Republic remains at odds with pilot union over compensation benchmarks

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Republic Airways Holdings chief executive Bryan Bedford says the International Brotherhood of Teamsters (IBT) has taken an "inexplicable" position that its competitive peer group for airline pilots includes carriers such as Hawaiian Airlines, Air Canada and JetBlue.

Bedford, speaking during Republic's second quarter 2012 investor call last week, said the main cause of distance between the company and the IBT in negotiating a new pilot contract is a difference in how to define Republic's peer group for compensation benchmarking purposes.

"Frankly, this is just baffling to us," says Bedford. "And it's the primary reason we remain far apart in the bargaining process."

In a regulatory filing dated 30 April, Indianapolis-based Republic stated that its compensation committee has changed the peer group it uses to benchmark compensation for executives.

For 2011, that peer group included Air Tran Holdings, Alaska Air Group, JetBlue Airways, UAL and US Airways Group.

For 2012, Republic changed that list to a grouping that includes transportation companies outside of the airline industry with similar revenues and attributes as itself, which extend the peer group to the freight, shipping, trucking, air freight and similar industries, although it does include two carriers - Pinnacle Airlines and SkyWest Inc.

The airline says it also "periodically reviews benchmarking information" for its core peer group plus AMR Corp., Delta Air Lines, Southwest Airlines, United Continental Airlines, US Airways group, Hawaiian Holdings and SkyWest for "annual incentives, equity-based incentives, benefits and perquisites."

Republic said it changed the peer group for benchmarking executive compensation to represent airline mergers and so that it more closely accounts for the transportation industry in a broader sense. The company said in the filing that it competes with these non-airline companies for new management hires.

The union contends that through this process, Republic has excluded carriers with higher pay rates that fly the same type of equipment but are not the same type of operation, thus limiting the airlines in the company's peer group.

IBT says that it used Republic's 2011 benchmarking group when making the final proposal for the Republic pilot contract, which has been amendable since April 2007. It says it has used a population of airlines to determine a peer group that includes all carriers who fly the same "equipment" as Republic.

In July, the airline division of IBT sent a letter to the National Mediation Board, requesting a release from Republic pilot contracts, which would commence arbitration.

"We disagree that a release was necessary at this stage in the negotiating process," says Bedford.

So far, the NMB has not authorised a release from mediation between IBT and Republic. The union says the possibility of pilot work stoppages is still on the table if it cannot settle its differences with Republic.

"We remain ready to conclude a new agreement that compensates our co-workers fairly compared to their regional airline peers," says Bedford. "We very much look forward to a quick and positive conclusion to these negotiations."

The IBT represents approximately 2,200 Republic pilots, as well as 1,900 flight attendants and 350 mechanics.