between 17 an 20 years
15 old on average.
16 So this is an indication.
17 And if you did the math on the fuel burn
18 per block hour per passenger, you would also see
19 that these two are the least fuel efficient
20 airplanes that United operated.
21 Q And as you have said on Slide 54, the
22 facts show that United did not implement firm orders
Inabnet Court Reporting (703) 331-0212 1631
1 for replacing those 737s.
2 A And you have got American sitting here
3 with 87 orders, largely as replacements, slow
4 replacements of 737s coming in to replace its
5 MD-80s.
6 In the middle of this past 2012, American
7 has sort of exhausted these orders. And they
8 reupped -- put together the largest aircraft order
9 in the industry's history on the verge of going into
10 bankruptcy. So the ability to get financing and
11 aircraft orders on the books is not a high hurdle
12 for large airlines, even small airlines as Mo
13 described.
14 So this is an odd duck view of this
15 situation, that United stands alone amongst its
16 network partners or competitors as the only one not
17 having equipment.
18 And the question is why?
19 Q Not having equipment ordered.
20 A Equipment orders.
21 And the question is why?
22 And I believe it's related to Mr. Tilton
Inabnet Court Reporting (703) 331-0212 1632
1 and some of the sentiments expressed by Dr. Campbell
2 that you want to know who your merger partner is
3 before you go and order.
4 Continental has a different complement and
5 hub network than US Airways, and a different sort of
6 manufacturer relationship than US Airways.
7 So that is not an unwise strategy is to
8 hold back to see if the merged Company looks
9 different in sort of the fleet scenario, fleet
10 rationalization as a merged Company versus a stand
11 alone.
12 Q And on page 55, did Continental end up
13 announcing retirements of some or more than 67
14 narrowbodies?
15 A Yes.
16 If you take a snapshot of 2007, the period
17 I just showed, and draw a line between 2007 and
18 2010, both United and Continental dropped their
19 fleets by significantly more than what they had
20 anticipated in early 2008.
21 That is, United dropped all of its 737s.
22 Continental dropped a huge chunk of its older
Inabnet Court Reporting (703) 331-0212 1633
1 generation 737s, about 20 less than United.
2 Q And did these phaseouts happen all at the
3 same moment in time?
4 A No.
5 Q What do you show on 56 as to Continental?
6 A Well, 56 has got a couple of parts to it.
7 This is the net change in the 737 fleet,
8 again, starting back in 2007. And you'll see that
9 in the second and third quarter of 2008, this is
10 Continental, there actually was a net gain in 737s
11 operated by Continental of seven and of five.
12 And that is, again, not five plus seven
13 equals 12. It's five and seven more than were
14 operated in the first quarter of 2007.
15 So sort of drawing a string with all of
16 this back to the complement of 737 aircraft that
17 were active in 2007.
18 And you'll notice then that as time goes
19 on, there's no line here that shows that Continental
20 lost 74 aircraft. And that is because Continental
21 had books -- had orders on its books to replace the
22 737s as they retired.
Inabnet Court Reporting (703) 331-0212 1634
1 They retired more 737s than they
2 anticipated in early 2008. And at the end of the
3 day, you have got 16 fewer 737s in third quarter of
4 2012 in the fleet of United Continental than you had
5 just at Continental in the year 2007.
6 And that fleet complement has shifted
7 hugely away from 737-500s to more modern 737s that
8 are more fuel efficient and updated as far as cabin
9 design and wi-fi, et cetera.
10 So the 737s that were retired aren't the
11 same 737s that are entering the fleet. They're
12 newer, better, more fuel efficient, more capable
13 737s.
14 Q And, Dan, what's the large downward bar
15 shown in the third quarter, 2010, in between the
16 merger announcement date and the merger closing on
17 October 1, 2010.
18 A Right. For that snapshot in time, Form 41
19 reflects active aircraft.
20 So at that point in time, that snapshot
21 showed that 59 737s were operated -- 59 fewer were
22 operated in the first quarter of 2007.
Inabnet Court Reporting (703) 331-0212 1635
1 A lot of that could have been driven by
2 painting or off-line maintenance for the 737s that
3 existed.
4 There wasn't 30 737s delivered the next
5 quarter to make up that difference. If you go from
6 minus 59 to minus 29, this is a measure of active
7 aircraft. So it could have been some maintenance or
8 painting going on in the third quarter of 2010.
9 Q All right. And, Dan, I think you have
10 already testified for both carriers, these type of
11 aircraft for United were exclusively used in
12 domestic operations --
13 A Right.
14 Q -- for Continental, were used primarily in
15 domestic operations and then also in some
16 transborder operations to the south.
17 Do you have some -- do you have some views
18 about whether there was -- you know, in thinking
19 about this question you have raised of why United
20 hasn't premerger reordered aircraft yet.
21 MR. KATZ: Yeah. I'm going to object at
22 this time.
Inabnet Court Reporting (703) 331-0212 1636
1 I don't think there's any foundation for
2 speculation by the witness on this subject.
3 MR. POLLAK: I'm seeking the witness'
4 opinions about what the management -- well, let me
5 think about that for a moment.
6 What the witness is going to testify to is
7 their opinion about whether the domestic position of
8 United or United's position and needs in the
9 domestic industry, premerger, were superior or
10 inferior to Continental, and, therefore, whether its
11 need for 737s were any less or more than
12 Continental.
13 That's well within Mr. Akins' area of
14 expertise.
15 MR. KATZ: Not at all.
16 You said it right the first time.
17 You're asking him to speculate about what
18 was in the mind of Glenn Tilton as to why he didn't
19 have any firm orders for 737 replacement aircraft or
20 any other aircraft in 2008 and most of 2009.
21 MR. POLLAK: Well, I will --
22 MR. KATZ: Let me finish what I was
Inabnet Court Reporting (703) 331-0212 1637
1 saying, please.
2 MR. POLLAK: Sure.
3 MR. KATZ: There's no basis, even for an
4 expert witness, without any foundation to engage in
5 such speculation.
6 It's pure fantasy.
7 MR. POLLAK: I think Mr. Akins can stay
8 away from speculating that was in the mind of
9 Mr. Tilton, but he can certainly talk about the
10 relative strength of the two domestic operations and
11 whether one had more on less need for 737s.
12 And that's what he's going to testify
13 about.
14 MR. KATZ: Well, I have been very lenient
15 in not objecting in the past to all of this
16 speculation we have gone through already.
17 But there has to be some limit to what
18 even an expert witness can guess about, and I think
19 we have reached it and gone beyond it.
20 So I object.
21 MR. POLLAK: All right. Well, I have to
22 say that that objection should be overruled because
Inabnet Court Reporting (703) 331-0212 1638
1 he's not going to testify about any speculation as
2 to what Mr. Tilton thought.
3 He's going to testify about the relative
4 strength of the two domestic operations.
5 ARBITRATOR EISCHEN: And I have been
6 pretty lenient about the table talk.
7 It's getting redundant.
8 So how about you just rephrase your
9 question?
10 BY MR. POLLAK:
11 Q Dan, prior to the merger, could you
12 discuss the relative strength of the two domestic
13 operations and whether one or the other had a
14 continuing need for narrowbody aircraft of the 737
15 type?
16 A Yes.
17 And I think we have to understand that
18 2008 sort of was a -- was a punctuation point that
19 was an aberration of both carriers' performance
20 after 2005.
21 United had made money in 2006 and 2007.
22 Made money in 2009 and 2010. Both carriers lost
Inabnet Court Reporting (703) 331-0212 1639
1 money in 2008.
2 The difference is, as I'm going to show in
3 these charts, is that Continental, who has pared
4 back less and replaced more domestic related
5 aircraft, the 737s, had a much weaker performance
6 domestically in terms of premerger announcement as
7 well as the period leading up immediately to the
8 third quarter closing of the merger.
9 And so in terms of the relative strengths
10 of the carrier, there's no reason why United would
11 prune its 737s because of a domestic performance
12 problem relative to Continental.
13 Q All right. Would you take us through
14 those slides?
15 A The first one is just simply stating kind
16 of the obvious, and I think that other witnesses
17 have shown this.
18 Q Page 58?
19 A Yes, page 58.
20 Both companies' revenues, ASMs, block
21 hours focus was about half devoted to the domestic
22 environment.
Inabnet Court Reporting (703) 331-0212 1640
1 You can't ignore the domestic environment
2 for the reasons that Mr. Garfinkle stated, it's a
3 big chunk of your company. It's very important to
4 feed two-thirds of the passengers on board your
5 international airplanes that come from behind the
6 gateway.
7 So having a strong international network
8 depends on having a strong domestic feeder system.
9 And that's related to the profitability
10 overall of each company.
11 Q And, Dan, on page 58, could you share for
12 the record what the measure of capacity is on this
13 particular side?
14 A It's ASM's total mainline, ASMs.
15 But, again, if you take a cut of these
16 companies and relatively every measure is going to
17 show up, domestic is, half of the Company's
18 operation.
19 Q And on page 59, do you have another
20 measure of that?
21 A Right. You can see the total revenue by
22 division.
Inabnet Court Reporting (703) 331-0212 1641
1 The previous page showed the relative
2 share of each Company's operation. Now, we're
3 looking at the actual dollar numbers of the revenue
4 produced in the period ended at the closing of the
5 merger.
6 So it's 12 months ended third quarter
7 2010.
8 United's domestic operation produced about
9 four and a half billion dollars more revenue than
10 Continental's for the reasons that Mr. Garfinkle
11 described.
12 It was bigger. It was more robust. It
13 had more hubs, had more presence, had more aircraft.
14 The Atlantic, essentially equal.
15 Latin, Continental has an advantage at the
16 mainline level, about four to one in terms of
17 revenue.
18 In the Pacific, United has an advantage
19 over Continental.
20 And then you have got Air Micronesia on
21 the right-hand side, which, if you add it to the
22 Pacific, it would be 1.4 billion, still about two
Inabnet Court Reporting (703) 331-0212 1642
1 billion smaller than United's transPacific
2 operation.
3 So this is sort of the lay of the land.
4 United bigger in domestic, equal in the
5 Atlantic, a little bit smaller in Latin, a little
6 bigger in the Pacific.
7 Q Let's stay with the domestic.
8 Look on page 60.
9 A So this snapshot gives kind of the new
10 world view of what was going on by the time this
11 merger was consummated.
12 And I believe it represents, again, sort
13 of a pivot point past 2008 where there were two
14 major exogenous events, fuel and the economy, plus
15 one internal event, which was the Delta/Northwest
16 merger, which was about the same time when the
17 Continental/United broke off in 2008.
18 So we have got Northwest and Delta as an
19 operating entity. And by the time this transaction
20 closes -- and you'll see that there's a significant
21 gap between Delta and everybody else. That used to
22 be more or less equal that Delta, United, and
Inabnet Court Reporting (703) 331-0212 1643
1 American, the big three, were kind of the same size.
2 And you'll see US Airways and Continental
3 domestically being sort of the smallest network
4 carriers in terms of domestic mainline revenue.
5 And United, again, being about five
6 billion, four and a half billion larger than
7 Continental on the domestic side in this snapshot.
8 Q And, Mr. Akins, turning to page 61, what
9 does this show about the long-term profitability of
10 Continental's domestic operating on a operating
11 profit margin basis?
12 A The numbers here reflect that the last
13 year before the merger that Continental actually
14 made operating profits was in 2000.
15 Q Operating profits where?
16 A Domestically.
17 Q Right.
18 A And, again, it's significant relating back
19 to what we discussed previously is that this
20 domestic arena is the domain of the 737s.
21 This is where the 737s fly.
22 This makes up the largest component of
Inabnet Court Reporting (703) 331-0212 1644
1 aircraft in Continental's fleet. And this
2 represents the largest environment where that
3 largest component flies.
4 So this is very important to understand in
5 terms of the relative decision making that
6 Continental was ordering planes to replace planes in
7 a market that hadn't produced profit in ten years.
8 Q And on page 62, what did those profit
9 margins look like on a quarterly basis starting at
10 the beginning of 2009 and running up to the merger
11 closing date?
12 A This is a more discreet look on a
13 quarter-by-quarter basis showing, again, the post
14 2008 period that United -- that Continental was
15 still struggling, but had made a pretty big
16 improvement in the third quarter of 2010 and the
17 second quarter of 2010.
18 But, again, if they're below the zero
19 percent line, they losing money domestically.
20 So it follows a pattern that led all the
21 way back to 9-11 that the domestic markets in the
22 mainline was losing money for Continental.
Inabnet Court Reporting (703) 331-0212 1645
1 Q And what do you show on page 63?
2 A 63 shows the same information for
3 Continental in those -- in those months prior to
4 the -- seven months prior to the merger, immediately
5 prior to the closing of the merger, that adding all
6 of losses up in domestic operations for Continental,
7 mainline lost about 1.5 billion, and United made
8 about $500 million in that same time frame.
9 Now, this time frame is chosen because
10 it's the most reflective of the health of the
11 Company's domestic operation immediately prior to
12 the merger.
13 It's more relevant than 2008. It's more
14 relevant than 2005.
15 It is the metrics upon which the deal is
16 being put together. This is the snapshot, at least
17 going back to 2009, where the companies are
18 assessing the strengths of the merger partner.
19 Q And, Dan, if you look at the relevant
20 strengths overall of the two companies for this same
21 time period, is it a similar picture starting on
22 page 65?
Inabnet Court Reporting (703) 331-0212 1646
1 A Right. On page 65, we have got a snapshot
2 of the year 2009, which is, again, reflective of the
3 last full year prior to the merger.
4 And you'll see that on the left-hand side,
5 carriers that tended to make more money during a
6 sagging demand period after the economic crisis are
7 low-cost carriers, those carriers that put out to
8 the public a product that is cheaper, less expensive
9 to get from point A to point B than the network
10 carriers.
11 And so you have got a grouping, Southwest,
12 Frontier, AirTran, and Jet Blue that have each made
13 money in 2009, where you have only got United and US
14 Airways as the network carriers that made money in
15 2009.
16 On the right-hand side, you'll see three
17 carriers that lost money, Continental, Delta, and
18 American.
19 So in the period immediately prior to the
20 merger, United was the largest network carrier to
21 post profits. All of the other network carriers,
22 excluding US Airways, lost money including
Inabnet Court Reporting (703) 331-0212 1647
1 Continental.
2 Q And on page 66 and 67, do you have some
3 more information on this subject?
4 A Again, take what was shown on previous
5 slides in a period immediately prior to the closing
6 of the merger, and show the relative performance in
7 operating profit margins of that entire seven-month
8 period for the mainline.
9 This is not domestic. This is all in.
10 Continental's profitability was less than
11 half that of United in terms of operating profit
12 margin.
13 Q And that's the period, again, from the
14 first quarter of 2009 through the third quarter of
15 2010?
16 A Yes.
17 Q And that translates into some absolute
18 dollar amounts on page 67?
19 A Right.
20 This is what I showed before about $500
21 million in profits -- or not before, this is what I
22 have shown in the previous slides as percentages.
Inabnet Court Reporting (703) 331-0212 1648
1 Continental overall posted a $513 million
2 profit during that seven-month period. United
3 posted a $1.4 billion profit.
4 And, again, this period is more relevant
5 in my mind than the operations of 2008, the crisis
6 period that had SARs and other types of maladies
7 exogenous to the industry that occurred since 9-11.
8 So this is a relatively calm water, and
9 there aren't a lot of exogenous events coming out of
10 the fuel price spike and the economic downturn that
11 shows that United was able to produce about three
12 times more dollars from its operation than
13 Continental.
14 Q And, Dan, have you prepared any slides
15 showing the relative balance sheet indices, I call
16 them --
17 A Sure.
18 Q -- of the two carriers on the eve of the
19 merger of -- with cash on hand, long-term debt?
20 A Right.
21 So in terms of the health of each company,
22 the numbers that I'm going to show here are from
Inabnet Court Reporting (703) 331-0212 1649
1 Form 41 for the mainline.
2 And it's important to understand what
3 Mr. Katz is likely to cross-examine me on, SEC
4 documents, we're talking about mainline only.
5 Both companies have a variety of
6 subsidiaries and other operations underneath the
7 hood of the SEC filings.
8 This is about strictly Form 41 mainline
9 reporting for the mainline entities for which these
10 pilots in this room are employed.
11 So when you look at carrier liquidity, on
12 an absolute basis, United had, on page 69, $600
13 million more in the third quarter of 2010 than
14 Continental, and that trend had been there for a
15 while.
16 This is the snapshot immediately before
17 closing. So United actually had more cash on its
18 books for the mainline from Form 41 than Continental
19 and Air Micronesia combined.
20 Continental also had more debt.
21 On the left-hand side, you'll see 5.8 and
22 $5.9 billion in long-term debt than United as a
Inabnet Court Reporting (703) 331-0212 1650
1 mainline Form 41 entity.
2 Sort of look at what Mr. Katz is likely to
3 cross me on, in the mainline section of the SEC --
4 MR. POLLAK: He's doing your work for you,
5 Dan.
6 MR. KATZ: I don't have anything to do.
7 He's asking the questions and answering
8 them.
9 MR. POLLAK: I know. I know.
10 Yes. He's a well-trained witness after
11 all these years.
12 MR. KATZ: I guess he has been
13 cross-examined before.
14 MR. POLLAK: I guess so.
15 THE WITNESS: The SEC, again, which is a
16 little bit dirtier number. It's not mainline
17 pilots. It's other equipment, other types of
18 operations -- is going to show that United had about
19 seven billion in long-term debt, and Continental had
20 about five and a half billion dollars in long-term
21 debt.
22 When you look at Form 41,
Inabnet Court Reporting (703) 331-0212 1651
1 apples-to-apples, mainline-to-mainline, this is what
2 is reported in the third quarter of 2010.
3 The most discreet focus on these two
4 carriers, whose employees we were discussing in the
5 seniority list integration, it's not about debt
6 levels related to RJs or other types of operations.
7 It's about the mainline.
8 BY MR. POLLAK:
9 Q Dan, on 71, what did United have to say
10 about itself?
11 A So this is a presentation that was given
12 just subsequent to the merger announcement by United
13 to a Bank of America conference. One of the many
14 Wall Street conferences that go on throughout the
15 year.
16 And this is the last time you really see
17 United presenting facts on the separate carriers
18 rather than combined carriers in front of Wall
19 Street analysts.
20 And what United is saying to the Wall
21 Street analysts is evident in the sort of subtext of
22 the heading, which is, Our liquidity is the
Inabnet Court Reporting (703) 331-0212 1652
1 strongest in the industry, while fixed obligations
2 are amongst the lowest.
3 And on the left-hand side, you'll see the
4 sort of performance metric of liquidity, which is
5 cash and short-term investments versus overall
6 revenue.
7 So United has got 25.9 percent of its
8 revenue made up in terms of cash, and Continental
9 has slightly less, 24.6.
10 So roughly equivalent, and it's the sort
11 of safe zone in liquidity.
12 Carriers don't declare bankruptcy until
13 they get well below 20 percent. The tradition is
14 around 12 or 13 percent.
15 So you have got both carriers going into
16 the merger. United having a little bit more cash,
17 having a little bit less debt on the mainline, and
18 the Company assessing the strengths of the liquidity
19 portion of the balance sheet being best in the
20 industry, and that the debt capital lease
21 obligations, going into the industry for the year
22 2010, are actually second lowest compared to US
Inabnet Court Reporting (703) 331-0212 1653
1 Airways, and about $200 million less than premerger
2 Continental.
3 So in terms of the presentation United is
4 making to Wall Street from their SEC standpoint,
5 they're the strongest in liquidity, and they have
6 got almost the industry lowest obligations on its
7 debt going into it.
8 It's been a fairly strong position as
9 opposed to the descriptions that were given earlier
10 in the Continental's direct, they were in a
11 relatively healthy balance position and were not in
12 the distress that they carried into bankruptcy.
13 So they fixed it.
14 Q Dan, I take it that's somewhat related to
15 their profitability in the prior quarters?
16 A Yes.
17 Cash balances were adding up at both
18 United and Continental, but at United a little bit
19 faster rate in the period coming out to 2008.
20 Q And, Dan, I guess this is obvious, but
21 when United removed its 737s from its fleet in 2008,
22 it obviously stopped flying 737s on its domestic
Inabnet Court Reporting (703) 331-0212 1654
1 operations at least temporarily.
2 A Yes.
3 Q By necessity.
4 Did you do an analysis to see whether,
5 after merger closing, the management, the merged
6 entity saw the need for 737s on what you might call
7 the franchise flying of United, the flying in and
8 out of its hubs?
9 A Yes.
10 Q And where -- would you explain what you
11 did starting on page 73?
12 A Sure.
13 On page 37, I have taken the quarterly
14 snapshot of typical weekly operations of 737s at
15 both United and Continental.
16 United being the red bar that sort of ends
17 abruptly in the third quarter of 2009, which is
18 reflective of the retirement of the last 737 that
19 United operated.
20 The blue bar, which is a little bit
21 higher, representing Continental's relatively larger
22 fleet of 737s, sort of trends down from 2008 and
Inabnet Court Reporting (703) 331-0212 1655
1 flattens out into the period of about 2010 were the
2 merger closing dash line is.
3 And this represents the total number of
4 nonstop routes that United, Continental, and then
5 the merged Company operated with 737s.
6 So you see that United's bar ends in the
7 fourth quarter of 2009. You see that the blue bar
8 sort of scales down for Continental, and that the
9 total number of routes the 737 is operating sort of
10 gets flat.
11 And then right after the merger, the
12 number of routes starts going up. Okay.
13 So we have got this period between third
14 quarter 2010, and let's say the first quarter of
15 2012, where Continental's 737 operations start
16 creeping back up in terms of the routes that they're
17 flying, the number of routes where they are
18 deployed.
19 And as of first quarter 2012, you see a
20 gigantic leap in what I believe is the joint
21 operational control over the fleet is finally
22 rationalizing from an industry perspective and a
Inabnet Court Reporting (703) 331-0212 1656
1 Company perspective as to where those 737s would
2 best operate.
3 And as we find out, they best operate to a
4 large degree at the places where United used to fly
5 737s.
6 So 737s out on United side, 737s in on the
7 joint operation of United Continental with
8 Continental 737s.
9 And so I want to make sure that the big
10 picture view here is that the 737 operations at
11 United's hubs were in and of itself valuable. And
12 that when the joint management team had a chance to
13 rationalize a 737 fleet, a lot of that flying went
14 back to the same hubs and the same routes that
15 United's 737s used to fly at the United hubs.
16 So that's what this is reflective.
17 It's a huge increase.
18 Q Dan, another obvious point, but on the --
19 as of merger closing, was there one management
20 making decisions about everything that would happen
21 and how to deploy aircraft?
22 A There's a lot of things to do with besides
Inabnet Court Reporting (703) 331-0212 1657
1 having one management.
2 So I'm not sure exactly on the closing
3 date. But I believe that that's when the transition
4 took place. The operational composition of the
5 airline takes a while, single operating certificate
6 takes a while for you to be able to operate under
7 the same certificate, for the employees to have a
8 single bargaining status.
9 So it doesn't all happen on the day of the
10 closing. There's a time frame. And I believe
11 American has just stated it's going to take 18
12 months beyond the closing date for the two
13 operations to co-mingle.
14 Q As we know, the pilots are sitting here
15 because the pilot lists stayed separate until the
16 seniority list integration process is completed and
17 implemented; right?
18 A Which is predicated on the joint contract
19 and the declaration of a single carrier status at
20 the NMB.
21 Q And, Dan, you had a red circle around the
22 big leap up sort of toward the end of 2011.
Inabnet Court Reporting (703) 331-0212 1658
1 I think you're going to show on the slides
2 that follow that big leap up most of it was driven
3 by an expansion of 737 flying in and out of
4 United's -- or what were United's hubs premerger?
5 A Yes.
6 Q And that would be like San Francisco, Los
7 Angeles, Denver, Chicago, and Dulles?
8 A Yes.
9 I think two things to take away from this
10 is, not only was there a great leap in the number of
11 routes operated by the 737s, which you would expect
12 after rationalization amongst those hubs versus just
13 having Newark and the two other hubs operated by
14 Continental.
15 You have more routes than existed back
16 before the pruning began. You have got roughly 180
17 routes. Before the pruning began, it was something
18 like 130 domestic route.
19 So you have got more places to put your
20 737s as a result of the merger, which is exactly
21 what Delta has done. It's exactly what American and
22 US Airways are going to do. They're going to
Inabnet Court Reporting (703) 331-0212 1659
1 rationalization their fleet and move pieces around
2 due to the dynamics of the new network.
3 So this is bigger than what Continental
4 found in terms of routes to operate 737s prior to
5 the merger by a pretty significant factor, which is
6 completely understandable because that's what
7 mergers are about.
8 So the next slide, 74, it looks busy. But
9 I want to walk through it. It's essentially the
10 sort of underpinnings of what we have just seen in
11 the previous slide.
12 It takes each of the United hubs, on the
13 left-hand side from Denver, Dulles, Los Angeles,
14 Chicago, and San Francisco, and takes a look at the
15 number of 737 routes that were connected to that
16 particular hub in 2008. And you'll see that column
17 underneath UA '08.
18 Q So what would be an example or a route
19 connected to a United hub?
20 A Denver to Des Moines.
21 Q Okay.
22 A Okay. That's a particular route.
Inabnet Court Reporting (703) 331-0212 1660
1 I'm not counting frequencies. I'm not
2 counting block hours. I'm counting the number of
3 routes where the 737s are deployed.
4 So from Denver, there were 41 United
5 routes listed under UA '08 in 2008. And United had,
6 you know, six at Dulles below it, three at LAX, 42
7 at Chicago, and San Francisco had seven.
8 So you can kind of get a sense that United
9 positioned its 737s at mid continent hubs, Denver
10 and Chicago, and not ones on the coast.
11 Continental at United hubs, and this
12 excludes connections to its hubs at Cleveland,
13 Houston, and Newark, had three Denver 737 flights.
14 Zero at Dulles, three at Los Angeles, two
15 at Chicago, and three at San Francisco.
16 So that's the snapshot of the world before
17 United pruned, essentially, the 737 fleet, and
18 before the merger.
19 So that's the position in the first
20 quarter of 2008 on an average week, I think, in
21 February.
22 2013, is the combined operation.
Inabnet Court Reporting (703) 331-0212 1661
1 Now, the combined operation only has
2 United 737s operating. So it's pretty easy to take
3 a look and know that every 737 is a former
4 Continental 737, now called United.
5 So in the first quarter of 2013, the
6 important columns to look at are the Continental
7 '08, and the United 2013, which shows, for example,
8 at Denver, Continental operated three prior to the
9 merger, now operates 34.
10 Q United?
11 A United, sorry.
12 Q Okay.
13 A United now operates 34.
14 At Dulles, zero before the merger. United
15 now operates 21 737 routes out of Dulles, and so
16 forth.
17 So the important thing here is sort of
18 twofold. One is a lot of 737 flying is migrating
19 into United hubs, where the former 737s of premerger
20 United pilots operated.
21 The real key is how many of those 737
22 routes that were operated prior to the merger by
Inabnet Court Reporting (703) 331-0212 1662
1 United are now being flown by the combined Company's
2 737s, which are being flown today by Continental
3 pilots.
4 That next one is the key piece here, key
5 takeaway, which is the overlap is 18 routes out of
6 34 routes are the former routes that United used to
7 operate back in '08.
8 So if you look at the overlap, 18 divided
9 by 41 is 44 percent.
10 So that's the key takeaway here, is that,
11 not only, did the United 2013 737s operate at United
12 hubs, 44 percent operated on the same routes at
13 Denver that the premerger 737s operated on.
14 So this is a degree of overlap, 737s off a
15 route, say Des Moines to Denver, 737s back on the
16 route, say Des Moines to Denver, same routes, same
17 hub, 737s, same plane that United pulled back.
18 Q I think you mentioned, Dan, flown in 2013,
19 and at the moment by the Continental list because
20 the lists are separate.
21 A Right.
22 Q Correct?
Inabnet Court Reporting (703) 331-0212 1663
1 And the 737s are on the Continental side
2 until everything is finally all drawn together?
3 A Right.
4 Q And I know this isn't your area of special
5 expertise, but you're aware that -- and we will have
6 another witness to treat this, but you're aware that
7 under agreements between the pilots and the Company,
8 the actual 737 domiciles, if I'm using the right
9 word, were set up at some of the United domiciles
10 for Continental pilots to be able to fly these 737s
11 efficiently in and out of the United -- premerger
12 United hubs.
13 A Yes.
14 And it makes sense for the Company to
15 attempt to do that because they want their pilots
16 positioned where the flying originates.
17 That saves them money. It's more
18 efficient.
19 Q I think on page 75, maybe we --
20 A Just before we leave 74, Roger.
21 Q Sure.
22 A I would just like to say that when you
Inabnet Court Reporting (703) 331-0212 1664
1 total up at the bottom of all these separate hubs,
2 you total up all flying, and, again, exclude the
3 flying that Continental did between its hubs and
4 United's hubs premerger, you end up with -- of the
5 99 routes that United used to fly from its hubs
6 using 737s, 51 are now being flown by Continental
7 pilots in the United airplanes in 2013, from those
8 same hubs.
9 So you have got at the bottom, the key
10 takeaway, again, is that number on the right-hand
11 side, 52 percent of all the routes that were flown
12 by United 737s, in 2008, are now being flown by
13 United 737s in 2013.
14 So it wasn't the value of the flying in
15 those hubs that the 737s that drove United to back
16 off in 2008. Those hubs had value for the exact
17 same type of equipment that was pulled from those
18 routes in 2008.
19 Q But not replaced premerger?
20 A Not replaced.
21 This is the replacement flying. This is
22 what, you know, is overlapping with what United used
Inabnet Court Reporting (703) 331-0212 1665
1 to fly.
2 These routes are valuable. These hubs are
3 valuable.
4 And this transition to Continental
5 aircraft under United, in 2013, is logically an end
6 to that. It went back into the same places.
7 Q Does page -- is there more to say about
8 page 75?
9 You have done a good job explaining all of
10 this on page 74.
11 A The numbers on the left-hand side
12 represent the start of Denver. The red bars
13 indicate that United lost all 41 of the routes in
14 2008.
15 Q The 737 routes?
16 A The 737 routes.
17 In looking at the net gain by 2013, in
18 Denver, United lost 41 routes flying 737s. The new
19 United is flying 31 routes.
20 And, again, I mentioned 18 of those are
21 the former routes of United in 2008, and so forth.
22 So it's just another way to look at the
Inabnet Court Reporting (703) 331-0212 1666
1 same numbers, only graphically.
2 And on page 76, it's the same. It's that
3 right-hand column that we saw on page 74. And it's
4 just displaying the bar graph for easier reference,
5 that this is the extent to which each hub in the new
6 United 737s are flying what the old United used to
7 fly at each of these hubs, the groups.
8 MR. POLLAK: I think this would be a
9 propitious moment to take a break.
10 We'll have 20 minutes, maybe, when we come
11 back, or perhaps a half an hour. The final modules
12 are shorter.
13 ARBITRATOR EISCHEN: Very copacetic.
14 We'll take a break. Off the record.
15 (A recess was taken from 11:26 until 11:42.)
16 BY MR. POLLAK:
17 Q All right. Mr. Akins, if you would turn
18 to the third tab of your presentation.
19 Have you prepared some slides about the
20 widebody flying and the widebody equipment at the
21 two carriers, premerger?
22 A Yes, I have.
Inabnet Court Reporting (703) 331-0212 1667
1 Q Would you like to take us through those
2 slides, starting at page 78?
3 A Yes.
4 I think on balance, it's important to kind
5 of note the different kinds of flying that were
6 performed, especially under the international
7 operation.
8 Most carriers fly primarily widebody
9 equipment internationally, that is bigger than
10 narrowbody equipment.
11 The operations of Continental is a little
12 bit different in that they fly a lot of narrowbodies
13 in the international environment.
14 And I think from a pilot's perspective,
15 bigger is better. Widebody equipment offers longer
16 haul route, higher pay. It's usually bid by the top
17 of the seniority list.
18 If you turn to page 78, I indicate that
19 just in general, United, like the other big three
20 network carriers, which are Delta and American, have
21 a balanced mix of widebody and narrowbody equipment.
22 United looks more like Delta and American
Inabnet Court Reporting (703) 331-0212 1668
1 than Continental does in its deployment of aircraft
2 in the international arena.
3 And as Mr. Garfinkle showed yesterday, the
4 757s that are operated by Continental are kind of an
5 odd duck in the Atlantic, in that most carriers
6 flying international, excluding Mexico, are flying
7 large widebody equipment on long haul routes that
8 pay more than narrowbody equipment, domestically or
9 internationally.
10 So that's a big component of what I'm
11 about to talk about.
12 And also, I want to reflect on the fact
13 that there are other measures besides block hours to
14 look at, the difference between operations amongst
15 carriers internationally. And that's directly
16 related to the size of the aircraft and the length
17 of haul flown by those aircraft.
18 And that's directly reflective of a
19 Company's ability to pay pilots more in the larger
20 long haul equipment types because there's more
21 revenue generated because they're flying longer,
22 more ASMs, people pay more, and that means that
Inabnet Court Reporting (703) 331-0212 1669
1 there is a logic as to why widebody Captains
2 performing largely the same job as RJ Captains get
3 paid more.
4 It's relative to the scope and scale of
5 the equipment that they're flying.
6 That's the point of this international
7 exhibit, that they were different between
8 Continental and United. And different between
9 Continental, United, Delta, and American. That this
10 was a different kind of operation internationally.
11 United operated 31 percent of its fleet as
12 widebody. Continental 16.7. And this is a snapshot
13 in the third quarter 2010.
14 You can look at the next slide, 79, going
15 back to premerger precrisis 2007. You can see that
16 it doesn't really matter when we start that line,
17 either 2007, 2008, 2009, or any period in that chunk
18 of time, that both United and Continental operated
19 widebody aircraft internationally, and that more of
20 United's fleet -- consistently more of United's
21 fleet was widebody aircraft.
22 Prior to the reduction in narrowbody
Inabnet Court Reporting (703) 331-0212 1670
1 flying, that component was about 25 percent. And as
2 a result of the curtailment of narrowbody flying,
3 and even though there was a reduction of United
4 widebodies, there's still a greater percentage of
5 widebodies, which indicates that more of the United
6 pilots are flying more widebodies than Continental,
7 all things being equal.
8 There are more pilots situated in
9 long-haul widebody aircraft at United than
10 Continental, virtually twice as many in terms of
11 percentage as Continental.
12 And I'm going to walk through, I guess, on
13 page 81, we saw a number of block hour measurements
14 from, I guess, Mr. Campbell.
15 Continental operates more block hours
16 internationally.
17 But, again, it's to look underneath the
18 hood and think about what kind of capacity does
19 Continental provide with that equipment versus
20 United because it's linked to the ability to pay, to
21 generate revenue, to pay pilots in those
22 environments more of a wage on widebodies than
Inabnet Court Reporting (703) 331-0212 1671
1 narrowbodies.
2 And it's part of the ALPA formula that has
3 existed in its contracts for decades.
4 Continental, in the Pacific, had 8.4
5 billion ASMs in the 12-month period ending third
6 quarter of 2010. It looks a lot like the 2009,
7 which looks a lot like the 2008 cuts. So this is
8 not a sort of a one-off snapshot. This is sort of
9 consistent with the prior periods.
10 And United, it states, operates more than
11 three times as many widebody ASMs in the Pacific as
12 Continental.
13 So you have got Continental/Micronesia and
14 Continental on the left-hand side, and United's
15 widebody ASMs on the right-hand side.
16 If you look at the next slide, again, this
17 is the Atlantic.
18 Continental had more block hours, I
19 believe, in the Atlantic but less ASMs as a result
20 of flying smaller versus widebody.
21 So you have got 22 percent of the -- or 22
22 billion ASMs generated in the Atlantic by United,
Inabnet Court Reporting (703) 331-0212 1672
1 which the 48 percent more ASMs than Continental did
2 in the Atlantic.
3 So it's sort of a different look,
4 different measure of the two carriers.
5 Q Dan, just clarifying on 82.
6 A Sure.
7 Q You're talking about the number of ASMs
8 each carrier flew in that time period on the
9 widebodies?
10 A In the Atlantic.
11 Q In the Atlantic.
12 A And then when you look at the Latin
13 division and you look at widebody flying, and,
14 again, widebody in common terminology is any
15 aircraft with two aisles, large long-haul capable
16 777s, 74s, 76s, 78s, those types of equipment.
17 The widebody generated more at Continental
18 than at United. But compared to what we saw in
19 previous charts, it's -- the discrepancy is not that
20 big. It's pretty small. It's only 10 percent.
21 And this is sort of, again, clawing back
22 into the most valuable flying that Continental
Inabnet Court Reporting (703) 331-0212 1673
1 pilots and United flying, in terms of widebody pay,
2 the most desirable flying in only one environment is
3 Continental produces more ASMs on their widebodies
4 than United.
5 You combine in the next slide, 84, all
6 widebody flying international versus Continental and
7 United, you'll see that United has virtually twice
8 as many ASMs generated by widebodies in the
9 international division.
10 And that's reflective of the fact that
11 United has over 100 widebody aircraft, and
12 Continental has less than half of that number,
13 approximately half of that number. So it's the
14 result of the fleet complement that each carrier is
15 putting into the mix.
16 And it's a different way to look at the
17 environments in terms of market share, in terms of
18 the gauge of flying. As we have seen from
19 Dr. Campbell's exhibits, Continental is largely
20 using, at least in the Atlantic, narrowbody
21 equipment to penetrate sort of secondary markets.
22 United is like the other big three
Inabnet Court Reporting (703) 331-0212 1674
1 carriers, more involved with their alliance
2 partners, feeding that pipeline between gateway to
3 gateway from U.S. to Europe with larger equipment
4 into the first tier business cities like London and
5 Frankfurt and Paris.
6 And that's a lot of Continental's flying
7 is to places that are direct feeds by Continental
8 into a secondary tier that isn't really connected to
9 the alliance network.
10 So it's a different type of operation and
11 one that doesn't fit as well the business model that
12 has been developed since the early '90s about
13 feeding alliance partners, offer more products on
14 the shelf, as Mo discussed yesterday.
15 So it's important to look at this as an
16 equally important measure as the block hour numbers.
17 But the next set of slides, starting at
18 page 86, and I guess there's four of them.
19 Again, segmenting out what we have seen
20 from Dr. Campbell's exhibits that United operates
21 fewer block hours and dialing into how many block
22 hours are representing -- represented by the largest
Inabnet Court Reporting (703) 331-0212 1675
1 equipment types, Continental operates less by about
2 150,000 block hours in this period of time on
3 international widebodies than United.
4 So, again, looking at the world through
5 pilot's eyes, the carrier flying more widebodies on
6 longer haul routes is preferential because you have
7 got more opportunities to fly at high pay because of
8 the route they're on, the type of business
9 passengers are on, the type of revenue that's
10 produced.
11 All things being equal, you would rather
12 be a pilot at the left airline than the right
13 airline because there's more opportunity for your
14 group to fly block hours internationally.
15 Next slide, 87, is essentially the share
16 of widebody and narrowbody flying internationally.
17 Again, this is at the 12-months ended
18 third quarter 2010. And it's important to note here
19 that there's only 7 percent of United's block hours
20 that are flown in what the DOT considers
21 international.
22 None of these aircraft are flown in what
Inabnet Court Reporting (703) 331-0212 1676
1 the United pilots contract would have considered
2 international. They're not deep south enough to get
3 there. So essentially, all of the United's
4 international flying, in this period, are developed
5 from widebody aircraft.
6 And if you look on the right-hand side,
7 you'll see that 57 percent on Continental's
8 international block hour development are in
9 narrowbody equipment.
10 And I think it's reflective, again, of the
11 route maps and the network strengths of the two
12 companies that they were two different types of
13 operations.
14 International means a lot of different
15 things. Going from Guam to Chuck is a different
16 type of thing for a pilot and for a passenger than
17 flying on a 777 to Hong Kong out of San Francisco.
18 For the pilot, it's a different
19 environment. For the passenger it's a different
20 environment.
21 So this says a lot about the different
22 values brought into the merger about the type of
Inabnet Court Reporting (703) 331-0212 1677
1 flying internationally.
2 It's not just international.
3 It's what it is and what kind of aircraft
4 you're flying. Is it short-haul narrowbody, or is
5 it long-haul widebody?
6 Continental has got more than half of its
7 international in narrowbody.
8 Now, if you drill down even further and
9 take a look at the next slide, which is 88, I have
10 parsed out what the DOT reported in it's segment
11 operating environment as on the left side, Atlantic.
12 On the middle portion, Latin. And on the right-hand
13 side Pacific, in terms of the total number of block
14 hours in thousands of hours produced in each of
15 those separate and discreet environments by United.
16 So you'll see that on the left-hand side
17 in Atlantic, all of the transAtlantic block hours at
18 United are in preferable widebodied long-haul
19 equipment. All of the service in the Pacific,
20 preferable widebodied equipment.
21 In the Latin environment, again, this is a
22 split between widebody and narrowbody. All of the
Inabnet Court Reporting (703) 331-0212 1678
1 widebodies are what United would call international.
2 None of the narrowbodies are what the United pilots
3 would call international.
4 So you essentially have, if you remove the
5 sort of DOT Form 41 operating parameters that
6 consider Mexico international and parts of near
7 Caribbean and near Southern South America to be
8 international, this would not be considered
9 international by the United pilots.
10 So all of the long-haul services
11 internationally are provided by widebody equipment
12 on United, subject to the correction of DOT data to
13 include what United considers international in its
14 contract.
15 The next slide is my last slide.
16 And it shows a different picture. And
17 sort of the best way to look at it is flipping
18 between the two slides. Not only does United have a
19 bigger volume of international block hours on the
20 widebodies, it also has far less narrowbody
21 operations.
22 And you can see roughly a little bit less
Inabnet Court Reporting (703) 331-0212 1679
1 than half of the Atlantic is considered narrowbody
2 flying by the DOT for Continental. The Latin is
3 primarily 167,000 block hours generated in Latin on
4 narrowbody equipment versus 26,000.
5 And in the Pacific, again, the short-haul
6 piece is largely Air Mic. The longer haul piece is
7 sort of the three or four routes that Continental
8 flew with widebody, I believe, 777 equipment in this
9 period.
10 Q Dan, the Latin flying includes the flying
11 back and forth from Houston to Mexico, Central
12 America, less than 1,000 miles type flying. That's
13 a lot of what could be shown there in that 167,000
14 block hours?
15 A I don't know if it's less than 1,000
16 miles.
17 It's most likely the bulk of it's less
18 than 1,000 miles, depending on aircraft capability.
19 But it's largely, as we have seen from route maps, a
20 lot of back and forth from Mexico and shorter haul
21 routes, which are appropriate for narrowbodies.
22 There's a reason why Southwest doesn't fly
Inabnet Court Reporting (703) 331-0212 1680
1 747s. It could afford it, but it doesn't work in
2 their route network. This is indicative of a
3 different type of route network than United.
4 It's indicative of a different type of
5 route network than the other big three carriers, who
6 had brought largely domestic based companies to
7 fulfill a particular portion of their network that
8 didn't pan out from a stand alone perspective.
9 So at the end of the day, I believe that
10 United and Continental are really a good merger.
11 The route maps worked for the reasons that Mo talked
12 about.
13 Continental is strong in Latin America,
14 where United is weak. United is strong in the
15 Pacific, where Continental is weak. United kind of
16 helps Continental fill out a largely sort of
17 diminished network largely west of the Rockies or
18 east of the Rockies. And this is indicative of the
19 types of equipment that flew, that worked for
20 Continental.
21 And the previous page was the types of
22 equipment that work at a big-three, large-scale
Inabnet Court Reporting (703) 331-0212 1681
1 international global carrier like United.
2 Q And, Dan, I take it in the JCBA and the
3 Delta pattern setting agreement that the historic
4 tendency of the widebody aircraft to be paid more
5 per hour than the narrowbody aircraft has continued?
6 A Yes.
7 I think, off the top of my head, It's
8 about a $60, $50 differential between the widebodies
9 and the narrowbodies that fly there.
10 So it's important from a pilot perspective
11 to know sort of what are the more desirable pieces
12 of equipment.
13 And the larger widebody long-haul are more
14 preferable because they pay more. The routes are
15 better in terms of the number of hours that are
16 produced by each cycle of the airplane is greater.
17 MR. POLLAK: All right. Thanks very much.
18 That's all I have on direct.
19 MR. KATZ: We would like to do the same
20 thing we did yesterday with Mr. Garfinkle, and
21 reserve on the question of whether we're going to
22 exercise the provision of the ground rules that it
Inabnet Court Reporting (703) 331-0212 1682
1 allows us to cross-examine Mr. Akins tomorrow, but
2 ask a couple of questions of a methodological nature
3 now.
4 And if that's acceptable to the
5 Arbitration Board and the United Merger Committee.
6 MR. POLLAK: Go right ahead.
7 It's acceptable to us.
8 CROSS-EXAMINATION
9 BY MR. KATZ:
10 Q Page 4, Mr. Akins.
11 A Yeah.
12 Q In calculating the United average annual
13 wages per pilot, you have used all of the data about
14 the -- from Form 41 concerning those United pilots
15 who were working, based on full-time equivalent
16 pilot; right?
17 A Yes.
18 Q In calculating the Continental average
19 annual wages for pilot for 2009, you left out the
20 Air Mic pilots.
21 A Right. There's a reason.
22 Q Well, that was what I was going to ask.
Inabnet Court Reporting (703) 331-0212 1683
1 A No head counts were available on Form 41
2 for Air Mic. It's a separate subsidiary.
3 I couldn't get them, so ...
4 Q So you left it out of this calculation on
5 page 4 because you couldn't find the data for the
6 number of pilots flying at Air Mic.
7 A As a separate subsidiary, it wasn't
8 available.
9 Q Just as a methodological question, it
10 would be helpful, when I go back with my committee
11 and Dr. Campbell, to decide what questions to ask on
12 cross-examination and what issues to deal with on
13 rebuttal, if you would identify for us which of
14 these charts omit Air Mic, because some of them I
15 saw later, you had a separate entry for Air Mic, and
16 you had the data to show for that.
17 A Right.
18 Q Would you do that for us, please?
19 A Sure.
20 Again, I said none of the pilot head
21 counts were available through my analysis of the
22 Form 41 numbers. There wasn't a head count
Inabnet Court Reporting (703) 331-0212 1684
1 available.
2 So in terms of what was included, it would
3 include -- do you want me to go through the whole of
4 everything?
5 Q Please.
6 A 4, 5, 6, 7 -- I'll have to check on the
7 block hour types in 9, 10, and 11.
8 13, I don't believe it's in there. 14
9 through that whole section is irrelevant. The next
10 section is irrelevant.
11 Next section fleet 737s is domestic.
12 It's irrelevant.
13 International ops, we include it where it
14 is available as I noted.
15 Q I think you're up to page 35?
16 A I'm on 81.
17 Q Oh.
18 A 81, 82, 83, where it says includes Air
19 Micronesia, below it obviously includes it.
20 But if there's any particular area where
21 you think I missed it or it would be impactful --
22 now, I can look at it again, but ...
Inabnet Court Reporting (703) 331-0212 1685
1 Q All right. Going back to 48, there's no
2 Air Mic.
3 9?
4 A 9, and block hours.
5 I would have to check.
6 Q How about 8?
7 Let's go back to 8?
8 A Yeah.
9 Q Is 8 in or out?
10 A I think it's -- I would have to check.
11 I can do that over lunch for you.
12 Q Would you do that and just have Jeff --
13 A 8 is definitely out because it's based on
14 head count.
15 Q Oh, so 4 to 8 is out.
16 There's no Air Mic.
17 A Yeah. And in the subsequent charts, of
18 the five buckets that are reported by mainline
19 certificated carriers, the pilots that President
20 Reagan left in the box, there were two submitted by
21 Air Mic, and three weren't submitted.
22 And I can't remember which two of the
Inabnet Court Reporting (703) 331-0212 1686
1 three were. One was wages for sure. And I'm not
2 sure if the other one was per diem, whatever.
3 So of the list that you get for both
4 United and Continental mainline, the boxes for Air
5 Mic, three of the five are missing. They're zeros.
6 So they have different reporting
7 requirements probably based on their size or
8 history.
9 But you can get things like aircraft
10 operated, average block hours, those types of
11 things. It's just when you get to the pilot
12 compensation piece that Air Mic is a little scant.
13 So that's why I would have to check on
14 some of this to see whether they were or not
15 included.
16 Q If you want to check.
17 And if there's anything different from
18 what you said, have Jeff or Roger --
19 A Sure.
20 Q -- email us.
21 A And point of fact, Dan, it's going to be a
22 fairly small impact given the size.
Inabnet Court Reporting (703) 331-0212 1687
1 Q Right. I wasn't asking about the impact.
2 A Okay.
3 MR. KATZ: What we would like to do now is
4 break for lunch and make a decision about whether
5 we're going to cross-examine Mr. Akins this
6 afternoon or tomorrow.
7 ARBITRATOR EISCHEN: Same ground rules as
8 yesterday, you want 90 minutes?
9 MR. KATZ: Yeah. That would be great.
10 ARBITRATOR EISCHEN: All right.
11 And I'll ask you to do the same as we did
12 yesterday, Dan. As soon as you have a sense of
13 which direction you're going to go, a courtesy
14 communication to opposing counsel and let us know.
15 MR. KATZ: Sure. Be happy to do that.
16 Did you get the text message yesterday?
17 MR. FREUND: Yeah. I did.
18 The greater the lead time you can give me,
19 just as a logistical matter, just to get centered.
20 MR. KATZ: As soon as we know, we'll let
21 you know.
22 ARBITRATOR EISCHEN: Any other business
Inabnet Court Reporting (703) 331-0212 1688
1 before we recess?
2 All right. Our target then is 1:30 with
3 and update before that.
4 (A recess was taken from 12:06 until 1:39.)
5 ARBITRATOR EISCHEN: On the record.
6 MR. FREUND: We're about to call our next
7 witness.
8 But before we do that, we have a little
9 bit of cleanup with regard to Mo Garfinkle's -- a
10 couple of Mo Garfinkle's exhibits.
11 Some questions that Dan raised, yesterday,
12 before we closed the record.
13 So I'll let Roger fill out the record on
14 those questions.
15 MR. POLLAK: There was a question about
16 whether Exhibits 4 and 8, which included each a
17 summary page and a series of maps, included all
18 flying inclusive of regional jet flying, and the
19 answer to that question is yes.
20 And then --
21 MR. KATZ: Was the answer yes for both
22 Continental and United?
Inabnet Court Reporting (703) 331-0212 1689
1 MR. POLLAK: Yes, to both, Continental and
2 United.
3 And as to the various exhibits that Mo put
4 in that looked at the top 25 and the top 100, first,
5 second, and third place positions by -- they're all
6 probably by passenger and also by revenue, those
7 were an analysis of the airport pairs, not the city
8 pairs.
9 Those are the good words of Morris
10 Garfinkle, Esquire.
11 MR. FREUND: One more little piece
12 regarding Mo's testimony.
13 Dan asked him whether the exhibits that
14 reflected profitability -- DOT information regarding
15 profitability of international markets was
16 confidential -- was supposed to be confidential
17 information, and Mo was going to check to get the
18 answer to that.
19 He doesn't have the answer to that. He's
20 going get it for us. In the meantime, we have not
21 put those exhibits up on the United website.
22 I think it may be water under the bridge,
Inabnet Court Reporting (703) 331-0212 1690
1 because I think that the Continental pilots put
2 those exhibits up on the website.
3 MR. KATZ: No.
4 MR. FREUND: No?
5 MR. KATZ: The transcripts --
6 MR. FREUND: Transcripts?
7 MR. KATZ: -- didn't really refer to
8 numbers in the charts.
9 MR. FREUND: That's what I was about to
10 say.
11 The transcript, I think, is considerably
12 more neutral. So we're going to hold off putting
13 the exhibit up on the web until we have an answer to
14 the question.
15 MR. KATZ: I think it's an easy fix if it
16 turns out they're supposed to be treated
17 confidentially according to DOT rules, Joey will
18 print up a separate confidential binder with the
19 discussion of that, and we'll treat the exhibit as a
20 confidential exhibit.
21 And if it's referred to in briefs, we'll
22 put in a separate confidential section of the brief
Inabnet Court Reporting (703) 331-0212 1691
1 to address that.
2 MR. FREUND: That's fine.
3 Again, as you said, I don't know whether
4 the transcript references have to be treated as
5 confidential, in fact, because they were generic and
6 didn't talk about specifics, but clearly, the
7 exhibit --
8 MR. KATZ: There was no mention of the
9 confidential data.
10 ARBITRATOR EISCHEN: Mr. Reporter, I think
11 we have consensus of counsel on that approach. If
12 that even comes to pass, you and I will coordinate.
13 Thank you.
14 MR. FREUND: With that, we will call David
15 Smith.
16 (Witness sworn by the court reporter.)
17 Thereupon,
18 DAVID SMITH
19 Called for examination by counsel for the
20 United Pilots, having been duly sworn, was examined
21 and testified as follows:
22 DIRECT EXAMINATION
Inabnet Court Reporting (703) 331-0212 1692
1 BY MR. FREUND:
2 Q Good afternoon.
3 A Good afternoon.
4 Q Could you state your name, please, for the
5 record?
6 A David Smith.
7 Q David, do you mind if I call you Dave?
8 A Please.
9 Q Dave, could you tell us where you're
10 employed, please?
11 A United Airlines.
12 Q What do you do for United Airlines?
13 A I fly as a 767/757 Captain based in
14 Denver, Colorado.
15 Q And how long have you done that?
16 A I was hired on April 4, 1985, so a little
17 over 28 years.
18 Q I'm going to have you tell the Panel what
19 you've done at United since the time you started, in
20 addition to flying planes.
21 But, first, before we do that, would you
22 just give the Panel a brief summary of your
Inabnet Court Reporting (703) 331-0212 1693
1 education starting with college and what you did
2 after you graduated college?
3 A I graduated from the University of North
4 Dakota in 1983.
5 And I did a little bit of charter work
6 from there. I was hired at Mesaba Airlines as a
7 Beach 99 First Officer, and interviewed with many
8 airlines at that point in time.
9 I got hired by United, and -- on April 4,
10 1985 as a 727 flight engineer.
11 Q And I'm not going to have you walk through
12 all the airplanes that you have flown at United. I
13 assume you worked your way up through the various
14 piece of equipment they had over time.
15 But aside from flying airplanes for
16 United, what other pilot-related work have you done
17 for United in your capacity as a pilot?
18 A As a United pilot, I was a line check
19 airman on the Boeing 727, and was named as Line
20 Check Airmen of the Year in 1999 in that fleet.
21 And I also served approximately five years
22 as a new hire pilot interview Captain back in the
Inabnet Court Reporting (703) 331-0212 1694
1 late '90s and throughout about 2000.
2 Q Have you also done work for the Air Line
3 Pilots Association, either for the national union or
4 for the United MEC or for local councils of the
5 United MEC?
6 A Quit a bit, yes.
7 Q Why don't you walk us through the various
8 kinds of ALPA work that you done.
9 A I'll just hit the highlights.
10 Q Or the low lights, depending on one's
11 point of view.
12 A I started shortly after I was hired on the
13 Professional Standards Committee in Denver.
14 And from there, I became involved with the
15 Membership Committee at the United Airlines Master
16 Executive Council.
17 I served as both vice chairman and
18 chairman of that committee for many years. And I
19 ran for and won the Captain representative of
20 Council 33, which is in Denver, Colorado, in 2000.
21 Served that term as chairman of that council and
22 member of the ALPA Board of Directors.
Inabnet Court Reporting (703) 331-0212 1695
1 After that interesting time frame, that
2 would have been the 9-11 time frames, past, and my
3 term ended, I was elected to the Grievance Committee
4 at the Master Executive Council level as vice
5 chairman.
6 And then from there, in 2006, was elected
7 to and served a couple of terms as a Merger
8 Committee Chairman at United Airlines for the MEC.
9 And as a result of that, served at ALPA -- for ALPA
10 National on the Merger Policy Review Committee.
11 After that term, a couple of terms was up
12 there, I served as the United Airlines MEC
13 Legislative Committee Chairman. And most recently,
14 still serve in about three capacities.
15 One of them is on the Steering Committee
16 for the United Pilots Political Action Committee.
17 The United pilots have their own separate PAC.
18 And also I served as our local Council
19 33's Communication Committee Chairman, and finally,
20 help out in the liaison role to the AFL-CIO.
21 Q I think you told me yesterday about a
22 Relief Committee.
Inabnet Court Reporting (703) 331-0212 1696
1 A Relief.
2 Q Maybe I'm confusing you with someone else.
3 A Which relief? I'm sorry.
4 Q We'll pass on that.
5 I want to -- I want to focus -- I want to
6 focus your attention today on the Merger Policy
7 Review Committee, and is it correct that you have
8 prepared a book of exhibits that relate to issues
9 involving the Merger Policy Review Committee?
10 A I have.
11 MR. FREUND: Would you pass those out,
12 please?
13 (Thereupon, United Smith Exhibit, Tab Nos.
14 1 through 13, were marked for identification and
15 received into evidence.)
16 BY MR. FREUND:
17 Q Before we start tromping our way through
18 these exhibits, can you tell us what the Merger
19 Policy Review Committee was?
20 A This particular version of it, if you
21 will, was established in 2007.
22 And our charter was to review in its
Inabnet Court Reporting (703) 331-0212 1697
1 entirety the ALPA Merger Policy for rewrite of said
2 policy.
3 Q Was there a particular reason that you
4 understood that this particular timing of this
5 committee was related to the timing and the
6 formation of the committee?
7 A Yes.
8 It was due to the rather unsuccessful
9 outcome, as viewed by some, of the US
10 Airways/America West seniority integration.
11 Q Okay. That was a seniority integration
12 which is commonly referred to or often referred to
13 as the Nicolau award.
14 A That's correct.
15 Q After the Nicolau award was issued, which
16 was in May of 2007, did the US Airways MEC begin a
17 series of efforts to try to undo the results of the
18 Nicolau award?
19 A Yes.
20 After that award was issued, they began
21 that process rather rapidly.
22 Q I would like to turn your attention,
Inabnet Court Reporting (703) 331-0212 1698
1 please, to Tab 1.
2 And if you could tell us what that is,
3 please?
4 A This is a letter from the US Airways MEC,
5 all their LEC and MEC officers to their pilot group.
6 Q And when was it -- when was it issued?
7 A This was issued approximately ten days
8 after the Nicolau award.
9 Q And if you could just read to the Panel --
10 the Panel can read the entire letter at its leisure,
11 but if you could read to the Panel, for the record,
12 the first sentence of the MEC's letter.
13 A "To be sure, our pilot group was
14 disseminated last week by an arbitration award that
15 was ill conceived and drafted contrary to some of
16 the most important tenants of ALPA's Merger Policy."
17 Q And if you flip over to page 2, we have
18 highlighted some language, maybe you could read that
19 for us to the Panel members as well?
20 A "The Executive Council must be made to
21 realize if ALPA's proud heritage is to be
22 maintained, inequities of this magnitude cannot be
Inabnet Court Reporting (703) 331-0212 1699
1 tolerated."
2 Q Subsequent to that letter, did the US
3 Airways MEC, in fact, make a presentation to ALPA in
4 an effort to overturn the Nicolau award?
5 A It began at the Executive Council meeting
6 and that --
7 Q Turn to Tab 2, please.
8 Do you understand Tab 2 to be the
9 presentation that the US Airways MEC made to the
10 ALPA Executive Council?
11 A Correct.
12 Q And what is that that we're seeing on the
13 first page of that presentation?
14 A This was a graphical view of each
15 individual pilot in that merger with the blue
16 indicating the US Airways pilots and the red
17 indicating the America West pilots.
18 Q And aged over time?
19 A Correct, through 2019.
20 Q And without going through the entire
21 document that follows that, was the burden and the
22 thrust of that document to demonstrate that that
Inabnet Court Reporting (703) 331-0212 1700
1 list was entirely unfair?
2 A Correct. Felt it was a gigantic windfall
3 for the America West pilots.
4 Q Again, I'll leave it to the Panel to
5 review the entire presentation that the US Airways
6 pilots made to the Executive Council.
7 But if I could ask you to flip to page 18,
8 please, where we have highlighted some text.
9 And, again, I know the Panel can read it,
10 but perhaps you could read it to all of us while
11 we're here together.
12 A "More significantly, the Board's erroneous
13 application of ALPA Merger Policy stems from its
14 misinterpretation of all five of the goals set forth
15 in the policy as encompassing a comparative
16 financial analysis of the premerger carriers.
17 "We submit that the Executive Council
18 should clarify for the parties in this case and for
19 future pilot groups involved in mergers, that the
20 considerations for fairly integrating pilot
21 seniority lists include such matters as the
22 respective pilots' dated of hire, lengths of hire,
Inabnet Court Reporting (703) 331-0212 1701
1 ages, status in the cockpit, routes, fleets, and
2 other factors directly bearing upon pilot careers,
3 but not the financial performance of their carrier
4 at some precise moment in time.
5 "Given the volatility of airline financial
6 performance in recent years, basing the construction
7 of pilot seniority lists on such analyses would
8 inevitably lead, as it has here, to inequities,
9 contradictions, and absurdities."
10 Q Now, later on in your exhibits, we are
11 going to look to what action ALPA ultimately took in
12 connection with the US Airways pilots' requests to
13 set aside the Nicolau award.
14 But before doing that, can you -- let me
15 just ask this. Did they ultimately set aside the
16 Nicolau award?
17 A No, they did not.
18 Q And following that failure to set aside
19 the Nicolau award, did in fact US Airways pilots
20 form a new union and desert ALPA?
21 A That is correct.
22 They formed USAPA.
Inabnet Court Reporting (703) 331-0212 1702
1 Q And we'll go through a little of that
2 history in a moment, but aside from seeking to
3 overturn the award inside ALPA, did the US Airways
4 pilots seek to have that award overturned through
5 the court systems?
6 A Yes, they did.
7 Q Turn to Tab 3, please.
8 Can you tell us what that is?
9 A This was a motion filed in the superior
10 court of DC with US Airways Master Executive Council
11 versus the America West Master Executive Council to
12 vacate the arbitration award, the Nicolau award.
13 Q And so far as you understand it, were they
14 successful in that suit and overturning the award?
15 A They were not.
16 Q I'm going to ask you to turn to Tab 4,
17 please, and really look sort of at Tab 4 and Tab 5.
18 Tab 4 is a decision from the Ninth Circuit
19 Court of Appeals in a lawsuit.
20 Can you tell us what you understand that
21 lawsuit to have been about?
22 A This was -- let me make sure I get this
Inabnet Court Reporting (703) 331-0212 1703
1 right.
2 Q Is this the one where a duty of fair
3 representation --
4 A Yes.
5 This is the DFR, duty of fair
6 representation, excuse me, against USAPA from the
7 America West side of the house.
8 Q And, again, the Panel can read that case
9 for itself, but we put this in here really just to
10 show the history of what happened at US Airways as
11 recited by the Court of Appeals for the Ninth
12 Circuit.
13 A Right.
14 Q Is that highlighted -- and the pages are
15 numbered. But is that highlighted on the third page
16 of the opinion?
17 A Yes. I highlighted a couple of sections
18 in there in the third page.
19 Q Okay. And it reflects that ultimately
20 that USAPA displaced ALPA.
21 ALPA -- I'm sorry, USAPA adopted a
22 constitution that required date of hire, seniority
Inabnet Court Reporting (703) 331-0212 1704
1 integrations. And the former America West pilots
2 sued USAPA over that?
3 A Correct.
4 Q And Tab 5 is another decision from a Court
5 of Appeals, this time in the Fourth Circuit.
6 Can you tell us what this lawsuit was
7 about, please?
8 A This was USAPA filing a lawsuit against
9 the America West side, if you will, basically for
10 RICO statute violations.
11 Q And, again, we put this in here largely
12 for a description of the history of what happened at
13 US Airways.
14 And is that highlighted on pages 3 and 4
15 of the opinion?
16 A Correct.
17 Q Do you know whether -- not that it really
18 bears on this case, but do you know whether USAPA
19 was successful in its RICO prosecution against
20 former America West pilots?
21 A No.
22 That case was dismissed.
Inabnet Court Reporting (703) 331-0212 1705
1 Q You told us earlier that eventually ALPA
2 acted on the US Airways pilots' petition to set
3 aside the award.
4 Let's turn to Tab 7 -- I'm sorry, Tab 6.
5 Can you tell us what Tab 6 is, please?
6 A This is a letter to both of the individual
7 MEC Chairman at America West and US Airways from the
8 president of ALPA national, John Prater, at the
9 time, discussing the Executive Council action.
10 Q This was an Executive Council action in
11 connection with the Nicolau award?
12 A Yes, with the arbitration.
13 Q And in this Executive Council action, was
14 this the Executive Council action in which the
15 Executive Council denied the US Airways pilots'
16 request to set aside the award?
17 Let's turn to page -- page No. 2 of 7 in
18 the bottom right-hand corner.
19 It's the third page of the exhibit.
20 MR. KATZ: What page is that?
21 MR. FREUND: It's the third page of the
22 exhibit.
Inabnet Court Reporting (703) 331-0212 1706
1 It's numbered page 2 of 7 in the Executive
2 Council Resolution.
3 THE WITNESS: I'm sorry.
4 You'll have to repeat the question.
5 BY MR. FREUND:
6 Q Well, I'll withdraw the question and ask
7 this.
8 If you turn to the third page of the
9 exhibit, page number 2 of 7, does it reflect what
10 one action that the Executive Council took in
11 response to the US Airways pilots' action?
12 A Yes.
13 The Executive Council, at that point,
14 directed Captain Prater to establish a committee
15 chaired at that point by the Captain Rice, First
16 Vice President, and including other Executive Board
17 members.
18 Q What was your understanding of the purpose
19 of what came to be known as the Rice Committee?
20 A It was an attempt to develop a consensus
21 between the pilot groups to rectify the problem that
22 was before them.
Inabnet Court Reporting (703) 331-0212 1707
1 Q And the problem before them was?
2 A The Nicolau award.
3 Q The Nicolau award.
4 A Yes, sir.
5 Q In the course of this Executive Council
6 resolution, did the Executive Council reflect on the
7 state of date of hire as a factor in ALPA merger
8 policy?
9 And I direct your attention to the next
10 page of the document on that point.
11 A Yes.
12 They reference that in 1991, that ALPA,
13 the Executive Board had removed all mention of the
14 word "date of hire" from Merger Policy.
15 Q But they didn't act on the US Airways
16 pilots' petition in this particular Executive
17 Council action, did they?
18 A No.
19 Q Just so we have kind of a time sequence,
20 let's remind ourselves the Nicolau award was issued
21 at the beginning of May.
22 The US Airways pilots' petition to set it
Inabnet Court Reporting (703) 331-0212 1708
1 aside was delivered to the Executive Council in May,
2 and the particular Executive Council resolution that
3 we are looking at now was in July of 2007.
4 And, again, by then, the Executive Council
5 had not acted on the US Airways pilots' petition?
6 A Correct.
7 Q Had the Executive Council delivered the
8 Nicolau award to US Airways at that point?
9 A At that time, no, they had not.
10 Q Turn to Tab 7, please.
11 What do we have at Tab 7?
12 A This was at the Executive Council meeting
13 in September of 2006, an agenda item.
14 Q And what was this agenda item about?
15 Direct your attention to the second page
16 of the exhibit.
17 A Yes. It reads: "As required by the
18 Transition Agreement between the Association and US
19 Airways and by Merger Policy, the Award is to be
20 submitted as issued to US Airways management,
21 providing that the award may not be used prior to
22 completion of a single collective bargaining
Inabnet Court Reporting (703) 331-0212 1709
1 agreement."
2 Q And that was, again, at a meeting between
3 September 17 and September 20, 2007?
4 A Correct.
5 Q Did ALPA, in fact, promptly deliver the
6 Nicolau award to US Airways?
7 A No. They did not.
8 Q Turn to Tab 8, please.
9 What do we have at Tab 8?
10 A Tab 8 is finally when Captain Prater, on
11 December 14, delivered to the CEO and Chairman of US
12 Airways the integrated seniority list.
13 Q So from the beginning of May, when the
14 award was issued, it took ALPA nearly seven months
15 to deliver the award to US Airways?
16 A A little over seven months.
17 Q A little over seven months, you're right,
18 my math is -- unlike Dan, I can neither add quickly,
19 nor am I ever right.
20 Under ALPA Merger Policy, isn't ALPA
21 supposed to deliver the award promptly and defend
22 the award?
Inabnet Court Reporting (703) 331-0212 1710
1 MR. KATZ: I'm going to object to that
2 question. I think ...
3 MR. FREUND: Either he knows the answer or
4 not.
5 MR. KATZ: Well, calls for a legal
6 conclusion, and there's no basis for the witness to
7 testify about.
8 MR. FREUND: It doesn't call for any legal
9 conclusion at all.
10 It calls for an understanding of ALPA
11 Merger Policy.
12 ARBITRATOR EISCHEN: If he knows, he can
13 answer the question.
14 THE WITNESS: Could you restate it now?
15 I'm sorry.
16 BY MR. FREUND:
17 Q Under ALPA Merger Policy, isn't ALPA
18 supposed to send the seniority integration award
19 promptly to the carrier and defend the award?
20 MR. KATZ: I'm going to object.
21 I don't know what he means by supposed to.
22 Is he talking about the Landrum-Griffin
Inabnet Court Reporting (703) 331-0212 1711
1 Act, the Railway Labor Act?
2 MR. FREUND: I'm talking about the ALPA
3 Merger Policy.
4 ARBITRATOR EISCHEN: Is the point under
5 discussion whether the policy so states?
6 MR. FREUND: What ALPA's obligation is.
7 ARBITRATOR EISCHEN: Under the policy as
8 worded at the time?
9 MR. FREUND: Correct.
10 I'm just asking a question.
11 ARBITRATOR EISCHEN: And your question of
12 him is did the policy require that?
13 MR. FREUND: Yes.
14 Do you know if the policy required ALPA to
15 promptly submit the seniority integration awards to
16 the carrier and to defend the award?
17 MR. KATZ: I am going to object.
18 I think that if Jeff wants to prove what
19 the policy at the time says, he can introduce the
20 policy.
21 ARBITRATOR EISCHEN: I'll take that
22 answer.
Inabnet Court Reporting (703) 331-0212 1712
1 Go ahead.
2 THE WITNESS: Yes.
3 ARBITRATOR EISCHEN: Thank you.
4 BY MR. FREUND:
5 Q Would it be fair to say that US Airways'
6 imbroglio was a major topic as you understood it of
7 ALPA's concerns in the period May to December 2007?
8 A It was about the sole focus of what was
9 occurring at that time.
10 Q Turn your attention to Tab No. 9, please.
11 You said you were appointed to the Merger
12 Policy Review Committee.
13 And what do we have at Tab 9?
14 A In November of that year, President
15 Prater, by resolution, asked six or seven of us to
16 form this committee.
17 Q And what is Tab 7?
18 A Tab 7 is -- I'm sorry, Tab 9 is the --
19 Q I'm sorry. Tab 9. Thank you.
20 A Is the letter of engagement, if you will.
21 Q For you?
22 A For me, as well as Captain Mike Arcamuzi,
Inabnet Court Reporting (703) 331-0212 1713
1 from Federal Express, chaired the committee.
2 Other members were Monty Allan, David
3 Short.
4 Q Where was Monty Allan from?
5 A I'm sorry, Air Canada Jazz.
6 David Short from Delta. Mike Lazarowicz
7 from Northwest at that time. Captain Brucia from
8 Continental. And myself.
9 Also Tom Whicore (phonetic), at that time
10 he was with Mesaba. He was also brought in as a
11 member. And we were assisted by an ALPA National,
12 Bill Couette, who was the ALPA National Vice
13 President of Administration.
14 Q How many times, roughly, did the Merger
15 Policy Review Committee meet?
16 A At least, including -- at least ten times.
17 Q And where did you meet when you met?
18 A Usually at the ALPA National headquarters
19 on Massachusetts Avenue, otherwise Herndon.
20 Q ALPA has an office in Herndon as well?
21 A Yes.
22 Q In addition to the members of the
Inabnet Court Reporting (703) 331-0212 1714
1 committee who you have recited, did you have the
2 assistance of various ALPA staff members and outside
3 consultants to ALPA?
4 A Yes.
5 As I believe was testified to before by
6 Captain Brucia, there was a litany of attorneys and
7 senior staff members to assist us in our efforts.
8 Q Do you remember who some of those ALPA
9 folks were?
10 A Everyone from Jonathan Cohen to Bruce York
11 assisted at times. Bob Salison (phonetic), Maggie
12 Ersine (phonetic).
13 The list goes on.
14 Q Were you supplied with materials in
15 connection with your work on the Merger Policy
16 Review Committee?
17 A Voluminous amounts.
18 Q Turn to Tab 10, please.
19 Tab 10 doesn't appear to be very
20 voluminous. It looks like it's only one page.
21 Can you tell us what Tab 10 is?
22 A When we first met, we were given the
Inabnet Court Reporting (703) 331-0212 1715
1 chronology of pretty much everything that had to do
2 with mergers and the Air Line Pilots Association
3 that stretched back all the way to the early 1930s.
4 It was a 350-page document.
5 Q This doesn't look like 350 pages.
6 Have you put it on a flash drive for the
7 Panel and for the CAL Committee.
8 A Yes, I have.
9 MR. FREUND: Why don't we pass that flash
10 drive out?
11 BY MR. FREUND:
12 Q I will let everyone read it as we sit
13 here. And I'm not going to spend any time asking
14 you detailed questions about it. But maybe Dan will
15 want to ask you questions on cross-examination, I
16 don't know.
17 But is it fair to say that there are
18 repeated references to the inclusion and exclusion
19 of date of hire or longevity as a factor throughout
20 the history of ALPA Merger Policy?
21 A Throughout the document, there are
22 numerous references to longevity, date of hire, et
Inabnet Court Reporting (703) 331-0212 1716
1 cetera.
2 Q Sometimes it was in policy; sometimes it
3 was out of policy?
4 A As the policy was written over the years,
5 yes, it changed many times.
6 Q In addition to reviewing materials, did
7 various folks from the outside world come in and
8 speak to the Merger Policy Review Committee?
9 A Yes.
10 We were lucky enough to have a plethora,
11 if you will, of true experts who had been there-done
12 that to speak before us, whether it was ALPA
13 National officers, people who had been involved with
14 the seniority integrations over the years, lawyers,
15 experts.
16 It was quite a few people before us.
17 Q Turn to Tab 11, please.
18 MR. KATZ: Despite Captain Smith's
19 compliments, I'm going to object to Tab 11, which
20 appears to be his notes from the one or two days in
21 2008.
22 It's not proper evidence to put in
Inabnet Court Reporting (703) 331-0212 1717
1 somebody's notes as a form of testimony.
2 MR. FREUND: Let me ask a foundational
3 question since Dan is not accurately describing what
4 Tab 11 is.
5 BY MR. FREUND:
6 Q Can you tell us what Tab 11 is, please,
7 sir?
8 First of all, looking at Tab 11, are those
9 your notes?
10 A No, they are not.
11 Q Who prepared those notes?
12 A Captain Arcamuzi, after we had interviewed
13 many of the people I spoke of in early January,
14 passed these notes out to the entire group.
15 It was just a way to make sure that we had
16 not missed anything and a -- to assist us in our
17 efforts to rewrite policy.
18 MR. KATZ: Well, that's even worse.
19 I mean, I think the witness' own notes,
20 then he would testify based on what he could
21 remember without looking at the notes, and then use
22 the notes to refresh his recollection. But under
Inabnet Court Reporting (703) 331-0212 1718
1 the rules of evidence, the notes themselves would
2 not come into evidence.
3 If it's somebody else's notes, then they
4 are even farther away from being admissible in
5 evidence.
6 BY MR. FREUND:
7 Q My question is this, did you have the
8 notes available -- did the members of the Merger
9 Policy Review Committee have Captain Arcamuzi's
10 notes in front of them, whether they're accurate or
11 inaccurate, at the time that they discussed and made
12 decisions about amendments to the Merger Policy?
13 MR. KATZ: Well, I don't think that has
14 anything to do with it.
15 Whether they had the notes in front of
16 them or not, they were doing the business of the
17 Merger Policy Review Committee.
18 When they got done with their business, it
19 was a report to the ALPA Executive Council. Captain
20 Brucia put that into evidence when he was
21 testifying.
22 And they adopted changes to the Merger
Inabnet Court Reporting (703) 331-0212 1719
1 Policy in accordance with the report from the Merger
2 Policy Review Committee.
3 The notes of one person, whether he was
4 the Chairman or a regular member, are not admissible
5 as part of the business records of the committee,
6 and they're not admissible in this proceeding.
7 MR. FREUND: Number one, they are business
8 records of the committee.
9 Number two, they're the functional
10 equivalent of legislative history. And I think they
11 are admissible in exactly the terms in which I
12 described them.
13 ARBITRATOR EISCHEN: Well, let's reverse
14 engineer this because I was thinking in terms of
15 legislative history as well.
16 But it seems to me that the predicate if
17 you resort to parol evidence, which this would be,
18 would be a finding of ambiguity in this seminal
19 document.
20 If there is a document on the record or to
21 be put on the record, which is the product -- end
22 product of a committee's deliberations, that is the
Inabnet Court Reporting (703) 331-0212 1720
1 document that we're to be referring to.
2 MR. FREUND: No question about that.
3 Captain Brucia left this Panel with the
4 impression that discussion of longevity -- there
5 wasn't really much of a discussion of longevity, and
6 US Airways really had nothing to do with the work of
7 the Merger Policy Review Committee.
8 And it's so far from being wrong that --
9 so far from being correct, that it seems to me that
10 this evidence is important.
11 MR. KATZ: If there's a difference of
12 opinion with Captain Brucia, and Captain Smith was
13 present for some discussions that contradict Captain
14 Brucia's recollections, I'm not suggesting that
15 Captain Smith is disqualified from testifying about
16 his recollections.
17 If Captain Arcamuzi, the chairman of the
18 committee, has recollections that differ from those
19 of Captain Brucia, I'm not suggesting that Captain
20 Arcamuzi would be barred from coming in and
21 explaining why he disagrees with Captain Brucia's
22 recollections.
Inabnet Court Reporting (703) 331-0212 1721
1 But this is hearsay.
2 It's -- Captain Arcamuzi's not here to be
3 cross-examined about his recollections. It's just a
4 written document that's totally inadmissible under
5 any of the rules of evidence in court or
6 arbitration, and I object.
7 ARBITRATOR EISCHEN: Well, I'm persuaded
8 that there are sufficient impediments to the
9 introduction of the document at this point in this
10 form, among others, a lack of a foundation for the
11 necessity of the document until we have heard
12 testimony from this witnesses, who is a direct
13 participant.
14 So I am going to ask that we remove it
15 from the books at this time.
16 If it becomes necessary later for some
17 other purpose such as credibility, reputation, or
18 some such, we can revisit the question.
19 But I'm persuaded at that this point in
20 the proceeding it is at least premature.
21 MR. FREUND: Okay.
22 BY MR. FREUND:
Inabnet Court Reporting (703) 331-0212 1722
1 Q Dave, did a number of outside experts, as
2 you put them, appear before the Merger Policy Review
3 Committee?
4 A Yes.
5 Q Was I one of them?
6 A Yes, you were.
7 Q Was Dan one of them?
8 A Yes, he was.
9 Q Do you remember some of the others who
10 were there?
11 A Oh, everyone from Captain Duane Worth, to
12 Dick Burke, to -- many of the people who had dealt
13 with the Company intricacies of Merger Policy in the
14 past.
15 Q Kim Snyder. Do you know who Kim Snyder
16 was?
17 A I know who Kim Snider is.
18 Q Who is Kim Snider?
19 A Kim Snider, at that point in time, was the
20 Vice Chairman of the US Airways MEC.
21 Q Do you know Steve Gillen?
22 A I do.
Inabnet Court Reporting (703) 331-0212 1723
1 Q Do you see him here in the room?
2 A I have seen him in the room, yes.
3 Q Was he there?
4 A Yes, he did testify before us.
5 Q Skip Eglet, do you remember Skip Eglet?
6 A Skip, yes.
7 Q Randy Babbitt?
8 A Captain Babbitt was -- made a
9 presentation.
10 Q Would it be fair to say that many, if not
11 all, of the people who spoke -- who came to the
12 sessions of the Merger Policy Review Committee,
13 among the folks that I have identified, talked about
14 that date of hire or longevity in one fashion or
15 another?
16 A I would say most, if not all, discussed
17 that very issue.
18 Q Some had one view, and others had another
19 view?
20 A Correct.
21 Q When I say view, did somebody have one
22 view as to whether longevity or date of hire ought
Inabnet Court Reporting (703) 331-0212 1724
1 to be maintained in the Merger Policy, and others
2 have a contrary view?
3 A Yes, including the counsel present.
4 Q Did the members of the Merger Policy
5 Review Committee discuss the question of whether
6 longevity and/or date of hire ought to be
7 reintroduced into the Merger Policy?
8 A Yes, we did.
9 Q And was there -- well, why don't you just
10 tell us what -- how the discussion went and what the
11 ultimate outcome was.
12 A Well, I believe the discussion was
13 initially teed up with a presentation about the
14 historical perspective of date of hire before us.
15 And basically what happened is the
16 committee was working through the various issues of
17 the policies, specifically the issue of what
18 specific factors should be considered in Merger
19 Policy. That was obviously one of the main tenants
20 of that.
21 So the discussion took the historical
22 perspective from each of the presentations we
Inabnet Court Reporting (703) 331-0212 1725
1 received.
2 And we basically divided up, after
3 throwing pretty much everything at the Board we
4 possibly could, put together what we felt were the
5 main three items which pretty much every one of
6 those other items fell under.
7 Q And what were those three that were
8 ultimately selected?
9 A The three that ended up being selected, of
10 course, were status and category, career
11 expectations, and longevity.
12 Q I don't know if you have it in front of
13 you, I don't have it as an exhibit, but it's an
14 exhibit probably floating around various places in
15 various books, but do you remember what the Merger
16 Policy that predated, immediately predated that this
17 current Merger Policy provided with respect to the
18 factors to be considered?
19 A Yes.
20 There was five factors that should be
21 considered in the immediate to that prior Merger
22 Policy, and those were -- tax my brain a little bit,
Inabnet Court Reporting (703) 331-0212 1726
1 but to basically preserve jobs was one of the
2 tenants. There was basically five.
3 The other couple were to maintain or
4 improve pilot wages and working conditions. Another
5 tenant was to maintain or improve the pilot status,
6 I believe was the phrase used.
7 And then another one was to minimize the
8 detrimental effects, if you will, of -- any
9 detrimental effects to career expectations.
10 And finally the one that goes through much
11 of my testimony, or at least the documents leading
12 thereto, are with windfalls at the expense of one
13 group, at the expense of another to avoid such.
14 Q And you said that under that Merger
15 Policy, the arbitrators should take those into
16 account?
17 A The way the language was written for a --
18 yes, it said that these five goals, they were
19 considered, should be considered.
20 Q Under current -- under the Merger Policy
21 that was ultimately adopted following your
22 committee's work, the word "should" was replaced
Inabnet Court Reporting (703) 331-0212 1727
1 with the word "shall;" correct?
2 A Correct.
3 Q Was that just by accident?
4 MR. KATZ: I'm going to object at this
5 time.
6 Number one, it's a leading question.
7 Number two, there really hasn't been a
8 foundation established for this witness to testify
9 about the deliberations of the committee.
10 While he was on the committee, I haven't
11 heard him say that he was present at all of the
12 meetings of the committee and there when the work of
13 the committee was finalized with a recommendation to
14 the Executive Council.
15 That would be an essential prerequisite
16 foundation for answering a question like that, if
17 the question were not leading.
18 ARBITRATOR EISCHEN: I'll sustain as to
19 the leading, but I'll observe that the Panel has
20 exhibited a great deal of latitude on Captain
21 Brucia's testimony on this subject, and we're going
22 to be fully informed by both sides on their views
Inabnet Court Reporting (703) 331-0212 1728
1 and recollections.
2 THE WITNESS: Captain Brucia testified
3 that he was present at all of the meetings.
4 ARBITRATOR EISCHEN: I heard you.
5 And I'm simply making that observation.
6 I'm sustaining the objection to -- on the
7 leading question. I would ask you if you would lay
8 the predicate.
9 But be prepared, gentlemen, that we're
10 going to be liberal about the introduction of
11 testimony in this regard from the two people who
12 were present on this committee.
13 Proceed.
14 BY MR. FREUND:
15 Q Were you present at either all or most of
16 the sessions of the Merger Policy Review Committee?
17 A Not all, most for sure.
18 Q Were you there when the discussion
19 regarding longevity occurred?
20 A There was more than one time that
21 occurred, but certainly, yes.
22 Q Did you participate or were you present
Inabnet Court Reporting (703) 331-0212 1729
1 and did you participate in the discussion where it
2 was decided to include longevity as one of the
3 factors?
4 MR. KATZ: What was your question?
5 MR. FREUND: Were you involved in the
6 discussion in which it was decided that longevity
7 should be one of the factors?
8 MR. KATZ: He said he wasn't at all of
9 those meetings.
10 MR. FREUND: I'm just asking whether he
11 was there at the meeting in which the decision to
12 include longevity as one of the factors was made,
13 and he said yes.
14 MR. KATZ: Well, how would he know what
15 happened at a meeting if he wasn't there?
16 MR. FREUND: Cross-examine him, Dan.
17 ARBITRATOR EISCHEN: The objection is
18 overruled, if there was an objection.
19 Proceed.
20 MR. FREUND: I wanted to ask him --
21 ARBITRATOR EISCHEN: Any further -- all of
22 the testimony concerning recollections of
Inabnet Court Reporting (703) 331-0212 1730
1 participants is kind of conditionally on the record
2 premised upon a determination by this Panel about
3 whether the document itself is ambiguous.
4 Proceed.
5 MR. FREUND: Fair point, and we'll come to
6 that right now.
7 BY MR. FREUND:
8 Q We have got these two exhibits out of
9 order, so let's go to Exhibit 13 first, and then
10 backtrack to 12.
11 This is a multi-page document, and we have
12 only pages 1 and 26 in the book of exhibits.
13 We have the whole document, which we are
14 perfectly prepared to provide it, but can you tell
15 us what this is, Dave?
16 A Once we had put together the policy, we
17 obviously needed to educate the representational
18 body to gain its acceptance.
19 And part of that effort was putting
20 together a PowerPoint presentation that Captain
21 Arcamuzi would give.
22 Q And is this -- are these pages from the
Inabnet Court Reporting (703) 331-0212 1731
1 PowerPoint presentation?
2 A Yes.
3 Q Turn to the second page, which is numbered
4 page 26.
5 ARBITRATOR EISCHEN: Let me just back up
6 and do a little housekeeping.
7 Let me sharpen the record if there's any
8 confusion that Tab 11, at this point, is blank, the
9 document having been removed from the document book.
10 We are now looking at Tab 13.
11 MR. KATZ: Yeah. I have never seen Tab 13
12 before.
13 You are offering a full copy of it?
14 I would like to have a copy of it.
15 MR. FREUND: I will do that.
16 BY MR. FREUND:
17 Q The second page, which is number page 26.
18 MR. KATZ: Mr. Eischen, could I have some
19 voir dire on this document?
20 MR. FREUND: Why don't we finish?
21 MR. KATZ: I would like to find out what
22 the document is before we start testifying about its
Inabnet Court Reporting (703) 331-0212 1732
1 substance.
2 ARBITRATOR EISCHEN: I had asked him what
3 it is.
4 Let me go back and let's go over it one
5 block at a time.
6 I'm not sure I picked up on what this
7 document is. I was busy with something else.
8 BY MR. FREUND:
9 Q Can you tell us what Exhibit 13 is,
10 please?
11 A After the Merger Policy -- or as the
12 Merger Policy Review Committee was finishing its
13 work, we needed to go out to the representational
14 structure of ALPA National and inform them of what
15 the changes were to said policy.
16 And this was the effort to educate them
17 about what changes the Committee had made to policy
18 in an effort to have that policy approved by the
19 Executive Board.
20 ARBITRATOR EISCHEN: There are two
21 observations: On the face of it, it has the word
22 "confidential."
Inabnet Court Reporting (703) 331-0212 1733
1 I don't know how that impacts upon our
2 agreement regarding protection of the record.
3 I'll leave that to counsel to flesh out.
4 MR. KATZ: That was one of the questions I
5 was going ask.
6 ARBITRATOR EISCHEN: The second point
7 appears to be pages 1 and 26 of a document, which we
8 may presume has at least 26 pages.
9 MR. FREUND: And I have said I have the
10 whole document, and I'm perfectly happy to make it
11 available to the Panel and to counsel.
12 MR. KATZ: Well, I would like to see a
13 copy of that.
14 MR. FREUND: That's fine.
15 MR. KATZ: And I would like to ask some
16 questions on voir dire about it before we get into
17 the substance of the document.
18 ARBITRATOR EISCHEN: Let's do that now
19 rather than take extrapolated pages.
20 If it is from a summary document, we'll
21 need the whole document in the record.
22 MR. FREUND: All right.
Inabnet Court Reporting (703) 331-0212 1734
1 Why don't we take a break?
2 ARBITRATOR EISCHEN: We'll do that.
3 MR. KATZ: Thank you.
4 ARBITRATOR EISCHEN: Off the record.
5 (A recess was taken from 2:28 until 2:58.)
6 ARBITRATOR EISCHEN: Back on the record.
7 MR. FREUND: So for the record, let me
8 describe what I have just passed out to the Panel,
9 and that is that I have provided a substitute
10 exhibit in -- in replacing Dave Smith's Tab No. 13
11 to bring it all together was two pages out of a
12 30-page PowerPoint presentation.
13 And I have now passed out the full 30
14 pages of the PowerPoint presentation just for
15 anybody in the decades to come unearths all of this
16 and sees that the original Dave Smith exhibit was
17 blue, and what I have now passed out is not blue.
18 Rather, it is white.
19 We decided to save a bit of the
20 environment by not having the printer -- and save
21 time because we would have been up there all day
22 printing it in blue. So we haven't printed it in
Inabnet Court Reporting (703) 331-0212 1735
1 white.
2 And if you will note on the two-page
3 summary, I had -- we had highlighted in yellow the
4 text that we were going to be referring to as both
5 sides have done at various parts of their exhibit.
6 Printing it in yellow would have made it
7 disappear, so we changed the color so we printed it
8 in something that could be in red.
9 ARBITRATOR EISCHEN: Is that page 26?
10 MR. FREUND: Page 26; correct.
11 ARBITRATOR EISCHEN: Thank you.
12 MR. FREUND: And, Dana, you asked me to
13 clarify the confidential draft language that's
14 contained at the bottom. I'll ask the witness
15 question about that.
16 ARBITRATOR EISCHEN: Yes, sir. Please do.
17 BY MR. FREUND:
18 Q You see at the bottom, it says
19 "Confidential Draft."
20 At what stage was this confidential?
21 A Before the presentation to the Executive
22 Council, when we were -- obviously, we were
Inabnet Court Reporting (703) 331-0212 1736
1 presenting the policy at one point in time, and so
2 this presentation was made prior to that
3 presentation.
4 Q And once it was made, it was no longer
5 confidential?
6 A Correct. I just happened to save this
7 particular version on my thumb drive because nothing
8 changed.
9 Q And after it was presented to the
10 Executive Council and the new Merger Policy was
11 adopted, was this PowerPoint, in fact, distributed
12 to MECs across the country?
13 A Yes. Everyone had access to it.
14 Q Why don't I finish my examination of the
15 witness, and if Dan still wants to voir dire on the
16 exhibit before it's admitted, that's fine, but I
17 only have one more exhibit to ask the witness a
18 question about.
19 And then we can turn the witness over in
20 his entirety to Dan.
21 MR. KATZ: That's fine.
22 You are going on to the last exhibit that
Inabnet Court Reporting (703) 331-0212 1737
1 hasn't been mentioned?
2 MR. FREUND: Correct. Thank you.
3 BY MR. FREUND:
4 Q Dave, turn back a page to Tab 12.
5 What do we see at Tab 12?
6 A This is an article from the October 2009
7 edition of the Air Line Pilot Magazine distributed
8 to all members of ALPA.
9 Q Now, we don't have the entire magazine
10 here, but we do have the entire article, don't we?
11 A That is correct.
12 Q And can you tell us who wrote this?
13 A The Chairman of the Merger Policy Review
14 Committee, Mike Arkamusey.
15 Q Did you all review it before it went out?
16 A Yes.
17 Q And turning to the bottom of the second
18 page, bottom on the left-hand column and the top of
19 the right-hand column, can you just read the -- you
20 don't have to read the red part, but can you just
21 read what's highlighted in yellow?
22 A "As the Committee evaluated the old
Inabnet Court Reporting (703) 331-0212 1738
1 policy, it became clear the factors for seniority
2 list integrations (SLI) had become a source of
3 controversy.
4 "The new policy states that the factors
5 that must be considered in constructing a fair and
6 equitable integrated seniority list, in no
7 particular order and with no particular weight, now
8 include but are not limited career expectation,
9 longevity, and status, and category."
10 Q And I take it that the author of the
11 article or the publishers of these thought it was
12 important enough to repeat it again in red?
13 A It was highlighted in a separate section
14 in larger print and bold.
15 MR. FREUND: Thank you.
16 I have no more questions.
17 ARBITRATOR EISCHEN: Thank you, sir.
18 Pass the witness.
19 MR. KATZ: Thank you.
20 CROSS-EXAMINATION
21 BY MR. KATZ:
22 Q Good afternoon, Captain Smith.
Inabnet Court Reporting (703) 331-0212 1739
1 I don't think we have ever met before,
2 have we?
3 A I have watched you work, but not
4 personally, no, sir.
5 Q I do have a few questions about your
6 experience on the Merger Policy Review Committee.
7 Perhaps you would share with the
8 Arbitration Board why it was that you missed some of
9 the meetings of the MPRC?
10 A I don't remember all the reasons.
11 I know one of them, I had a preplanned
12 vacation. I'm certain of that one.
13 Q Do you remember when that was?
14 A It would have been either September or --
15 it could have been October of 2008.
16 Q And you were appointed in -- the letter is
17 in here, I believe, November of 2007.
18 A Correct.
19 Q That's correct?
20 A Yes.
21 Q The ALPA article was in the October 2009
22 Air Line Pilot Magazine.
Inabnet Court Reporting (703) 331-0212 1740
1 Do you recall whether the Committee's work
2 ended with the Executive Council adopting the
3 recommended changes of the Committee around April of
4 2009?
5 A I remember after the Executive Council
6 meeting, we all went to the Executive Board.
7 Q Right. And when was that?
8 A That would have been shortly after the
9 Executive Council meeting. They generally follow.
10 Q A few days later?
11 A Correct.
12 Q So do you recall that being April or May
13 of 2009?
14 A That would make sense, yes.
15 Q Okay. So there was a vacation that you
16 had, that you went on that conflicted with the work
17 of the Merger Policy Review Committee --
18 A Yes.
19 Q -- in October or November of 2000?
20 A September, October, I believe.
21 Q Okay. I wasn't trying to change the dates
22 you gave me. I just forgot what you said.
Inabnet Court Reporting (703) 331-0212 1741
1 The record in this case reflects that
2 earlier in 2008, around April, there was an
3 announcement of discussions between United Airlines
4 and US Airways regarding a possible merger.
5 Do you recall that event?
6 A Yes.
7 Q And were you, at the time, a member or
8 chairman of the United Pilots Merger Committee?
9 A Yes.
10 Q And did you have some duties that you
11 undertook in connection with that possible
12 transaction?
13 A Yes.
14 Q Would you describe for the Arbitration
15 Board what those were, please?
16 A As chairman -- and correct me if I'm
17 misconstruing your question. But as chairman of the
18 committee, yeah, obviously, the committee all got
19 together.
20 And because of what we -- we certainly
21 understood that United Airlines was going to be
22 merged, so we were doing the standard scenario work,
Inabnet Court Reporting (703) 331-0212 1742
1 pretty much, I'm guessing, almost full time
2 concerning what the various scenarios could have
3 been at that time, and doing the work of a Merger
4 Committee.
5 Q So you were meeting with your other
6 committee members?
7 A Yes.
8 Q You were meeting with merger counsel?
9 A Yes.
10 Q Did you meet with the representatives of
11 the US Airways pilots?
12 A I don't remember, but I don't believe so.
13 Q And this was in the April, May, 2007, time
14 frame, is that about right?
15 A I believe so.
16 Q Did it also predate that, if you recall?
17 A Our work with?
18 Q Your work with the Merger Committee?
19 A The Merger Committee?
20 Q Yes.
21 A We had other things that we -- yes, we had
22 been involved.
Inabnet Court Reporting (703) 331-0212 1743
1 Q And so you said at some point it got to be
2 full time.
3 Does that mean that the meetings of the
4 Merger Policy Review Committee didn't take priority?
5 The work of your Merger Committee took priority at
6 that point?
7 A Yes.
8 But there's, at that point, three other
9 members of the committee.
10 Q Well, I understand these things can get
11 intense. But my question, really simplified, is, Do
12 you know whether you missed any of the meetings of
13 the Merger Policy Review Committee during that early
14 part of 2008 on account of the work that you were
15 doing with your Merger Committee?
16 A I don't recall.
17 Q Possible?
18 A It's possible, yes, sir.
19 Q And did you also undertake some activities
20 in connection with possibly transaction involving
21 Lufthansa?
22 A The only thing I remember, and, again,
Inabnet Court Reporting (703) 331-0212 1744
1 I'll -- it's not a matter of confidentiality being
2 covered because, obviously, we had done some
3 activities that I really couldn't talk about here
4 except off the record.
5 Q I don't want you to reveal anything at
6 this point that's confidential.
7 I think that what I'm really getting at is
8 did you have a number of trips abroad in connection
9 with whatever you were doing vis-a-vis Lufthansa,
10 and did that cause you to miss some of the meetings
11 of the Merger Policy Review Committee?
12 A No.
13 Q Which part was the no to?
14 A Trips abroad.
15 Q You didn't go abroad?
16 A No, sir.
17 Q Did you miss trips -- did you miss
18 meetings of the Merger Policy Review Committee for
19 any other reasons that we haven't covered?
20 A Except for the vacation that I'm certain I
21 missed for and possibly some conflicting work.
22 I don't remember any others. It wasn't a
Inabnet Court Reporting (703) 331-0212 1745
1 dramatic amount.
2 Q Do you know how many meetings you missed?
3 A No, I do not.
4 Q Do you know how many meetings there were?
5 A I didn't keep track, to be honest.
6 And my estimate of ten was probably as
7 best I could estimate.
8 Q All right. So it's fair to say you don't
9 know exactly how many of the meetings there were of
10 the Merger Policy Review Committee?
11 A I did not keep track of that, sir.
12 Q Do you remember how many you attended?
13 A For the same reason that I don't know how
14 many there were, I mean, I had missed a few,
15 absolutely.
16 But I was there for the majority of the
17 work as United's representative to that committee.
18 Q I'm just asking how many -- as we're
19 sitting here today, how many meetings do you
20 remember attending?
21 A I honestly can't answer that.
22 I just -- I couldn't give you a number
Inabnet Court Reporting (703) 331-0212 1746
1 because I wasn't necessarily keeping track.
2 We were busy, and I was doing that work
3 and other work. And I could go back and look at my
4 schedule. But I cannot answer that because I don't
5 recall.
6 Q Do you recall that there was a great deal
7 of discussion at the Merger Committee meeting,
8 Merger Policy Review Committee meetings that you
9 attended regarding the importance of communications?
10 A In the early phases, absolutely, yes.
11 Q And did these meetings result in an
12 agreement amongst the members of the MPRC that the
13 policy should be clarified to emphasize the
14 importance of communications both between ALPA
15 National and pilots and between the MECs and the
16 pilots?
17 A Yes.
18 Q With regard to how the Merger Policy
19 should be -- would be implemented?
20 A Yes.
21 Q And would you consider that one of the
22 important clarifications that was made in the
Inabnet Court Reporting (703) 331-0212 1747
1 revisions to the Merger Policy?
2 A Yes.
3 And if I may just say, I figured the three
4 most important things that we did were
5 communication, the gathering of value, if you will,
6 from the synergies created in a merger, i.e.,
7 seniority list and Joint Collective Bargaining
8 Agreement.
9 And then lastly, of course, was the
10 factors.
11 Q Okay. Well, I was about to get to the
12 second one. So since you mentioned it, let's talk
13 about that.
14 One of the difficulties with the
15 USAir/America West transaction was that the joint
16 contract had not been negotiated, still hasn't been
17 negotiated.
18 A Correct.
19 Q As far as I know. I'm not involved in it.
20 But as far as I know, it still hasn't been
21 negotiated.
22 And so a much larger group, it's 5,000
Inabnet Court Reporting (703) 331-0212 1748
1 USAir pilots against almost 2,000, 18 or 1,900
2 America West pilots, was able to block the
3 implementation of the merged list by blocking the
4 completion of a merged contract.
5 Is that a fair description of that aspect
6 of the problem?
7 A Yes.
8 Q And so the Merger Policy was also revised
9 to give the pilot groups involved in a merger the
10 opportunity to do what we have done here, which is
11 negotiate the joint contract first and do the work
12 on a merged seniority list afterwards so that it can
13 be simply plugged into the merged contract and
14 implemented by the Company; correct?
15 A Correct.
16 Q And so that was a second major
17 clarification of the policy was that option was open
18 to pilot groups involved in a merger?
19 A Yes.
20 Q All right. And then the third was the
21 revision that was emphasized on direct about the
22 factors.
Inabnet Court Reporting (703) 331-0212 1749
1 A Correct.
2 Q I have here, unfortunately, just my own
3 copy, the one copy of the final report from the
4 Executive Board meeting, April 28 to 29, 2009.
5 Do you happen to have that with you?
6 It's in the volume of exhibits marked
7 Volume G from Captain Brucia.
8 A I don't believe I have that.
9 MR. KATZ: Maybe Oz can help with that.
10 THE WITNESS: Unless we had it in ours
11 here.
12 MR. KATZ: If we could pause for just a
13 minute, maybe Greg and Grant will get the Panel
14 their volume.
15 This is this Exhibit 1.
16 And I think it might be helpful to follow
17 along with the strikeouts and the underlines.
18 MR. FREUND: Which exhibit number is it?
19 MR. KATZ: It's in Tab 1.
20 And the first few pages of Tab 1 are like
21 the letters that -- appointing Captain Brucia to the
22 MPRC, like the one that this witness is telling.
Inabnet Court Reporting (703) 331-0212 1750
1 MR. FREUND: I'm going to stand over his
2 shoulder so I can look at it at the same time.
3 MR. KATZ: Okay.
4 BY MR. KATZ:
5 Q Let's get everybody to Tab 1.
6 And then it's the back part of the
7 exhibit. And I guess I would like to have the
8 witness turn to the page that's numbered --
9 MR. FREUND: 12?
10 BY MR. KATZ:
11 Q Let's start on -- let's start on page 18
12 of the numbered page at the bottom of the Executive
13 Board resolution.
14 ARBITRATOR EISCHEN: Just a note, we're in
15 Volume G, Tab 1, page 18, at the bottom.
16 MR. KATZ: About 10 pages into the
17 document.
18 ARBITRATOR EISCHEN: Thank you, sir.
19 BY MR. KATZ:
20 Q And Part 3, Captain Smith, starts in the
21 middle of the page and describes the changes to the
22 seniority integration process.
Inabnet Court Reporting (703) 331-0212 1751
1 Is that correct?
2 A Correct, Part 3.
3 Q And the first group here headed A, says:
4 "Communications upon knowledge of probable
5 transaction and determination of merger."
6 And the underlined part is the
7 "communications," which means that it's the new
8 verbiage; correct?
9 A Correct.
10 Q And so as you were describing, on
11 cross-examination, this section deals with the
12 important clarifications to the communications that
13 ALPA needs when two groups are involved in the
14 merger; correct?
15 A Yes.
16 Q And then flipping to the next page, B,
17 deals with, Joint Negotiating Committee and joint
18 negotiations.
19 And it goes on for several pages, but it
20 does give the two groups the option to proceed like
21 we have done here; correct?
22 A Correct.
Inabnet Court Reporting (703) 331-0212 1752
1 Q And then turning to page 22, at the top,
2 we see the beginning of Seniority List Integration
3 in Subsection C of Part 3, which governs the process
4 that we're in right now; right?
5 A Yes.
6 Q And if you turn to page 24, at the bottom,
7 you see the part with the factors.
8 A Yes.
9 Q In what's marked as "e."
10 And it talks about the merger
11 representatives carefully weighing all the equities;
12 right, in the very first line?
13 A Yes.
14 Q And then a little farther down, it says,
15 the strikeout language, is "keeping in mind the
16 following goals;" right?
17 A Correct.
18 Q And the goals have now been downgraded to
19 factors to be considered in constructing a fair and
20 equitable integrated seniority list; right?
21 MR. FREUND: Object to the use of the word
22 downgraded.
Inabnet Court Reporting (703) 331-0212 1753
1 MR. KATZ: What's the objection?
2 It's not ...
3 MR. FREUND: It's not --
4 MR. KATZ: You're just arguing with me.
5 MR. FREUND: No. You're just arguing with
6 the witness.
7 The words say what they say.
8 ARBITRATOR EISCHEN: We'll take the
9 question and the exchange between counsel in
10 context.
11 Proceed.
12 MR. FREUND: Thank you.
13 BY MR. KATZ:
14 Q Would you answer the question, please,
15 Captain Smith?
16 A Would you repeat it, I'm sorry?
17 MR. KATZ: Joey, would you help us with
18 that, please?
19 Can you get back to the question?
20 (The record was read back as requested.)
21 THE WITNESS: So the question is have the
22 factors been downgraded to -- the five factors have
Inabnet Court Reporting (703) 331-0212 1754
1 been downgraded as four goals.
2 BY MR. KATZ:
3 Q No.
4 It said that there -- it used to say
5 "keeping in mind the following goals."
6 Let me make that more neutral, and the
7 word "goals" has been changed to "factors."
8 A Yes.
9 Q Correct?
10 A Correct.
11 Q And those factors are to be considered in
12 constructing a fair and equitable integrated
13 seniority list; right?
14 A Yes.
15 Q And the standard for the arbitrators to
16 apply, just as merger representatives, based on your
17 experience on the MPRC, is to build a fair and
18 equitable integrated seniority list; correct?
19 A Correct.
20 Q The changes that follow, it looks like
21 there's added language, which says after the "in no
22 particular order," it added, "and with no particular
Inabnet Court Reporting (703) 331-0212 1755
1 weight, shall include but not be limited to the
2 following," all of that was discussed in the Merger
3 Policy Review Committee?
4 A At great length.
5 Q And what do you recall being said about
6 that modification?
7 A With no particular order and with no
8 particular weight is exactly what it says in the
9 end, and the discussions leading up thereto were to
10 ensure that -- just exactly what it says.
11 I mean, we could go through the history of
12 how it came about.
13 Q Well, no. I wasn't really so much asking
14 about the history of how it came around.
15 You said there was a great deal of
16 discussion at the MPRC --
17 A Yes.
18 Q -- about this additional language, and
19 "with no particular weight shall include but not be
20 limited to the following."
21 Did that mean, for instance, according to
22 the discussions that you were present at, that there
Inabnet Court Reporting (703) 331-0212 1756
1 might be other factors that the merger
2 representatives or the Arbitration Board would want
3 to consider and it would be appropriate for them to
4 do so?
5 A Correct. We left it up to them.
6 Q And did it also mean that since it was no
7 particular weight, that some of these factors could
8 be considered and then not used in the final
9 decision of the merger representative or the
10 Arbitration Board, if they felt that was necessary
11 to accomplish a fair and equitable merged list?
12 A Correct.
13 Q And was there discussion about windfalls
14 being encouraged since the language about avoiding
15 windfalls was deleted?
16 Did anybody at the MPRC say, We should
17 have windfalls, and that's something that we should
18 strike the language in order to achieve?
19 A No.
20 Q What was the discussion about windfalls,
21 please?
22 A Well, it started all the way back with
Inabnet Court Reporting (703) 331-0212 1757
1 literally the presentation by Captain Snider and
2 others.
3 And ultimately, it was not to be -- not --
4 it should not be allowed into the policy.
5 That's why it was downgraded.
6 Q But the avoidance of windfalls, even
7 though it's not in the policy any longer, was not
8 something the MPRC was aiming to achieve, was it?
9 A We did not encourage windfalls.
10 Q You didn't encourage windfalls if
11 people -- if the Arbitration Board wants to avoid
12 windfalls, that's one of the almost infinite number
13 of factors that's appropriate for them to consider.
14 Is that true?
15 A Well, I -- as the policy is written, maybe
16 you could construe that.
17 I certainly don't think that that is what
18 the words say. I mean, if they want to give a
19 windfall, they may.
20 The answer is obviously they could.
21 That's up to them.
22 Q But by deleting the language about
Inabnet Court Reporting (703) 331-0212 1758
1 windfalls, the Association -- the Merger Policy
2 Review Committee was not intending to have
3 Arbitration Boards give windfalls to one group at
4 the expense of others.
5 I'm making my questions confusing, and I
6 guess it is.
7 Let me ask it --
8 ARBITRATOR EISCHEN: Shall I just say it
9 this way? We get it.
10 MR. FREUND: Somehow, I thought you did.
11 MR. KATZ: I think a word to the wise is
12 sufficient.
13 I don't have any additional questions.
14 ARBITRATOR EISCHEN: Did you have anything
15 further for Captain Smith?
16 MR. KATZ: Nothing further.
17 ARBITRATOR EISCHEN: Thank you, Dan.
18 Is there any redirect?
19 MR. FREUND: No.
20 ARBITRATOR EISCHEN: Members of the Panel?
21 ARBITRATOR NOLAN: I'm good.
22 ARBITRATOR EISCHEN: Arbitrator Kaplan?
Inabnet Court Reporting (703) 331-0212 1759
1 ARBITRATOR KAPLAN: I'm good.
2 ARBITRATOR EISCHEN: Thank you very much,
3 Captain.
4 I'm good. Off the record, please.
5 (A recess was taken from 3:25 until 3:41.)
6 MR. VAZQUEZ: The United Merger Committee
7 calls Kirk Koenig to the stand.
8 ARBITRATOR EISCHEN: Mr. Vazquez, would
9 you have your witness spell his name for the record,
10 please?
11 THE WITNESS: Kirk, K-I-R-K.
12 Last name is K-O-E-N-I-G.
13 ARBITRATOR EISCHEN: I can't hear you.
14 THE WITNESS: Kirk, K-I-R-K.
15 Last name is K-O-E-N-I-G.
16 MR. VAZQUEZ: That part was not under
17 oath.
18 ARBITRATOR EISCHEN: We recognize
19 Mr. Koenig's name.
20 Thereupon,
21 KIRK KOENIG
22 Called for examination by counsel for the
Inabnet Court Reporting (703) 331-0212 1760
1 United Pilots, having been duly sworn, was examined
2 and testified as follows:
3 DIRECT EXAMINATION
4 BY MR. VAZQUEZ:
5 Q Good afternoon, First Officer Koenig.
6 You have already state your full name for
7 the record.
8 Can you please tell the Board what your
9 current position is?
10 A I'm currently a DC-based 767 First Officer
11 with United Airlines.
12 Q And where are you domiciled?
13 A Right here.
14 Q DC.
15 A Yeah.
16 Q How long have you been a pilot for United?
17 A Sixteen years.
18 Q And can I call you Kirk?
19 A Yeah, sure.
20 Q Kirk, going back to what you did before
21 you became a pilot at United, can you please just
22 walk us through your experience since graduating
Inabnet Court Reporting (703) 331-0212 1761
1 college?
2 A Yeah, sure. I graduated from Purdue
3 University in 1989.
4 After that, I had various flying jobs,
5 corporate, commuter operations, eventually getting
6 on at Britt Airways, which is the forerunner of
8 Q And when did you start at Britt Airways?
9 A Started at Britt on 5-14 of '90.
10 Q Now, in connection with your testimony
11 today, have you prepared a binder of exhibits?
12 A Yes, I have.
13 MR. VAZQUEZ: Bob, if you can pass them
14 out?
15 I'm going to make a procedural note about
16 the binder and the exhibits for this witness and the
17 next several witnesses.
18 As you can see, this is a pretty large
19 binder. It just has a few pages and tabs for Kirk
20 Koenig.
21 As the next witnesses come up, we'll have
22 different packets to be inserted in the binder after
Inabnet Court Reporting (703) 331-0212 1762
1 Kirk's exhibits are -- after we go through Kirk's
2 exhibits.
3 ARBITRATOR EISCHEN: Thank you, sir.
4 MR. KATZ: I was dealing with the binder.
5 Would you repeat that?
6 MR. VAZQUEZ: Sure. For the next several
7 witnesses, we have enough space in this binder to
8 incorporate several additional exhibits.
9 So as we bring up each next witness, we'll
10 have a packet just to insert after Kirk's.
11 MR. KATZ: I see. That's fine.
12 ARBITRATOR EISCHEN: So Witness Koenig is
13 going the sponsor the first four?
14 He'll be sponsoring the first four?
15 MR. VAZQUEZ: He'll be sponsoring the
16 first four.
17 ARBITRATOR EISCHEN: Thank you, sir.
18 (Thereupon, United Koenig Exhibit, Tab
19 Nos. 1 through 4, were marked for identification and
20 received into evidence.)
21 BY MR. VAZQUEZ:
22 Q Going back to your experience at Britt.
Inabnet Court Reporting (703) 331-0212 1763
1 You said that it was owned by Continental,
2 or you say it later became Continental Express?
3 A Yes.
4 Initially, when I was hired in May of '90,
5 it was owned by Continental Airlines.
6 It was called Britt Airways doing business
7 as Continental Express at that point. About '91,
8 they changed it over to Continental Express.
9 Q And what type of flying did you do at
10 Britt that later became Continental Express?
11 A The whole entire time I was in an Embraer
12 120, we call it a Brasilia, a 30-passenger
13 turboprop, two pilots, one flight attendant, mostly
14 flying in Cleveland.
15 Q Your domicile was in Cleveland. Where
16 else?
17 A The majority of the time I was domiciled
18 in Cleveland.
19 I was also in Newark for a very short time
20 when they grounded the ATRs. I was also in
21 Shreveport and Tallahassee.
22 Q And now, there has been testimony about a
Inabnet Court Reporting (703) 331-0212 1764
1 flow-through policy by which pilots at Continental
2 Express could fly for Continental.
3 Are you aware of a flow-through policy at
4 Continental Express?
5 A Yes.
6 ARBITRATOR EISCHEN: If you could speak
7 up.
8 BY MR. VAZQUEZ:
9 Q Yeah. If you would speak up.
10 A Sure. Okay.
11 ARBITRATOR EISCHEN: If you would speak
12 up.
13 And this guy has got to get it, so if you
14 could slow down just a little bit.
15 THE WITNESS: Sure.
16 ARBITRATOR EISCHEN: Thank you, sir.
17 BY MR. VAZQUEZ:
18 Q How are you aware of the policy?
19 When were you first informed about it?
20 A When I interviewed, it was known that was
21 one of the benefits of getting hired at Continental
22 Express, Britt Airways, Bar Harbor, Rocky at the
Inabnet Court Reporting (703) 331-0212 1765
1 time.
2 They had a flow-through agreement to
3 Continental Airlines where, after you completed your
4 training, your name was on the Continental Express
5 pilot list and also added to the Continental pilot
6 list at the same time.
7 So there were pilots on Continental
8 Express list that are senior to me. They're also
9 senior to me other at Continental.
10 And then as ones were hired after me at
11 Continental Express, they were put below my name at
12 the Continental Airline seniority list.
13 Not all pilots' at Continental Express
14 name was on the Continental list.
15 Q Did you ever get a chance to see the list?
16 A Yes.
17 Q And was your name on the Continental
18 seniority list?
19 A Yes.
20 At that time, you know, when you were
21 initially hired, you know, you didn't really ask
22 about the details of being hired. You're just happy
Inabnet Court Reporting (703) 331-0212 1766
1 to be hired as a young pilot.
2 And then the list turns out on a, you
3 know, every six months or a year. So by the time
4 you see your name on the list, you know, it's been a
5 little while.
6 At that point, most guys were somewhat
7 surprised because there were these gaps in the list.
8 There were four blank spots on the list and then an
9 Express pilot name, and four blank spots, another
10 Express pilot name.
11 That was how it was when I was hired.
12 I was in a group that that's how the list
13 was comprised. The blank spots were reserved for
14 new hire Continental pilots off the street because,
15 at the same time I was hired at Continental Express,
16 Continental Airlines was still hiring pilots off the
17 street.
18 Q And prior to 1990, around when was the
19 first time you saw your name on the Continental
20 list?
21 A Probably early '91, maybe the summer of
22 '91, right around there.
Inabnet Court Reporting (703) 331-0212 1767
1 Q And at that point, could you bid your
2 seniority at Continental or bid in connection with
3 what your name --
4 A No. That's not how it worked.
5 To activate your number, you had to go
6 over there first. So the way that happened was
7 Continental Airlines would run what we commonly
8 called a vacancy bid, and everyone gets to bid and
9 do what they want to -- what they want to bid.
10 Sometimes when the bid gets done, there's
11 vacancies at the bottom, and that's an open position
12 over there. At that point, Continental Airlines
13 would let Continental Express know that we have 25
14 vacancies.
15 At this point, Express would select 25
16 guys to go over there. Then they would go over at
17 the bottom. And then the next time there's a bid at
18 Continental Airlines, they could use their seniority
19 at that point.
20 But you always had to go over to the
21 bottom.
22 Q And when did you go over to Continental?
Inabnet Court Reporting (703) 331-0212 1768
1 A Actually, I went to United Airlines on the
2 same day I was supposed to come to go to Continental
3 Airlines.
4 Q And as a reminder what day was that?
5 A On 4-21-97.
6 Q And is it correct to say that you would
7 not have been able to exercise seniority at
8 Continental until that day?
9 A That's correct.
10 Q Now, just a walk-through of a couple of
11 the policies, if we could.
12 You say that there were different
13 policies, and that, for your group, it was with
14 names on the list with blanks in between.
15 A Right.
16 Q What was your understanding of the way
17 policies applied for other pilots that were hired?
18 A By now, the group, we called them the
19 2-1-88 guys because that's -- 2-1-88 is when the
20 program started. That's the snapshot day. That's
21 when this program goes into effect.
22 ARBITRATOR EISCHEN: February 1988?
Inabnet Court Reporting (703) 331-0212 1769
1 THE WITNESS: 1988. 2-1-88.
2 On that date, that group got -- I wasn't
3 in that group. They had some ability to pass. If
4 Continental said, Hey, we need 25 guys, they could
5 say, I don't want to go for whatever reason. They
6 had some ability to defer it for a period of time.
7 My group, when they called you, you had to
8 go. Also, my group, about '93, they did away with
9 the gaps and compressed the list up. My group ends
10 in '94.
11 Generally speaking, the group I was in can
12 be identified by all their employee numbers start
13 off with 80, 84, right around 82, 83.
14 BY MR. VAZQUEZ:
15 Q If you could turn to Tab 1 in the binder,
16 I think that might help illustrate what we're
17 talking about.
18 A Sure.
19 Q So what are we looking at here in Tab 1?
20 A This is part of the certified seniority
21 list.
22 And if you look at pilot number --
Inabnet Court Reporting (703) 331-0212 1770
1 Seniority No. 1642, employee number is 80002, Tommy
2 Hull. So he's the first guy from the Express
3 operation to be put on the list at Continental.
4 And obviously, over there, the original
5 carrier BT means Britt Air. Actually, I remember
6 Tom. He used to commute out of Indianapolis with
7 me.
8 So he was the most senior guy ever to go
9 over under the program.
10 Q Okay. And when you say BT means Britt
11 Air, this is drawn from CAL Exhibit C-1, is that
12 from the testimony by Captain Butcher about what the
13 terms meant?
14 A Correct. BT is Britt. RM is Rocky
15 Mountain. I think BA somewhere down here is --
16 that's Bar Harbor.
17 And then -- but keep in mind about '91,
18 they do away with those three terms, Britt, Bar
19 Harbor, and Rocky. And pilots after that are called
20 Continental Express pilots, CX.
21 Q And if you turn to Tab 2.
22 A Right. Tab 2, what you're seeing here,
Inabnet Court Reporting (703) 331-0212 1771
1 Pilot Seniority No. 2220, 84245 employee number,
2 Robert Hunter.
3 What that signifies is he's the last of
4 the 8-0 guys, though his number is 8-4, and he was
5 obviously hired as a Continental Express pilot.
6 And that ends the pilot group that was the
7 group that -- the policies that I was under called
8 the Pilot Development Program that was in the Pilot
9 Employment Policy.
10 Q Sure. And do you know who Nicholas
11 Bonacci is?
12 A Yeah. That signifies the start of the
13 Eastern Airline pilots.
14 When I was there, Eastern had gone
15 bankrupt. There was a strike. Airline went out of
16 business, as I'm sure you're all aware.
17 And out of that, there was a lawsuit
18 involving ALPA, and a settlement that said
19 Continental would offer preferential hiring to a
20 certain amount of pilots from Eastern.
21 And that's who that is.
22 That's the first guy that got the job.
Inabnet Court Reporting (703) 331-0212 1772
1 Now, this happened more in the mid '90s,
2 but Continental didn't do any hiring off the street
3 until that guy right there.
4 Q Now, you mentioned the Pilot Development
5 Program and the pilot employee policy?
6 A Pilot Employment Policy.
7 Q Do you have any understanding as to how
8 those were imposed or created?
9 A When I started, there was no union.
10 It was -- it would be about '94 -- '93,
11 '94 before the first union came on.
12 So when I got hired, they handed you a
13 Pilot Employment Policy similar to a contract, but
14 obviously, the Company controlled the policy and
15 could alter the policy as they so wanted to.
16 We did have -- there was a thing on the
17 Continental side called the Pilot Ops Group.
18 I don't really have a whole lot of
19 information on them, other than I know there's a
20 Pilot Ops Group, and they worked with Management in
21 some fashion to effect change in the Pilot
22 Employment Policy.
Inabnet Court Reporting (703) 331-0212 1773
1 But inside the Pilot Employment Policy was
2 the Pilot Development Program, which that's what
3 this system is.
4 Q Okay. And now, you have said this a
5 couple of times. When you say the Continental side
6 or going over there, is that your term or is that
7 term or a way of characterizing Continental that was
8 used by other Express pilots?
9 A It was common.
10 I mean, it was two different companies.
11 We were treated different. We had different
12 benefits.
13 I mean, it was a different company.
14 Q And you refer to the Pilot Operations
15 Group, the Pilot Ops Group.
16 Was there -- to your knowledge, was anyone
17 from the Continental Express pilot group?
18 A No.
19 It was -- the Continental pilots had -- we
20 didn't have what would be representation until the
21 IACP came on the Express side.
22 Q And when the IACP came, do you know if
Inabnet Court Reporting (703) 331-0212 1774
1 there was one collective bargaining agreement for --
2 A No.
3 There was two.
4 Q Now, we have talked a little bit about the
5 way that pilots from Continental Express could go
6 over there, go to the Continental side and fly for
7 Continental.
8 Did the policies work in the other
9 direction?
10 Did you have people from Continental come
11 to Continental Express?
12 A Yeah. It was -- it was very rare.
13 I know of twice before the major event
14 happened that we had -- we had two pilots show up,
15 one in Cleveland that I remember.
16 I don't know where the other guy bid to,
17 but at that time you had to retire when you were 60,
18 and so these two gentlemen wanted to continue
19 flying.
20 I don't know why they wanted to continue,
21 if they enjoyed it or if it was a medical or
22 whatever.
Inabnet Court Reporting (703) 331-0212 1775
1 So two guys said, We want to fly Express.
2 And the employment policy, back then, basically said
3 Continental pilots could go to Express. But it
4 doesn't really talk about how and details.
5 So someone made a decision, and one of
6 them came to Cleveland, in particular. They just
7 sort of stuck him in the middle of the Captains
8 list.
9 I don't know how the agreement was made on
10 staking him there because, obviously, he was senior
11 to almost all of the pilots at Express.
12 Q And you refer to a major event that led
13 to --
14 A Yeah. In '94, they had started a thing at
15 Continental called CAL Lite. I believe somebody's
16 earlier testimony they talked about the -- trying to
17 do a low-cost carrier within a carrier. Everybody
18 seemed to try it.
19 And Continental tried it when I was there,
20 and they called it CAL Lite. And basically, they
21 took some aircraft that were moving out of Denver
22 because they were downsizing Denver, basically
Inabnet Court Reporting (703) 331-0212 1776
1 making it go away.
2 They moved the aircraft and started a hub
3 in Greensboro, and put more seats into the airplane
4 and decided to fly the airplane more, sort of like
5 Southwest.
6 As a matter of fact, some executives from
7 Southwest came, and this was sort of their plan.
8 And because of that, they needed more
9 service; they needed more pilots. Well, the pilots
10 then came from Express.
11 So a couple of hundred pilots went up from
12 Express to Continental to fly because of CAL Lite.
13 Apparently, it was a failure pretty quick.
14 I think it lasted about a year and a half.
15 And I recall that that's when Gordon
16 Bethune had come. And one of the first things he
17 did within six months of being there is say, We have
18 got to quit doing this. We're losing too much
19 money.
20 So he shut down CAL Lite, put the
21 airplanes back the way they were.
22 And of course, now, there's too many
Inabnet Court Reporting (703) 331-0212 1777
1 pilots at Continental. So they have to go back to
2 Express. So they furloughed those guys back to
3 Express, again. Not -- I don't know the exact
4 number of how many came back to Express.
5 I remember in Cleveland, probably 15 or
6 20. Cleveland was a smaller domicile, maybe 15 or
7 20 guys came back. Also some odd -- some odd things
8 were there because some of the guys that came back
9 had never flown at Express. It was just the way the
10 seniority list was.
11 So they had to put these guys somewhere.
12 They consulted -- we were told they
13 consulted with the Pilot Ops Group, and the Ops
14 Group said these pilots should get the seniority
15 positions of the pilots that had originally come
16 over from Express to Continental.
17 These guys get their seniority spots.
18 So you had a 1990 new hire at Continental
19 end up flying at Continental Express, and he ends up
20 with somebody very senior, such as Tommy Hull, who
21 has got a 1967 date -- 1976 date of hire.
22 So he immediately goes almost to the top
Inabnet Court Reporting (703) 331-0212 1778
1 of the list at Continental Express.
2 There was a lot of animosity, a lot of
3 anger over this. It wasn't the pilot's fault. I
4 mean, it's just how it was implemented. But it very
5 much remained in people's minds.
6 Q And to clarify, so Tommy Hull had a 1976
7 date of hire at Express?
8 A Right.
9 Q And the CAL pilots who went to fly for
10 Express and took his position were there because
11 Tommy Hull didn't come back and fly for Express?
12 A Right. Tommy Hull didn't come back.
13 They came back.
14 And it sticks with me because that's when
15 my first upgrade was. I upgraded to Captain because
16 of CAL Lite's expansion. Everyone moved there. I
17 got to move up. They came back, I got pushed back
18 down to copilot.
19 Q And have you had occasion to review, aside
20 from these excepts, the rest of the CAL seniority
21 list?
22 A Yes, I have.
Inabnet Court Reporting (703) 331-0212 1779
1 Q When was that?
2 A I think the first time I saw the list was
3 2010, summer of 2010.
4 Q And was that working with the Merger
5 Committee?
6 A Yes. They asked me to look at it.
7 Q Now, did you see any furloughs reported
8 from the era in which you talk about now, the CAL
9 Lite demise?
10 A I didn't see a single one.
11 Q Did anything else jump out at you related
12 to the furloughs from the review of the list?
13 A Yeah. I know particular two pilots' names
14 that got furloughed back to Express, or supposed --
15 well, would have been furloughed to Express, but
16 they chose not to -- you didn't have to take the
17 furlough. You could go find another job.
18 And I know two that went and flew in
19 Europe during that CAL Lite furlough, and they were
20 not at Express and they were not at Continental,
21 and -- Dave Skinner and Nick Tulo (phonetic).
22 Q And were they based in Cleveland as well?
Inabnet Court Reporting (703) 331-0212 1780
1 A Yes.
2 (Interruption by court reporter.)
3 BY MR. VAZQUEZ:
4 Q When they based in Cleveland as well for
5 Express?
6 A Yes. They were Cleveland pilots.
7 Q And to clarify, did Mr. Tulo and
8 Mr. Skinner show any furlough time on the
9 Continental list?
10 A The list I was given doesn't show the
11 names on it at all.
12 Q The names or the furloughs?
13 A It doesn't -- on the furloughed list,
14 their name is not on the furlough list.
15 Q Turning to Tab 3.
16 Now, this is a list titled Continental
17 Express and Continental were separate companies.
18 I was hoping we could walk through just
19 very briefly what the different entries go over to.
20 A Sure.
21 Q So if you can speak to the first bullet
22 point, that COEX and CAL pilots, et cetera.
Inabnet Court Reporting (703) 331-0212 1781
1 We have already talked a little bit about
2 it.
3 A Yeah. I just want to make sure that I'm
4 clear.
5 There's two separate seniority lists with
6 Continental side and the Continental Express side.
7 There were pilots at Continental Express
8 names that are on the Continental list. Not all.
9 Some guys didn't want to participate in the program.
10 Some guys failed the program when it initially
11 started. But not all are there.
12 The Continental pilots names were never on
13 the Continental Express seniority list.
14 Q And then the second bullet point gets to
15 that pilots could not bid on vacancies in the other
16 carrier.
17 A Right. We had run vacancies at Express,
18 they did not put that vacancy out over on the
19 Continental side, other then when they had that
20 furlough.
21 That's within they could, okay, you can go
22 back to Express. And we couldn't bid over there
Inabnet Court Reporting (703) 331-0212 1782
1 until you went over there. There's one exception in
2 late '96, where they did put a very large bid out
3 and actually let you use your seniority. And that
4 was for training all through '97.
5 That's the -- that was the event that I
6 was supposed to go over for.
7 Q And you said it was late 1996?
8 A Late '96 they put the very large bid out.
9 Q And until then, you weren't able to go
10 over.
11 A That's the first opportunity I had since
12 1990 to bid to go over to Continental.
13 Q And next question is about the policies.
14 Were you given employment policy when you
15 started?
16 A Right. I think I mentioned it earlier.
17 There was a Pilot Employment Policy. Ours
18 said Continental Express on it, very similar to a
19 union contract. It had, you know, your vacation,
20 and moving expenses, and training things, and your
21 pay rates.
22 And, you know, the pay rates were for the
Inabnet Court Reporting (703) 331-0212 1783
1 aircraft we operated and didn't show 737s or
2 something like that.
3 Q And was it your understanding that the
4 policy for the Continental pilots had rates and
5 information for their types of flying?
6 A I never had their employment policy.
7 So I'm not familiar with what their
8 employment policy had in it.
9 Q Same question for the collective
10 bargaining agreements once the union did come on the
11 property.
12 A Right.
13 Q There were two?
14 A Right.
15 Q Were the rates in the collective
16 bargaining agreement for Continental Express based
17 on flying at Continental Express and Continental
18 bid?
19 A They had separate collective bargaining
20 agreements.
21 Ours talked about stuff related to
22 Continental Express. I don't know what theirs said
Inabnet Court Reporting (703) 331-0212 1784
1 on the Continental side.
2 Q Sure. Well, you used the term for the
3 mainline types of flying.
4 Well, first to understand the term
5 mainline and what that means.
6 A Yes.
7 Q Is that a term you used back when you
8 worked at Express?
9 A Absolutely.
10 Q You just yourself or others?
11 A It's very common.
12 Q For mainline rates of pay for the 737,
13 747s, anything else, were those in the CBA of
14 Continental Express?
15 A No.
16 Q And then the next bullet point is about
17 operating certificates.
18 To your knowledge, what did Britt Airways
19 and later Continental Express fly under for
20 operating certificates?
21 A When I was hired, it was still Britt
22 Airways, and, in the manuals, it still had Britt's
Inabnet Court Reporting (703) 331-0212 1785
1 certificate.
2 They had folded their Rocky Mountain
3 certificate into the Britt certificate before I got
4 there.
5 Bar Harbor came in more like '91. It
6 folded in later. That's why some of them are a
7 little different on the seniority list.
8 They put the Bar Harbor one then under
9 Britt, and Britt continued the entire time I was
10 there as the certificate.
11 Q And did you have any knowledge as to the
12 certificate that CAL pilots flew under?
13 A I never saw their certificate.
14 So I'm not sure.
15 Q Next point is about the other categories
16 of differences, I guess.
17 A Right. There were many differences.
18 We shared very few things.
19 Break rooms were different, employees were
20 different, flight attendants, mechanics, the crew
21 planners, the dispatchers, the headquarters
22 building.
Inabnet Court Reporting (703) 331-0212 1786
1 I mean, even the layover hotels. I mean,
2 everything was different.
3 Q And the next point is a little bit more
4 concrete, pension benefits.
5 A Right.
6 Q Cans you describe those?
7 A And, you know, that was probably one that
8 pilots care about is their pension, their
9 retirement.
10 At Express, very simply, we had a 401K
11 that matched up to 3 percent of the money when the
12 Company made money.
13 Continental had a real traditional defined
14 benefit plan, and we didn't participate in it at
15 Express.
16 When you went over to Continental, that's
17 when you started accruing time to the defined
18 benefit plan.
19 Q And then the last point, W-2s, did you get
20 your W-2s from Express?
21 A I kept my W-2s from my very first job
22 ever.
Inabnet Court Reporting (703) 331-0212 1787
1 And so I reviewed my W-2s.
2 Q And that's under Tab 4?
3 A Tab 4. And as you can see, my W-2 from
4 1990 is on the left. It says Britt Airways.
5 Then I put in the 1993 one, where they
6 have now changed the name from Britt Airways, and it
7 now says Continental Express.
8 The tax ID numbers for the Company
9 obviously changed because they changed the name.
10 Then the next page 4-2, that's showing my
11 last partial year. And, as you can still see, it
12 still says Continental Express in 1997 and with the
13 same tax ID number of Continental Express.
14 Q And then the last page here is a -- you
15 can describe for the Board what that is.
16 A Yeah. That's just a public SEC filing,
17 10-K from 1997.
18 And as you can see, the tax ID number for
19 Continental Airlines is there, and it's different
20 than Continental Express.
21 Q And you -- these are just a few of the
22 W-2s from between --
Inabnet Court Reporting (703) 331-0212 1788
1 A I have them all, yes.
2 Q Did any of them ever say Continental
3 Airlines, Inc.?
4 A No.
5 Q Or anything other than Continental Express
6 or Britt Airways?
7 A That's the only two things that said
8 Continental Express or Britt Airways.
9 Q Just a last few questions.
10 You testified that you started United in
11 April of 1997. That's when you left Express?
12 A Right.
13 Q If you can just talk about the
14 circumstances behind leaving Express?
15 A I left on good terms.
16 I had interviewed at another airline,
17 Northwest. I had put in, you know, applications at
18 United. And United had called me in January and
19 said, you know, welcome to the interview.
20 And I went through the process and got a
21 job offer and had to decide because I had the exact
22 same day to go to either Continental or United.
Inabnet Court Reporting (703) 331-0212 1789
1 In reality, you know, several factors
2 were -- I thought of. In reality, even though I had
3 been there for seven years. I only had a few
4 hundred pilots below me, which that's one factor.
5 They really hadn't hired any pilots at the
6 time.
7 Also, the rates of pays, I would have gone
8 over with my seven years, and I would have been
9 making seven-year pay at Continental.
10 And I did the math, and like how many
11 years of flying at United does it take to make -- to
12 catch up to the pay that I'm going to have at
13 Continental. It was like four years before I would
14 be slightly ahead.
15 And then also, one of the biggest things
16 for me was I had been flying commuter planes for
17 seven years. I was sort of tired of that
18 up-and-down and one- or two-hour flights. And I
19 really wanted to fly more of the widebody
20 international flying.
21 And so United had more widebody
22 international flying than Continental. So that was
Inabnet Court Reporting (703) 331-0212 1790
1 the factors in my decision, and I decided to go to
2 United.
3 Q And just a clarification point.
4 When you say you got seven years of pay,
5 you would have -- is it correct to say you would
6 have changed rates from the Continental Express CBA
7 to the Continental rates in that CBA --
8 A Correct.
9 Q -- you would have been paid at the level
10 of seven years?
11 A Right. I would have been a seven-year,
12 which not everybody -- again, you know, I spoke
13 about there were sort of different deals for the
14 different groups.
15 A lot of people there always said that our
16 group got the best deal because we could go over,
17 and we kept our vacation accrual, and we kept our
18 rate of pay.
19 So you went right into the seven-year pay
20 then on their list, on the Continental list. So you
21 don't take a pay cut starting over.
22 Q And when you say you had just 200 pilots
Inabnet Court Reporting (703) 331-0212 1791
1 underneath you, what did you mean by that, that
2 would be?
3 A Well, because Continental didn't hire any
4 pilots off the street the whole time I was there.
5 They only hired a few hundred at Express.
6 So ergo, when I went over in '97, there
7 would have only been a couple of hundred guys when
8 those guys flowed over to --
9 Q Below your spot.
10 A Right.
11 Q And what position were you flying at
12 Continental Express when you left?
13 A I was still a Brasilia Captain.
14 Q And what would your position have been at
15 Continental?
16 A Well, actually, it was a unique bidding
17 time back in, I think I told you in late '96.
18 And they put a bid out that allowed in
19 '97, they had all the training dates for the first
20 eight or nine months of the year that you could bid
21 on the day or the piece of equipment or the base.
22 And I bid Newark 727 flight engineer.
Inabnet Court Reporting (703) 331-0212 1792
1 Q And what position did you take?
2 A Same exact position.
3 Q 727 flight engineer?
4 A Right.
5 MR. VAZQUEZ: With the Board's indulgence.
6 No further questions.
7 ARBITRATOR EISCHEN: Thank you, sir.
8 Mr. Katz.
9 MR. KATZ: I would like to take a short
10 break to confer with my clients.
11 ARBITRATOR EISCHEN: Yes, sir.
12 Off the record.
13 (A recess was taken from 4:15 until 4:45.)
14 ARBITRATOR EISCHEN: Okay, everybody.
15 We are on the record.
16 MR. KATZ: Thank you.
17 CROSS-EXAMINATION
18 BY MR. KATZ:
19 Q Good afternoon, Mr. Koenig.
20 A Hi.
21 Q I do have a few questions about your
22 testimony on cross-examination.
Inabnet Court Reporting (703) 331-0212 1793
1 So why don't I start where we left off,
2 which was your decision to go to United.
3 A Uh-huh.
4 Q Because the way you described it, you did
5 have the option to go to Continental and United at
6 the same time.
7 A Yes.
8 Q And if you had gone to Continental, you
9 would have been at the seventh-year longevity status
10 for pay purposes; right?
11 A Correct.
12 Q And you would have accrued vacation at
13 Continental in accordance with seventh-year status;
14 right?
15 A Yes.
16 I don't recall the specifics of how long.
17 Q And in fact, if you went to Continental at
18 that point in time, you would also have had the
19 opportunity to carry your vacation bank from
20 Continental Express flying with you to Continental.
21 Isn't that true?
22 A I'm not familiar with what you mean by the
Inabnet Court Reporting (703) 331-0212 1794
1 term vacation bank.
2 Q Well, you accrue vacation during the time
3 you were working for the Company.
4 A Right.
5 Q And if you don't use it all, you have some
6 left over for the next year.
7 A I can't recall if we had to use it or lose
8 it.
9 I don't remember if you could, you know,
10 never take vacation the whole time and accrue a
11 massive amount.
12 I don't recall that.
13 Q I don't remember whether you accrued
14 vacation?
15 A Well, obviously, we earned vacation.
16 Q It was kept in hours?
17 A I don't recall the specifics of vacation
18 on hours versus days.
19 I don't recall if we -- you could accrue
20 it over a -- you know, like a massive amount and
21 keep it and not go on vacation for the year.
22 Q Well, you accrue it in one year and use it
Inabnet Court Reporting (703) 331-0212 1795
1 the next, don't you?
2 A Yeah, yeah, yeah, that would be typical.
3 Q If you accrued it in '96, you would be
4 able to use it in '97 at Continental.
5 A That's correct.
6 Q The same for sick leave, if you accrued
7 that in '96, you could use that at Continental in
8 '97.
9 A Yes, that's right.
10 (Interruption by the court reporter.)
11 BY MR. KATZ:
12 Q Yeah. The court reporter wants me to
13 finish and you to wait until I'm finished my
14 question, and then you start the answer.
15 A Okay.
16 Q All right. For pass purposes, Mr. Koenig,
17 if you had taken a job at Continental, you would
18 have kept that 1990 date for pass purposes, wouldn't
19 you?
20 A That is true.
21 Q And you said there were only a few hundred
22 people junior to you at Continental if you had gone
Inabnet Court Reporting (703) 331-0212 1796
1 in 1997.
2 A Yes.
3 Q But when you went to United, there was no
4 one junior to you, other than the people in your own
5 class; right?
6 A That's correct.
7 If I can elaborate, though, at
8 Continental -- at the time, United was hiring 30
9 pilots a week when I went to United.
10 Q In 1997?
11 A Yes.
12 Q And I understand that you have been a
13 75/76 First Officer at DRC for a while now.
14 A Yeah. I would say 90 percent of the time
15 I fly the 767, international out of Dulles.
16 That's what most of our flying is in
17 Dulles.
18 Q Have you ever checked out as Captain at
19 United?
20 A No.
21 I could have. I choose to try -- I prefer
22 flying -- I obviously could not have checked out as
Inabnet Court Reporting (703) 331-0212 1797
1 a widebody Captain. I could have been a narrowbody
2 Captain.
3 I prefer to fly international.
4 Q Let me show you an exhibit that we
5 prepared, which I'll call Cross-examination Exhibit
6 10 (sic).
7 (Whereupon, Continental Cross-Examination
8 Exhibit No. 9 was marked for identification and
9 received into evidence.)
10 MR. KATZ: I just have one more question
11 before we pass this exhibit out.
12 BY MR. KATZ:
13 Q You gave us your W-2s from vary employers.
14 Do you recall what your earnings were in
15 2010 and 2011 as a United First Officer?
16 MR. VAZQUEZ: I object.
17 This is irrelevant and outside the scope
18 of testimony.
19 MR. KATZ: It's not irrelevant.
20 He's talking about his decision to go to
21 United rather than Continental. I think his
22 earnings are relevant.
Inabnet Court Reporting (703) 331-0212 1798
1 ARBITRATOR EISCHEN: We'll allow some
2 latitude. Go ahead.
3 BY MR. KATZ:
4 Q If you recall?
5 A I would be speculating.
6 Q Around $100,000?
7 A I was an Airbus copilot.
8 I'm sure somebody could look in the
9 contract and do the math.
10 Q No. No. I'm asking what your W-2s show.
11 A Yeah, probably around 100,000.
12 MR. KATZ: Okay. Now, I would like to
13 distribute Cross-examination Exhibit No. 10.
14 BY MR. KATZ:
15 Q Under your photo, we have your seniority
16 number at 4873.
17 That's on the April 2013 list.
18 Date of birth, age, date of hire at United
19 is April 21, 1997. And your Continental date of
20 hire was May 14, 1990.
21 You have not been furloughed at United.
22 You have been working there for 15.9 years. And
Inabnet Court Reporting (703) 331-0212 1799
1 this last figure about the earnings is the average
2 earnings of people in your base equipment status of
3 DCA 75, 76 FO.
4 MR. VAZQUEZ: And I'll object to the
5 reference to a CAL date of hire, both misstates the
6 record that was just -- Continental Express date of
7 hire, and goes to the legal conclusion that's before
8 the Board itself.
9 ARBITRATOR EISCHEN: Do you want to
10 rephrase, Dan?
11 BY MR. KATZ:
12 Q Well, is this information shown under your
13 name correct?
14 MR. VAZQUEZ: I object -- stand by my
15 objection.
16 ARBITRATOR EISCHEN: Is this a
17 demonstrative exhibit?
18 For what purpose is this coming in?
19 MR. KATZ: This is a demonstrative
20 exhibit.
21 It is based on information that's in the
22 record already.
Inabnet Court Reporting (703) 331-0212 1800
1 MR. VAZQUEZ: I'll restate the objection
2 on the fact that this misstates the record.
3 There's nothing in the record that says
4 that his CAL date of hire is May 14, 1990.
5 His Continental Express date of hire is
6 May 14, 1990. We can -- if it's demonstrative, we
7 can correct it and have it come in in that fashion.
8 But there's absolutely nothing that says
9 his CAL date of hire is May 14, 1990.
10 MR. KATZ: Well, I would think that the
11 record does reflect that.
12 The witness testified that when he started
13 to work at Continental Express, it was on that date.
14 And that on that date he got a number that ended up
15 on both lists.
16 He didn't see the Continental list for a
17 year or so afterwards. But when he saw it, his date
18 of hire, as shown on the Continental list, was the
19 same date as the date he had on the Continental
20 Express list.
21 MR. VAZQUEZ: If I may, just very briefly,
22 that's -- the subject, this very question is the
Inabnet Court Reporting (703) 331-0212 1801
1 subject of 40 pages of briefing from both sides.
2 ARBITRATOR EISCHEN: Yeah. We recognize
3 that.
4 And I think that we appreciate being
5 alerted to the -- to having you flag the issue
6 again, Mr. Vazquez.
7 But I think we're going to permit the line
8 of questioning, understanding that it is somewhat
9 rhetorical and that the question of whether this is
10 the appropriate seniority date to be assigned is a
11 matter that is in some controversy.
12 Proceed.
13 MR. KATZ: Thank you.
14 BY MR. KATZ:
15 Q Mr. Koenig, is the information under your
16 name correct?
17 A All of it?
18 Q Yeah.
19 A I have no idea if the BES earnings is
20 correct.
21 Q Okay. I'll accept that qualification.
22 Anything else under your name that's
Inabnet Court Reporting (703) 331-0212 1802
1 mistaken?
2 A I don't consider that I was hired at
3 Continental Airlines on 5-14-09 as being accurate.
4 Q Well, when you were interviewed for the
5 job, wasn't Max Jackson an official of Continental
6 Airlines there for the interview?
7 A No, he was not.
8 Q Was there somebody there from Continental
9 Airlines?
10 A Yes. His name was Steve Olson.
11 Q Steve Olson.
12 And have you seen these gentlemen on
13 either side of you on this exhibit?
14 A I recall the guy on the left.
15 I don't recall the guy on the right.
16 Q And who was the guy on the left?
17 A John McAlister.
18 I believe he was in my class.
19 Q And was he one number senior to you?
20 A My number was 80858, so I can't remember
21 if there was an 80857 or not.
22 Q He was in the same class as you, and he's
Inabnet Court Reporting (703) 331-0212 1803
1 a little bit older?
2 A Yes.
3 Q And then there was a Dale Lange?
4 A Okay.
5 Q On the right.
6 He has also got the same date of hire
7 5-14, 1990. You never seen him before?
8 A I don't recall him.
9 He's got the same number as the other guy,
10 so I don't know, 80856 for both guys.
11 Q Well, if you had gone to Continental, if
12 you had taken the other path --
13 A Uh-huh.
14 Q -- these people would have been on --
15 right in the list around you.
16 A Okay.
17 Q And they both checked out as Captain, and
18 their earnings on average in their base equipment
19 status are nearly $200,000?
20 A Okay.
21 Q Based on that, wouldn't you say that you
22 made the wrong decision?
Inabnet Court Reporting (703) 331-0212 1804
1 A I don't know if the numbers are accurate
2 for the earnings.
3 I don't know if you have included
4 retirement.
5 Q This includes --
6 A I don't know if you have included
7 insurance.
8 I don't know what you have included or not
9 included in this.
10 Q This includes a 16 percent addition --
11 well, let me just back up.
12 It's based on Company payroll records that
13 came to the two committees in the form of
14 averages -- it's based on an addition of 12 and
15 three-quarter percent of defined contribution plan
16 for Continental pilots, and a 16 percent add-on for
17 the United pilots.
18 So assuming those numbers are accurate
19 reflections of the average earnings people in base
20 equipment status of these three pilots, wouldn't you
21 agree that you made a mistake of going to United
22 Airlines?
Inabnet Court Reporting (703) 331-0212 1805
1 A No.
2 Because I don't want to be a 737 Captain
3 in Houston. I would rather fly international
4 widebody equipment.
5 Q Don't you think that these Captains would
6 have the ability to fly international from Newark?
7 A And if you would go back a couple of years
8 prior to this, I could have been a Captain also, if
9 that's your point.
10 I mean, at certain times in my career
11 there -- I could be a 747-400 copilot, if I want to
12 go fly out of San Francisco. But I don't want to
13 commute all the way to San Francisco.
14 Obviously, these two gentlemen want to fly
15 guppies in Houston.
16 Q Guppies?
17 A Yeah.
18 Q They earn $200,000 a year flying these
19 airplanes.
20 MR. VAZQUEZ: I object.
21 ARBITRATOR EISCHEN: Okay. Let me just
22 have a reality check here.
Inabnet Court Reporting (703) 331-0212 1806
1 We have got a time for advocacy and we
2 have got a time for evidence gathering. And let's
3 keep with the evidence gathering at this point in
4 the proceeding.
5 Dan, just a little procedural check. I
6 think we have only previously marked eight of the
7 cross-examination exhibits.
8 So this is 9 rather than 10.
9 MR. KATZ: Well, since the record is going
10 to show it as 10, maybe we can, maybe we can put in
11 9 --
12 ARBITRATOR EISCHEN: It won't show it as
13 10 if I go back and change it.
14 MR. KATZ: Okay. Let's make it 9 then.
15 I'll go along with that.
16 We will find something else for 10.
17 ARBITRATOR EISCHEN: Exhibit 9.
18 MR. KATZ: This is like the Congressional
19 Record where you write the things the way you want
20 it to say.
21 ARBITRATOR EISCHEN: What congressmen
22 really wanted to say was what they told them to say.
Inabnet Court Reporting (703) 331-0212 1807
1 BY MR. KATZ:
2 Q Mr. Koenig, you referred in your direct
3 testimony to the Pilot Development Plan.
4 Isn't it a fact that you were hired under
5 the PEP Chapter 9?
6 A The Pilot Development Program is inside of
7 the Pilot Employment Policy.
8 Q That's your opinion.
9 Have you actually read the pilot
10 employment plan?
11 A The Pilot Employment Policy?
12 Q Yes.
13 A Yes. We were given those back in 1990.
14 Q And isn't it true that if you had gone to
15 Continental or the pilots that went to Continental
16 under this program did not go to the bottom of the
17 list.
18 They went where their numbers called for?
19 A Not sure I understand the question.
20 Q Well, you testified on direct that when a
21 pilot went from Continental Express to Continental,
22 he went to the bottom.
Inabnet Court Reporting (703) 331-0212 1808
1 A Yes.
2 Q And isn't that incorrect?
3 Isn't it true, in fact, that pilots who
4 made that move, went where their seniority, their
5 seniority would take them based on their date of
6 hire, under the vacancies that were available?
7 A When I was there, from May of '90 until
8 '97, the way it happened was Continental ran their
9 bid first.
10 Generally speaking, there would be some
11 number of vacancies at the bottom of the list in
12 what was considered the most junior base and seat
13 and fleet, which most of the time -- a lot of the
14 time is -- was Guam 727 flight engineer.
15 So, often, that was your choice.
16 If you were going over, you went to Guam
17 as a 727 flight engineer.
18 Q But your choice was whatever the vacancies
19 were, wasn't it?
20 A Yes.
21 Q And in fact, you testified on direct that
22 Continental Express would allow 25 pilots to go to
Inabnet Court Reporting (703) 331-0212 1809
1 Continental.
2 It wasn't just a situation where there was
3 a random group of 25 people chosen. The Continental
4 Express pilots bid in seniority order --
5 A No.
6 Q -- for vacancies, didn't they?
7 A No, not while I was there.
8 When I was there, and I can show you on
9 the list, and it explains why some pilots -- it was
10 out of order because, obviously, if there were 25
11 vacancies and if it just so happened the most 25
12 senior next group of guys were all Brasilia Captains
13 in Cleveland, there's only 50 Brasilia Captains in
14 Cleveland.
15 So they can't let 25 Brasilia Captains all
16 go to Continental at the same time because they
17 don't have enough pilots to replace them.
18 Q So Management had the right to order a
19 deferral, so we need this guy to stay in Cleveland
20 and fly the Brasilia in the left seat.
21 A Yes. So it was not in seniority order.
22 Q But absent a designation of a Management
Inabnet Court Reporting (703) 331-0212 1810
1 deferral, the pilots did bid in seniority order to
2 the vacancies at Continental; correct?
3 A I only bid the one time in December of
4 '96.
5 Q So you're saying you don't know the answer
6 to my question?
7 A I don't know the answer to that.
8 Q And you only bid one time, but you had
9 opportunities to bid before that, for instance, when
10 the expansion caused by Continental Lite --
11 A No.
12 Q -- you could have bid to Continental at
13 that point, couldn't you?
14 A No.
15 Q You chose to upgrade to First Officer on a
16 Brasilia rather than bid to Continental; isn't that
17 correct?
18 A No.
19 Q Upgrade to Captain on the Brasilia?
20 A No.
21 Q Why no?
22 A Because I didn't -- I wasn't in line yet
Inabnet Court Reporting (703) 331-0212 1811
1 to go to Continental.
2 Q You weren't senior enough?
3 A Right.
4 Q These two pilots who were -- you claim
5 were furloughed.
6 A Yes.
7 Q They went to fly in Europe?
8 A Yeah.
9 Q They had Company offered leave of
10 absences?
11 A I have no idea.
12 Q You didn't talk to either of them about
13 what they were doing?
14 A I know later on they talked about going to
15 Europe and flying Europe.
16 Q But you don't know whether they had
17 Company offered leave of absences?
18 A No idea.
19 Q You talked about Continental pilots who
20 had not been at Continental Express.
21 A Yes.
22 Q Coming to Continental Express and being
Inabnet Court Reporting (703) 331-0212 1812
1 fit into the seniority list.
2 A Yes.
3 Q Isn't it true that PEP Chapter 9 defines
4 exactly where they go on the list?
5 A The PDP, Pilot Development Program, is
6 Chapter 9 of the Pilot Employment Policy.
7 Now, the Chapter 9 was kept in the Chief
8 Pilot's office. I never saw, in my seven years,
9 what the Pilot Development Program said.
10 So I can't tell you Version 1 said this
11 and Version 2 said this and Version 3 said this.
12 Q You said you did read the Pilot Employment
13 Policy, though?
14 A Yes.
15 And on Chapter 9, the front page, it says,
16 This is maintained in the Chief Pilot's office.
17 Q Well, we have attached it to the memo that
18 we distributed to the Panel, and I have got an extra
19 copy of our memo.
20 If you look at this attachment, this is
21 Attachment 2 to the memo. And it says it's the
22 Pilot Employment Policy.
Inabnet Court Reporting (703) 331-0212 1813
1 A Right.
2 Q And if you look at page 10.6.
3 A Uh-huh.
4 Q It says: "A pilot holding only a CAL
5 seniority number who successfully bids a CAL Express
6 position will assume, for CAL Express bidding
7 purposes, the most senior CAL Express seniority
8 number that a CAL seniority position within the
9 subBase and status that his seniority will hold."
10 So there wasn't any question really about
11 where the pilots would go as long as the PEP was
12 followed. Isn't that true?
13 A That's what that document says, with that
14 date on it.
15 I have no idea because those guys would
16 have came back before '93.
17 I have no idea what the previous policy
18 said.
19 Q But you haven't read it?
20 A Nope.
21 Q Isn't it true, Mr. Koenig, that the Pilot
22 Operations Group was a Continental Express pilot
Inabnet Court Reporting (703) 331-0212 1814
1 operations group before the IACP came in?
2 A I do not recall the Pilot Ops Group at
3 Continental Express. I know there was one at
4 Continental.
5 Cleveland was a very small base. I don't
6 recall a Pilot Ops Group person in Cleveland,
7 representative.
8 Q On this Exhibit 3 that you talked about on
9 direct --
10 A Yes.
11 Q -- you mentioned the CAL Express carriers
12 originally had separate FAA operating certificates.
13 Are you aware that Continental owned all
14 of the aircraft that were flown by Continental
15 Express?
16 A No. It wouldn't surprise me.
17 I don't know if they were owned or not.
18 Q Well, you were flying the Brasilia.
19 Isn't there a certificate on the airplane
20 that shows who the owner is?
21 A I'm sure there was.
22 I don't recall what the certificate said.
Inabnet Court Reporting (703) 331-0212 1815
1 Q You didn't notice that it said Continental
2 Airlines owns this airplane?
3 A I didn't -- I mean, I barely looked at it.
4 Q You said that there were different
5 headquarters for Continental and Continental Express
6 on your direct testimony?
7 A Correct.
8 Q Isn't it true that the companies had the
9 same address, 2929 Allen Parkway, Houston, Texas?
10 A Nope. Ours was on JFK.
11 I don't know the exact address, but when I
12 was there it was on JFK Boulevard, right by the
13 airport. That's where the training center was --
14 the training people stayed, the ...
15 Q The Gateway building?
16 A Yeah.
17 Q That's right next door to 2929 Allen
18 Parkway, isn't it?
19 A I don't live in Houston.
20 I think -- Allen Parkway, I thought was
21 downtown, but maybe somebody could do a little bit
22 of ...
Inabnet Court Reporting (703) 331-0212 1816
1 Q So the training -- you were in the
2 training department?
3 A No.
4 I never worked in the training department.
5 Q No. No.
6 When you were talking about being in the
7 Gateway building, that was the training department.
8 A No.
9 The office people were there. The
10 dispatch was out of there. The crew planner, when
11 you called, that did the vacation type stuff, that
12 was in the building by the airport.
13 Q Would you look at Exhibit 4, please?
14 A Okay.
15 Q What's the address shown for Continental
16 Express in your W-2 form?
17 A Continental Express, the one on the right?
18 Q Yeah.
19 A Okay. 2929 Allen Parkway.
20 Q All right. Now, turn to the next -- the
21 page after next.
22 A Page 2?
Inabnet Court Reporting (703) 331-0212 1817
1 Q Page 4-3, please.
2 A 4-3.
3 Q This is the Continental Airlines, Inc.
4 Form 10-K, filed at the Securities and Exchange
5 Commission.
6 A Right.
7 Q Do you see the address directly underneath
8 the yellow highlighted name of the Company?
9 A Yes.
10 Q Would you read that for the record,
11 please?
12 A 2929 Allen Parkway.
13 MR. KATZ: I would like to have marked as
14 exhibit --
15 ARBITRATOR EISCHEN: 10.
16 MR. KATZ: 10, thank you.
17 This would be X-10.
18 (Whereupon, Continental Cross-Examination
19 Exhibit No. X-10 was marked for identification and
20 received into evidence.)
21 ARBITRATOR EISCHEN: I think for the hell
22 of it, I'm going to call it 15.
Inabnet Court Reporting (703) 331-0212 1818
1 ARBITRATOR NOLAN: You can do whatever you
2 want.
3 ARBITRATOR EISCHEN: Marking
4 Cross-examination Exhibit 10.
5 BY MR. KATZ:
6 Q Mr. Koenig, this is a paycheck for Michael
7 F. Hill.
8 A Okay.
9 Q April 1, 1992, while he was at Britt.
10 Did you ever know him?
11 A I think he was in my class. I remember
12 that name.
13 Q And would you read for the record, please,
14 the name of the corporate entity on this check?
15 A Continental Airlines, Inc.
16 Q And is it still your testimony that all of
17 your paychecks said Britt or Continental Express?
18 MR. VAZQUEZ: Objection, misstates his
19 testimony.
20 BY MR. KATZ:
21 Q Well, is it your testimony that all of
22 your paychecks said Continental Express or Britt?
Inabnet Court Reporting (703) 331-0212 1819
1 A I'm sorry. Did you object?
2 MR. VAZQUEZ: I did.
3 The question was is it still your
4 testimony that all of your paychecks said X or Y.
5 ARBITRATOR EISCHEN: The question as
6 rephrased, is it your testimony?
7 THE WITNESS: Can you restate the
8 question?
9 BY MR. KATZ:
10 Q Is it your testimony, Mr. Koenig, that all
11 of your paychecks either say Britt or Continental
12 Express?
13 A No.
14 Q Did some of them say Continental Airlines?
15 A Yes.
16 MR. KATZ: No further questions.
17 ARBITRATOR EISCHEN: Thank you, sir.
18 Mr. Vazquez, anything on redirect?
19 MR. VAZQUEZ: We do.
20 If I may just have to minute with my
21 colleagues.
22 ARBITRATOR EISCHEN: Sure.
Inabnet Court Reporting (703) 331-0212 1820
1 MR. VAZQUEZ: We're ready.
2 ARBITRATOR EISCHEN: We are back on the
3 record.
4 BY MR. VAZQUEZ:
5 Q First Officer Koenig, I just have a very
6 few questions.
7 Just to start off with where Mr. Katz left
8 off, looking at Continental Exhibit --
9 Cross-examination 10, paychecks, if you could
10 clarify, did you ever see Continental paychecks
11 during the time that you worked at Continental
12 Express?
13 A Did I ever see a Continental paycheck?
14 Q Somebody that was working in the same
15 domicile that was a Continental pilot and whether
16 you ever saw their paychecks.
17 A No.
18 Q And, actually, if you could just flesh out
19 what your paychecks did say.
20 A When I started, they said Britt Airways.
21 Somewhere '90ish, the paychecks changed to
22 Continental Express.
Inabnet Court Reporting (703) 331-0212 1821
1 And then mid '90s, '92, you know,
2 somewhere -- the logos changed, there were different
3 logos. And then it eventually became Continental
4 Airlines. And then it changed again after this one
5 to something -- it used to look different, it was
6 red.
7 It was all red.
8 Q And when it changed again, after this one,
9 did the logo change?
10 A Yes. The logo changed.
11 Q And did the name change as well?
12 A It just said Continental.
13 Q Just said Continental.
14 Mr. Katz asked you about the mechanics of
15 the mainline bids and when the vacancies would come
16 up.
17 Am I correct to understand that your
18 testimony was that there would be a bid for
19 Continental pilots, all the Continental pilots would
20 bid, and then there would be vacancies.
21 For whatever the Continental pilots did
22 not bid, and you testified it was the Guam 727
Inabnet Court Reporting (703) 331-0212 1822
1 engineers, or whatever it was, and at that point is
2 it correct to say that the Continental Express
3 pilots would be sent over?
4 A Basically, you got the leftovers, just
5 like you said.
6 Q And was it something automatic that you
7 would see the results of the bid and then you would
8 bid your Continental Express seniority number?
9 A They did their thing, and someone on their
10 side said, We need this many pilots.
11 And that's how it -- you -- they would
12 tell you that, you know, here are the positions.
13 There's 25 positions. And don't get me wrong, not
14 all of the time they were in Guam. A lot of time
15 they were.
16 Q And once the Continental Express pilots
17 bid for those Guam or other positions, did they have
18 to train in order to fly for those positions?
19 A Yes. You had to go to training.
20 A lot of guys would -- that was sort of
21 the hope that you could drag it out, get down to
22 training, you know, drag out your EO training and
Inabnet Court Reporting (703) 331-0212 1823
1 maybe get to Guam and not actually even show up in
2 Guam because maybe a bid will finally come out and
3 you can bid out of Guam before you ever show up and
4 not have to commute halfway around the world.
5 Q And switching gears, on the Pilot
6 Employment Policy, there was a little bit of
7 confusion.
8 Did you testify that you read the
9 Continental Express Pilot Employment Policy?
10 A Yes.
11 The heading was Continental Express Pilot
12 Employment Policy.
13 Q And when you were testifying on
14 cross-examination about the reference in Chapter 9
15 as to where the PDP was kept, was that in the
16 Continental Express Pilot Employment Policy?
17 A The Continental Express Pilot Employment
18 Policy had a chapter, Chapter 9. It was one page.
19 And on the page it said, Pilot Development
20 Program. Below it, it said, Maintained in the Chief
21 Pilot's office.
22 Q And that's -- is it fair to say that
Inabnet Court Reporting (703) 331-0212 1824
1 Continental Express Pilot Employment Policy is
2 different from what Mr. Katz showed you in
3 connection with this question?
4 A He only showed me the Chapter 9 Pilot
5 Development Program.
6 I don't know where it came from.
7 ARBITRATOR EISCHEN: Record reference
8 attachment to the April 17 memo.
9 BY MR. VAZQUEZ:
10 Q And just the last couple of questions, and
11 I'll refer you to Cross-examination Exhibit 9 as
12 renumbered, the one with your picture and the
13 picture of Mr. McAlister.
14 This is -- if you know, do you happen to
15 know whether John McAlister went for a training
16 class at Continental in May of 1997?
17 A All of my class would have been
18 sometime -- could have been the very last -- or I
19 mean, the earliest date my group could have gone
20 over would have been late December of '96 through
21 August of '97, my new hire class.
22 That would have been the opportunity in
Inabnet Court Reporting (703) 331-0212 1825
1 that area.
2 Q And for Captain McAlister and Captain
3 Lange, you don't know their precise dates when they
4 went over and took the class?
5 A No, I do not.
6 MR. VAZQUEZ: I have no further questions.
7 ARBITRATOR EISCHEN: Mr. Katz.
8 MR. KATZ: No, that doesn't prompt
9 anything further.
10 ARBITRATOR EISCHEN: Thank you, sir.
11 Colleagues?
12 ARBITRATOR NOLAN: No.
13 ARBITRATOR KAPLAN: I'm good.
14 ARBITRATOR EISCHEN: Thank you.
15 THE WITNESS: Thank you.
16 (Witness stood down.)
17 ARBITRATOR EISCHEN: What's your pleasure?
18 MR. FREUND: Off the record.
19 ARBITRATOR EISCHEN: Off the record.
20 (A recess was taken from 5:35 until 5:48.)
21 (Thereupon, Daniel Madruga was duly
22 sworn.)
Inabnet Court Reporting (703) 331-0212 1826
1 ARBITRATOR EISCHEN: All right, gentleman.
2 The witness has been sworn. We are on the
3 record.
4 MR. FREUND: Thank you, why don't I --
5 since I know that Dan has expressed off the record a
6 desire to get an objection in the record, which is
7 fine. We might as well do it, get it teed up. Why
8 don't I introduce the witness, get his background.
9 And then I will ask one question that will I think
10 set up the objection so that we can then put it in
11 your laps.
12 Thereupon,
13 DANIEL MADRUGA
14 Called for examination by counsel for the
15 United Pilots, having been duly sworn, was examined
16 and testified as follows:
17 DIRECT EXAMINATION
18 BY MR. FREUND:
19 Q Dan, would you state your name for the
20 record, please?
21 A Daniel Madruga.
22 Q And where are you employed?
Inabnet Court Reporting (703) 331-0212 1827
1 A United Airlines.
2 Q What do you do at United Airlines?
3 A I'm an Airbus First Officer in LA.
4 Q When did you start working for United
5 Airlines?
6 A On November 2, 1998.
7 Q And give us your sort of background, your
8 CV starting from graduation from college.
9 A I graduated from the University of San
10 Diego in 1986 with a Bachelor's degree in business
11 administration.
12 And that same year, I started in the Navy
13 at Officer Candidate School and then went to flight
14 training in 1987.
15 I was in the Navy until 1998, when I got
16 hired at United Airlines.
17 Q In the course of your testimony -- let me
18 just let me back up one notch.
19 Did you prepare a book of exhibits in
20 connection with your testimony today?
21 A Yes, I did.
22 Q Does that book of exhibits deal with the
Inabnet Court Reporting (703) 331-0212 1828
1 United Airline Pilots Merger Committee's effort to
2 obtain information concerning the longevity of
3 pilots of Continental airlines?
4 A Yes, it does.
5 Q As part of your exhibits, is a packet
6 of -- is one of those exhibits a listing of the
7 months of defined benefit credit earned by
8 Continental pilots?
9 A Yes.
10 MR. KATZ: But I have an objection to the
11 entire volume of exhibits, not just to the defined
12 benefit months of participation.
13 There's another list in there that's
14 called the Zeus database, which was provided to both
15 merger committees by the Company, by Management.
16 And neither of these databases is reliable
17 and admissible evidence.
18 In addition to the problems with these two
19 databases, we view the entire subject of the United
20 Merger Committee's difficulties in securing
21 information on this subject to be totally irrelevant
22 to the matters before this Board.
Inabnet Court Reporting (703) 331-0212 1829
1 Many of the pieces of documentation in
2 this volume of materials do not address the
3 substance of the building blocks for the merged
4 list, people's dates of hire, people's places on
5 seniority list, people's jobs, people's earnings.
6 Instead, they are about inter-nesting
7 (phonetic) battles between the two merger committees
8 that amount to nothing of interest, I would think,
9 to this Board.
10 Let me start with the Zeus database
11 because there is some information here that will
12 show you how unreliable and absurd it is to offer
13 the document into the evidence for any purpose.
14 If you look at Tab 6, in the volume of
15 materials before you, we have a letter from Dan
16 Casey who was, at the time, Vice President of Labor
17 Relations for United Airlines. And it's dated
18 December 15, 2010 and responds to a letter that the
19 recipient, United MEC Merger Committee Chairman,
20 Jeffrey Ruark, had made for information.
21 And in Mr. Casey's response, he outlines
22 what the United Merger Committee was seeking. The
Inabnet Court Reporting (703) 331-0212 1830
1 various dates when mainline pilots were first placed
2 on CAL's payroll or on the payroll of several
3 predecessor carriers as well as flow-up and
4 flow-down dates to and from Continental Express or a
5 list of 14 other regional carriers.
6 The request I'm sure is in here, too. I
7 just noticed the Casey letter.
8 But Mr. Casey says: "After reasonable
9 inquiry, it does not appear that Continental
10 maintains such information." He goes onto say, when
11 you jump down to the paragraph that's highlighted
12 below that at the bottom of the page: "Since the
13 only employment-related dates needed to manage the
14 airline are relative seniority position and the
15 longevity dates necessary to properly administer
16 pay, benefits, and pass travel, those are the only
17 dates that Continental tracks. When a pilot first
18 began training, or was originally hired by a
19 predecessor airline is matter the details of which
20 do not retain importance for any ongoing purpose.
21 In other words, the Company doesn't need
22 to keep this information. It's not necessary for
Inabnet Court Reporting (703) 331-0212 1831
1 their operations, and it's not kept.
2 He says, Accordingly, these events have
3 long since been forgotten, especially since for some
4 of the Continental pilots, those events could have
5 occurred 40 years ago.
6 He goes on to say on the next page, the
7 seniority positions and longevity dates of pilots
8 that flowed up from Continental Express were
9 established at various times and under various
10 contractual terms.
11 We outlined this in our memo to the Board
12 of April 17. There were a whole variety of programs
13 that we described in the memo.
14 We have received a responsive memo from
15 the other side, and Mr. Casey is confirming that.
16 He says: "Similarly, when pilots were
17 furloughed from Continental, some had the option to
18 take a Company-offered leave of absence or displace
19 into a position at Continental Express, while others
20 did not. Those who did, some of them chose to move
21 to Express immediately. Others chose to do so at a
22 later date, and some at yet a different date."
Inabnet Court Reporting (703) 331-0212 1832
1 There's all these -- the dates that would
2 be considered their flow-down dates or the date they
3 returned to the mainline are unclear, cannot
4 reasonably be determined without research into each
5 individual pilot across differing data sources, some
6 of which are not under Continental's control.
7 The Zeus database, just so you see what we
8 are talking about. They printed some of the data in
9 Tab 15.
10 ARBITRATOR EISCHEN: I'm beginning to have
11 a little concern just in terms of record
12 maintenance.
13 You have read significant portions, Dan,
14 of a document, the introduction of which into the
15 record you are attempting to --
16 MR. KATZ: I don't object to this document
17 that I have just read from, nor do I object to the
18 document in Tab 13, which I think was the
19 transmittal email for the Zeus database itself
20 because these documents are Company reports about
21 the records that they keep and the records they
22 don't keep.
Inabnet Court Reporting (703) 331-0212 1833
1 And in transmitting the Zeus database, I
2 don't object to Tab 13 because it says, Here's the
3 spreadsheet, and it's sending to the Continental
4 Merger Committee, and a copy is sent to Jim Brucia,
5 as you will see on the email.
6 It says: "This data was taken from a now
7 obsolete database that was maintained at Continental
8 over many years and by many different individuals.
9 By spot-checking certain individuals for whom we
10 know the correct date, we know that there are errors
11 in the data represented in the attached spreadsheet.
12 We have no way of knowing how prevalent those errors
13 are or the extent to which the dates may be
14 incorrect.
15 "As we have stated before" -- I think he
16 is referring back to the Casey letter -- "this
17 information has no bearing on the operation of the
18 airline or the employment entitlements of the pilots
19 it represents. And, as such, has ever had cause nor
20 reason to be challenged or verified. These are
21 merely data fields pulled from a long forgotten
22 database."
Inabnet Court Reporting (703) 331-0212 1834
1 So it's unclear who prepared it, who kept
2 it, what purpose it was done for.
3 It's in Tab 15, and we do object to Tab
4 15, because it's obviously totally unreliable and
5 has none of the informature (phonetic) of a record
6 that is kept by a business in the normal course of
7 operations that is therefore admissible because it's
8 a legitimate business record.
9 It's just the opposite.
10 The United Merger Committee knows that.
11 The Continental Merger Committee was given the same
12 advice from the company that is reflected in these
13 records.
14 We have, at every stage of the process,
15 cooperated with the United Merger Committee. But I
16 don't think whether there has been cooperation or
17 not is an appropriate subject for the deliberations
18 of this Board, and I don't think the Zeus database
19 has any place in evidence.
20 There's also problems, similar problems
21 with the defined benefit months of participation
22 that they are seeking to put in.
Inabnet Court Reporting (703) 331-0212 1835
1 Among them, the fact that there were
2 different rules applied for defined benefit vesting
3 and defined benefit accruals, the fact that
4 different categories of pilots coming from different
5 predecessor airlines were treated in different ways.
6 And there's no sense that it's going to be
7 a reliable substitute for anything reflecting the
8 information on which this Board should rely.
9 I think it makes more sense to provide an
10 opportunity for us to brief this in response to the
11 memo that was just given to us the day before
12 yesterday, along with the issues that were raised in
13 that memo, and to do whatever litigation needs to be
14 done instead of working through witnesses like
15 Mr. Koenig, who was describing his impressions of
16 how things went using the method that we have
17 started -- the road we started down, which is
18 briefing the issue with documents and affidavits, if
19 necessary.
20 ARBITRATOR EISCHEN: I'm going to try to
21 get us back to us close to what we had concurred was
22 going to be a limited activity.
Inabnet Court Reporting (703) 331-0212 1836
1 Dan, are there any other tabs of the
2 document besides proposed 6 and 13 to which you
3 would not attach your generic objection?
4 MR. KATZ: I haven't really had the
5 chance, Dana, to look through the whole volume. I
6 just saw generally what the subject matter of the
7 volume was, and I saw the Zeus database and the
8 defined benefit database, and so I thought I ought
9 to speak up.
10 But I honestly haven't looked through the
11 other exhibits other than to see that a lot of them
12 are emails about -- and letters about United Merger
13 Committee's agitating to get information that
14 doesn't exist.
15 MR. FREUND: If I can respond.
16 ARBITRATOR EISCHEN: Of course.
17 MR. FREUND: Let's be crystal clear, and I
18 think we all understand at some level, some of us
19 perhaps better than others, that what the United
20 pilots have been doing since the day they began
21 looking at the problem of integrating these two
22 seniority lists has been engaging in an effort to
Inabnet Court Reporting (703) 331-0212 1837
1 parse the data that is contained and the information
2 that's contained in the Continental pilots seniority
3 list which reflects dates of hire of pilots like
4 Mr. Koenig, although Mr. Koenig obviously is not on
5 the Continental list. The pilots like Mr. Koenig
6 who began their service flying for an express
7 carrier and who have that date of hire reported on
8 the certified seniority list sent over by the
9 Continental pilots, as though it was the date of
10 hire they began flying at the mainline.
11 The United pilots have also been pursuing
12 since the day this case began, some three years ago,
13 efforts to understand and quantify the time at which
14 pilots like Mr. Koenig, although not Mr. Koenig
15 because he was not on that list, the pilots like
16 Mr. Koenig who are on the Continental pilots
17 seniority list who began at Continental Express and
18 who are sitting between two pilots who are hired
19 originally at Continental who were furloughed and
20 who have furlough time shown for them.
21 Nevertheless, those pilots who began at
22 Continental Express do not have furlough time shown
Inabnet Court Reporting (703) 331-0212 1838
1 for them when they we know they were not flying at
2 Continental Airlines.
3 Everybody in the room knows that.
4 Everybody in the room understands that. Everybody
5 in the room I think understands that that has been
6 the drive and the desire of the United pilots to
7 parse, as well as it can be parsed under the
8 circumstances, in the face, I might add, of
9 overwhelming resistance by the Continental Pilot
10 Merger Committee, including up to this very moment,
11 to have that information see the light of day.
12 Now, I used a phrase in the memo that we
13 submitted to you that there is an effort on the part
14 of the Continental pilots in the context of the
15 arguments that they are making of letting the
16 perfect be the enemy of the good.
17 We are faced with an ALPA Merger Policy
18 which mandates that the Panel consider longevity for
19 purposes of constructing a fair and equitable
20 integrated seniority list.
21 We have clear direction from the president
22 of ALPA and, following it, agreement between the two
Inabnet Court Reporting (703) 331-0212 1839
1 merger committee counsel, that this Board in the
2 context of deciding this case has the power and
3 authority to define the terms longevity, furlough,
4 and date of hire as they appear in ALPA Merger
5 Policy. That's in your charge.
6 I can tell you now, without giving away
7 state secrets, that the United pilots' proposed
8 integrated seniority list relies on a determination
9 of the longevity of the Continental pilots that
10 takes into account what we have determined and what
11 we will be presenting to the Board.
12 And the Board will be free to make its
13 judgments about how it should weigh it, how it
14 should assess it.
15 But we have determined, based on the
16 universe of evidence that we have been able to
17 acquire -- some of which is less than perfect, we
18 understand -- but as best we have been able to
19 acquire in the face of three years of smoke and
20 three years of lack of cooperation.
21 Our -- is what we would say is the correct
22 longevity for purposes of assessing the longevity
Inabnet Court Reporting (703) 331-0212 1840
1 factor in ALPA Merger Policy for the Continental
2 pilots.
3 Our -- to put it in the starkest terms I
4 can say, the proposal that you will hear from
5 Captain Ruark, Chairman of the United Merger
6 Committee when he puts the proposal to you, you will
7 have embedded in it determinations about longevity
8 of pilots on both groups based on the collection of
9 evidence that we have been able to ascertain.
10 And what Dan is asking you to do -- again
11 make no bones -- I make no bones about it.
12 What Dan is asking you to do is to say to
13 us at this stage of the case that we are unable to
14 present to you what we have determined is the best
15 we can do in ascertaining the longevity of
16 Continental pilots and use that in the construction
17 of our proposed seniority list.
18 Nothing more than that and nothing less
19 than that.
20 And I submit to you that you are a panel,
21 you are a board of arbitrators. You are not a jury.
22 You are capable of making judgments about the
Inabnet Court Reporting (703) 331-0212 1841
1 liability, and you are ultimately capable of making
2 judgments about the fairness, about whether a
3 particular list is fair and equitable under all the
4 circumstances.
5 And it seems to me to be beyond question
6 that you ought to hear the evidence that we have
7 adduced, and you ought to hear how that evidence
8 features into our proposal. And you ought to then
9 make whatever judgments you feel you need to make
10 about using that evidence and using that for the
11 proposal that follows from that evidence in shaping
12 your result.
13 And the only thing that Dan is doing by
14 raising this objection is the same thing that his
15 committee has done over the course of the last three
16 years.
17 And it would be a crime, I submit, to
18 prohibit this evidence from coming in.
19 ARBITRATOR EISCHEN: Anything further
20 gentlemen before we recess on this point?
21 MR. KATZ: I just want to say one point.
22 I have heard many arbitrators say over the
Inabnet Court Reporting (703) 331-0212 1842
1 years, let something in for what it's worth. But I
2 have also heard arbitrators, if something isn't
3 worth anything, the appropriate thing to do is to
4 tell the parties that this is not -- this is not a
5 piece of information that I'm going to make my
6 decision.
7 And I think with the buildup from Dan
8 Casey and from Andy Papaleo of what is in the Zeus
9 database and similar kind of problems with the
10 defined benefit information, which relates to
11 pensions and not seniority placement, the proper
12 response for this Board is to say, This is not
13 information that rises to the level of evidence that
14 we are going to consider.
15 And that's not a crime. That's an
16 appropriate way to proceed.
17 ARBITRATOR EISCHEN: Thank you very much,
18 gentlemen.
19 We are going to go off the record for a
20 moment. I want to consult with my colleagues and
21 then we will be back.
22 (A recess was taken from 6:09 until 6:57.)
Inabnet Court Reporting (703) 331-0212 1843
1 ARBITRATOR EISCHEN: I want to simply
2 state that the panel has had a brief interlude for
3 discussion and deliberation, but the matters raised
4 in the immediately foregoing exchange and the
5 objections and the proffered documents are
6 significant and weighty, and they deserve further
7 reflection and at least an overnight consideration.
8 So we are going to be reserving judgment
9 until tomorrow morning.
10 With that, we thank you both counsel and
11 the committees for their participation again today.
12 We will be adjourned until 9 tomorrow
13 morning.
14 (Whereupon, at 6:58 p.m., the proceedings
15 in the above-captioned matter were recessed to
16 resume on May 13, 2013 at 9:00 a.m.)
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Inabnet Court Reporting (703) 331-0212 1844
1 CERTIFICATE OF REPORTER
2 I, Joseph A. Inabnet, do hereby certify
3 that the transcript of the foregoing proceedings was
4 taken by me in Stenotype and thereafter reduced to
5 typewriting under my supervision; that said
6 transcript is a true record of the proceedings; that
7 I am neither counsel for, related to, nor employed
8 by any of the parties to the action in which these
9 proceedings were taken; and further, that I am not a
10 relative or employee of any attorney or counsel
11 employed by the parties thereto, nor financially or
12 otherwise interested in the outcome of the action.
13
14
15 ______Joseph A. Inabnet 16 Court Reporter
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Inabnet Court Reporting (703) 331-0212