Judge blocks NMB rule change; Air Canada stockholders vote to increase pool of shares available

A decline in the wider market pushed North and South America shares lower on Friday (28-May-2010), with the Dow dropping 1.2%, after Fitch Ratings downgraded Spain’s debt rating from ‘AAA’ to ‘AA+’. The decline ensured the market will suffer its biggest monthly drop since Feb-2009, falling 7.9% so far in May-2010.

The AMEX Airline Index (-1.7%) declined as a result, despite a fall in oil prices (-0.8%), to USD73.97.

Judge blocks NMB rule change

A US District Court Judge, Paul Friedman, has blocked the change the National Media Board (NMB) made two weeks ago, paving the way for easier certification of unions at airlines. The order defers the implementation date from 10-Jun-2010 to at least 30-Jun-2010, allowing the Air Transport Association to mount its suit against the rule change. A hearing to decide on a preliminary injunction is set for 14-Jun-2010.

SkyWest Airlines President, Chip Childs, said he has had a stream of pilots who do not want anything other than their own SkyWest Airline Pilots Association on the property. He indicated that the rule has been changed and, for now, pending the ATA challenge, which he supports, they will have to adhere to it. That means, he told pilots who have approached him, they will have to become more active in these matter to ensure their voices are heard.

The rule change overturned 76 years of practice and is the latest signal that the Obama Administration is delivering on his union IOUs. Unions no longer have to have a majority of those eligible to vote but only a majority of those voting. While ATA is suing, four members declined to join the suit including Continental, United, American and Southwest.

SkyWest has sent a letter of objection to the NMB agreeing with not only ATA but the Regional Airline Association and the Chamber of Commerce. “We don’t feel it is fair to change the rule to get unions voted in and not change the rules to get unions voted out,” Childs told CAPA. “We don’t think there is fairness on either one of those issues that took place. But even with the rule change, we still believe in the fundamental principle at SkyWest and that is to make sure we take care of our employees. We capitalise on a special relationship that is a close relationship that makes sure we can get things done faster than anyone else can. And our workforce is very engaged in that philosophy. So, that is something that we have to emphasise and grow in the future even with the rule change.”

Childs was asked by CAPA he agrees that the industry’s objection to the rule flies in the face of decades’ old pleas for industry regulators to treat it no differently than any other industry. Airlines have long held restrictions against foreign investment and consolidation hamper its ability to achieve success.

“There are some things we have to evaluate with what is broken with the industry,” he said. “It is an industry that has not made a healthy return in or any return on investment in decades. When you talk about what the industry needs and what the flying public is after, we have to address some of the fundamental principles that are driving some of the things related to foreign investment and the ability and need to consolidate. I think everyone’s open to those things to make sure the industry gets healthy. But with the rule change our industry is still being treated differently relative to how the unions can easily be voted in but didn’t change the how the unions can be voted out.”

Air Canada stockholders vote to increase pool of shares available

Air Canada (-4.3%) continued to decline, after stockholders voted with an 82% majority to increase the pool of potentially available shares from 5.0 million to 19.4 million, despite opposition from the carrier’s pilots, represented by the Air Canada Pilots Association (ACPA). The pilots seek the revocation of the increase in shares available to Air Canada executives under long-term incentive plans.

Elsewhere, US Airways (+1.0%) was the only carrier to gain for the day, as it continued to benefit from an analyst upgrade earlier in the week.

America Airline Daily is your one-stop shop for news, data and analysis from the dynamic North American, Caribbean and Latin American aviation markets. Other stories featured in today’s issue include:

  • American Airlines signs tentative agreement with Transport Workers Union of America;
  • Frontier to expand services into competitive markets;
  • Hawaiian Airlines takes delivery of new A330-200;
  • DOT fines airlines for violating advertising rules;
  • Porter Aviation prices shares lower than expected.

North & South America selected airlines daily share price movements (% change): 28-May-2010