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Analysis of the Economic Impact of the COVID-19 Pandemic on Alaska Airlines and Maximizing Bargaining Leverage in Upcoming Flight Attendant Contract Negotiations

A message from Aviation Economist Dan Akins of FlightPath Economics, LLC
(Compiled from the 2nd virtual roadshow transcript and lightly edited.)

Hi everybody. I have been in the industry for about 38 years. Kind of like (AFA Director of Collective Bargaining) Joe (Burns), I’m involved in a lot of different negotiations inside AFA and outside. I do mechanics, pilots, rampers (and) dispatchers. I’ve helped with the last Alaska AFA contract, and my role is essentially trying to keep track of each company and their place within the industry as well as the industry’s overall health.

Thanks for inviting me to this important decision-making process regarding your extension. As I mentioned in the introductions, I’ve been in the business for a long time, and negotiating sessions all have a context. The most important context for labor is to hit the timing well, meaning you have leverage when you’ve got profitable companies. We had about 10 years’ worth of profitable industry results that were punctuated by this unforeseen pandemic, and the context really is that the industry is different than it was during any pandemic, or crisis, or war, or after 9/11, in that it’s more consolidated–and Alaska’s obviously participated in that consolidation.

So, the industry is different, and this crisis is different, and one of the ways it’s different is that with a consolidated industry (there is) more control with fewer carriers. We also had PSP grants, of which Alaska has taken about 1.6 billion dollars. That’s never happened before. So, the odd thing about the worst crisis the airline business has ever faced is that no carrier has declared bankruptcy. No large carrier. So that’s different. But what is not different is we are still climbing out of the worst hole the industry has ever faced.

I want to talk to you about what that means regarding your vote for your TA and what it means likely for the future. My biggest concern is, you want to regain the foothold in leverage that you had in bargaining prior to the pandemic which was strong across the industry based on company results. So, I want to talk to you about generally what everybody knows about Covid-19: It was bad. How bad was it for the industry? How bad was it for Alaska? What are the prospects for the industry’s recovery and what are those prospects based on?

So about I think October, September last year, most of the industry analysts were saying that Covid impact on the airline business was worse than all the other impacts that have ever affected the airline business. Now what does that mean? The industry had 20 billion dollars in profits in 2019, and we swung to 35 billion in losses in 2020. That’s a 55-billion-dollar swing in a year. That has never occurred.

The way we stayed out of bankruptcy is government loans and PSP programs to support our payroll and our benefits. The impact back in September, October was foreseen to last as long as five to eight years. The most aggressive analysts (optimistic analysts) were saying maybe two or three. Now from Alaska’s perspective, it has hurt the company, it’s hurt its profits, it’s hurt employment potential, it shut its growth for the industry. Domestically last year at this time we only had about 10% of the normal ridership in April that we normally have across the industry. Right now, we’ve got about 60% so it’s a vast improvement and it’s on an upward trajectory.

The worst place to be as far as an airline position is to depend on business traffic or long-haul international revenue because those markets are dependent on international criteria (and) all kinds of restrictions on flights. The loss of international traffic last year at this time was almost 100% with 99.2 percent of all international traffic evaporated last year during April. Right now we’re about 25 percent back, (which is) 75 percent below where we should be.

So, the good news is for Alaska is that Alaska does not participate in long-haul wide-body international flights that are the worst affected. That helps the prospects for Alaska’s recovery. It also helps the prospects for carriers that are primarily domestic and primarily discretionary. That is vacation traffic that’s pent up and if any of you have flown on the “sun markets,” (such as) the Hawaii markets (and the) California markets, those airplanes are full, and the prices are high. That is sort of the ballast for the recovery at Alaska.

Know that people have retired. You know there was a temporary furlough (of) employment at Alaska and employment in the U.S. is about 60,000 fewer people employed today in passenger carriers than were here last year. That’s despite Covid early retirements, voluntary leaves, etc.

Right now, Alaska has reported its revenue (is) off by about 63 percent and as I mentioned Alaska did take the beneficial program known as PSP (or) Payroll Support (Program). There’s a third round (and) I’m not sure if Alaska signed up to take the third round, but essentially, we’ve gotten this huge benefit to save our jobs and save our payroll. Alaska’s cash is more than six times what it normally is in a regular year. In a regular year Alaska usually carries a couple hundred million dollars in cash on its balance sheet and that’s important because it’s a measure of liquidity that if something came up Alaska could handle it with what it has in the bank right now. Alaska has about $1.4 billion however Alaska has already taken on another $1.2 billion in debt.

The good news for Alaska is that the debt exposure and the ability to pay it off with cash is almost 100 percent so Alaska didn’t borrow money to buy airplanes or fixed facilities. Alaska borrowed money to generate cash and so Alaska even says in its (Form) 10k that they are largely prepared to pay down the increase in debt when the industry is stabilized. The industry hasn’t stabilized yet, (and) we’re still crawling out of this industry hole.

So, when you think about where we are in terms of leverage, Alaska reported the largest loss like every other carrier in 2021 from operating profits of $1.1 billion. (I know I’m throwing around a lot of numbers.) $1.1 billion in 2019 was the operating profit minus $1.7 billion was the operating loss in 2020. Now the first half of 2021 … is approaching break even on a cashflow basis. On a profitability basis after you pay for everything–after you pay for the debt service (on) the airplanes (and) all the non-operational costs that every airline has to bear–the front end of the year is going to be a loss (and) a pretty big one.

The back end of the year looks like a profit. On balance Alaska is likely to post a $600 million operating loss but that is mostly because we’re going to lose about that much in the first quarter and about half that much in the second quarter and then slowly rebuild according to expectations in the third and fourth quarter of this year. So, when we hit the amendable date of the current contract, we will have had two years of horrendous losses which again according to what Joe has said and from my background, bargaining from a position of strength means that you’re bargaining from profitability and that’s what we don’t have going into December.

However, the good news is according to Wall Street forecasts, 2022 looks highly profitable: about two-thirds as profitable as 2019. Then 2023 as much as anybody can hope looks like it’s even more profitable getting back to around a billion dollars in operating profit. So again, I think the fundamental choice you have is do we go in and expose ourselves to the negative side of the environment or wait a year, get a pay raise (and) keep ourselves positioned as the number two or three highest paid Flight Attendants at top of scale in the industry and wait until things get better so we can leverage that situation and look back at this period as a temporary problem that Alaska and the industry was able to conquer.

Alaska is very well positioned to become profitable as fast as just about anybody in the business, but it’s going to have to wait for about another year before we’re back to a position of strength where Alaska can build on its profits, and (then) we can leverage that at the bargaining table…. I think getting a TA with a one and a half percent in normal times might not seem that great, (but) in the most cataclysmic times that have ever occurred, I think it’s almost incredible to be able to do this.

The Impact of the COVID-19 Pandemic on Flight Attendant Negotiations

A message from AFA Director of Collective Bargaining Joe Burns
(Compiled from the 2nd virtual roadshow transcript and lightly edited.)

Hi everybody. I’m Joe Burns, director of Collective Bargaining at AFA. I’ve been at AFA for 20 years. I’ve been doing bargaining (on) most contracts in the industry (that) I have worked on in one capacity or another. For the last five years I’ve been director of bargaining overseeing our bargaining at various carriers.

I just want to give you a little background on bargaining in the industry over the last couple years and how this contract extension fits into that. If you rewind the clock about a year to a little over a year and a half what you find is that we were in a very sort of offensive mode of bargaining where we had Flight Attendant work groups demanding increases in pay and improvements. We had a big battle going on at Hawaiian Airlines that (Aviation Economist) Dan (Akins) and myself and (AFA Senior Staff Negotiator) Paula (Mastrangelo) work closely with the Flight Attendants there where we took a strike vote we were doing picketing and very much seeking improvements.

Overall, the American Flight Attendants were back at the bargaining table after their joint contract that had been put together in 2015. At end of 2014 the United Flight Attendants had an early opener (and) you all here at Alaska had an early opener coming up and Spirit had an early opener coming up. So overall we had a lot of bargaining going on.

We were really sort of pressing the issue to get improvements then the coronavirus hit, and you know by the by the time we were getting into February and march of last year the bargaining climate shifted dramatically. Through some very hard bargaining we were able to get our deal done at Hawaiian right before they shut down the state, but it was really a photo finish. The horizon Flight Attendants were able to get a deal but that was done before the crisis really hit although they voted on it during that period.

But other than that, groups that did not have locked in agreements found that their bargaining stalled out rather dramatically. The American Flight Attendants were in Section 6 bargaining. They haven’t bargained for a year. I’m working with that work group, and I think our analysis there has been that it has not been a good time to be in bargaining. We were concerned about (American management) coming in and demanding concessions and trying to take away work roles. When the company is losing millions of dollars of cash each day, it would be hard to win any types of improvements. So that bargaining got put on hold.

Beyond that I think a lot of the work that the unions and the companies have been doing for the last year have been focused on doing side letters dealing with furloughs and so forth, and there hasn’t really been the attention that would have been given to negotiations. So, in general what we’ve seen throughout the industry’s work groups … who are in bargaining are pausing their negotiations, so that would be the American Flight Attendants. At Southwest I think there was an attempt to keep the bargaining going, but pretty soon management started demanding concessions, so those negotiations have slowed down.

In work groups that had bargaining coming up, pretty much across the board the Flight Attendants have opted to delay the early openers in their negotiations. Your group already did that once. The Flight Attendants at Spirit Airlines delayed their early opener. The Flight Attendants at United did not exercise their early opener. All of these groups based (their decisions) on an analysis that this is not the time that you want to be in bargaining. You want to be generally bargaining during an upswing. I think you know six months ago before we got the payroll support programs passed, the real concern is that management would use these negotiations as a way–because we had open contracts–of trying to force through concessions, frankly.

So anyway, that that was the overall framework. I think Dan can talk more to the economics of it, but we’re predicting that the bargaining climate is going to continue to be difficult for the next several years. We’re hopefully starting to see an uptick, and we’ll get through the worst of the pandemic crisis, but when the company spends down a lot of their cash reserves (and/or) when they borrow money, then it creates a bargaining climate where they’re pinching pennies for the next number of years, and we’re going to have to fight to get whatever we can get frankly. So, for these negotiations in particular I think what sort of made sense is at some point it was in our interest to be pushing back negotiations for the reasons that I’ve stated.

But then at a certain point I think the discussion of your MEC leadership was if it’s in our interest to delay negotiations, (so) why don’t we see if we can get some immediate increases for Flight Attendants to do what’s in our interests anyway, which is to delay the negotiations. So, I think that’s really where the thought process is in terms of getting a one and a half percent increase and then going back to the table in another year. I think that’s probably more in line with where the negotiations are going to be throughout the industry, which is as I’ve indicated, having somewhat of a pause (or) a regrouping and then be(ing) able to go back to the table and push offensive demands.

Q: I heard that in the proposed Open Time system you are locked out of all Open Time trading on a closed day. Is that true?

A: No.

In the proposed Open Time system, all Open Time trades are allowed on a closed day(s) (including the days automatically closed four days prior) except for:

  • Direct (straight) drop(s) (from a FA to Open Time) on the closed day(s), and
  • Trading out of the closed day(s).

Again, all other types of Open Time trades are allowed as long as you do not drop or trade more than 40 net TFP into Open Time (the “Net 40”) in that bid month. Day-for-day (or greater) trades are allowed on closed days either on a trip-for-trip basis or by a single transaction multiple trade. This is very similar to the trading rules in place under the previous “Back to Book” trading system (prior to late 2015).

Example: Open Time is automatically closed today (the 10th) and for the next four days (11th, 12th, 13th, 14th). You have a 4-day starting tomorrow (11-14). You may exchange your 4-day for any of the following trips in Open Time as long as you have not dropped or traded more than 40 net TFP into Open Time:

  • 2-day today (10-11) + 3-day 12-14 [day-for-day and greater via a single transaction multiple trade]
  • Different 4-day 11-14 [day-for-day]
  • Turn tomorrow on the 11th + all-nighter turn 12-13 (single duty period spanning two calendar days) + another turn on the 14th [day-for-day via a single transaction multiple trade]
  • Any combination of trips from Open Time as long the trips operate on (i.e. cover or touch) the 11th through the 14th.

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Important Dates

  • May 6: CA Membership Meeting
  • May 12: Contract Extension TA Voting Closes
  • June 1:  Rainmaker Launch
  • June 30: Q2 CBT Due

CA Bases Local Council Membership Meeting

As previously communicated, our local Council meeting will be Thursday, May 6, 2021 at 1100 PDT. The meeting will be via Zoom and is open to all members of Councils 35 (SFO), 18 (LAX) and 15 (SAN) in good standing.  The primary purpose of the meeting will be to discuss the AFA Board of Director’s meeting scheduled for May 13-14, and any local council agenda items.  Please submit local council agenda items to SFO@afaalaska.org prior to May 5th, 2021.  Advance registration is required using a personal (non-company) email address. To receive confirmation to attend, please register here. 

COVID Point Forgiveness

Calling in sick for a COVID related issue, such as exposure, vaccine appointments or reaction to the vaccine may receive attendance point forgiveness.  Management has agreed to remove all points related to COVID with documentation.  It is recommended that FAs save all receipts and appointment confirmations and send evidence to performance for conversion.  This process is manual so allow some time for the adjustment to show on the attendance record.  For more information, please review the April 12 Bulletin on the inflight page of Alaskasworld.

Flight Attendant COVID Vaccination Status

AFA International is collecting data on Flight Attendant Vaccinations.  Please complete the form to help discover trends in vaccination availability in your area.  Please visit the website for more information.

Trending Discipline

Reserve Not at Base

Reviewing the JCBA§11 which defines the AS reserve rules, the company expects that a reserve Flight Attendant will be within 2 hours of base at the beginning of the assigned reserve availability period (RAP). Commuting into base or being more than 2 hours aways from base at the start of RAP would be considered time card fraud and normally results in termination with the first offense.  Lineholders picking up reserve days should be aware of the reserve rules found in JCBA§11 in order to be familiar with the expectations.  Any reserve F/A or lineholder picking up reserve days who are interested in extra support or guidance, please reach out to the SFO Reserve Committee for assistance.

Sick Leave Abuse

The focus on sick leave usage has increased again.  Actions that trigger an investigation include calling out sick after a reassignment, calling out sick after a reserve assignment, or calling out when a deadhead leg is converted to a working leg.   Sick leave is not the same as paid time off (PTO).   Company provided sick leave is a benefit that is offered with a condition.  That condition is illness.  Use of this benefit for any other reason is considered fraud.  In the event the company suspects misuse, the burden of proof is on the Flight Attendant to prove an illness.  Contrary to popular belief, this isn’t a violation of HIPAA laws, as the company is prohibited from asking the nature of the illness, but rather that illness was the cause of the call out and that the conditional benefit was used appropriately.  If misuse is confirmed (no evidence is discovered), the company has historically discharged on first offense.

A Special Note to Commuters

Commuters with a registered city have also been the focus for many investigations.  This includes sick leave and reserve violations.  When suspicion arises through the above mentioned actions that trigger a closer look,  travel records are often pulled to confirm suspected violations.  Additionally, monthly audits of registered commuters have been performed.  Violations found during the audit normally result in a Confirmation of Oral Warning on first offense, but can escalate up the steps of discipline if multiple violations occur.

TA Extension Info

Questions about the TA and voting?  Please visit the AFA Alaska dedicated TA Extension webpage to find answers!  All roadshows have been uploaded and the Q&A section has been added to the blog.  Questions not already addressed may be sent to: extension@afaalaska.org.  Reminder: voting ends May 12!

Catering Update

by Raymond Ramirez, SFO ISC Chair

With all the catering updates that went into effect on April 13, please utilize B2B to provide feedback with regards to food quality, missing items, new equipment, etc. Also, if you happen to make a note of a catering issue but forget to submit it on B2B before the flight disappears from your IMD, I’m happy to receive feedback through my e-mail raymond.ramirez@afaalaska.org. Please remember to provide the flight # and date, and if possible the aircraft tail and a photograph if possible. Also, if you are flying on Airbus and encounter a FC oven without an insert, that should be written up on B2B and not through the aircraft logbook. Speaking of the aircraft logbook, please write up tray tables that have the appearance of looking brown and stained. The cleaning chemicals over the last 12 months are causing these to look dirtier than they actually are. Although the company is aware, we can help bring more awareness by asking the pilots to write it up.

Uniform Update

by Lisa Mueller, SFO Uniform Chair

Our new uniforms have been on the line for about a year now. Since the new custom uniform was released during COVID, many Flight Attendants returning from furlough will be wearing it for the first time.

Wondering what the guidelines and policy are for the new uniform? Here is a link to the uniform page for guidelines, ordering, the fit center, etc: https://splash.alaskasworld.com/es/uniforms/

Need different uniform pieces? Different sizes? Here are some options to help if it is past the 90 day return policy:

  • Inquire with the Seattle Fit Center.  They have limited pieces that you may possibly (not guaranteed) be able to exchange your pieces for if they have the size you need. These are pieces from flight attendants who have quit, retired etc.  Phone:  206-392-7730,  email: fitcenter@alaskaair.com
  • Trade your uniform pieces with other flight attendants. There are private groups on Facebook that may be a good resource for finding other FAs willing to trade
  • You can also to order new pieces via the Uniform Webpage

In case no one told you today…You look marvelous! See you on the line! 

Updating Personal Information and Membership Dues

by James Ikehara, Council 35 Secretary
Have you recently moved to another city or changed your email address? Please use this link to update your personal details  to ensure the Membership Services department of AFA International has the most current contact information in their database. If you are coming back from a leave and need to inquire about the amount of dues owed on your account, use this link and someone from the Membership Services will contact you with details on the status of your account. Payments on your account can be made using this link.

How do I contact Council 35 Officers?

Using a personal email address, the preferred methods of contact are:

  • Open an Online Support Request ticket
  • Officer group email sfo@afaalaska.org (if one officer is flying /unavailable other officers can respond)
  • Individual officer emails (if information is for a specific officer)
  • Calls/text (if situation requires more urgent attention)

When contacting Council 35 officers please avoid the following methods:

  • Sending to/from alaskaair email (subject to company audits and therefore not private)
  •  Officer personal Facebook/social media accounts (not actively monitored for AFA concerns)
  • Excessively lengthy texts (please use email for important information as it’s easier to respond and forward to appropriate resource-texts should be reserved for alerts to an issue that requires a timely response)

Please allow at least one business day for a response to any method of contact (email, phone, text).  

In solidarity,

Melissa, James and Brad

Melissa Osborne, LEC President •  Melissa.osborne@afaalaska.org • 415-275-1322
James Ikehara, LEC Secretary •  James.ikehara@afaalaska.org  • 415-289-9011
Bradley Young, Council Representative • Bradley.young@afaalaska.org • 916-508-3503

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CA Based Local Council Membership Meeting


As previously communicated, our local Council meeting will be Thursday, May 6, 2021 at 1100 PDT. The meeting will be via Zoom and is open to all members of Councils 15 (SAN), 18 (LAX) and 35 (SFO) in good standing.  The primary purpose of the meeting will be to discuss the AFA Board of Director’s meeting scheduled for May 13-14, and any local council agenda items.  Please submit local council agenda items to san@afaalaska.org prior to May 5th, 2021.  Advance registration is required using a personal (non-company) email address. To receive confirmation to attend, please register here.

MEC President Jeff Peterson has offered to be available to answer any questions regarding the Contract Extension Tentative Agreement during the first portion of the meeting.

Road Show Videos Posted For TA Extension Vote

All four virtual roadshows have been posted. Recordings of the Zoom sessions and their respective transcripts (when available) may be accessed from the Contract Extension 2021 webpage –> Virtual Roadshows –> Session Recordings.

The MEC highly encourages you to check out the 2nd roadshow with special guest panelists AFA Director of Collective Bargaining Joe Burns and Aviation Economist Dan Akins of FlightPath Economics.

Click here for the 2nd  roadshow video >

Did Not Receive a Ballot or Misplaced Your Activation Code

Flight Attendants who do not receive their voting instructions with the 16-digit activation code after the polls open may request a new code and instructions by filling out an online form. Membership Services will process these requests and a new activation code with instructions will be emailed directly to the Member as soon as possible during regular business hours.

Click here for the Request a New Activation Code form > 

Alternatively, you may call the AFA Ballot Helpline at (800) 424-2401, choose option 1, then enter extension 706. Flight Attendants who have dues or membership issues should call AFA Membership Services at (800) 424-2401 and choose option 7.

AFA Membership Services and the AFA Ballot Helpline are staffed Monday through Friday from 9:30 AM to 5 PM EDT. The AFA International office is currently closed due to the COVID-19 pandemic, so everyone is working from home. Please leave a voice message with your name, Peoplesoft number and a good callback number. Someone will return your call as soon as possible during regular business hours.

Dues, is the Invoice You Received Correct?

AFA International recently updated their billing systems. There were also several types of leaves due to Covid that may not have been coded consecutively. Your invoice may be showing you owe more than you do.

Before paying your invoice or if you’ve already paid please contact AFA Membership Services at (800) 424-2401 and choose option 7. AFA Membership Services is staffed Monday through Friday from 9:30 AM to 5 PM ET. Keep in mind that the AFA International office is currently closed due to the pandemic, so everyone is working from home. Please leave a message and someone will call you back as soon as possible during regular business hours.

You can also email San@afaalaska.org 

We need to know the following 

  • Peoplesoft 
  • Type or leave
  • Month or months of each leave
  • continuous or multiple leaves
  • did you come back from leave and go out on a new one
  • did you attend RT or RQ while on leave

Uniforms

The new uniforms have been on the line for about a year now. Since the new custom uniform was released during COVID, many Flight Attendants returning from furlough will be wearing it for the first time.

Wondering what the guidelines and policy are for the new uniform? Here is a link to the uniform page for guidelines, ordering, the fit center, etc: https://splash.alaskasworld.com/es/uniforms/

Need different uniform pieces? Different sizes? Here are some options to help if it is past the 90 day return policy:

  • Trade your Uniform pieces (if it’s past the 90 day return policy) with other flight attendants by posting on the AS/QX in-flight new uniform Forum on Facebook AS / QX Uniform Trades
  • Inquire with the Seattle Fit Center.  They have limited pieces that you may possibly (not guaranteed) be able to exchange your pieces for if they have the size you need. These are pieces from flight attendants who have quit, retired etc.  Phone:  206-392-7730,  email: fitcenter@alaskaair.com
  • You can also to order new pieces via the Uniform Webpage

Committee Chairs and Members Needed

The following Council 15 committees have vacancies in both the chair and member positions:

If you are interested in volunteering, please have a look at the position duties and responsibilities and reach out to your Council 15 officers at SAN@afaalaska.org.

Covid-19 Absence Reporting Form

 If you accrued attendance points for sick leave usage under Section 32 (Attendance Policy) of the CBA for a COVID-19 related absence, you had the option to submit a “COVID-19 Absence Reporting Form.”  Per the Bulletin dated April 12 2021. F/As on any leave of absence (including EVF or ELOA) as of the date of that Bulletin will have 14 calendar days to submit starting from their first day back to active service (the date you return from your leave of absence regardless of whether you fly that day or not.  Ensure you include enough detail in question #6 of the form (the reason for the absence) so a thorough review may take place 

Any future non-work-related sick leave absences due to COVID-19, from the date this Bulletin is published, through 5/31/21, must be substantiated with a non-work-related positive COVID-19 test from either the F/A or someone in the F/A’s immediate household to be considered for point reduction. Please submit your documentation to the following confidential email address: inflightperformanceteam@alaskaair.com.

Are you Contributing to 401k

We discovered many F/A’s  are not taking advantage of their 401K company match. The previous company match was 7% its been 7.5% company match for 5 years. If you are able and you haven’t updated your contribution to 7.5% try and do so It all adds up in the long run. The % change is not automatic, you have to physically go into your Vanguard account or call Vanguard direct (800-523-1188).

Healthcare Premiums

Q Which healthcare premiums are frozen at the 2019 rates?

A Please note the healthcare premiums are established in the 2018-2021 JCBA. The language would not change whether or not the contract extension TA is ratified.

Only the PPO premiums are frozen at the 2019 rates pursuant to JCBA §23.A.1-2 [Flight Attendant Insurance Plan(s)].

For the high deductible PPO premiums, Flight Attendants will pay no more than any other workgroup to participate in the plan pursuant to §23.A.3.

For Health Maintenance Organizations (HMOs), Flight Attendant will pay the greater of either the PPO rate or the difference between the entire cost of the HMO and the Company contribution for the PPO plan.

Pay Increases Under the Contract Extension Extension TA?

Q I saw the news about the tentative agreement with the 1.5% increase in pay. I’m confused about this though. Does this mean 1.5% and that is all we will see until a new contract is signed in 1-2 years? Or is there some other step increase that will be honored?

A You will continue to progress through the step rates on your anniversary date just like always if you are not at top of scale. The only difference is that the entire pay scale would also increase by 1.5% on December 17, 2021, if the TA passes. This is the same type of increase that changed the entire pay scale by 2.5% on December 17, 2020 under the current 2018-2021 JCBA. Eligible Flight Attendants at the top of scale will also continue to move to the level of Longevity Premium on their applicable anniversary date.

If We Vote “No” on this TA…?

Q If we vote “no” on this contract extension TA, does this mean we have to go into new contract negotiations, or can we negotiate a new extension in hopes for a higher pay increase?

A The MEC approached management regarding this extension, so it’s not like management was necessarily interested in negotiating an extension. There is technically nothing preventing management and AFA from negotiating another extension with different terms (such as pay rates) if this TA is not ratified, but we do not see any incentive for management to do so at this time.

Regular negotiations are scheduled to begin in September 2021, so there would be just over three months following the mid-May TA count date for both parties to prepare for those negotiations.

Does a Contract Extension Makes Sense Right Now? (2)

(Compiled from the 2nd virtual roadshow transcript and lightly edited.)

Q Some Flight Attendants think that starting negotiations later this year will position us to take advantage of potential profitability later. Is this a good strategy?

A

Well, I think we’ve heard a lot about “the curve.” Is it a good strategy? It’s an opinion question, so I’m going to answer it with my opinion based on my experience.

It’s not a terrible strategy, but is it the best strategy? I don’t believe so. I think that we would be better served by waiting just one year longer to be on the other side of that curve where it’s not just starting to start go up but where everyone else is starting to rise, too, and other groups have started to bargain. So I would not call it a good strategy.

I think it’s not a completely detrimental strategy, but it wouldn’t be my preferred way to go, which is why I am in favor of this extension. At the same time, no one has a crystal ball, and I don’t want to tell anyone how to vote, so you really have to look at it and just listen to all the information and decide for yourself what you think is the best for you, your family and for all of us collectively.

MEC President Jeff Peterson

Does a Contract Extension Makes Sense Right Now?

(Compiled from the 2nd virtual roadshow transcript and lightly edited.)

Q According to an economist at Morgan Stanley I talked with about a month ago, this pandemic produced what is called an exogenous shock to the economy, which typically produces immediate chaos but a short recession and quick recovery. In this case that is what is happening: The US economy bottomed out last July, corporate profits reached pre-pandemic levels Q1 2021, and corporate revenues are on track to do so by June 2021. Employment always takes longer to recover. The airline industry will lag but will also recover.

Since the contract negotiations will take several years, and I’ve read that the pay part of negotiations happens at the end, we should be well into recovery by the time our pay is negotiated. Without this extension our prior contract already has been extended. Many Flight Attendants don’t believe another extension makes sense. Can the economist comment on this?

A

Yes, the economist can. First off, I don’t know which corporations are operating at pre-pandemic levels of profitability in the first quarter of 2021.Obviously airlines aren’t, and I guess the question really is in terms of the next year following the amendable date without a TA the difference between 1.5% and 0% is kind of what we’re looking at.

So, when I when I say that I mean we are not going to get that money back in a future year by saying we gave it up, (but) we want it back in 2023 or 2024. It’s kind of a lost opportunity in my book. To look at with the contract opening in December of 2021where would we be in a year if we didn’t extend, and I would say we would have gotten zero percent pay increases for sure as opposed to a 1.5 percent pay increase for sure.

So, I agree that the airline industry lags behind the rest of the economy. The economy is forecast to grow very strong coming out of this recession, but I do think it’s really a question of do you want a one and a half percent pay raise or a zero percent pay raise over the next year after the amendable date. That’s really the question on the table because I don’t think there’s any way to negotiate this money back in some future period to make up for what we gave up.

Aviation Economist Dan Akins – FlightPath Economics, LLC

Almost every section of the agreement has an economic impact, and when you’re bargaining, if the company is really in cash preservation mode, then even sections you wouldn’t think like sick leave and vacation–any little work rule improvement that you want there–they’re looking at how is that going to impact on sick leave rates, how it’s going to impact on vacation utilization and so forth. In that context what you find once you get into scheduling and reserve, they’re looking at all of those work rules that you wouldn’t necessarily think as economic items as well. So, in the context where a company is either concerned about cash burn or they’re concerned about rebuilding cash reserves, all of the sections of the contract become a lot more difficult to negotiate, and things really slow down.

In part we know the answer here because we know that negotiations were proceeding at a pace such as (at) American and Southwest. Even though they…already started their negotiations, those negotiations essentially stalled out. Even though they weren’t at (the) economics (yet), just because there wasn’t going to be or there wasn’t any progress being made. When there [were] substantive discussions, the company was coming in and demanding concessions.

So, the other thing I think to take into account is Jeff went over your position in the industry [regarding pay ray rates earlier in the roadshow], and … one of the features of bargaining in this industry is we do something called “leapfrog bargaining.” What that means is we’re able to win increases at one carrier that provides a platform for the next Flight Attendant group to come back and use those increases as an argument about why they need more.

So, for example the Hawaiian Flight Attendants got an increase right before the pandemic. Those negotiations centered on where was everyone else situated, and we had a big fight with [Hawaiian management]. It was really based on what the comparators in the industry, and how does that affect our negotiations. One of the difficulties if you try to speed up your negotiations in front of everybody else is that your comparators haven’t had a chance to get the increases that they normally would have gotten. American you know we would have hoped but for the pandemic that they would have been in a better place right now with their contract. If they had gotten some good increases, that provides a better basis for you to get increases and so forth. United, Spirit and all of that.

You want to be … doing your timing correctly … in order to get the increases … that you really want in these negotiations. We need some of these other work groups to get in there and also be fighting for increases otherwise you’re going to be a little bit ahead of the curve.

This one-and-a-half percent, it’s basically in line when you do an extension. You don’t get a massive increase, but you get something to kind of keep you where you’re at until you can have a more favorable point.

AFA Director of Collective Bargaining Joe Burns

From my experience with negotiating for AFA Alaska, it’s exactly like what Joe has been saying about what Flight Attendant might think is not economic because it’s not specifically having to do with the step rate–so the pay rate–or say the vacation value or something like that. They think that’s not economic, all the other things, but they actually are…. Say open time is an example of something that we may want to likely revisit, and it does have an economic impact because … it does impact staffing, and therefore it costs the company money…. A sensitive topic that we will address at some point is say TFP versus block, and there’s a whole conversation that could be had on that, but … again it’s an economic conversation.

So, if we didn’t delay, (then) we would go to the table [in September], and we would quickly blaze through the non-discrimination (policy), all the stuff that we agree to right away, or the very low-lying things about certain definitions or updating and incorporating LOAs that we’ve already agreed to into the contract.

Once we’re done with that, then it really is like all of it is economic: reserve, scheduling, hours of service, obviously pay, vacation, sick leave. So, it would just make it challenging to have those conversations and probably would not be extremely productive for some period of time, and that’s why we have brought it to you guys for consideration whether this is our best strategic position to enter negotiations [in September or to extend for a year].

MEC President Jeff Peterson

Rising Stock Price (NYSE: ALK)

(Compiled from the 2nd virtual roadshow transcript and lightly edited.)

Q Our stocks are up way up today (April 12, 2021) at 71. What would you say that has on the influence of how we are doing?

A

I think that it’s an encouraging sign for Alaska in particular. I do think that at least with the last scan–I haven’t been following the other aviation stocks–but I think our stock is probably a little over inflated at the moment based on recovery. It is encouraging, but the recovery is far from certain.

MEC President Jeff Peterson

Yeah, I think … that’s a good point, Jeff. The recovery is far from certain, and if you look at where we are with a 71-ish dollar value stock, it’s the highest it’s been since about 2017 October. But if you look at carriers that are positioned in the box that I talked about earlier, which is no wide body international mostly domestic discretionary traffic, those carriers including Alaska, Southwest, somewhat jetBlue, Spirit, Allegiant (and) Frontier. Those stocks are all kind of in that same bucket. They’re close to all-time highs–at least all-time highs in the last three or four years–and it’s all because those are the places of the industry analysts expect the recovery to be to be happening fastest. It’s a reflection of not what’s actually occurring but relative to other airline stocks.

What’s likely to occur at Alaska and other primarily narrow body domestic focus carriers are looking at…a faster recovery than United, American and Delta, which if you look at their stocks are still about halfway back to where they were this time or a little bit earlier last year. So, I think it’s a reflection of what the market expects to happen in the future not so much what’s happening now.

Aviation Economist Dan Akins – FlightPath Economics, LLC

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