In the Matter of the

Applications of the

AIR LINE PILOTS ASSOCIATION

and

ALLIED PILOTS ASSOCIATION

alleging a representation dispute pursuant to Section 2, Ninth, of the Railway Labor Act, as amended

involving employees of

AMERICAN AIRLINES

and

RENO AIR

26 NMB No. 85

CASE NO. R-6701

(FILE NO. CR-6666)

FINDINGS UPON

INVESTIGATION-

DETERMINATION OF

CERTIFICATIONS

August 30, 1999

Procedural Background

This determination addresses the applications filed by the Air Line Pilots Association (ALPA) and the Allied Pilots Association (APA) requesting the Board to investigate whether American Airlines and Reno Air are a single transportation system. For the reasons set forth below, the Board finds that effective August 31, 1999, the two Carriers will be operationally merged.

On June 15, 1999, ALPA filed an application for investigation of a representation dispute among "Flight Deck Crew Members," employees of Reno Air and American Airlines. This matter was assigned File No. CR-6666. Attached to ALPA's application was a letter from the Organization requesting the Board to investigate "whether and when Reno and American will constitute a single transportation system for purposes of the Railway Labor Act, as amended."

ALPA was certified as the representative of Flight Deck Crew Members on Reno Air in Case No. R- 6532. APA represents Pilots on American Airlines pursuant to Board certification in Case No. R-3619.

On June 18, 1999, APA also filed an application and a request that the Board conduct an investigation "regarding the operation of American and Reno as a single transportation system." In addition, APA stated its position that the two carriers became a single transportation system "on or after December 23, 1998, when American acquired . . . stock in Reno and when American acquired control of the Reno Board of Directors."

On June 21, 1999, the Board sent a letter to the Carrier(s) and Organizations asking for responses to specific questions in order to determine the scope of the system.1 American and Reno responded on July 7, 1999. Both Carriers stated that an operational merger would occur effective midnight, August 30, 1999, and that as of August 31, 1999, Reno would cease to exist as a separate entity.

On July 15, 1999, ALPA filed a response to the carriers' July 7, 1999, submissions. ALPA stated that "under the Board's standards as set forth in Trans World Airlines/Ozark Airlines, 14 NMB 218 (1987), a single transportation system encompassing the former Reno Air will have been created no later than August 31, 1999."

APA filed a position statement on July 21, 1999, maintaining that the two Carriers constituted a single transportation system as of December 23, 1998.

American filed a response to APA's position statement on July 23, 1999, contending that the operational merger will not be effective until August 31, 1999.

ISSUES

Are American Airlines and Reno Air a single transportation system? If so, what are the representation consequences of the merger on ALPA's and APA's certifications?

CONTENTIONS

ALPA

ALPA takes the position that a single transportation system will exist no later than August 31, 1999.

APA

According to APA, as of December 23, 1998, American has exercised "common control over Reno's finances, operations and labor relations pursuant to a merger agreement that by its own terms was fully effective as of February 22 [1999]." The Organization maintains that in the past the Board has found a merger to occur prior to the "designated merger date" where there was "sufficient common control." In support of this contention, APA cites Pennsylvania Airlines, Inc./Allegheny Commuter Airlines, Inc., 19 NMB 362 (1992) and Midway Airlines, Inc., 14 NMB 447 (1987). The Organization also cites Continental Airlines/Continental Express, 20 NMB 326 (1993), where the Board found a single transportation system despite the lack of a formal merger date.

APA asserts that American has had control of Reno since December 23, 1998, and complete ownership as of February 22, 1999. According to the Organization, American's ownership has led to "its managerial and labor relations control of Reno." For example, the Organization asserts that American began negotiating with APA regarding the terms and conditions of employment for the Reno Flight Deck Crew Members in January 1999.

In sum, APA maintains that "well before the formal merger date," American was managing and operating Reno.

American Airlines

American argues that until August 31, 1999, Reno continues to hold itself out to the public as a separate carrier with a separate schedule, signs, logos and livery, and a separate work force. American further asserts that Reno maintains its own management which supervises operations, has a separate corporate identity, and is operating under its own Federal Aviation Administration (FAA) operating authority and its own maintenance program.

The Carrier also argues that APA is attempting to involve the Board in a matter "that has already been the subject of extensive court litigation." According to American, the fact that APA did not invoke the Board's Merger Procedures2 until June 18, 1999, as opposed to December 23, 1998, is consistent "with the fact that the merger will be effective August 31, 1999."

American distinguishes the cases cited by APA based upon its contention that "this proceeding does not involve . . . two or more carriers . . . operating independently on an ongoing basis and . . . alleged to be a single carrier." The Carrier maintains that "[f]rom the outset, American has acknowledged that it intended to merge the two carriers as soon as the prerequisites necessary for an orderly and lawful merger of operations could be accomplished." According to American, many of the facts cited by APA as evidence that the operational merger has already occurred "merely mirror this transition." The Carrier asserts that ALPA has continued to be involved in "day-to-day labor management dealings" with Reno, and also has participated in the "transitional negotiations" involving American and APA.

In support of its position that the Board traditionally does not find a single transportation system to exist until the operational merger occurs, the Carrier cites AirTran Airlines/AirTran Airways, 26 NMB 82 (1998) and 25 NMB 429 (1998), Federal Express Corporation/Flying Tiger Line, Inc., 16 NMB 433 (1989), and USAir, Inc./Piedmont Aviation, Inc., 16 NMB 412 (1989). According to American, in these cases and others, the Board found the operational merger to have occurred several months after acquisition.

In sum, American requests the Board to conclude that the merger will be effective August 31, 1999.

FINDINGS OF LAW

Determination of the issues in this case is governed by the Railway Labor Act (RLA or Act), as amended, 45 U.S.C. §§ 151-188. Accordingly, the Board finds as follows:

I.

American Airlines and Reno Air are common carriers by air as defined in 45 U.S.C. § 181.

II.

ALPA and APA are labor organizations and representatives as provided by 45 U.S.C. § 152, Ninth.

III.

45 U.S.C. § 152, Fourth, gives employees subject to its provisions, "the right to organize and bargain collectively through representatives of their own choosing. The majority of any craft or class of employees shall have the right to determine who shall be the representative of the craft or class for the purposes of this chapter."

IV.

45 U.S.C. § 152, Ninth, provides that the Board has the duty to investigate representation disputes and to designate who may participate as eligible voters in the event an election is required. In determining the choice of the majority of employees, the Board is "authorized to take a secret ballot of the employees involved, or to utilize any other appropriate method of ascertaining the names of their duly designated and authorized representatives . . . by the employees without interference, influence, or coercion exercised by the carrier."

STATEMENT OF FACTS

I.	Corporate Transactions

AMR Corporation announced its plans to acquire Reno in November 1998 and acquired controlling interest by December 23, 1998. At that time, the Reno Board of Directors was reduced from nine to seven members, with four new members, officials of American, assuming places on the Board. By February 1999, all nine of Reno's Board of Directors had resigned. In January 1999, Don Carty, American Airline's Chief Executive Officer, met with Reno's Board to discuss the merger. In February 1999, Donald P. O'Hare, former Senior Vice President of Field Services for American, became president of Reno Air. American formed a Reno Air Integration Team headed by O'Hare and Lauri L. Curtis, Vice President of American Airlines. Curtis submitted a declaration stating that the Integration Team "is charged with . . . facilitating the process of integrating the routes, equipment and employees of Reno Air into American." The Integration Team coordinated with various American departments regarding time lines for implementation and other matters.

APA states that American and Reno merged completely on February 22, 1999, according to Articles of Merger filed with the State of Nevada. However, according to a February 23, 1999, report filed with the Securities and Exchange Commission, the merger in question was the "merger of Bonanza [Acquisitions, Inc., a Nevada Corporation and a wholly-owned subsidiary of American] with and into Reno . . . with Reno as the surviving company."

II.	Operations

On or about August 31, 1999, according to American and Reno, the two carriers will consummate their operational merger, and "the operating airline" will be called American Airlines. Reno Air will cease to exist. In the interim, the carriers are operating under their separate names and FAA certificates. As of August 31, 1999, operational functions will be combined under American's air carrier certificate.

III.	Representation

As of June 25, 1999, there were approximately 9,471 APA-represented Pilots at American, and 290 ALPA-represented Flight Deck Crew Members at Reno.

On Reno, there are approximately 447 Flight Attendants represented by the International Brotherhood of Teamsters (IBT), and approximately 21,672 Flight Attendants represented by the Association of Professional Flight Attendants (APFA) on American.

All other employees at Reno are unrepresented. On American, the Flight Engineers International Association (FEIA) represents approximately twelve Flight Engineers, and the Transport Workers Union of America (TWU) represents approximately 31,105 employees in various crafts or classes.

IV.	Management and Labor Relations

The Carrier states that during the several months since the acquisition, employee relations and human resources functions have been administered by Reno's managers, under Reno's pay and benefit systems, and Reno's collective bargaining relationships.

Effective August 31, 1999, Reno operations will be managed by American management. Reno management and clerical employees will have to compete for vacancies at American.

Sue Oliver, American's Vice President of Employee Relations, will manage all labor relations functions including collective bargaining, grievance processing, and representational matters on the surviving carrier. Jaynne Allison, American's Vice President of Human Resources, will manage all human resources functions such as hiring, record-keeping, and salary and benefits administration. According to American, effective August 31, 1999, all former Reno employees hired by American will be subject to the same pay and benefit systems as American employees.

American began negotiations with all organizations representing employees on American in January 1999, with meetings between American and its unions taking place over the next several months.

American has reached agreements with APFA and TWU regarding pay and seniority integration, as well as other issues. To date, the Carrier and APA have not reached an agreement.

V. Routes, Schedules, Uniforms, and Insignia

Effective August 31, 1999, Reno's former routes will carry an American designator code. American employees will book the travel on the integrated routes. While some Reno aircraft will have Reno markings until September 30, 1999, by August 31, 1999, American's name and logo will replace Reno's on airport signs, printed schedules, ticket stock, uniforms, insignia, and name tags. All marketing will be in American's name effective August 31, 1999.

Until American employees are fully trained to operate and maintain Reno's fleet of MD-80's and MD- 90's, former Reno aircraft and routes will be designated with a special set of "AA" flight numbers.

Uniforms will be standardized August 31, 1999, the effective date of hire for most former Reno employees.

The process of conforming the markings and modifying the aircraft interiors of the Reno fleet will be completed by June 2000. Conversion of airport facilities will be complete by April 2000.

VI. Training

Maintenance of the former Reno aircraft will be governed by a separate section of American's FAA operating certificate and will be performed by third- party contractors until American's maintenance employees are fully trained. According to American, integration of equipment and routes will be completed by 2001. Until that time, former Reno aircraft will only be used on routes on the West Coast, but will be operating as American flights.

Completion of Pilot training is expected by July 2000, with full flight personnel integration also expected in July 2000. Flight Attendant training will be completed by September 24, 1999, with full integration expected by December 1999.

Flight Operations Systems integration is expected to be completed in July 2000. Completion of reservations manning requirements, systems tasks and training is expected by November 1999.

DISCUSSION

I.	The Board's Authority

Section 2, Ninth, of the Act, 45 U.S.C. § 152, Ninth, authorizes the Board to investigate disputes which arise among a carrier's employees over representation and to certify the duly authorized representative of such employees. The Board has exclusive jurisdiction over representation questions under the Railway Labor Act. Switchmen's Union v. National Mediation Board, 320 U.S. 297 (1943); General Committee of Adjustment v. M.K.T. Railroad, 320 U.S.

323 (1943).3 In ALPA v. Texas Int'l Airlines, 656 F.2d 16, 22 (2d Cir. 1981), the court sated, "the NMB is empowered to . . . decide representation disputes arising out of corporate restructurings."

II.	Single Transportation System

A.

In Trans World Airlines/Ozark Airlines, supra, the Board enunciated factors which will be examined to determine whether the carriers operate or will operate as a single transportation system. The following factors were cited by the Board as indicia of a single transportation system:

[W]hether the two systems are held out to the public as a single carrier. We recognize that there may be differences between two carriers' intent to hold themselves out to the public as a single carrier and the public's perception of whether there is a single system. That is why the Board looks into such practical considerations as whether a combined schedule is published; how the carrier advertises its services; whether reservation systems are combined; whether tickets are issued on one carrier's stock; if signs, logos and other publicly visible indicia have been changed to indicate only one carrier's existence; whether personnel with public contact were held out as employees of one carrier; and whether the process of repainting planes and other equipment, to eliminate indications of separate existence, as been progressed.

Other factors investigated by the Board seek to determine if the carriers have combined their operations from a managerial and labor relations perspective. Here the Board investigates whether labor relations and personnel functions are handled by one carrier; whether there are a common management, common corporate officers and interlocking Boards of Directors; whether there is a combined workforce; and whether separate identities are maintained for corporate and other purposes.

14 NMB at 236.

The Board consistently has found a single transportation system to exist only where there is evidence of substantial integration of operations. Generally, the integration of operations occurs over a period of time. For example, in AirTran Airlines/AirTran Airways, 25 NMB 24 (1997), the Board declined to find that a single transportation system existed. The investigation in that case established that although there was a merger agreement between two carriers, there was no integration of operations. The Board found evidence of substantial integration of operations ten months later in AirTran Airlines/AirTran Airways, 26 NMB 429 (1998). In USAir/Piedmont Aviation, supra, although Piedmont became a wholly-owned subsidiary of USAir in November 1987, the Board found that the merger of operations was not consummated until August 1989, almost two years later. See also Federal Express/Fying Tiger Line, supra.

Based upon application of the principles cited above to the facts established by the investigation, the Board finds that American Airlines and Reno Air will operate as a single carrier effective August 31, 1999. On August 31, 1999, Reno will no longer exist. The process of integrating operations will have been substantially completed. Schedules and routes will be combined, and conforming of markings is underway. Significantly, as of August 31, 1999, managerial and labor relations functions will be integrated.

B.

APA has cited several Board decisions in support of its contention that the Board should find that a single transportation system existed as of December 23, 1998, the date American acquired controlling interest in Reno. However, those decisions do not support APA's position.

In Pennsylvania Airlines/Allegheny Commuter Airlines, supra, the Board found that an operational merger would occur on July 1, 1992, approximately one month before the "formal corporate merger" date. The Board's conclusion was based upon its finding that the merger had been in progress for several months and would be "completed substantially" by July 1, 1992. The two carriers were to begin operating under a combined name on July 1992.

Midway Airlines, supra, involved a merger process that had been ongoing for a substantial period of time, with the two carriers holding themselves out to the public as a single entity for two years. The Board found that the operational merger had occurred approximately one month before the carriers asserted it had.

In Continental Airlines/Continental Express, 20 NMB 326 (1993), the Board found a single transportation system to exist despite the fact that there was no merger, because the two entities were under common control, shared common officers, and had centralized labor relations and personnel functions. The two carriers also shared common marketing, common markings and insignia, scheduling, and reservations. The Board made a similar finding in USAir, Inc./Shuttle, Inc., 19 NMB 388 (1992).

The Board finds no persuasive evidence that an operational merger was consummated between American and Reno on December 23, 1998. While American did acquire ownership and control on that date, the integration of operations progressively has taken place over a several month period since that time. The Board's review of its case law has not identified any decisions since the 1987 Merger Procedures, supra, where the Board found a single transportation system to exist as of the date of acquisition without any other significant indicia of operational integration.4 All of the cases cited by APA are consistent with the Board's findings in this matter, i.e., that the two Carriers will have substantially integrated operations as of August 31, 1999. In each of the cases cited by the Organization, there were significant indicia of operational integration beyond mere acquisition of ownership or control.

The Board also notes that although APA asserts that the merger between American and Reno was effective in February 1999, in fact, the merger in question was between Bonanza Acquisitions, a subsidiary of American, and Reno. Reno has continued to operate as a separate entity since that time.

III. Representation Consequences

A. Pilots

Once the Board determines that a single transportation system exists, it examines the potential representation issues. Over the last several years, the Board consistently has extended an organization's certification to cover employees in the craft or class on the entire system when the numbers of employees on each part of the system are not comparable. For example, in Continental Airlines/ Continental Express, supra, the Board extended the certification of an incumbent which represented 6,994 Flight Attendants to include 423 unrepresented Flight Attendants. In 20 NMB 580 (1993), which also involved Continental Airlines and Continental Express, the Board extended the certification of an incumbent which represented sixty-five Flight Dispatchers to cover twenty-six unrepresented Flight Dispatchers. See also SAHSA/TAN, 19 NMB 17 (1991); Air Wisconsin, Inc./Aspen Airways, Inc., 18 NMB 336 (1991); and Alaska Airlines, Inc./Jet America, Inc., 15 NMB 42 (1987).

The Board's examination of the record in this case establishes that the numbers of APA-represented Pilots on American and ALPA-represented Flight Deck Crew Members on Reno are not comparable. Therefore, effective August 31, 1999, APA's certification in Case No. R-3619 is extended to cover the entire craft or class of Pilots, and ALPA's certification in Case No. R-6532 is terminated.

B. Other Crafts or Classes

The other organizations representing employees on either American or Reno are reminded by copy of this decision, of the Board's Merger Procedures, supra, Subpart B-4.

CONCLUSION

Effective August 31, 1999, American Airlines and Reno Air will operate as a single transportation system. Reno Air will cease to exist. APA's certification in Case No. R-3619 is extended effective August 31, 1999, to cover the entire craft or class of Pilots on the merged system, American Airlines. File No. CR-6666 is hereby converted to Case No. R-6701 and closed on the basis of this Findings Upon Investigation-Determination of Certifications.

By direction of the NATIONAL MEDIATION BOARD.

Stephen E. Crable

Chief of Staff

Copies to:

Richard A. Malahowski

Donald P. O'Hare

Harry A. Risseto, Esq.

Marcus C. Migliore, Esq.

Edgar N. James, Esq.

Mady Gilson, Esq.

Ray Benning

Roland Wilder, Esq.

John J. Kerrigan

Denise Hedges

Edward Burns