Labor peace provision could scuttle city's fresh five-year lease deal with American Airlines

The city has a pending lease deal with the airlines at Philadelphia International Airport, but it could be scuttled over a City Council "labor harmony" provision making it easier for lower-paid workers at the airport to unionize.

American Airlines, Philadelphia's hub carrier with 70 percent of the airport passenger traffic, and the other airlines have agreed to a new five-year lease with two one-year extensions with the Nutter administration that provides $158.2 million in capital investment. Also, it would include up to $750 million for one additional airport project to be chosen in the next 18 months.

A City Council committee was scheduled to consider a bill on Wednesday authorizing the commerce director to enter into use-and-lease agreements between the city and each of the airlines at the city-owned airport.

However, the committee hearing was postponed because of a stumbling block over the labor provision City Council approved in December, and whether or not to include it in the airlines' new lease.

American Airlines officials and attorneys shuttled between closed-door meetings in City Hall with representatives of the Service Employees International Union (SEIU) and other airport stakeholders, in an effort to reach a compromise.

Council President Darrell Clarke adjourned the hearing until 9 a.m. Thursday.

"The airport is one of the most significant economic engines in the city," Clarke said afterward outside Council chambers. "Our ability to see that expand and enhanced over time is clearly something we, as the government, would like to see.

"But these negotations are tough about a number of specific issues," Clarke said. "We've recessed today, with the hope that between now and tomorrow morning [Thursday] they can get a consensus and we can make whatever amendments are needed to be made and we can move ahead with a use-and-lease agreement."

Under the lease terms, the airlines agreed, beginning July 1, to require all airline subcontractors to pay $12 an hour to about 2,000 low-wage airport employees. These workers - wheelchair attendants, skycaps, aircraft cleaners, and baggage handlers - now earn as little as $7.25 an hour plus tips.

Many Philadelphia airport workers are covered by union contracts, but these service employees work for low-bid contractors hired by the airlines.

There is a time crunch to getting the proposed lease - with or without the labor provision - approved by June 30, when the current lease expires.

It must be approved, or voted out, by the Council committee early Thursday, with a first reading at Council's regular session later Thursday, and considered by the full Council on June 18, the last day Council is in session until September.

If the airlines do not sign the lease by June 30, the Philadelphia airport would collect landing and gate fees from them under a city regulation, "which raises a series of significant risks and concerns," said airport chief executive Mark Gale, in prepared remarks for the Council hearing.

The airport's capital improvement program and hundreds of union construction jobs would halt, the city said.

Philadelphia voters in May 2014 approved a "living wage" standard requiring firms with city contracts to pay their workers $12 an hour plus benefits as of July 1, 2015.

The airlines, led by American, refuse to agree to the "labor harmony" provision introduced by Councilman W. Wilson Goode Jr. and approved by City Council on Dec. 11. It's designed to improve work rules and conditions, help solve labor disputes, and make it easier for subcontracted workers to unionize. If City Council insists the provision be included in the lease, American and the airlines will not sign it.

The workers would need only to express interest, or sign a petition, to unionize, and the SEIU would become their union, thereby bypassing National Labor Relations Board procedures for voting on and selecting a labor union, according to the City of Philadelphia law department.

American's position is that the labor provision at issue would set a precedent across the country and increase the airline's operating costs, the city said.

An interfaith clergy group, Philadelphians Organized to Witness, Empower and Rebuild (POWER), which supports the subcontracted workers, said American is trying to engineer a "loophole" that undermines the wishes of Philadelphia voters and freeze the workers' wages for seven years - the period of the new lease.

Gale said in his prepared remarks that the proposed lease "means continued growth and development for the airport and for the city. It will ensure and create jobs."

The value of the current and proposed new agreements is "between $2.7 billion and $4.1 billion," Gale said. Over the proposed five- to seven-year term, airlines would pay an "estimated total of $1.3 billion to $2.1 billion in airport rates and charges," he said.

The rates and charges are used to operate and maintain the airport terminals and airfield, and to finance capital projects, Gale said.

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