BEFORE THE SENIORITY INTEGRATION ARBITRATION BOARD DANA E. EISCHEN, ROGER KAPLAN AND DENNIS R. NOLAN

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1 BEFORE THE SENIORITY INTEGRATION ARBITRATION BOARD DANA E. EISCHEN, ROGER KAPLAN AND DENNIS R. NOLAN : In the matter of the seniority : integration between : : THE PILOTS OF CONTINENTAL : AIRLINES : : AND : : THE PILOTS OF UNITED AIR LINES : : MEMORANDUM OF THE CONTINENTAL PILOTS MERGER COMMITTEE REGARDING THE CERTIFIED CONTINENTAL PILOT SENIORITY LIST Pursuant to the request of the Arbitration Board, the Continental Merger Committee submits this memorandum outlining the basic facts about the construction of the certified Continental pilot seniority list and explaining how it complies with ALPA Merger Policy (Jt. Exh. A) and the Protocol Agreement (Jt. Exh. B). 1 I. Introduction ALPA Merger Policy and the Protocol Agreement required each merger committee to compile and verify the employment data of all pilots on its respective pilot seniority list, including those pilots dates of hire and time spent on furlough. 2 The Continental Merger Committee compiled and verified this data for all Continental pilots and created the certified 1 ALPA Merger Policy Part 2.C.1. permits the parties to agree to an alternative process for seniority list integration, and the Protocol Agreement was signed by the Continental and United Master Executive Council Chairmen, Continental and United Merger Committee Chairmen and the ALPA President on May 17, The parties did not include specific language in the Protocol Agreement to further define what the term date of hire means or what it means for a pilot to be on furlough. 2 Id. Part 3.C.2. 3.; Protocol Agreement 2.B. 1

2 Continental pilot seniority list as of May 17, 2010 (the Certified List), which it exchanged with the United Merger Committee. 3 Because of Continental s corporate history, the Certified List does not follow a pattern of listing pilots beginning with the earliest date of hire and proceeding to the latest date of hire. Rather, the Certified List includes pilots whose positions on the list were awarded in one of four previous seniority list integration (SLI) arbitrations: (1) Continental-Texas International (1983) (Greenbaum, Arb.); (2) Continental-New York Air (1986) (Bloch, Arb.); (3) Continental-Frontier (1987) (Nicolau, Arb.); or (4) People Express-Continental-Frontier (1991) (Ross, Arb.). It also includes pilots whose positions on the list were assigned under the terms of: (1) the Continental Express 4 pilot seniority program appearing in Chapter 9 of the Continental Pilot Employment Policy (PEP Chapter 9); (2) the Eastern settlement agreement; or (3) the Employment Opportunities and Furlough Protection Agreement, Letter of Agreement #7 of the IACP- Continental 1997 Collective Bargaining Agreement (EOFPA). Finally, the Certified List includes pilots whose positions on the list were assigned in sequence as they were hired beginning in Of the 4,807 pilots on the Certified List, 1,641 (34%) of them were awarded their positions under one of Continental s four previous SLI arbitration awards. Another 1,652 (34%) of them were placed on the list under PEP Chapter 9, the Eastern settlement agreement or the EOFPA. Finally, there is a group of 1,514 pilots (31%) who were hired since 2005 and who were sequentially placed on the list. 6 3 See ALPA Merger Policy Part 3.C.3; Protocol Agreement 2.B. 4 For purposes of this memorandum, Continental Express includes Britt Airways (Britt), Rocky Mountain Airways (Rocky Mountain) and Bar Harbor Airways (Bar Harbor). Specific mentions of those airlines will be made only as needed. 5 A Timeline of Relevant Events Regarding the Certified Continental Pilot Seniority List is attached hereto as Att Due to rounding, the percentages listed do not equal 100%. 2

3 II. ALPA Merger Policy and the Protocol Agreement Although the pilots on the Certified List have varied origins, the Continental Merger Committee meticulously constructed the Certified List in conformity with ALPA Merger Policy and the Protocol Agreement. In particular, the Continental Merger Committee correctly applied ALPA Merger Policy s and the Protocol Agreement s guidance regarding the determination of a pilot s date of hire and furlough time when creating the Certified List. A. Date of Hire ALPA Merger Policy defines a pilot s date of hire as the date upon which a pilot first appears upon the Company s payroll as a pilot and also begins initial operational training required to perform such duties in airline operations. 7 It does not, however, specify which company is the Company on whose payroll a pilot must first appear. Because a pilot s date of hire does not reset as a result of a merger of two or more airlines that creates a new company, the Continental Merger Committee s interpretation of this provision is that the Company includes Continental as well as its predecessor and subsidiary companies, such as People Express, Texas International and Rocky Mountain, to name a few. Continental acquired Rocky Mountain and Britt on April 1, 1987, and coordinated their operations as part of its Commuter Division. 8 Continental acquired a majority interest in Bar Harbor in February These wholly-owned carriers jointly operated as Continental Express, and the companies were restructured as Continental Express on April 27, Later that year, the National Mediation Board (NMB) certified that the Independent Association of Continental Pilots (IACP) ha[d] been duly designated and authorized to represent for the purposes of the 7 ALPA Merger Policy Part 3.C.2.d Continental 10-K, at 2, 3. 9 See 1989 Continental 10-K, at Continental 10-K, at

4 Railway Labor Act, as amended, the craft or class of Pilots, employees of Continental Airlines, Inc. and Continental Express, Inc. 11 This certification and single-carrier determination remained in effect when the NMB approved the merger of IACP and ALPA and ALPA succeeded to the position of bargaining agent for the Continental and Continental Express pilots on May 22, ALPA created a single MEC to provide representation for all Continental and Continental Express pilots. Continental accepted this combined NMB Certification No. R and signed collective bargaining agreements with the IACP and ALPA to cover all of these pilots. Thus, the NMB and Continental both recognized Continental Express as a part of the Company. Pilots on the Certified List have used their Continental pilot seniority numbers for competitive bidding purposes for as long as they have flown at Continental. They still do. B. Furlough The Protocol Agreement and ALPA Merger Policy also provide guidance for how the merger committees are to compile and exchange furlough data with one another. The Protocol Agreement specifies that the certified lists will... reflect[] each pilot s circumstances regarding the pilot s availability to engage in revenue flying (i.e., leave status, instructor status, management pilot status, medical/disability status (if twelve months or longer)), all as of the Effective Date, and the starting and ending dates of each of the pilot s furloughs, if any, other than strike-related furloughs. ALPA leaves, military leaves, personal leaves, FMLA leaves and sick leaves shall not be included NMB Certification No. R-6193, 20 N.M.B. 570, 571 (1993) (emphasis added). 12 See IACP-ALPA Transfer, 28 N.M.B. No. 80, at *3 (July 17, 2001). 13 Protocol Agreement 2.B. Regarding furlough time, ALPA Merger Policy states: Each furlough and leave of absence or any intervening periods of service other than as a flight deck crew member with this Company shall be listed separately with an explanation covering the period. Furlough time directly related to a labor dispute or work stoppage, ALPA leaves, military leaves, FMLA (or Canadian equivalent) leaves and sick leaves shall not be included. ALPA Merger Policy Part 3.C.2.b. 4

5 Neither the Protocol Agreement nor ALPA Merger Policy defines furlough. The Continental Merger Committee applied the definition that a pilot is on furlough within the meaning of these documents only when he or she is not flying as a pilot in a position at the Company that is contractually available to him or her as a result of a reduction in force (RIF). When pilots bid to pilot positions at Continental Express under the provisions of PEP Chapter 9 or the EOFPA, the Continental Merger Committee determined that they were not on furlough, even if they did so when a RIF was occurring at Continental, and we therefore did not report those periods of flying as furlough time. These pilots were still going to work regularly at a wholly-owned subsidiary of Continental, wearing the same pilot uniforms, flying passengers for the Company and receiving steady wages and benefits. III. Construction of the Certified List: Early Portion of the List SLI Arbitration Award Pilots Sen. No. Name Emp. No. Date of Hire 1 Ralph Rina /28/ Gary Anderson /01/1988 Number of Pilots: 1,641 Percentage of Certified List: 34% Exh. C-1 at 1 31 On the Certified List, the positions of the senior 1,641 pilots were awarded in one of Continental s four previous SLI arbitrations: (1) Continental-Texas International (1983) (Greenbaum, Arb.); (2) Continental-New York Air (1986) (Bloch, Arb.); (3) Continental-Frontier (1987) (Nicolau, Arb.); or (4) People Express-Continental-Frontier (1991) (Ross, Arb.). Any out-of-sequence dates of hire in this portion of the list result from those awards. 5

6 IV. Construction of the Certified List: Middle Portion of the List A. Summary of PEP Chapter 9 Total PEP Chapter 9 Pilots Sen. No. Name Emp. No. Date of Hire 1642 Thomas Hull /11/ Robert Hunter /21/1993 Number of Pilots: 579 Percentage of Certified List: 12% Exh. C-1 at PEP Chapter 9 outlined how pilots flying at Continental Express were included on the Continental pilot seniority list and bid flying positions at Continental. It also addressed how pilots flying at Continental could bid flying positions at Continental Express. 1. Continental Express Pilot Transitions to Continental a. Pilots Hired Before February 1, 1988 (2/1/88 Group) 2/1/88 Group Pilots Sen. No. Name Emp. No. Date of Hire 1642 Thomas Hull /11/ Joseph Lapensky /17/1987 Number of Pilots: 145 Percentage of Certified List: 3% Exh. C-1 at Under PEP Chapter 9, Continental Express pilots flying at Bar Harbor, Britt or Rocky Mountain as of February 1, 1988, were eligible to interview for pilot positions at Continental. 14 These pilots had a one-time option to participate in the program; if a pilot rejected the offer of a Continental seniority number, then he or she lost all rights to that reserved place on the Continental pilot seniority list PEP Ch. 9 A.1.a. (attached hereto as Att. 2.) 15 Id. A.1.c., g. 6

7 Continental placed the accepted pilots on the Continental pilot seniority list in a block immediately junior to the last pilot in the February 1, 1988, class. 16 Within that block, Britt and Rocky Mountain pilots are listed together by date of hire, followed by Bar Harbor pilots listed by date of hire. 17 According to PEP Chapter 9, members of the 2/1/88 Group began accruing seniority and pay longevity on February 1, 1988, and service credit from that date applied to company longevity, which determined vacation accrual, pass travel priority, service pins and vesting in Continental s benefits plans. 18 However, pay longevity for these pilots did not actually reset to that date but continued from their dates of hire. 19 PEP Chapter 9 required that all future Continental pilot openings first be offered to 2/1/88 and 8/1/88 Group (discussed below) pilots until Continental Express management could not release additional Continental Express pilots due to its operational requirements. 20 Continental Express management could defer a 2/1/88 Group pilot offered a position at Continental up to 12 months due to operational reasons, or longer subject to Continental Pilot Operations Group (POG) review. 21 When a 2/1/88 Group pilot was offered a position at Continental, his or her Continental seniority number was awarded regardless of whether he or she remained at Continental Express or transitioned to Continental. 22 A 2/1/88 Group pilot offered a Continental position could accept his or her Continental number but elect to stay at Continental Express. 23 If the pilot did so, his or her position was protected for two years unless he or she bid to a lesser-paying 16 Id. A.1.b. 17 See id. A.1.d. 18 Id. A.1.e. 19 See Crew Communication System, Shawn A. Doyle Pay Screen (showing that Captain Doyle s pay longevity began on October 21, 1987, his date of hire, and not on February 1, 1988) (attached hereto as Att. 3). 20 PEP. Ch. 9 A.3.a. 21 Id. A.3.b See id. A.3.b Id. A.3.b.2. 7

8 position or there was a RIF at Continental. 24 The number of assigned positions was significant because 2/1/88 Group pilots were subject to displacement during a Continental RIF only to the extent of the number of Continental seniority numbers that had been awarded. 25 b. Pilots Hired Between February 1, 1988, and August 1, 1988 (8/1/88 Group) 8/1/88 Group Pilots Sen. No. Name Emp. No. Date of Hire 1787 Charles Fletcher /01/ James Keith /29/1988 Number of Pilots: 23 Percentage of Certified List: <1% Exh. C-1 at 34 Continental Express pilots hired between February 1, 1988, and August 1, 1988, were eligible to interview for Continental positions after all 2/1/88 Group pilots had been interviewed. 26 They were placed in a block on the Continental pilot seniority list immediately junior to the 2/1/88 Group pilots. 27 Within that block, the pilots were listed by their dates of hire at their Continental Express carrier. 28 Service credit for pay and similar purposes began accruing on those dates. 29 As mentioned above, when PEP Chapter 9 was implemented, all future Continental newhire positions were offered to pilots in the 2/1/88 and 8/1/88 Groups. 30 When an 8/1/88 Group pilot was offered a Continental position, his or her Continental seniority number was awarded and activated. 31 This was because 8/1/88 Group pilots did not have the option of protected 24 Id. 25 Id. A.1.e. 26 Id. A.2.a. 27 See id. A.2.b. 28 Id. 29 Id. A.2.d. 30 Id. A.3.a. 31 Id. A.2.c. 8

9 voluntary deferral, unlike pilots in the 2/1/88 Group. 32 8/1/88 Group pilots were, however, subject to Continental Express management deferrals for up to 12 months, or longer with Continental POG review. 33 c. Pilots Hired Between August 1, 1988, and August 1, 1993 Pilots hired between August 1, 1988, and August 1, 1993, were hired with the input and final approval of Continental and had to meet the required Continental pilot profile. 34 Max Jackson, Manager of Pilot Recruiting at Continental, participated in these pilots interviews, and these pilots were hired as Continental pilots with Continental seniority numbers. 35 According to PEP Chapter 9, pilots hired after August 1, 1988, who flew at Continental Express, were awarded Continental seniority numbers 29 weeks after their dates of hire, 36 but these modified dates were never used. On the contrary, their dates of hire on the Continental pilot seniority list are their actual dates of hire, and they began accruing longevity for pay, passes, vacation accrual and the like, on those dates. 37 i. 4:1 Ratio Group 4:1 Ratio Group Pilots Sen. No. Name Emp. No. Date of Hire 1810 Albert Dortenzio /28/ Alan Overton /01/1990 Number of Pilots: 149 (39 Continental Express, 110 off-the-street) Percentage of Certified List: 3% Exh. C-1 at Pilots hired after August 1, 1988, started flying at Continental Express and were added to the Continental pilot seniority list in a 4:1 ratio with the pilots who Continental hired off the 32 See id. A.2.c., 3.b Id. A.3.b Id. A.4.a. 35 See id. A.4.b. 36 Id. 37 See Crew Communication System, Anthony Montalto Pay Screen (showing that Captain Montalto s pay longevity began on August 14, 1989, his date of hire, and not 29 weeks thereafter) (attached hereto as Att. 4). 9

10 street. 38 Continental reserved four seniority numbers (Reserved Positions) on the Continental pilot seniority list, which were populated whenever it hired off-the-street pilots, followed by one pilot already flying at Continental Express. 39 ii. Compression Group Compression Group Pilots Sen. No. Name Emp. No. Date of Hire 1959 Robert Penttila /14/ Robert Hunter /21/1993 Number of Pilots: 262 Percentage of Certified List: 5% Exh. C-1 at On July 1, 1993, Continental announced that it would compress the Continental pilot seniority list and remove all unfilled Reserved Positions junior to Alan Overton, Sen. No on the Certified List. 40 Robert Hunter, hired on June 21, 1993, was the last Continental Express pilot assigned a Continental seniority number under PEP Chapter Continental Pilot Transitions to Continental Express In addition to outlining how Continental Express pilots were included on the Continental pilot seniority list, PEP Chapter 9 also explained how Continental pilots could transition to Continental Express, either voluntarily or as a result of a Continental RIF. Pilot positions at Continental Express were regularly posted for bidding by pilots flying at Continental or Continental Express. a. Continental Seniority Positions at Continental Express The number of Continental Express flying positions available to Continental pilots depended on the number of Continental seniority positions that existed at Continental Express, 38 PEP Ch. 9 A.4.b. 39 See id. 40 PEP Ch. 9 Side Letter 1.a. 41 See id. 1.c.; Exh. C-1 at

11 which were created in two ways. 42 First, when a 2/1/88 or 8/1/88 Group pilot was offered a position at Continental, the position that he held at Continental Express became a Continental seniority position regardless of whether he (1) transitioned to Continental, (2) exercised his deferral rights (if he was in the 2/1/88 Group) or (3) was subject to management deferral. 43 Second, when a Continental Express pilot hired after August 1, 1988, transitioned to Continental, a corresponding Continental Express position became a Continental seniority position. 44 A Continental seniority position at Continental Express had to be held by a Continental Express pilot who had a Continental seniority number. 45 In the event of a Continental RIF, the number of Continental pilots who could bid to pilot positions at Continental Express was limited to the number of Continental seniority positions at Continental Express that is, it was limited to the number of Continental positions offered to Continental Express pilots. 46 Unlike a furloughed pilot, a pilot who bid to Continental Express as part of a Continental RIF continued flying for a salary as a flight deck crew member at an airline that comprised a part of the Company. b. Longevity for Pay Purposes Regardless of whether a pilot initially flew at Continental or Continental Express, he or she was paid based on Continental pay longevity at Continental Express pay rates when flying at Continental Express. 47 He or she retained and continued to accrue longevity for pay purposes while at Continental Express. 48 Thus, unlike a furloughed pilot, a pilot who transitioned to 42 See PEP Ch. 9 B Id. B.1.b. 44 Id. B.1.a. 45 Id. 46 See id. B Id. B.2.d. 48 Id. 11

12 Continental Express as part of a Continental RIF continued to receive compensation as a pilot in the airline operations of the Company. PEP Chapter 9 states that a Continental Express pilot would become a Continental employee as of the date he began training to staff a position at Continental. 49 It also states that a Continental Express pilot with an activated [Continental] seniority number who bids and hold[s] a [Continental] seniority position at [Continental Express], without ever staffing a position at [Continental], will remain a [Continental Express] employee until he [or she] begins training to staff a position at [Continental]. 50 B. Summary of the Eastern Settlement Agreement Total Eastern Settlement Agreement Pilots Sen. No. Name Emp. No. Date of Hire 2221 Nicholas Bonacci A /20/ Larry Hall A /27/1997 Number of Pilots: 53 Percentage of Certified List: 1% Exh. C-1 at On March 24, 1994, Continental and ALPA entered into a settlement agreement regarding the Eastern pilots, in which it agreed to create a Preferential Hiring List of the 225 most senior Eastern pilots who elected to be included on the list. 51 Continental stipulated that it would offer future new-hire vacancies to the Eastern pilots on the Preferential Hiring List before offering the vacancies to off-the-street pilots. 52 Pilots on the Preferential Hiring List could not fill vacancies at Continental Express, and their rights under the settlement agreement were subordinate to those of Continental Express 49 Id. B.2.a. 50 Id. B.2.b. 51 Continental-ALPA Claims Settlement Agreement 5.(B). 52 Id. 12

13 pilots under PEP Chapter That is, an Eastern pilot could not be senior to any pilot who had received a position on the Continental pilot seniority list pursuant to PEP Chapter 9, and the former Eastern pilots were therefore added in a block immediately junior to the last PEP Chapter 9 pilot. 54 Their pay longevity began on the dates that they began training as Continental pilots. 55 C. Summary of the Employment Opportunities and Furlough Protection Agreement Total EOFPA Pilots Sen. No. Name Emp. No. Date of Hire 2274 Robert Morse /17/ Christopher Green G /11/2001 Number of Pilots: 1,020 Percentage of Certified List: 21% Exh. C-1 at Subsequent to entering into the IACP-Continental 1997 Collective Bargaining Agreement, the IACP, Continental and Continental Express signed the Employment Opportunities and Furlough Protection Agreement, Letter of Agreement #7 of the 1997 Collective Bargaining Agreement on June 25, Continental and the IACP had already implemented the EOFPA on October 10, 1997, because of Continental s staffing needs. 57 All three parties signed the Supplemental Employment Opportunities and Furlough Protection Agreement on December 14, The EOFPA and Supplemental EOFPA governed how pilots flying at Continental s wholly-owned subsidiary, Continental Express (later ExpressJet), would receive opportunities to fly at Continental. It also addressed how pilots flying at Continental could transition to 53 Id. 54 Id.; see Exh. C-1 at Continental-ALPA Claims Settlement Agreement 5.(B). 56 See Employment Opportunities and Furlough Protection Agreement 5.F. [hereinafter EOFPA ] (noting agreement date) (attached hereto as Att. 5). 57 See Letter from C. D. McLean, Executive Vice President, Operations, Continental, to Len Nikolai, President, IACP (Oct. 16, 1997). 58 See Supplemental Employment Opportunities and Furlough Protection Agreement F.6. [hereinafter Supp. EOFPA ] (noting agreement date) (attached hereto as Att. 6). 13

14 Continental Express in the event of a Continental RIF. By its terms, the EOFPA would terminate if (1) another carrier acquired Continental, (2) Continental ceased to have a controlling interest in Continental Express (more than 50% ownership) or (3) six years elapsed from the date of signing. 59 The EOFPA terminated on August 4, 2003, when Continental divested itself to less than 50% ownership of ExpressJet Continental Express Pilots Added to the Continental Pilot Seniority List The Top 110 Pilots Sen. No. Name Emp. No. Date of Hire 2275 Robert Morse /17/ John Romine /18/1985 Number of Pilots: 116 (34 Continental Express, 82 off-the-street) Percentage of Certified List: 2% Exh. C-1 at EOFPA Pilots Sen. No. Name Emp. No. Date of Hire 2390 David Haskell /17/ Gregory Conetta C /09/1998 Number of Pilots: 577 (154 Continental Express, 423 off-the-street) Percentage of Certified List: 12% Exh. C-1 at The EOFPA provided a mechanism by which Continental Express pilots could be placed into an eligibility pool to transition to Continental. It divided Continental Express pilots into four different categories, each with different requirements to enter the eligibility pool. The Top 110 Pilots. First, the senior 110 pilots on the July 1, 1997, Continental Express seniority list were automatically placed in the eligibility pool to transition to Continental. 61 They 59 EOFPA 5.C. 60 See Press Release, Continental Airlines, Continental Airlines Announces Intention to Sell Approximately $200 Million of ExpressJet Shares; Reducing Its Ownership Below 40% (July 29, 2003). 61 EOFPA 1.B. 14

15 were not required to participate in an interview. 62 The senior one of these pilots was placed on the Continental pilot seniority list immediately junior to the most junior former Eastern pilot. 63 EOFPA Pilots Hired Before June 25, Second, a Continental Express pilot hired before June 25, 1998, who had completed his or her jet captain Initial Operating Experience (IOE) and met Continental s objective requirements and criteria, was placed in the eligibility pool to transition to Continental. 64 Third, a Continental Express pilot hired before June 25, 1998, who had not completed his or her jet captain IOE, was placed in the eligibility pool to transition to Continental if he or she met Continental s objective and subjective requirements and criteria. 65 Continental s subjective requirements were met if the pilot satisfactorily completed a panel interview with three management pilots and a simulator ride evaluated by two check airmen. Thus, Continental Express pilots who were not jet captains on June 25, 1998, but otherwise met Continental s objective criteria could enter the eligibility pool in one of two ways: (1) Wait to upgrade to jet captain or (2) successfully complete the interview and simulator ride. Continental Express Pilots Hired After June 25, Fourth, a Continental Express pilot hired after June 25, 1998, would enter the eligibility pool once he or she flew as a jet captain for no less than 24 months and met Continental s objective criteria. 66 This group of pilots never came into play under the EOFPA or Supplemental EOFPA because the last pilot to transition to Continental under this program was hired on June 10, Once placed in the eligibility pool, Continental Express pilots were assigned in seniority order to fly at Continental. 68 The EOFPA did not require Continental to employ a certain 62 See id. 63 See Exh. C-1 at EOFPA 1.B. 65 See id. 66 EOFPA 1.A. 67 See Exh. C-1 at EOFPA 1.C. 15

16 number of new hires, 69 but it did require that each Continental new-hire class include at least one Continental Express pilot for every two off-the-street hires. 70 Continental Express pilots were listed with their dates of hire and were placed on the Continental seniority list one day before their classes began, which made them senior to the off-the-street hires in their classes. 71 Continental Express pilots who transitioned to Continental were considered to be on a trial basis for a period not to exceed one (1) year from the first day of training at [Continental]. During the trial period, pilots shall not be considered to be on probation. However, neither the pilot nor the Union shall be entitled to challenge... Continental s right to permanently return such pilot to [Continental Express]... for failing to adequately demonstrate his [or her] ability to perform the duties of a Continental pilot during the trial period. 72 Continental Express management could defer a pilot selected to fly at Continental due to operational constraints for no more than nine months. 73 If Continental Express management deferred a pilot, the deferred pilot was replaced in the ratio by an off-the-street hire who was not counted for the 2:1 ratio. 74 The deferred Continental Express pilot received a seniority date the day before the class for which he or she was assigned, as if he or she had not been deferred. 75 Additionally, he or she was offered a position in the next class for which Continental Express could release him or her and received the greater of the applicable Continental and Continental Express pay rates while on deferral. 76 A Continental Express pilot bidding to fly at Continental could also voluntarily defer his or her transition for six months Id. 5.B. 70 Id. 1.C. 71 See id. 3.A. 72 Id. 1.E. 73 Id. 1.F. 74 See id. The Supplemental EOFPA changed this arrangement regarding the 2:1 ratio. Under that agreement, if a pilot was on management deferral and was replaced by an off-the-street hire, the off-the-street hire was counted for the 2:1 ratio. Supp. EOFPA A. 75 EOFPA 1.F. 76 Id. 77 Id. 1.G. 16

17 A Continental Express pilot transitioning to fly at Continental began accruing longevity for pay, pension, vacation accrual and competitive bidding purposes on the day that he or she transitioned to Continental (that is, his or her class date). 78 The transitioning pilot retained his or her last-received pay rate from Continental Express until it was exceeded by the applicable Continental pay rate. 79 For example, if a Continental Express pilot earned a higher hourly rate at Continental Express than the Continental second-year pay rate, the pilot continued earning that higher amount for two years, or possibly even longer, until it was exceeded by the applicable Continental pay rate for the pilot s pay longevity and status. The pilot retained his or her accrued longevity for non-pension benefits continuation (e.g., passes, vacation accrual, insurance). 80 If the pilot s transition was delayed due to a management deferral, his or her longevity for pay and competitive bidding purposes began when it would have begun if the pilot had been in the class from which he or she was deferred. 81 If a pilot flying at Continental Express did not wish to transition to Continental, he or she could assume Protected Rights Status at Continental Express. 82 A pilot who elected Protected Rights Status permanently forfeited his or her opportunity to fly at Continental under the EOFPA. 83 However, Continental Express pilots in Protected Rights Status were not subject to displacement by Continental pilots exercising furlough protection rights under the EOFPA Id. 3.C. 79 Id. 80 Id. 81 Id. 3.D. 82 Id. 1.H. 83 Id. 84 Id. 17

18 2. Furlough Protection Rights for Continental Pilots Pilots who transitioned to Continental Express due to a RIF at Continental did not receive furlough pay and were not considered to be on furlough except for purposes of recall. 85 They could continue to bid Continental vacancies and staff them as soon as their positions on the Continental pilot seniority list allowed, regardless whether a recall occurred. 86 These pilots retained their sick leave, occupational injury bank, insurance and vacation entitlement. 87 They also retained their Continental pay longevity while at Continental Express, but did not accrue additional Continental pay longevity. 88 While at Continental Express, they accrued pay longevity only for service at Continental Express. 89 In addition to setting forth the terms under which Continental Express pilots could enter the eligibility pool to transition to Continental, the EOFPA provided furlough protection rights for Continental pilots in the event of a RIF. 90 If there was a RIF at Continental, a Continental pilot could: (1) take a company offered leave of absence (COLA); (2) bid to a pilot position at Continental Express or (3) be furloughed to the street with furlough pay. Transitioning to Continental Express was an option that allowed the pilot to continue flying in airline service at a wholly-owned subsidiary and continue earning compensation for such flying. When pilots elected to transition to Continental Express, the EOFPA stated that they would be integrated into the [Continental Express] list on the basis of their [Continental] date[s] of hire. 91 However, a pilot who previously transitioned from [Continental Express] shall 85 Id. 2.D. 86 Id. 87 Id. 2.E. 88 Id. 3.E. 89 Id. 90 By its terms, the EOFPA did not apply to pilots who transitioned to Continental under PEP Chapter 9. Those pilots retained the same rights and entitlements they held under that program regarding transitioning to Continental Express in the event of a Continental RIF. Id. 2.A. 91 Id. 2.B. 18

19 resume his [or her] same relative position on the [Continental Express] seniority list that he [or she] held prior to his [or her] transition. 92 If a pilot s position on the Continental pilot seniority list allowed him or her to hold any pilot position at Continental, the pilot was barred from transitioning to Continental Express. 93 According to the EOFPA, the number of positions at Continental Express available to pilots transitioning from Continental due to a RIF was equal to the number of pilots who had transitioned to Continental from Continental Express under PEP Chapter 9 and the EOFPA. 94 If the RIF was greater than the number of available positions at Continental Express, the excess Continental pilots had to take a COLA or be furloughed to the street with furlough pay. 3. Supplemental EOFPA Supplemental EOFPA Pilots Sen. No. Name Emp. No. Date of Hire 2967 Steven Jacobson /17/ Christopher Green G /11/2001 Number of Pilots: 327 (122 Continental Express, 205 off-the-street) Percentage of Certified List: 7% Exh. C-1 at On December 14, 1998, the IACP, Continental and Continental Express signed the Supplemental EOFPA. It addressed management deferrals and changed the way that the 2:1 hiring ratio applied in certain circumstances (noted above). It also provided a way for senior Continental Express pilots to enter the eligibility pool. As of December 14, 1998, a Continental Express pilot not in the eligibility pool who was awarded a jet captain position under a system bid and who was senior to the most junior pilot in 92 Id. 93 Id. 2.C. 94 Id. 2.B. 19

20 the eligibility pool could be placed in the eligibility pool. 95 This provision applied to pilots hired by Continental Express before June 25, 1998, but it was not available to all of them. It did not apply to that number of the most junior pilots equal to the number of Continental Express pilots who had transitioned to Continental between November 1, 1997, and June 25, When a junior pilot completed his or her jet captain IOE and was placed in the eligibility pool before a more senior pilot who was awarded jet captain under a system bid but had not yet completed jet captain training, the more senior pilot was placed in the eligibility pool on a system-wide one-for-one basis. 97 That is, for every one junior pilot who entered the eligibility pool after completing jet training, one senior pilot who held a jet captaincy under a system bid entered the eligibility pool. If the senior pilot subsequently failed jet training, he or she was removed from the pool and had no further rights or entitlements. 98 If the senior pilot s place on the list entitled him or her to a Continental class, he or she received a Continental seniority date conditioned on subsequent completion of jet captain training at Continental Express. 99 Additionally, no Continental Express pilot was entitled to a position at Continental under the Supplemental EOFPA until he or she met the Continental hiring requirements specified in the EOFPA Supp. EOFPA F. The Supplemental EOFPA essentially ended the ability of Continental Express pilots to transition to Continental via the interview and simulator ride. 96 Id. F.1. The Certified List shows 121 Continental Express pilots added between November 1, 1997, and June 25, See Exh. C-1 at However, the number of pilots excluded from this provision was presumably larger than that since there has certainly been attrition due to, for instance, retirement, death or discharge between June 25, 1998, and May 17, Id. F Id. F Id. F Id. F.6. 20

21 V. Construction of the Certified List: Remainder of the List Remaining Pilots Sen. No. Name Emp. No. Date of Hire 3294 Kiriakis Hristoforatos G /05/ Michael Nelson N /06/2008 Number of Pilots: 1,514 Percentage of Certified List: 31% Exh. C-1 at Continental resumed hiring on April 5, All 1,514 of these pilots were placed on the Continental pilot seniority list in the sequence they were hired at Continental. VI. The Certified List Complies with ALPA Merger Policy and Utilizes Reliable Information Pilots have had disputes over the meaning of date of hire since the earliest seniority integrations. The Continental Merger Committee has applied a reasonable interpretation of date of hire to the results of the SLI arbitrations and contractual arrangements described above, and the Certified List complies with ALPA Merger Policy and the Protocol Agreement. The dates of hire that the United Merger Committee questions were given when they began their employment as pilots with companies that were later combined with Continental through corporate mergers or acquisitions or became wholly-owned subsidiaries. From the pilots perspectives the precise corporate arrangements were unimportant and they were flying as pilots for the Company. Their positions on the Continental seniority list have been the same for ten, twenty or more years. The certified dates of hire were determined based on when the pilot first appeared on Continental s (or a predecessor or subsidiary company s) payroll as a pilot and began initial operational training to perform duties as a pilot. When a pilot began his or her employment as a pilot is the focus of ALPA Merger Policy rather than when that pilot first appeared on the 101 See Exh. C-1 at

22 Company s payroll. Thus, for the pilots who had worked for Continental in other capacities such as Molly Sullivan, who was a Continental flight attendant before she became a Continental pilot 102 the Continental Merger Committee ensured that the Certified List reflected the dates that they were first employed by the Company as pilots. In addition to situations like Ms. Sullivan s, ALPA Merger Policy s focus on a pilot s date of hire as a pilot addresses the historically important scenario where a professional flight engineer subsequently became employed as a pilot. It states: Persons who initially function as flight deck crew members, but in a classification which did not allow normal progression to pilot status in accordance with seniority, and who have subsequently gained the right of progression to pilot status by agreement with ALPA, shall acquire date of hire as a pilot as of the date specified by such agreement. 103 Moreover, focusing on when a pilot appeared on the Company s payroll can be problematic when two merging companies have different processes in place for introducing new pilots into their workforce. In Pinnacle-Colgan-Mesaba, for instance, Arbitrator Richard Bloch considered possible interpretations of date of hire, specifically, what it means to be on the Company s payroll as a pilot. 104 However, he merged the separate lists by using ratios and therefore did not need to resolve the interpretive question because resolution of that issue is not required for purposes of implementing the methodologies set forth below. The use of a ratioed Status and Category approach devitalizes the impact of most potential date of hire calculation discrepancies See, e.g., Exh. C-1 at 46 (listing Ms. Sullivan s date of hire as May 8, 1994, the date she was hired as a pilot). 103 ALPA Merger Policy Part 3.C.2.d. 104 Pinnacle-Colgan-Mesaba at 15 n.10 (2011) (Bloch, Arb.). 105 Id. 22

23 The Continental Merger Committee has utilized a reasonable interpretation of the term date of hire in constructing the Certified List, which conforms with ALPA Merger Policy and the Protocol Agreement. Additionally, the Continental Merger Committee s determination not to report periods of time when pilots flew in contractually available positions at the Company as furlough time is not novel. The Continental pilots had options available to them in the event of a RIF. The Continental Merger Committee counted as furlough time the periods when pilots chose to take furlough pay and were furloughed to the street. However, it did not count as furlough time any periods when pilots, faced with a RIF, chose to bid to contractually available pilot positions at the wholly-owned subsidiary, Continental Express, and thereby continued earning salaries as flight deck crew members at the Company. Nor did ALPA Merger Policy or the Protocol Agreement require them to treat such pilot employment as a furlough. In prior SLI arbitrations, pilots who flew contractually available positions elsewhere following a RIF at their carrier were not considered to be on furlough. For instance, in Republic- Hughes Airwest, Arbitrator Bloch addressed whether length-of-service credit should be given to certain pilots pursuant to a wet lease to Saudi Arabia. 106 He noted that, in general, a pilot who leaves the airline and works for another carrier while on furlough should not reasonably expect to accrue seniority credit in the context of a length-of-service approach. 107 However, Arbitrator Bloch recognized that the Saudi wet lease presented a different situation: A joint agreement between the Company and the pilots established reasonably extensive understandings with respect to recall, longevity accruals for base pay and vacation purposes, and other matters. It was not service in the business-asusual sense. But it was a close and continuing relationship with the Company and should fairly be viewed as service for purposes of seniority accrual Republic-Hughes Airwest at 36 (1981) (Bloch, Arb.). 107 Id. 108 Id. 23

24 Therefore, the resultant integration included length-of-service credit for some of the Airwest pilots, with the intent to rank Saudi pilots as high as possible, consistent with credited service. 109 Although some of these pilots were blocked from receiving full credit for their service on the integrated length-of-service list by pilots senior to them on the Airwest list who had opted not to fly in Saudi Arabia, Arbitrator Bloch found that the wet lease flying was essentially equivalent to active duty. 110 Likewise, in Flying Tiger-Seaboard World, Seaboard operated three leased DC-8s pursuant to a wet leasing air transport cargo contract with Saudia Airlines, which required special staffing for operational reasons specific to Saudia. 111 The Seaboard pilots argued that they should receive full credit for the time they worked at Saudia. 112 Arbitrator Seibel noted that there is no guarantee and the contract will expire... unless renewed. 113 However, he determined that [i]f the Saudia contract were guaranteed to remain in force in uninterrupted fashion as a wet lease with its present staffing requirements, it would pose no problem to grant the [Seaboard] pilots full credit for Saudia flying. 114 Although Arbitrator Seibel constructed the merged list via a status-and-category ratio instead of length of service, he nevertheless recognized the equity that these flying arrangements had brought to the Seaboard pilot group. 115 Similarly, in Delta-Northwest, the Northwest pilots advocated for service credit for the time that some of the Northwest pilots flew for KLM Royal Dutch Airlines pursuant to a joint venture between the carriers. Lane Kranz, a member of the Northwest Merger Committee, 109 Letter from Richard Bloch, Chairman, Republic-Hughes Airwest Arbitration Board, to Daniel Katz, Ronald Natalie and Joseph Manson, Counsel for Parties, at 3 (May 5, 1981). 110 Id. 111 Flying Tiger-Seaboard World at 154 (1981) (Seibel, Arb.). 112 Id. at Id. at Id. (emphasis added). 115 Id. at 154,

25 testified that in the early 1990s Northwest was furloughing pilots but provided an opportunity for continued employment as a Northwest pilot under contract to KLM. 116 Counsel for the Delta Merger Committee, Jeff Freund, thereafter stipulated to the Northwest pilots position: If the issue here is whether they should be treated as being continuously employed for that period of time covered by their KLM employment, we can skip that, we can skip the testimony on that. We have no quarrel with that proposition. 117 In a prior arbitration involving pilots on the Certified List, Arbitrator Jerome Ross treated pilots flying at wholly-owned express carrier subsidiaries the same as all other pilots in the proceeding before him. 118 They were called Flight Manager Representatives (FMRs) and were the junior pilots on the People Express seniority list. 119 Despite contrary arguments from one of the pre-merger pilot group s representatives, Arbitrator Ross determined that their placement on the merged list should not be diminished because they flew at People Express s wholly-owned express carrier subsidiaries. Rather, they were part of the People Express pilot group which the airline brought to Continental.... As such, their equities were superior to those of the Continental new hires who had no employment relationship with the Company at the time of the [Texas Air Corporation-People Express] merger. Any requirement at People Express for the FMRs to have flown at a commuter line does not alter the balance of the equities Thus, Arbitrator Ross integrated the FMRs into the list ahead of pilots hired after the merger, just as he did with all of the other pilots involved in that SLI arbitration proceeding. 121 These prior cases demonstrate that when a sufficiently close nexus exists between a pilot s employer and the other flying that the pilot does, the pilot was flying for the Company. 116 Transcript of Arbitration Hearings at 1661, Delta-Northwest (attached hereto as Att. 7). 117 Id. 118 See People Express-Continental-Frontier, at 132 (1991) (Ross, Arb.). 119 See id. at Id. at See id. at

26 The flexibility shown in prior SLI decisions has resulted in the expansion of the term the Company to far more remote connections than the situation presented in the instant case. The pilots on the Certified List who are not in date-of-hire order have held their positions on the Continental pilot seniority list for well over a decade, in some cases twenty or more years. During that entire period of time, the order of these pilots on the Company s published list has remained unchanged, and the Continental Merger Committee has corrected information on the Company-published list only to rectify administrative errors or to comply with ALPA Merger Policy, as in the case of pilots like Ms. Sullivan. The Continental Merger Committee utilized reliable data and followed an exhaustive process in researching, verifying and certifying the data contained in the Certified List, which in every respect complies with ALPA Merger Policy and the Protocol Agreement. Dated: April 17, 2013 Respectfully submitted, /s/ Daniel M. Katz Daniel M. Katz Gregory R. Shoemaker Grant E. Mulkey Katz & Ranzman, P.C Wisconsin Avenue, N.W., Suite 250 Washington, D.C (202) Counsel for the Continental Pilots Merger Committee 26