House Subcommittee hearing

The House Committee on the Judiciary, Subcommittee on Courts and Competition Policy, will hold a hearing on the proposed merger of United and Continental on June the 16^th. Unfortunately, I won't be able to attend due to negotiations with United that week. When the webcast link is posted I'll add it here. In the mean time here is a list of correspondence between the Committee and the Carriers. In addition here is the press release from the Committee and Subcommittee Chairman stating that they need more answers from the Carriers.

Subcommittee review

I would like to extend thanks to Airline Division Director David Bourne for allowing me the opportunity to tag along with the IBT contingent to the Senate Committee on the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights regarding the potential consumer impact of the United Continental merger. In attendance for the IBT were our lobbyist, Jack Albertine of the Albertine Group, Jamie from Strategic Research, as well as Law Clerks Jason Usher and Andrea Andrade.

Before reporting on the hearing, here is the GAO report dealing with the merger. The 27 pages of information provide a very detailed look at the two separate companies as well as the proposed deal. Jock Creach from Seattle did a review of the webcast of the hearing and it can be found here.

In order to get decent seats for the hearing we got in line two hours early. There were several employees, mostly pilots, waiting to observe the proceedings. Just prior to 2pm Jeff Smisek came through and greeted uniformed employees and spoke to them for about fifteen minutes before taking his place in the hearing room. I would characterize this exchange as more than cordial, with the United pilots obviously very excited to speak to Mr. Smisek. In turn Mr. Smisek was smiling and shaking hands with them as he addressed their questions.

Attending the hearing as witnesses were, Glen Tilton CEO United, Jeff Smisek CEO Continental, Darren Bush Associate Professor of Law with the University of Houston Law Center, and finally Bill McGee Consultant for the Consumers Union. Here is a link to the webcast and you will need to fast forward to about 14:14 before the video shows people. The video lasts about an hour and a half.

My review of the hearing is as follows;

I thought both Mr. Tilton and Mr. Smisek came very well prepared to answer questions. Mr. Bush and Mr. McGee were also very prepared and brought some intriguing counterpoints to the discussion. Both of the latter gentlemen were opposed to the merger, stating in part that past mergers rarely produce the promised goals of more stable airlines that benefit consumers. Their contention was that these past mergers generally resulted in reduced flying from some cities as well as higher ticket prices. The testimony of all four of these gentlemen can be read here (Tilton and Smisek), here (Bush), and here (McGee).

There was much concern around potential job loss in Houston by Senator Cornyn of Texas. At one point the Senator even questioned in a veiled manner if the deal to keep headquarters in Chicago were an attempt to please President Obama. The testimony of both CEO's was that there would be job losses in Houston, but that it would be a small percentage of the total workforce, and any losses would most likely be suffered by overlapping management employees. The CEO's both said that frontline employee job losses would be negligible. In any event, Mr. Tilton testified that there had been a huge commitment by the people and city of Chicago. For this reason Mr. Tilton explained that a move in headquarters would have been a deal breaker. Congresswoman Sheila Jackson Lee was in the audience and submitted a statement to the Subcommittee that was entered into the record without objection. The Congresswoman has been quoted in many papers as having concerns over potential Houston job losses should the merger be approved.

There were questions and concerns about the eight current hubs and whether the new airline would continue to maintain their current presence at each of them. Neither CEO would commit to this premise stating that while they believed all eight were necessary to the combined carrier, demand would drive the routes flown. In addition they stated that if there were a shock to the traveling public, as have been witnessed in the past, those events may also drive changes in the scheduling at the hubs. Both CEO's also stated that there may be changes to equipment flying certain routes amongst the hubs as they move larger aircraft to higher yielding routes.

Questions of retirement security as well as a headcount promise were brought up by Senator Amy Klobuchar of Minnesota. The Senator asked both CEO's if they were willing to commit to headcounts as the Delta group did during testimony on the Delta Northwest merger. Neither CEO was prepared to offer any sort of promise regarding headcounts. The Senator then asked both CEO's if they were committed to providing retirement security to their employees. Mr. Smisek, without hesitation, said that he was committed to proving retirement security to his employees. Mr. Tilton then said in a very roundabout way, that only if the merger were approved would he be in a position to talk to the appropriate parties about the possibility of talking about pensions. I sent Senator Klobuchar a note of thanks after the hearing as I was impressed with the direct manner in which she questioned the two CEO's on the employee's behalf.

Finally, Chairman Kohl of Wisconsin asked if the panel had anything else that they would like to add. All four gentlemen gave a wrap up of their respective positions, with Mr. Tilton finishing last. At that point the Chairman thanked the panel and adjourned the hearing.

C-SPAN coverage

The Senate Subcommittee hearing on the merger's impact on consumers is not on the schedule today for live coverage at C-SPAN. According to this article both companies "failed to provide sufficient assurances" regarding service by refusing a committee request to commit to retaining all of their hubs. I'll give a short report of the hearing tonight or tomorrow.

EDIT: I should have read the link to the Subcommittee witness list better. It was live cast and can now be found here. Actual footage starts about 14 minutes and 10 seconds into the video and it is about an hour and a half.

Interesting article

The IBT Airline Mechanics blog from Denver has an interesting article by Doug Cameron of the Dow Jones newswires. The article talks about the possibility of joint negotiations prior to the merger's completion. Here is a link to the article. As I understand it, there are only two groups not facing representational elections as a result of the merger. Those two groups would be the pilots and mechanics. My guess after reading the article, is that these two groups would be the most likely candidates of early talks.

Weekly report 5-24-10

General Information

There will be a Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights, of the Judiciary Committee, hearing this week on Thursday regarding "The United/Continental Airlines Merger: How Will Consumers Fare? ". Here is a line-up of the witnesses. So far, C-SPAN doesn't have it on the schedule, but I'll post a link on the
blog
to the hearing when they upload the footage.

Please check the link at the top of the blog for the latest merger information. The IBT is launching a web page dedicated to providing factual information to address our questions surrounding the merger. As always, if you think of a question you'd like answered, let me know and I'll pass it on to the right people.

Ralph Salzano, our new Business Agent, did a station visit last week. Ralph talked to many members in all three departments. If you missed him this time he'll be back again as his schedule permits.

MM

All existing second steps were heard last week. Several grievances were settled prior to the hearings and I'm waiting on answers for the remainder. There were a few denied first steps that are being reviewed for potential appeal.

The Company is working with me towards a comprehensive set of local overtime rules. We have agreement on a couple of major points so far, and they include a sign up list and access for everyone to review the call sheets. Both of those items would be done electronically.

GQ

The one second step in the shop was heard and denied. That grievance is being reviewed for possible appeal to the Joint Board.

PV

All second step grievances were heard last week. There was one immediate settlement and several more that are waiting for answers.

 

That's all for now,

Bob

Merger discussion update May 21st 2010

Airline Division Director Meets with UAL and CAL Management

In Washington this week, Airline Division Director David Bourne and IBT Staff Attorney Ed Gleason held meetings with Doug McKeen Vice President of Labor Relations for United Airlines, and Mike Bonds, Vice President of Human Relations and Labor Relations for Continental. The Company officials were in Washington for meetings with the National Mediation Board regarding ongoing contract discussions at their respective properties and the pending merger of UAL and of CAL.

Bourne also discussed with McKeen and Bonds, the ongoing negotiations involving the mechanics and related workgroups. They all expressed a desire and a commitment to reach agreements in a timely fashion. In speaking about the meetings, Director Bourne said, “The meetings were very positive and I appreciate both gentlemen taking time to sit down and discuss the negotiations and the merger. I reiterated to both that during the process, we will maintain our neutrality in terms of the merger, however, we intend to monitor both companies very closely regarding the treatment of their employees and their approaches and attitudes both in terms of contract discussions and employee treatment and respect. As is the case in all airline mergers, good, solid working relationships between management and labor are an essential component to success. I am very pleased that we have such relationships with both United and Continental and I am equally pleased that the carriers are as committed as the Teamsters are in strengthening those relationship even more.”

UAL/CAL Merger Resource Page to Debut Soon

A webpage with specific information about the proposed UAL/CAL merger will soon be available to Teamster members. Hosted on the www.teamsterair.org website, the page will provide answers to many of the pressing questions and concerns that members have about the proposed merger. “We view this as a tremendous asset to our membership,” said Airline Division Director David Bourne. “While many facets of mergers are similar, each merger has differences as well. We hope that this soon to be active link will provide answers and help the membership become more informed.”

The link address and announcement will be sent as soon as the site becomes active in the coming days.

AMR CEO expects UA/CAL labor costs to rise

Here is an article where Gerard Arpey speculates that labor costs will rise at the new combined carrier. I agree.

EDIT; sorry for any confusion. I was researching the VA Workmans Comp statute and inadvertently pasted a link to the law instead of the referenced article. It is now fixed.

Parker supports UA/CAL merger?

Here is an interesting article from Reuters where Doug Parker supports the proposed merger of United and Continental.

Denver JBA

I just wanted to say the two days in Denver this week were time well spent. Both sides presented their cases very well, and the hard work that went into preparation by CS Pete Angelos and BA John Hennelly was evident throughout the proceedings. This process is beginning to pay dividends by reducing the backlog of third steps, either by being heard before the Board, or by being settled preceding actual hearings. As we continue to move forward in clearing this backlog, the type of work displayed by Pete and John will serve the membership well.

Employee incentive plans

Here is an interesting article from the Centre for Asia Pacific Aviation titled "US airline employee incentive plans largely window dressing".

Airline Division merger FAQ

Here is a link to the first in a series of FAQ's prepared by the IBT Airline Division regarding the upcoming merger. This is a well written and very informative piece. I recommend you check it out.

CAL "Employee memo" form 425 filing

Thanks to Jock Creach from SEA for sending this on. Here is a link to the CAL employee memo, form 425 filing with the SEC. This is the same merger Q&A document that was sent via my e-mail tree earlier in the week. It is an interesting read.

TWU AA TA

Thanks to Carlos Barrantes from SFO for sending this information. Here is a link to the TWU Mechanic's TA communication.

Official announcement

As reported yesterday the merger was officially announced this morning. It looks like the company logo has been changed to Continental's current logo. Here is Phil LeBeau talking about the merger on Squawk Box. When the Tilton/Smisek interview is uploaded on CNBC I'll post it here.

CNBC has now posted the CEO's interview, and it can be found here.

EDIT: there is now a merger website and it can be found here.

As suspected

It looks like the merger is a done deal pending regulatory and stockholder approval. Here is the link.