A federal appeals court on Thursday upheld a lower court ruling that pilots for Atlas Air Inc. and Southern Air need to follow binding arbitration to resolve differences over whether each company’s merger agreements applied to bargaining with the combined company over a new joint labor agreement.
The International Brotherhood of Teamsters, which represents the pilots, had argued the disagreement should be handled before a federal mediation board.
The three judges on the U.S. Court of Appeals for the 2nd Circuit voted 2-1 on Nov. 21 in favor of Atlas’ right to compel arbitration after the two sides couldn’t reach an agreement. The decision dismissed all three union arguments, including that an arbitration board for one of the companies can’t exercise jurisdiction over the other’s employees. The arbitration boards consist of designated representatives from both sides.
The court said the Atlas and Southern boards will only decide whether their respective collective bargaining agreements require each group of pilots to negotiate a joint contract. “Nothing in the process of interpreting the provisions of the two collective bargaining agreements (CBA) purports to bind Atlas or Southern pilots to the terms of another existing collective bargaining agreement,” Judge Denny Chin wrote for the majority.
The decision is the latest in a series of setbacks for the union. Last summer, two arbitrators separately rejected the Atlas pilots’ request to negotiate their next contract and instead imposed an arbitrated contract process. A U.S. appeals court also affirmed a district court decision that ordered the union to stop work slowdowns and related tactics, such as taking excessive sick days on short notice or refusing to volunteer for overtime shifts.
The holding company for all-cargo operator Atlas Air [NASDAQ: AAWW] acquired Southern Air in April 2016 and in September of that year both CBAs became eligible to be amended, as spelled out in the Railway Labor Act. The law regulates labor relations in the airline industry and is supposed to prevent service interruptions in the transportation industries by requiring the parties to go through a lengthy series of negotiating procedures, including presidential intervention, before they can resort to a lockout or strike.
Atlas and Southern held that the parties were obligated to negotiate a joint CBA covering both companies’ pilots, while the union argued for separate negotiations to amend each individual CBA.
The pilots became frustrated with Atlas’ efforts to change work terms and staffing levels under the existing agreement as the company adapted its business model to capture more domestic e-commerce business, which increased flying tempo. They fear that arbitration isn’t balanced and works in Atlas’ favor. Limited by law from striking, the union instructed pilots to “work to the rule,” essentially doing the minimum allowed under the contract, to pressure Atlas into making concessions.
The dispute has prevented the companies from being integrated. Each operates under its own federal airworthiness certificate.
The labor dispute has impacted Atlas Air’s on-time performance and resulted in lost business from Amazon.com, which has turned more to competitors to fly leased aircraft because of reliability concerns. Atlas partially blamed its third-quarter loss and poor second-quarter performance on the pilot dispute.
The carrier has said the long-stalled talks could move forward once the pilots submitted a merged seniority list of pilots.
“With these decisions behind us, it’s time for the union to honor its obligations under the collective bargaining agreements and these binding decisions. Specifically, the union has an obligation to produce an integrated seniority list and engage in direct bargaining for a defined and limited period of time,” Atlas Air Worldwide Chairman and CEO William J. Flynn said in a statement. “In ongoing negotiations, the union has yet to provide us with a comprehensive economic proposal covering pay and benefits for evaluation. We remain committed to working collaboratively with union leaders to efficiently negotiate and complete the contract,.”
Tim Jewell, president of Teamsters Local 1224, said in a statement, “We are disappointed by this split decision but are determined to ensure that the interests of the Southern Air pilot group are clearly represented.”
There are now about 1,800 unionized pilots at Atlas. Their growth led them in early October to form their own bargaining unit, Local 2750, separate from the multi-employer Teamsters representation. Previously, Teamsters Local 1224 said it would furnish a merged list once pilots vote on and ratify a contract proposal and the federal airworthiness certificates are combined. Southern has about 300 pilots. Union officials are concerned that producing a merged seniority list prior to a ratified contract gives Atlas too much negotiating power.
Atlas Air Worldwide met last week with union representatives in Washington. The sides have completed about 60% of a labor deal and are close to finishing other sections, Jeff Carlson, senior vice president of flight operations, said in a Nov. 15 online note to crewmembers. The company is still waiting for the union’s comprehensive economic proposal to assess the cost of the total deal before it moves ahead with the remaining components, he said.
“Remarkably, after more than three years of bargaining, the union has not only been unwilling to provide an economic proposal, but has now requested the company to provide one. We were very disappointed to hear this request as it is the union’s responsibility to provide the company with their financial objective,” Carlson said.
The online post is intended as a way to communicate directly with pilots and put blame for the slow pace of negotiations on union representatives.