In the Matter of the Arbitration of the Seniority Integration Between THE PILOTS OF US AIRWAYS - and - OPINION AND THE PILOTS OF THE US AIRWAYS SHUTTLE AWARD

Before the ALPA Arbitration Board George Nicolau, Chair Don R. Jacobs, Neutral Pilot Michael J. Lazarowicz, Neutral Pilot

APPEARANCES:

For the US Airways Pilots: Katz & Ranzman By: Daniel M. Katz, Esq. Louse P. Zanar, Esq. Erica J. Dominitz, Esq.

For the US Airways Shuttle Pilots: Baptiste & Wilder By: Roland P. Wilder, Jr., Esq. Patrick J. Szymanski, Esq. William R. Wilder, Esq.

On November 19, 1997, US Airways, which had been operating the US Airways Shuttle under an April I0, 1992 Management Agreement (USS Ex. 16)1 announced that it would exercise its option to take

~Joint Exhibits are designated JX___, US Airways Exhibits are designated USA EX__ and Shuttle Exhibits are designated USS EX

-I- ownership of that entity. The acquisition, which was consummated on December 30, 1997, brought ALPA’s Merger Policy into play.

Under that Policy, each pilot group selects Merger Representatives, whose function it is to attempt to arrive at a fair and equitable merger of the airlines’ seniority lists. The Policy, in pertinent part, provides as follows:

The merger representatives shall carefully weigh all the equities inherent in their merger situation. In joint session, the merger representatives should attempt to match equities to various methods of integration until a fair and equitable agreement is reached, keeping in mind the following goals, in no particular order:

a. Preserve jobs. b. Avoid windfalls to either group at the expense of the other. c. Maintain or improve pre-merger pay and standard of living. d. Maintain or improve pre-merger pilot status. e. Minimize ~detrimental changes to career expectations.

If the Merger Representatives fail to reach agreement on an integrated list, as they have here, the matter is referred to a Board of Arbitration consisting of a Chairman and at least two Pilot Neutrals selected from ALPA’s Master List of Pilot Neutrals.2 The purpose of arbitration, like that of negotiations between Merge~ Representatives, is to reach a fair and equitable resolution consistent with ALPA policy:

2. As it was, the Merger Representatives had been meeting for some time before the acquisition. Those talks, like those that followed the acquisition, were unproductive.

-2- After receiving pre-hearing statements of position, this duly- appointed Board held a hearing over fourteen days in Washington, D.C. in the months of October 1998 and January 1999, during which both Parties were afforded full opportunity to offer evidence and argument and to present, examine and cross-examine witnesses. A transcript, consisting of 2231 pages, was taken. There were 21 witnesses and a total of 550 exhibits. Subsequent to the hearing, the Parties filed exhaustive post- hearing briefs, with the Record closed on March 22, 1999, the day of their receipt. Thereafter, the Board met in executive sessions to consider the case and reach its conclusions.

The Background

The carriers differ in both size and nature. As of the beginning of this proceeding, US Airways had 5,311 pilots on its System Seniority List, while the Shuttle had 162. The larger airline, itself a product of. various mergers over the years (USA Volume A), has grown from a regional carrier serving domestic cities to one with an international presence in both the Caribbean and Europe and bases in Baltimore, Boston, Charlotte, Pittsburgh, Philadelphia and Washington. Its September 30, 1998 fleet of some 371 aircraft ranges from 40 F-100,s to 12 wide-bodied 767’s. The 12 767’s and the 34 757’s are known for pay purposes as Group I aircraft and the 40 F-100’s are characterized as Group III. The bulk of the fleet consists of narrow-bodied 737’s, MD-80’s, DC-9-30’s and an A-319 in what is known as Group II. There are also approximately 28 737-200’s flown by MetroJet, the Company’s "airline within an airline," under sep.arate work rules and a combination of pay and stock options. All US Airways’ planes have two-person crews. Though the airline once had

-3- 727’s, a Group II aircraft requiring 3-person crews, those planes are no longer in its fleet.

In contrast, the only planes in the USA Airways Shuttle fleet are 3- person crew 727-200’s. Those 12 planes fly between Logan in Boston and LaGuardia in New York and between New York’s LaGuardia and Washington’s National Airport, for a total of 64 daily departures.

As to the characteristics of the pilot groups and their placement on their respective seniority lists, the Shuttle pilots are generally older than their US Airways’ counterparts. Forty-nine of the 162 USS pilots will reach mandatory retirement age within the next five years and 93 will retire within the next decade. Moreover, the Shuttle seniority list is characterized by sharply defined demarcations, with Numbers 1 through 67 populated predominantly by Captains, Numbers 68-105 mainly by First Officers and 106-162 chiefly by Second Officers. In contrast, the US Airways List is much more heterogeneous. For example, though there are only 344 Group I captaincies, the first Group I Captain is # 1 and the last is #1292 (USS Ex. 162). In between those numbers, we find the first Group II Captain at #80, the first Group III Captain at #443, the first Group I First Officer at #525, and the first Group II First Officer at #573. These variants from sharply defined blocks prevail through the list (USS Ex. 162).

US Airways purchased the Shuttle, then known formally as Shuttle, Inc., from a consortium of banks which, in 1991, had taken over what was then known as the Trump Shuttle as part of a complex restructuring of Mr. Trump’s debt. Trump, in turn, had purchased the Shuttle from Eastern Airlines, with many pilots coming over from EAL to staff the

-4- ¯Trump operation. Thus, the Shuttle began as the Eastern Shuttle in 1965, then became the Trump Shuttle in 1989, was subsequently Shuttle, Inc. and is now the US Airways Shuttle.

Based on their view of the Shuttle’s history, the Shuttle pilots have constructed a proposed integrated seniority list that gives some recognition to the service of those pilots who came from Eastern to Trump in 1989. That list also takes into account what the Shuttle pilots contend was a managing down of the Shuttle during the 1992-1997 Management Agreement period, an asserted circumstance brought about by a February 13, 1992 Memorandum of Understanding ("MOU") between US Airways and the US Airways MEC (USS Ex. 25) as well as a number of independent operational decisions of US Airways management. In this regard, the Shuttle pilots note that the period of the Management Agreement began with 20 Trump Shuttle aircraft and ended with only 12. Similarly, the most junior Captain at the beginning of the Management period was #92 on the Seniority List and is now #67.

The Shuttle pilots proposed integrated list assertedly compensates for this phenomenon by treating 25 of the more senior First Officers as if they were Captains and merges, on a ratio basis, the 67 USS Captains and those 25 USS First Officers with the bulk of US Airways Group II Captains. The Group II Captain "neighborhood" the Shuttle pilots use for this purpose, which contains 1173 of the 1547 Group II Captains, runs from just below the 95th percentile of the US Airways Group I Captains to

the 95th percentile of Group II Captains. Thus, the most senior Shuttle Captain (Laney), whose EAL Date of Hire ("DOH") is 8/9/65, would be #871 on the merged list, one number below Captain McCord, whose US Airways DOH is 1/16/79. Wesley Robinson, the Shuttle’s junior Captain

-5- at #67, whose EAL DOH is 4/9/73, would be #2387 on the merged list, one number below Stone, a Group III F-100 Captain with a DOH of 4/10/85. The Shuttle’s most senior First Officer (E. Robinson, USS 68), with.an EAL DOH of 4/19/73, would follow at #2410, one number below

Altman, a F-100 Captain with a DOH of 4/15/85, and the 25th most senior First Officer (G. Jones, USS 92), whose EAL DOH is 11/3/80, would be #2961, one number below Sflverstein, an MD-80 CaPtain, whose DOH is 12/3/85.3

The methodology of the remainder of the Shuttle Pilots’ proposed list is based on captain expectancy dates, i.e., the date, according to USS witness Dr. Michael Tannen, that each pilot would expect to advance to Captain status on his or her pre-merger airline, absent any growth, and the preservation of that expectation on the merged list. The respective captain expectancy dates are a captaincy on the Shuttle’s 727’s and a captaincy on US Airways Group II, i.e., narrow body aircraft, piloted by US Airways mainline rather than MetroJet pilots. Thus, Shuttle FO Hume (USS #93) is #3452 on the integrated list. USS Numbers 94 through 157, which include 42 Second Officers, range from Numbers 3452 to 5227 on the integrated list. The last five Shuttle Second Officers (USS # 158-# 162), all with a DOH of 2/12/90, are arrayed at the bottom of the list (5469- 5473), below Mase (#5468), the last recalled US Airways furloughee whose DOH is 4/23/90.4

Originally, as explained by counsel, the US Airways pilots had proposed a date-of-hire merger with the DOH for the bulk of the Shuttle

a All of the seniority numbers in this section of the Opinion are as they appear on the USS proposed integrated October 1, 1998 List (USS Ex. 158). 4 Actually, Mase has resigned since the publication of the list. So, the last recalled US Airways furloughee is Foerster, #5467 on the USS proposed list and #5310 on the unmerged US Airways list. -6- pilots, even the 121 that had come from Eastem, set at June 6, 1989, the date the Trump Shuttle became operational. On the October 1998 US Airways Seniority List, this would have placed Captain Laney, the most senior Shuttle pilot, at #4796 as opposed to the Shuttle Representative’s proposed position of #871.

Though the US Airways Representatives abandoned the concept of a date-of-hire list during the course of the proceeding, their revised proposal, which continues to reflect June 6, 1989 as the earliest USS hiring date, is still dramatically different from that of the Shuttle pilots. The revised proposal (USA Ex.H: 16-A) places the junior Shuttle Captain (W. Robinson, USS #67) under the junior MetroJet Captain (Fernandez, US Airways #4081) and ratios the remaining 66 USS Captains above them on a 1:4 basis. This places Captain Laney at #3818 on the integrated list, a stark contrast to his present position of # 1 on the USS List and #871 on the USS proposed integrated list. Similarly, the Shuttle’s most junior First Officer (Slater, USS #129) is placed immediately junior to Censullo (US Airways #5030), who was the last active US Airways pilot prior to the recent recalls. The 61 more senior USS First Officers are then distributed above Censullo on a ratio of 1:5. This method places USS’s senior First Officer (E. Robinson, #68, EAL DOH 4/4/73) at #4793, one number below First Officer Nemeth (DOH is 4/20/89), whose US Airways unmerged number is #4725. This placement at #4793, in addition to creating a gap of 644 numbers between the junior Shuttle Captain and its most senior First Officer, is in contrast to First Officer Robinson’s position of #2410 under the USS proposal. Under the US Airways revised proposal, 33 of the 47 USS Second Officers are placed at the bottom of the list (#5441 to #5473) below Mase, the last of US Airways’ recalled pilots. This is in

-7- contrast to the five Second Officers that the-Shuttle Representatives agree should be at the end of the list.

Along with their list, the US Airways Representatives also propose various conditions and restrictions, one of which is a so-called "Captain Protected List" under which Shuttle fl~ng is essentially reserved to Shuttle pilots as long as the Shuttle is run "as a separate operation for pilot bidding purposes, or until January 2, 2003, whicheger occurs sooner..." (US Airways Ex. H: 16 at 3).

The US Airways Representatives base their proposal primarily on ¯ two grounds: (1) a comparison of 1996 and 1997 W-2 earnings of the USS and US Airways pilots and (2) the Northwest Airlines/Trump Shuttle integration proposall to which the USS pilots had agreed in 1991 at the time Northwest was a prospective purchaser of the Shuttle operation.

The Shuttle Representatives contend that integrating a seniority list on the basis of pay comparisons while discounting the status and experience of the Shuttle’s Captains and First Officers, particularly in the circumstances of this case, is fundamentally unfair. The Shuttle Representatives note that there was little difference in pay prior to the Management Agreement period. Since then, however, the Shuttle pilots, whose last increase was in 1990, were unable to obtain any wage increases during the Management Agreement period while the US Airways pilots had received five increases in just over three years. Moreover, the Company continued to resist Shuttle increases in 1996 because it was about to enter mainline bargaining and seek either concessions or a stand-still agreement from the US Airways MEC. The Shuttle Representatives also point out that the US Airways Representatives

-8- simply abandon the pay comparison concept in their placement of the bulk of the Shuttle’s Second Officers, all of whom earned compensation in 1996 and 1997, below all of the US Airways’ recalled furloughees whose airline earnings in the same two years were nil.

The Shuttle pilots further contend that reliance of the US Airways Representatives on the Northwest/Trump Shuttle integration proposal is similarly misplaced. What might have been appropriate as a "pre-nuptial" agreement involving another airline under very different circumstances eight years ago is not appropriate today, particularly when those who are eight years closer to retirement are placed near the "bottom of the seniority escalator." Moreover, a close comparison of the Northwest Agreement and the US Airways proposal reveals, the Shuttle pilots say, similarities in form but great differences in substance.

Discussion

The Board has carefully considered the :USS and US Airways proposals and the myriad of reasons offered on their behalf, both in the testimony and the voluminous briefs. Our conclusion is that neither proposal meets the ALPA standards to a degree sufficient to warrant our support.

The proposed USS placement of Captains is at a point where circumstances would permit some to gain Group I seats, a result not within their pre,merger career expectations. Moreover, we cannot accept the argument that 25 of the more senior Shuttle First Officers should be treated as Captains in the list’s construction. Though that point was

-9- vigorously pressed, the fact is that the February 13, 1992 US Airways/US Airways MEC Memorandum (USS Ex. 25), at which the Shuttle Representatives directed their fire, is a standard defensive tactic regularly employed in similar situations. Moreover, Shuttle management decisions during the period at issue were not aimed at "managing down" per se, but at restoring profitability. It is also clear that the mainline operation was contracting during the same period. Thus, we see, a different and less advantageous starting point for the placement of Shuttle Captains on the integrated list than that proposed by the Shuttle Representatives and a separation of Captains and First Officers.

For different reasons, we find the US Airways proposal unacceptable. In the circumstances of this case, placement of Shuttle Captains and First Officers primarily on the basis of pay comparisons ignores basic principles of ALPA Merger Policy, dismisses the concept of comparable aircraft and comparable jobs, harms career expectations and places the hard earned status of those pilots at risk, particularly given the nature of the suggested "Protected Captain List." We also find unacceptable the placement of the bulk of the Second Officers at the bottom of the list below recently recalled furloughees. The Second Officers have brought jobs to US Airways in essentially the same fashion as their higher rated contemporaries. However, their jobs are at greater risk in that the replacement of 727-200’s, if that were to occur, would mean the elimination of those positions. That circumstance requires that they be treated separately. It does not require their placement at the bottom as if the positions were of no value.

Vv"nile the Parties to this process were at odds on many elements, there is one point of agreement we find significant and determinative.

- 10- Both Parties recognize that the 727-200 is a Group II aircraft. This leads us to conclude that the Shuttle Captains, who command Group II aircraft, should be placed among the US Airways Group II captains. That placement, however, should begin, for reasons previously expressed, at a point below the last Group I Captain. This placement will preserve the career expectations of the Shuttle Captains while leaving senior US Airways expectations essentially undiminished. Our conclusion as to this placement, based on the comparability of aircraft, makes it unnecessary to resolve the date-of-hire issue that has dominated much of this proceeding. Thus, the 67 USS Captains (Laney to W. Robinson) should be distributed by means of relative percentile ranking between the last US Airways Group I Captain on the US Airways unmerged October 1998 List (Crump, #1292) and Krantz, #3259, the last Group II Captain.

We have used the same relative percentile ranking to distribute the USS First Officers (E. Robinson #68 to Slater #129) beginning with US Airways First Officer Joseph, #3260 on the unmerged US Airways List, and ending with #4697, US Airways First Officer Etzel. The first half of the spread between #3260 and #4697 contains some US Airways’ Wide- body First Officers and MetroJet Captains and it could be argued, because of this, that complete comparability of jobs is not fostered by placing all of the Shuttle’s Group II First Officers where we have. The explanation for our placement is that the Shuttle pilots, older than those at US Airways, have brought their attrition with them. As a result of that unalterable fact and their spread throughout the range, they Will not attain, absent growth, the degree of advancement they would have attained if they had remained as a separate entity at the Shuttle. Their

-11- placement is generally with their counterparts and seems fair to us, given all the circumstances of this particular case.

As to the remainder of the List, the Parties have agreed that the five Second Officers that were hired on February 12, 1990 should be placed at the bottom of the list after the last recently recalled US Airways pilot. The US Airways Merger Representatives would place the 28 other Second Officers in the same position. On the other hand, the Shuttle ¯ Representatives would place all 28 above the 280 recalled furloughees.

We cannot agree with either placement. The US Airways placement ¯ essentially assumes that the Second Officers bring no jobs to the merger, while the Shuttle proposal tacitly assumes that the Second Officer positions are not at any risk. A balancing of the equities, which also takes into consideration the reasons behind the lengthy furloughs of those who have recently been recalled to US Airways’ active rolls as well as the extended furloughs endured by 18 of the 28 Shuttle Second Officers, suggests to us that the 28 Shuttle Second Officers, beginning with Sullivan (USS #130) and ending with Cardoza (USS #157) should be distributed between US Airways unmerged #4859 (Scoble) and #5310 (Foerster). This would place those who have experienced furloughs and have relatively similar se~cice in comparable positions on the list.

In constructing the integrated list we have used the October 1998 unmerged lists supplied by the Parties. The US Airways Representatives asked that we use 1999 lists, but we decline to do so. It should also be noted that the October lists, as given to us, contained the names of individuals who had already retired, resigned or died. We have removed those individuals from our integrated list attached to the Award as

- 12- Exhibit A. Thus, there will be some skipping of unmerged numbers. That was deliberate in order that the actual unmerged numbers of active pilots could be accurately shown.

The Award also contains the usual "no bump, no flush, no system re-bid" condition and one condition preserving Shuttle seats for Captains and First Officers. Other than that, we believe that the List has been constructed so as to make conditions and restrictions unnecessary. In our opinion, it preserves expectations absent growth and permits the sharing of any growth that may occur.

Our view, taking into account the attrition rate of both groups and all the factors that must be considered and balanced in any merger, leads us to the conclusion that the List achieves, as well as any list can, the objectives of ALPA Merger Policy. Though we have had differences in reaching this conclusion, we have unanimously agreed upon this Opinion and, with the permission of Captain Jacobs and Captain Lazarowicz, I have signed the accompanying Award on behalf of the entire Board.

The Under:signed, acting as the Chairman of the Board of Arbitration pursuant to ALPA Merger Policy, with the Board having duly heard the proofs and a11egations of the Parties, therefore renders, on behalf of the Board, the following

AWARD

A. The Consolidated List The Consolidated US AiPecays Pilot System Seniority List shall be the List attached to this unanimous Award as Exhibit A.

- 13- B. Conditions and Restrictions

(1) No Bump, Flush or System Re-Bid. Neither the implementation of the Consolidated US Airways Pilot System Seniority List nor the expiration of any condition or restriction herein shall be cause for the displacement of any pilot from a Position (awarded status, equipment or domicile) he or she is holding.

(2) Priority_ Right to Shuttle Fl_vin~. Until January 2, 2003, each pilot presently on the Shuttle System Seniorify List in the status of Shuttle Captain or Shuttle First Officer during the month of October 1998 shall retain a prior right, as against all other pilots not holding such a right, to retain that Status as a Shuttle Captain or Shuttle First Officer, or to return to that Status at the Shuttle if he or she is involuntarily displaced from it, irrespective of the equipment (aircraft type) the Company chooses to use in any Shuttle operation.

(3) The Kagel Award. The conditions and restrictions ,imposed by the Kagel Award, effective October 31, 1988 shall not be affected by the foregoing conditions and restrictions. C. Effective Date The effective date of the Consolidated US Airways Pilot System Seniority List shall be in accord with Paragraph O of ALPA Merger Policy.

D Retention of Jurisdiction

In accord with Paragraph J of ALPA Merger Policy, the Board of Arbitration shall retain jurisdiction to resolve, at the request of the Shuttle or US Airways Merger Representatives, any dispute concerning the interpretation, application or implementation of any of the provisions of this Award.

Dated: June 6, 1999

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