Airline Legal Alert: Allegheny-Mohawk LPP Amendment Added to FAA Reauthorization Bill

Date   May 21, 2007


On May 16, the Senate Commerce Committee added an amendment to the FAA Reauthorization bill (the Aviation Investment and Modernization Act of 2007, S.1300) that would impose Allegheny-Mohawk Labor Protective Provisions (LPPs) on any future airline mergers or acquisitions.


On May 16, the Senate Commerce Committee added an amendment to the FAA Reauthorization bill (the Aviation Investment and Modernization Act of 2007, S.1300) that would impose Allegheny-Mohawk Labor Protective Provisions (LPPs) on any future airline mergers or acquisitions. If the bill is approved with this amendment, it will significantly impact the financial feasibility of future airline mergers and acquisitions. It could also nullify existing merger provisions in collective bargaining agreements negotiated between airlines and unions.

Specifically, the amendment (proposed by Senator McCaskill from Missouri) amends § 6 of the Railway Labor Act, 45 U.S.C. § 156, by providing that "with respect to any covered transaction involving a covered air carrier that results in the combination of crafts or classes that are subject to the [RLA], the labor protective provisions imposed by the Civil Aeronautics Board [CAB] in the Allegheny-Mohawk merger (as published at 59 C.A.B. 45) shall apply to the covered employees of the covered air carrier." The amendment also provides that any individual, including a labor organization representing the individual, claiming to be aggrieved as a result of a violation of the LPPs may file suit in federal court.

The LPPs referred to in the amendment were established by the CAB in 1972. The CAB routinely imposed LPPs in the 1950s and 60s in airline mergers and, in its 1972 Allegheny-Mohawk decision, formalized a standard set of LPPs granting specific forms of financial aid and other rights to employees affected by a CAB-approved merger. These provisions included:

  • A monthly "displacement allowance" for employees who, as a result of the merger, were placed in jobs that paid less than the jobs the employees held prior to the merger. The displacement allowance was based upon the employee's average monthly compensation in the higher paying job for the twelve months immediately preceding the employee's displacement. This average monthly compensation was the minimum amount guaranteed to the displaced employee. In any month in which the employee's compensation in his post-merger position was less than the average monthly compensation, the employee was to be paid the difference. This protection applied to displacement occurring within a period of three years from the effective date of the merger. Employees were entitled to the displacement allowance for a period of four years from the date of the employee's displacement.
  • A "dismissal allowance" for employees who lost their job as a result of the merger, within three years from the effective date of the merger. This allowance was 60% of the employee's average monthly compensation for the prior twelve months in which the employee earned compensation before being deprived of employment as a result of the merger. The length of time the employee received this allowance varied based on the employee's length of service, with a maximum of five years for employees who had been employed for fifteen years or longer.
  • A requirement that provisions be made for the integration of seniority lists "in a fair and equitable manner," including, where applicable, agreement through collective bargaining between the airlines and the representatives of the employees affected. The LPPs did not define "fair and equitable."

Other provisions included continued access to job benefits such as health insurance for affected employees and reimbursement for specified moving and traveling expenses, and for expenses and losses resulting from the sale of their homes for employees required to relocate.

After deregulation, the CAB announced that it would no longer require LPPs as a matter of course, but only under special circumstances. When the Department of Transportation (DOT) acquired jurisdiction over the airline mergers in 1985, it reiterated the policy against LPPs and consistently rejected requests for their imposition. The DOT has repeatedly stated that mandatory LPPs are inconsistent with deregulation and that if employees want merger protections they should obtain them through collective bargaining. Accordingly, airline unions have routinely negotiated merger and succession provisions into their labor contracts.

However, if the proposed amendment becomes law, such negotiated provisions would apparently be rendered void if they conflict with the LPPs. Additionally, the potential financial burden imposed by the Allegheny-Mohawk LPPs would likely be so significant that most airline mergers would be economically untenable.

In Allegheny-Mohawk, a case that occurred prior to the Airline Deregulation Act, the CAB found the merger of the two airlines to be appropriate in part because it would resolve Mohawk's financial difficulties. Additionally, the CAB examiner found that the merger generally would not result in a reduction in employment because Allegheny would absorb most of the surplus employees with the exception of five dispatchers who would likely be dismissed. Thus, the financial impact of the LLPs in the Allegheny-Mohawk case was limited due to the limited number of employees affected.

In today's economic environment, where airline mergers and acquisitions may affect hundreds or even thousands of employees, the Allegheny-Mohawk LPPs are simply financially infeasible. Imposition of such requirements would not protect employees of financially struggling airlines. Instead, the ultimate impact of this amendment will likely be that many such airlines will go out of business and all of their employees will be unemployed.

In addition to the Allegheny-Mohawk LPP provision, the FAA Reauthorization Bill contains a number of other employment-related provisions, including the following:

  • a requirement that all flight attendants have a minimum level of English language skills;
  • authorization of a study of pilot fatigue and direction to the FAA to consider the study results in its rulemaking proceeding on flight time limitations and rest requirements;
  • direction to the FAA to initiate a process to carry out the recommendations of the CAMI study on flight attendant fatigue;
  • a provision requiring the administrator of the FAA to establish milestones for the completion of work began under the 2000 Memorandum of Understanding between the FAA and OSHA and requiring the FAA to develop a policy statement setting forth the circumstances in which the Occupational Safety and Health Act will apply to crew members while working in the aircraft cabin; and
  • a provision modifying the FAA's age 60 rule for pilots.

The FAA Reauthorization Bill must still be approved by the full Senate and House and will not become law without the approval of President Bush. Airlines may want to consider contacting their senators or representatives to express their views on the Allegheny-Mohawk amendment.

If you have any questions regarding this issue, please contact the Ford & Harrison attorney with whom you usually work.