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Airline stocks mixed with oil back above $80 a barrel
Carriers face labor test as unions that backed Obama tap federal support
By Christopher Hinton, MarketWatch
Last Update: 10:07 AM ET Nov 18, 2009
NEW YORK (MarketWatch) -- Airline stocks were mixed Wednesday as the price for oil topped $80 a barrel, with most of the major carriers trading down.
Elsewhere, emboldened by the more labor-friendly Obama administration, unions are gearing up for a fight with airline managements over new labor contracts and unionization.
At last check, the NYSE Arca Airline Index XAL added a fraction to 27.13 with seven of its 13 components trading up. In the last 52 weeks, the benchmark index has moved in a range of 30.95 to 12.62 points.
Crude oil for December delivery rose 95 cents, or 1.2%, to $80.09 a barrel in electronic trading as U.S. reserves declined along with the value of the dollar. Read about oil prices.
Shares of American parent AMR Corp. AMR, Continental CAL, Delta Air Lines DAL, United parent UAL Corp. UAUA declined fractionally. Alaska Air ALK fell 1% to $29.29.
Delta Air Lines and its SkyTeam alliance partners intend to offer Japan Airlines Corp. JALS.Y $1.02 billion in funding to lure the troubled carrier from rival American Airlines and the Oneworld alliance. Read more about the Delta, SkyTeam offer on WSJ.com
The offer follows weeks of posturing by both airlines, which are eager to use JAL as an entryway to the fast-growing Asia market.
Countering the expected move, American is looking to team up with private-equity firm TPG for a minority stake in JAL. The Tokyo-based airline is also considering bankruptcy and a government bailout package. Read more about Japan Airlines.
Carriers face a renewed labor movement
On Wednesday, flight attendants from American Airlines intend to simulate a strike by wearing a red tag on their lapels to signify that the flight would not be operating if there was an actual walk off.
Union members will also walk "mock" picket lines, with United Airlines attendants expected to join in as a show of support.
"Both United and American flight attendants shouldered deep concessions to help their airlines turn around during United's bankruptcy and American's efforts to avoid Chapter 11," the Association of Flight Attendants said in a statement. "Now the flight attendant union members are standing together to rebuild their career by negotiating fair contracts at each airline with improvements in pay, healthcare, retirement and quality of work life."
American flight attendants have been in contract negotiations for about 18 months.
Unions supported Barack Obama's candidacy last year, citing his history of supporting government health care expansion and legislation to protect overtime. At the time of his election, unions said they expected a more labor-friendly tone from Washington D.C. after eight years of Republican influence.
"He stood by workers again and again," said Margaret Blackshere, former president of the Illinois AFL-CIO, part of the country's largest federation of unions.
Unions are hoping the National Mediation Board, as guided by the Railway Labor Act, will now be more willing to preside over difficult labor negotiations. In particular, unions would like to see an acceleration in the series of steps airline and railroad workers must take before the NMB declares a 30-day "cooling off" period, after which workers are free to strike.
"It seems that over the past several years, mediators have been reluctant to get to the (final) stage," said Corey Caldwell, a spokeswoman for the Association of Flight Attendants. "The impact has been to not bring pressure to the corporate side."
In May, Obama nominated Laura Puchala, a former flight attendant and union leader to the National Mediation Board, responsible for settling disputes between companies and labor.
Puchala is one of three board members, but she made her presence felt last month when she supported a change in a rule under the Railway Labor Act that has traditionally favored carriers when workers tried to unionize. Absent voters are currently counted against union membership, but the new rule would simply count them as abstentions, as they are in national elections.
The industry's trade group, the Air Transport Association, came out against the proposed change.
Delta, the world's largest airline, is largely nonunion and could face a half-dozen union representation elections as the Association of Flight Attendants and the International Association of Machinists approach its various work groups, according to the unions.
Meanwhile, the pilot union for US Airways LCC is asking the NMB to mediate its conflict with management to secure a new contract. Pilots have been without a contract since 2005, and leaders at the US Airways Pilots Association say the talks are "hopelessly stalled."
Hawaiian Airlines pilots are facing a similar prospect, having been in negotiations for a new contract for about three years. Pilots already approached the NMB, which responded talks had to first complete talks scheduled for the week of Dec. 7 before an impasse could be declared.
Hawaiian is a unit of Hawaiian Holdings Inc. HA
Southwest LUV, often praised for its good labor relations, just saw its pilots approve a new contract that provided pay increases and new job-protection policies.
The 5,900 pilots in the Southwest Airlines Pilots' Association had rejected an early offer in June.
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