BEFORE THE MCCASKILL-BOND AMENDMENT SECTIONS 3 AND 13 ARBITRATION BOARD DANA E. EISCHEN, IRA F. JAFFE, M. DAVID VAUGHN, Arbitrators _________________________________ ) In the matter of the seniority list ) integration involving the Pilots of ) NEW AMERICAN AIRLINES ) _________________________________ ) Post-Hearing Brief of the US Airways (East) Pilot Seniority Integration Committee TABLE OF CONTENTS INTRODUCTION ....................................................................................................1 Factual Background: Restoring American Airlines to Preeminence Through the Merger With US Airways ............................................................................... 11 1. American’s path into bankruptcy ................................................................... 12 2. American seeks to impose a concessionary agreement on its pilots that would gut the APA agreement and reduce the active American pilot group by 15 percent; the American pilots choose a merger of American and US Airways as their best strategic alternative ........................................ 14 3. US Airways’ pursuit of a merger with American ............................................ 19 4. USAPA initiates bargaining for a four-party memorandum of understanding ............................................................................................... 21 5. American receives permission to reject the American pilot contract under Section 1113 ....................................................................................... 22 6. Labor negotiations resume after the end of the merger blackout, leading to a ratified APA contract and then to the final four-party Memorandum of Understanding ........................................................................................... 23 7. American and US Airways announce and gain approval of their merger and later resolve a challenge to the merger by the United States ................ 29 8. APA and USAPA engage in negotiations with American for a joint collective bargaining agreement; the APA, after its certification as the single pilot representative, establishes a negotiating committee that included former USAPA negotiators to conclude a JCBA ............................. 31 9. The American-US Airways merger dramatically increased the value of the bankrupt American, improving value for all shareholders including the American pilots, and providing the financial strength for the $1.73 Billion JCBA .................................................................................................. 33 SUMMARY OF ARGUMENT .............................................................................. 35 ARGUMENT ........................................................................................................ 36 i I. The East Pilot Committee Proposal Fairly and Equitably Balances the Actual Seniority Equities of the Three Pilot Groups and Should Be Adopted by the Board ................................................................................... 36 A. The East Pilot SIC proposal is properly based on the December 9, 2013 equities and a “static fleet” assumption; the Board should not base the ISL on an artificial and nonexistent business plan or fleet plan ............................................................................................................ 38 B. The record establishes that length of service must be used as a basis for integrating the pilot groups in this proceeding ............................ 41 C. The Board should adopt the East Pilot Committee’s method of calculating length of service ...................................................................... 45 1. Service time at legacy carriers not counted in the pre-merger seniority systems ............................................................................. 45 2. The Board should adopt the East Pilot Committee’s position that service time at US Airways’ “MidAtlantic Division” is included in the calculation of length of service for certain East Pilots ............................................................................................... 49 3. Time in service by American pilots at American Eagle should not be included in the length of service calculation ......................... 52 D. The Board should adopt the East Pilot Committee’s construction of category and status groups including the treatment of American and West pilots on furlough on the Snapshot Date .......................................... 53 1. The East Pilot Committee correctly constructed a furloughed category 9 among American pilots with 1,165 furloughed pilots on the Snapshot Date and 61 furloughed pilots among West pilots on the Snapshot Date since both pilot groups brought more pilots with rights to jobs than available jobs in their system ............................................................................................. 53 2. The Board should adopt the East Pilot Committee’s construction and ordering of Category and Status groups .............. 58 E. The East Pilot Committee Proposed ISL is fair and equitable to all the pilot groups .......................................................................................... 61 ii 1. The East Proposal functions like a proper seniority list by exchanging the benefits of the ISL among the three groups over time .......................................................................................... 62 2. The East Proposal maintains or enhances the time in position of American and West Pilots while maintaining a reasonable career progression for East Pilots ................................................... 66 3. The East Pilot Committee’s proposed Group 4 position condition is a reasonable and necessary measure to safeguard the legitimate near-term pre-merger career expectation of American and East Pilots to Group 4 positions in the anticipated final operational integration of the carriers .......... 73 4. The East Proposal maintains the integrity of career progression in the separate pre-merger seniority lists by integrating pilots with their appropriate peers and maintaining the strong correlation between length of service and pre- merger seniority progression ........................................................... 76 II. The Board May Not Adopt the Nicolau Award ISL As the Basis for Ordering East and West Pilots Under the ISL ................................................ 79 III. The West Committee Proposal’s Impermissible Use of the Nicolau Award List Creates An Inequitable and Unjust ISL That Must Be Rejected By the Board ................................................................................... 96 IV. The AAPSIC Proposal Must Be Rejected Because It Ignores the Reality of the American-US Airways Merger, Strips Away the Seniority Equities of US Airways Pilots and Grossly Exaggerates the Seniority Equities of Premerger American Pilots; It Is Contrary to the Fundamental Purpose of Section 3 to Establish a Fair and Equitable Seniority List by Its Arbitrary Disregard of the Pilots’ Length of Service, Devaluation of Jobs Held By Premerger US Airways Pilots, and Manipulation of Nonexistent Fleet Plans and Staffing Assumptions ......................................................... 110 A. The AAPSIC use of an alleged pre-merger pay analysis to integrate the pilots is contrary to Sections 3 and 13 and has been rejected by every arbitrator who has considered the notion ...................................... 112 B. The AAPSIC proposal grants massive windfalls to American pilots while severely and permanently prejudicing East Pilots in the ISL and must be rejected ............................................................................... 121 iii V. East Pilot SIC Position On Certain Outstanding List Build Issues ........................................................................................................... 130 A. West “Letter T” proposal .......................................................................... 130 B. The Board should use the job counts established by the East Pilot Committee ............................................................................................... 133 C. Pull and Plug method for reinserting inactive pilots ................................ 134 VI. The Board Should Reject Certain Conditions Proposed By the American Pilot Committee and West Pilot Committee ................................. 135 A. AAPSIC Group 4 position condition ........................................................ 135 B. The Board should reject AAPSIC’s proposed restriction on the displacement rights of pre-merger US Airways pilots ............................. 136 C. AAPSIC proposal concerning extension of the retirement age should be adopted .............................................................................................. 138 D. The Board should reject AAPSIC’s effort to enhance Supplement C rights in this arbitration ............................................................................ 138 E. The Board must reject the West Committee’s effort to obtain enhanced recall rights for “dual lister” pilots ............................................ 139 VII.The Board Should Adopt Step 6 of the Continental-United Award ISL Methodology To Update the December 9, 2013 Premerger Seniority Lists To Remove All Pilots Who Have Left The Company’s Employ Since the Snapshot Date Prior to Populating the Final Hybrid ISL .............. 139 VIII.While the East Proposal Is the Only Fair Basis for Integration