US Airways Pilots, After Long Wait, Want Payoff From AMR Merger

Tickers in this article: AAMRQ.PK LCC

CHARLOTTE, N.C. ( TheStreet) -- Since the airline industry began to restructure with a wave of bankruptcies following the Sept. 11, 2001, terrorist attacks, no pilot group has paid a higher price than the pilots of US Airways (LCC) .

Now, a likely merger with American (AAMRQ.PK) presents a chance to regain some of the lost ground. The first step will be to quickly negotiate a memorandum of understanding, which must then be approved by the two airlines and the two pilot unions. On Saturday, American pilots agreed on an MOU proposal, which also requires four-party approval.

The US Airline Pilots Association and its president, Gary Hummel, seem up to the challenge. But it will not be easy because the sacrifices have been so vast, and the recovery will not be complete. Right now, no one has a tougher job than Hummel, who cannot possibly meet the expectations of all of his constituents.

Let's take a brief look at the history of US Airways pilots sacrifices.

In 2002, US Airways became the first carrier to file for bankruptcy following the 2001 attacks. The bankruptcy took just seven months and failed to sufficiently reduce costs. The airline filed again in 2004. Facing the possibility of liquidation, pilots agreed to wages that were the lowest for any major airline. Also, the bankruptcy court approved the termination of their pension plan, which was taken over by the Pension Benefit Guaranty Corp., which imposed maximum payout levels below what the pilots had expected. By contrast, at American, which did not file bankruptcy until 2011, the existing pilot pension plan was frozen.

In 2005, US Airways merged with America West and emerged from bankruptcy. A bankruptcy deal combined America West's youthful, ambitious management team with US Airways' valuable assets in Charlotte, Philadelphia and Washington National. Leveraging these assets and the newly lowered cost structure, the America West people took two weak airlines and made one strong one. It began to seem that pilots might reap the benefit of their sacrifices.

But wait. Pilot seniority integration was handed over to arbitrator George Nicolau, who issued a ruling in 2007. It seems fair to say that the ruling was absurd. It followed a conventional pattern for "slotting" pilots from two merging carriers, but it also placed a never-laid-off 56-year-old pilot with 17 years at US Airways behind a 35-year-old America West pilot with a few months on the job. In hundreds of similar cases, east pilots with 15 or more years at the carrier went behind west pilots with a few years or less. In fact, the ruling seemed to violate ALPA's anti-windfall policy.

It must also be said that the ruling resulted from binding arbitration. Nicolau was jointly selected by pilots from both airlines. One cannot dispute west pilots' contention that "binding arbitration is binding arbitration," although an east pilot once told me that "my first marriage was final and binding too." In my view, rank-and-file US Airways pilots were sold out by hardline leaders who refused to back down from their insistence on unadulterated date-of-hire seniority, even though Nicolau asked them to negotiate and Jack Stephan, who was president of the US Airways ALPA chapter, wanted to. Over the years, multiple non-pilot sources have told me that Nicolau was frustrated by the conduct of these supposed leaders. His ruling seems to reflect that.