• Federal Appeals Court Lifts Injunction Barring Transfer of Pan Am Flights to Boston-Maine
  • May 25, 2005
  • Law Firm: Ford & Harrison LLP - Atlanta Office
  • The First U.S. Circuit Court of Appeals has lifted an injunction issued by a federal trial court that prohibited Pan Am from transferring flights to its non-union subsidiary, Boston-Maine. See Air Line Pilots Ass'n v. Guilford Transportation Indus., Inc. (1st Cir. Feb. 28, 2005). (See the discussion of the trial court's decision in the December 2004 issue of the Airline Management Letter.) Reversing the trial court's decision, the First Circuit held that the dispute is a minor dispute under the Railway Labor Act (RLA) and should be settled pursuant to the RLA's arbitration procedures.

    In 1999, Guilford Transportation Industries, Inc. (Guilford) formed a wholly owned subsidiary, Pan American Airlines, Inc. (PAA) as a repository for the assets of a bankrupt airline. PAA placed those assets in a wholly owned subsidiary, Pan American Airways Corp. (Pan Am), which began offering commercial airline service aboard a fleet of leased Boeing 727 jet aircraft. Due to financial difficulties, Pan Am informed federal regulators in June 2004 that it would cease flight operations on October 31, 2004. Pam Am's pilots were represented by ALPA.

    In 1999, PAA formed a second wholly owned subsidiary, Boston-Maine, which is a commercial airline whose pilots are not represented by a union. Boston-Maine originally operated only Jetstream 31 turboprop aircraft, but in August 2004 began operating B-727 aircraft formerly flown by Pan Am. After Pan Am began transferring the work of flying B-727s to Boston-Maine, ALPA sought an injunction preventing this transfer until the dispute resolution processes under the RLA could be exhausted. The trial court entered the injunction and the First Circuit reversed this decision.

    The First Circuit held that Guilford's interpretation that the CBA between ALPA and Pan Am permitted contracting out some of Pan Am's scheduled flights was arguably justified and, thus, the contracting out issue was a minor dispute that must be resolved through arbitration.

    The court also held that Guilford's decision to close Pan Am was a management prerogative and that pilots have no right under the RLA to insist that management try to make a go of a unionized business. "Because employees have no right to force a company to remain in business, they lose nothing when, after the company fails, an affiliated company absorbs some (or perhaps all) of the closed company's business operations." The court also held, however, that a union might have an arguable claim if a company that closes its doors would not have done so but for the opportunity to transfer its organized operations to a non-union affiliate. In this case, the court found no evidence in the record that Pan Am was shut down for the purpose of shifting its union work to its non-union affiliate, but held on remand, the union should be entitled to present such evidence. If the union could do so (and the court noted that this is a long shot), a major dispute would exist.