Alaska/Virgin America Pilot SLI Arbitration – Opinion and Award Page 1 of 2 1 ARBITRATION PROCEEDINGS AIR LINE PILOTS ASSOCIATION MERGER POLICY In the Matter of the Seniority List ) Integration Arbitration Between: ) ) ) THE PILOTS OF ALASKA AIRLINES ) ) and ) ) THE PILOTS OF VI RGIN AMERICA ) ) ) OPINION AND AWARD Board of Arbitration: Fredric R. Horowitz, Chair man Stephen E. Crable Dennis R. Nolan Appearances: ALA Merger Committee: Bredhoff & Kaiser, PLLC By: Roger Pollak, Jo shua B. Shiffrin, and Jeffrey Freund VRD Merger Committee: Altshuler Berzon, LLP By: Jeffrey B. Demain and Eric P. Brown Merger Committees: For the ALA Pilots: William Shivers, Chair Paul Emmert Brian Good Rob Stumph Greg We rtz For the VRD Pilots: Grant Bachman, Chair Robert Casey James Coffelt Mario James Michael Zenner Alaska/Virgin America Pilot SLI Arbitration – Opinion and Award Page 2 of 2 1 I. INTRODUCTION These proceedings arise out of the acquisition of Virgin America by Alaska Airlines which was announced on April 4, 2016. Airline acquisitions and mergers inevitably present problems in integrating the pilots of the respective carriers. Because both carriers’ pilots were represented by ALPA, ALPA’s April 2009 Merger and Fragmentation Policy governed the Seniority List Integration (S LI) process. A central purpose of that policy is to establish a procedure for “concluding the fair and equitable merger of seniority lists” (Joint Exhibit 1, p.2). The ALPA Policy establishe s certain principles for a fair seniority integration policy. These principles are of particular relevance here (Joint Exhibit 1, p.4): 1. This policy calls for fair and equitable integration of seniority lists, but aside from the specific requirements embodied in policy, what appears to be “fair and equitable” typi cally differs depending upon the eyes of the beholder and it may be difficult to reach a consensus or there may be no consensus on what is “fair and equitable. . . .” 4. The merger representatives should recognize the difficulty of forecasting what will occur well into the future. 5. ALPA’s role through this policy is solely to provide the process by which the pilot groups conclude the integrated seniority list for presentation to management, using arbitration if necessary, together with the opportunit y for MECs to agree on alternative processes that meet their own needs. 6. If agreement cannot be reached, final and binding arbitration is mandated by this policy on unresolved issues. Each pilot group must recognize that the arbitration process involves the assumption of very substantial risk to the interests of the pilot group, since there is no means of predicting the outcome. The policy also lists certain criteria for a “fair and equitable” seniority list (Joint Exhibit 1, Sec. 45.C.4.e.). Section 4 5.C.5.a.(2) specifies that these criteria apply to pilot negotiators as well as to mediators and arbitrators: Factors to be considered in constructing a fair and equitable integrated seniority list, in no particular order and with no particular weight, sh all include but not be limited to the following: ■ Career expectations. ■ Longevity. ■ Status and category. Alaska/Virgin America Pilot SLI Arbitration – Opinion and Award Page 3 of 2 1 The ALPA policy provides for mediation and , ultimately , arbitration if the respective pilot groups are unable to reach agreement on merging the ir seniority list. At the outset, the parties reached a number of agreements that advanced this process. Among them were a Transition and Process Agreement (“TPA”) concluded in December 2016 (Joint Exhibit 2); a Protocol Agreement, dated January 3, 2017 , attached to the TPA which defines important terms; and a joint collective bargaining agreement (“JCBA” or “CBA”) (Joint Exhibit 5 ) , on November 1, 2017. The Protocol Agreement sets the Merger Announcement Date (April 4, 2016) as the Constructive Notice Date that places pilots hired on after that date at the bottom of the new seniority list, defined as the Integrated Pilot Seniority List (“IPSL”). The parties appointed this Board of Arbitration (“Board”), which consists of three impartial arbitrators, p ursuant to the ALPA policy and the Protocol Agreement. To assist the Board, they negotiated fifteen Stipulations and Agreements dated July 25, 2017 (Joint Exhibit 3). The second stipulation sets the merger closing date, December 14, 2016, as the “snapsho t date” for “analysis of the respective pre - merger equities.” Other stipulations provided for exchange of certified seniority lists, agreed that both parties would use Harmony as their software program, defined date of hire (“DOH”) for measuring longevity as “the first day of indoctrination, to include any scheduled, required company orientation,” and set the method for counting and stovepiping the affected positions. The parties further agreed to use the carriers’ respective fleet plans as of the Snapsho t Date for the arbitration but without prejudice to any arguments they wish to make about the relevance of fleet plans in building the IPSL. The parties agreed that, for purposes of seniority list integration, there would be just one category called “narr owbody.” On March 19, 2017, the parties agreed on Ground Rules which were adopted by the Board (Joint Exhibit 9). The Ground Rules established dates for arbitration hearings in April and May, 2018, the order of proceeding, and other procedural matters. The Ground Rules identified nine Joint Exhibits and provided that the Board would have 60 days after submission of briefs to issue the Award. The Alaska and Virgin America pilot groups negotiated through their merger committees but were unable to reso lve their differences. Mediation occurred in January 2018 before Board Chairman Horowitz. Despite the best efforts of the parties, they could not reach agreement on the IPSL. Pursuant to Paragraph 2. I. of the Protocol Agreement and reiterated by the pa rties at the conclusion of mediation, the mediator did not share the discussions and proposals exchanged in mediation with the other Board members. The Board of Arbitration held hearings in Santa Monica, California on April 9 - 12 and May 7 - 9, 2018. The parties submitted their briefs on July 27, 2018. Thereafter, the parties jointly asked the Board to release the Award to counsel via email on October 11, 2018. Alaska/Virgin America Pilot SLI Arbitration – Opinion and Award Page 4 of 2 1 II. ALASKA AND VIRGIN AMERICA HISTORY AND OPERATIONS Alaska Airlines and Virgin America eac h operated fleets of narrowbody aircraft. Alaska operated narrowbody Boeing equipment and Virgin America operated narrowbody Airbus aircraft. Both marketed their air services as a low cost, premium service product. The pilots of both airlines were repre sented by the Air Line Pilots Association. ALPA had a longstanding relationship with Alaska and collective bargaining agreements going back decades, while Virgin America pilots only recently voted for ALPA representation. At the time of the merger announ cement, ALPA had not yet negotiated a first agreement with Virgin. T he Alaska pilot agreement provided significantly better pay, work rules, pension and insurance benefits than the status quo pay and conditions at Virgin America developed with some input from Virgin America pilots before ALPA representation. In most other respects, the histories, operations, and finances of the two airlines were very different. A. Alaska Airlines Alaska Airlines’ predecessor carrier was founded in 1932. F rom its incep tion Alaska was one of the most successful airlines in aviation history. Of all the legacy air carriers operating before airline deregulation in 1987, only Alaska Airlines managed to be consistently profitable without resorting to the bankruptcy courts. Before its acquisition of Virgin America, Alaska employed approximately 1,721 pilots and flew 155 aircraft to 112 destinations. Alaska maintained pilot bases in Seattle, Portland, Anchorage, and Los Angeles. Alaska’s route structure focused on north - s outh flying on the W est C oast. Over time, Alaska expanded its transcontinental flying with the addition of Washington , DC and other significant eastern destinations. Alaska experienced steady growth since 2011 Between 2011 and 2016, its fleet grew f rom 117 to 148 aircraft. The impact of an increased fleet count and increased fleet gauge dramatically increased Alaska’s available seat miles (“ASMs”). In the eight years prior to its acquisition of Virgin America, Alaska ASM’s grew by 60%. This growth stood in contrast to the industry trend that found every other major carrier except Southwest contracting and declaring bankruptcy. Alaska added over 100 new markets to its network during this period, growing three times faster than the rest of the indus try from 2010 to 2016. Alaska was able to achieve these outsized returns in part because of the strength of its Seattle and Portland hubs where it leveraged its dominant seat share (57% at Seattle and 48% at Portland in the first quarter of 2016). As of the Snapshot Date of December 14, 2016, Alaska’s stand - alone fleet consisted of 155 Boeing 737 - series aircraft. Alaska/Virgin America Pilot SLI Arbitration – Opinion and Award Page 5 of 2 1 Not surprisingly, Alaska’s operational success led to financial success. Over the five years prior to the merger, Alaska had the highest prof it margin in the industry (18.9%). Alaska’s profit margin grew almost year by year — more than doubling between 2010 and 2016, when its pre - tax profit margin rose to 24.4%. The effect of this financial success led to outsize returns for Alaska’s shareholde rs. Between January 1, 2009, and January 1, 2016, Alaska ’s share prices increased by more than 1000%. These returns exceeded the returns to shareholders in Southwest and Allegiant, the two other carriers who were experiencing positive financial and opera tional results during the comparable period. B. Virgin America Virgin America started operations in 2007 as a small transcontinental carrier that sought to differentiate itself by offering a premium product at affordable prices. Virgin America’s servic e offered several innovations, including first class service, Wi - Fi access, free in - seat entertainment, in - seat power, comfortable seating, extra legroom in the main cabin select section, and food and beverage service on demand via seatback screen. Virgin America’s market strategy relied heavily on its affiliation with Richard Branson’s Virgin Brand which appealed to business travelers and younger, more hip travelers. The initial pilot cadre was based in San Francisco, Los Angeles and New York (JFK). The primary focus of Virgin America flying was coast to coast centering on the pilot domicile cities. On the snapshot date of December 14, 2016, Virgin America employed 690 pilots operat ing 63 aircraft to 24 destinations. Virgin America’s operational and f inancial progress following its startup were problematic, particularly as contrasted with Alaska. Between 2007 and 2012, Virgin America lost $600 million. Despite these losses, Virgin America continued to expand service and order aircraft. In 2011, Virg in America ordered 60 new Airbus aircraft. Half of the orders (30 aircraft) were set for delivery in 2015 - 16. The other 30 aircraft were scheduled for delivery between 2016 and 2019. In 2012, however, driven by less than successful financial and operati onal results, Virgin America underwent a significant restructuring. Virgin America curtailed growth and significantly reduced aircraft orders. 1 Virgin America cancelled 20 of its 30 near term deliveries and pushed the other 30 orders to delivery in 2020. The impact on capacity was negative. Between 2012 and 2013, and then again between 2013 and 2014, Virgin America decreased total capacity. Between 2014 and 2015, Virgin America marginally increased total capacity. While Virgin America’s aircraft purch ases fluctuated over its history, from the date of its start up until the snapshot date Virgin America’s fleet grew by an average of 6.2 planes per year. 1 Virgin America’s start up experience sharply contrasted with other comparable carriers . JetBlue and AirTran grew their fleets faster than Virgin America in their first five years (60 and 50 aircraft, respectively, versus 37 for Virgin). Both airlines quickly turned a profit, JetBlue after one year, and AirTran after two. Jet Blue earned $437 million in operating profit in its first five years compared to the hundreds of mil lions lost by Virgin America. Alaska/Virgin America Pilot SLI Arbitration – Opinion and Award Page 6 of 2 1 The recession of 2008 and 2009 , the bankruptcies , and the drastic consolidation of the airline indus try during Virgin America’s early years presented a daunting challenge. While Alaska had sufficient market power in its Northwest hubs, Seattle and Portland, to withstand and grow in the era of mega - carriers like American, United and Delta, Virgin America was not well positioned for the changes occurring in the industry. Virgin America competed heavily o n its routes with the legacy mega - carriers, and it lacked dominant market share in any of its bases. Virgin America’s largest seat share at any airport w as SFO, where it registered a 12% seat share in the first quarter of 2016. Its next largest position was 7% at Dallas Love Field, where Southwest controlled 91% of the seats. Virgin America also had a 6% seat share at LAX and 4% at JFK. None of these po sitions provided Virgin with the marketing leverage that comes from dominating a hub. From its startup to 2016, Virgin America added service to 56 total routes, looking for a profitable niche. As a result of Virgin America’s various operational, financi al, marketing , and strategic decisions made between its startup and 2015, it finally managed a profit margin of 13.2% in 2015. This margin was only slightly lower than the 13.9% average margin of American, United and Delta (all with higher labor costs) bu t was substantially less than Alaska’s. In 2016, the year of the acquisition, Virgin America achieved its most profitable year ever, earning $210 million in pre - tax profit. However, as a result of large losses in its early years, Virgin America was unpro fitable for its ten - year existence, losing a cumulative $288 million over that period of time. By the time of its acquisition by Alaska, Virgin America’s standalone operations as well as its financial and cost structure had shown consistent improvement. Virgin America shareholders were handsomely rewarded, with Alaska paying $57 per share for shares offered at $30 per share in Virgin America’s Initial Public Offering in 2014. III. POSITIONS OF THE PARTIES A. Alaska Committee The Alaska Integrated Pil ot Seniority List Committee (“Alaska Committee”) argues that ALPA merger policy calls for a merged list that is fair and equitable. T he three pillars of ALPA Merger Policy are longevity, career expectations, and status and category. The first two of these considerations decidedly favor the Alaska pilots. Alaska pilots have far more longevity than Virgin America pilots, and Alaska pilots had far superior pre - merger career expectations. The third pillar of ALPA merger policy is neutral. Both Alaska Airlin es and Virgin America flew only one category of equipment, narrowbody, and had only two status es, Captain and First Officer. Alaska/Virgin America Pilot SLI Arbitration – Opinion and Award Page 7 of 2 1 The Alaska Committee argues that a fair and equitable integration for Alaska and Virgin America pilots means honoring the superio r longevity of the Alaska pilots, protecting the superior career expectations of the Alaska pilots up and down the list , and minimizing changes to the career expectations of Virgin America pilots to the extent possible consist ent with the above. The Alas ka Committee points to numerous equitable considerations that make its proposal for an IPSL fair and equitable. Alaska Airlines has been operating since 1935. It has successfully weathered the financial and business model storms following Airline Deregul ation in 1979. Alaska has a strong balance sheet, an enviable record of earnings and a stock price that matches its financial success. While most of the industry’s pre - deregulation network carriers have filed for one or more bankruptcies, Alaska consiste ntly has been profitable. Alaska has defended its home turf from incursion by American, Delta and United, the three industry giants. Over the years, Alaska has successfully added equipment, focus cities, and flight frequencies to its network of service. The existing JCBA between ALPA and Alaska Airlines is a product of years of negotiations and provides pay and work rules that are far superior to the pay and work rules that exist at Virgin America. Finally, the attrition of Alaska pilots who will rea ch age 65 in the next few years would have provide d pilots working for a standalone Alaska Airlines with a significant opportunity to spend more career time in Captain status than comparable expectations for Virgin America pilots. The Alaska Committee s harply contrasts the history and prospects of Alaska Airline with the history and prospect s of Virgin America. The Alaska Committee notes that Virgin America only began operations as a small startup carrier in 2007. For most of its history, Virgin Americ a lost money. Virgin America has entered, withdrawn from, and then re - entered cities and routes. It has ordered new equipment, then cancelled some of the orders and deferred others in very short periods of time. Virgin America attempted to plan for expa nsion, but it ultimately pursued merger opportunities. In the Alaska Committee’s view, these actions reflect a business without a successful strategy for running a stable, profitable airline. Indeed, at the time Virgin America and Alaska entered into a merger agreement, the Virgin America Board of Directors concluded that a sale, not running an independent airline, was the strategy that best maximize d shareholder value. And that Alaska Airlines, rather than any of the other airlines interested in acquir ing Virgin America, offered the best possibility for long term survival. With these considerations, the Alaska Committee proposes an IPSL constructed in four steps. First, build a hybrid list of all active pilots with a 70% longevity/30% status - and - cate gory weighting. Second, reorder approximately the bottom third of the hybrid list using a straight Alaska/Virgin America Pilot SLI Arbitration – Opinion and Award Page 8 of 2 1 ratio of 2.0899:1 (i.e., 558/267). This adjustment results in a group of junior Virgin First Officers being moved incrementally down the list (versus their positions in a 70/30 hybrid list, with 51 Virgin First Officers being grouped at the end of the list.) Third, plug each inactive pilot into the list one pilot senior to the pilot junior to him or her on his or her pre - merger seniority list. Fourth, supp lement the IPSL with condition s and restriction s providing reduction protections to Alaska and Virgin America Captains. The Alaska Committee argues that the proposed ratio is necessary to protect the legitimate career expectations of Alaska First Officer s tak ing into account Time in Seat (“TIS”) differences. Using a 70/30 formula for an I P SL results in post - merger Alaska pilots experiencing a small increase in the TIS as a First Officer (and less TIS as a Captain) while Virgin American pilots experience the opposite (a decrease in First Officer TIS and an increase in Captain TIS). Ratioing the lower third of the list mitigates this inequity to a large extent. Over time, the Alaska Committee asserts that the proposed ratio effect for Alaska pilots largel y disappears , and the Virgin America pilots will not receive a windfall not otherwise supportable by the relative equities of the pilot groups. In its conditions and restrictions proposal, the Alaska Committee sought to protect both Alaska and Virgin Ame rica Captains who might be displaced by operational changes following the merger. The Virgin Committee made a similar proposal but with a different approach. Following the initial round of hearings in arbitration, the Alaska and Virgin America Committees met in mediation to resolve those differences. The parties reached a mutually satisfactory agreement which at their request has been adopted by the Board and included in Paragraph B.7. of the Award. B. Virgin America Committee The Virgin America Inte grated Pilot Seniority List Committee (“Virgin America Committee”) asserts that a “fair and equitable” integrated seniority list would be achieved by taking into account each of the three factors identified by Section 45 of the ALPA Merger Policy: career expectations, longevity, and status and category. According to the Virgin America Committee, the career expectations of both pilot groups are similarly positive. Alaska pilots have greater longevity, but correcting for longevity differences can be achiev ed by adjusting the percentage weight given to longevity in a way that balances the interests and expectations of the two groups and arrives at a result that is fair and equitable. Category and status, the third consideration under ALPA merger policy, is neutral in this dispute since both Alaska and Virgin America operate only one classification of aircraft, narrowbody. That makes this seniority list merger simpler than other rec ent arbitrated seniority lists. Alaska/Virgin America Pilot SLI Arbitration – Opinion and Award Page 9 of 2 1 The Virgin America Committee asserts that t he task of integrating the pre - merger seniority lists of Alaska and Virgin America is facilitated by the similarity between the pre - merger carriers. Both airlines served the same low - cost, premium segment of the market. Both Alaska and Virgin America wer e profitable and growing. Both had experienced continuous fleet growth. In short, both merger partners came from positions of strength, with complimentary operations, and made nearly equal contributions to the success of the merged Alaska Airlines. Both airlines projected fleet growth, separately as well as together, and reasonable fleet growth must be built into any analysis of the merger’s impact on pilot seniority. The Virgin America Committee argues that Virgin America had three advantages that con tributed to its impressive operational and financial performance: (1) it offered a premium travel experience, while (2) maintaining a Low - Cost Carrier (“LCC”) cost structure, and (3) it had an established presence and critical access in key markets for tra nscontinental and west coast travel that positioned it well for continued growth. The Virgin America Committee notes that Virgin America’s financial and operational success is a particularly significant consideration for th e Board Virgin America comm enced operations in 2007 and in a relative short time grew from 6 aircraft to 62 aircraft (with orders for more) in 2016. Since 2012, and following a successful IPO, Virgin America has been an increasingly profitable and growing airline. From 2013 throug h 2015, its pre - tax income increased dramatically. The airline’s total revenue per available seat mile (adjusted for stage length), which is a critical measure of financial success, increased dramatically. Using this key measure, Virgin America’s results were on par with Alaska Airlines and only exceeded by the big three airlines, American, Delta , and United. The Virgin America Committee points to Virgin America’s reputation and system operations as equitable considerations supporting the Virgin Comm ittee’s proposal. From its inception, Virgin America consistently won awards for best business and leisure travel and highest quality of service from numerous travel publications and business journals. Virgin America’s reputation as a premium brand enabl ed it to maximize profits. Virgin America’s presence in key markets and its route structure positioned it well for continued growth and profitability. The bulk of Virgin America’s flying was in long - haul markets, with its focus cities being Los Angeles a nd San Francisco. A significant portion of flying was long haul transcontinental flying. In many cases, Virgin America also controlled valuable slots at capacity - controlled East Coast airports, including LaGuardia, JFK, Newark, and Washington Reagan Nati onal. Taking into account the revenue generation of its premium brand, low cost model, and route structure, Virgin America was not only profitable, but had a secure future as a standalone airline. Without the valuable assets and synergies brought to the merger by Virgin America, it Alaska/Virgin America Pilot SLI Arbitration – Opinion and Award Page 10 of 2 1 would have been extremely difficult for Alaska to become a truly national carrier as a stand - alone carrier. After taking these considerations and other equities into account, the Virgin America Committee proposes to achieve a fair and equitable IPSL by using the type of hybrid methodology adopted in other recent integrations, including United/Continental and American/US Air. The Virgin America Committee’s methodology assigns a weight of 15% to longevity and 85% to status. T his approach preserves pilot career expectations to the greatest extent possible, recognizes and credits the greater longevity of Alaska pilots, and results in an IPSL that leaves all pilots in a position close to that they held on their respective pre - mer ger seniority lists. The fairness of the Virgin America Committee’s proposal is demonstrated by the fact that the Alaska pilots, as a group, will see a modest increase in their relative position on the IPSL as compared to their positions on the pre - mer ger Alaska seniority list. More importantly, the Virgin America Committee proposal contains, at least initially, a disproportionate number of Alaska pilots at the top of the list. This initial imbalance will self - correct in fairly short order for three r easons. First, the age difference, and attendant attrition advantage, is not as great as the longevity disparity suggests. Second, the higher rate of Alaska pilot retirements dissipates over time. Third, pre - merger Virgin America First Officers actually had expectations of upgrading more quickly than their Alaska counterparts because of Virgin America’s faster rate of growth. Accordingly, the Virgin America Committee’s proposed IPSL itself achieves a fair result without a need for fences or other potentia lly problematic restrictions since the disparity will self - correct over time. As part of its pre - hearing proposal, the Virgin America Committee, like the Alaska Committee, proposed certain conditions and restrictions. As noted above, to their credit, th e Committees have reached an agreement on the conditions and restrictions to be incorporated into the final arbitration award. C. Alaska Committee Rebuttal to Virgin America Proposal The Alaska Committee argues that the Virgin America Committee’s IPSL proposal is not fair and equitable because the proposal ignores ALPA merger policy and produces a windfall for the Virgin America pilots at the expense of the Alaska pilots. The Virgin America Committee’s proposal essentially ignores longevity as one of t he primary considerations in developing a fair and equitable IPSL. Instead, the Virgin America Committee proposal relies almost exclusively on c ategory and s tatus. By doing so, the Virgin America Committee list becomes a list based on relative seniority. Relative seniority is not mentioned in ALPA merger policy and the concept of relative seniority has been eschewed in previous SLI arbitration decisions. The harm that results Alaska/Virgin America Pilot SLI Arbitration – Opinion and Award Page 11 of 2 1 when longevity is ignored in a seniority integration dispute is sadly illustra ted by the labor relations chaos that resulted from the award involving USAir and America West. The Alaska Committee further contends that the Virgin America Committee’s relative seniority - based proposal also ignores the superior career expectation bro ught to the merger by the Alaska Pilots and rests on incorrect factual assertions. The Virgin America Proposal would cause Alaska First Officers to lose Captain time and Virgin America First Officers would significantly gain Captain time. This windfall c annot be justified under the fair and equitable standard. Finally, the Alaska Committee concludes that the Virgin America Committee’s fears of Alaska pilots moving into Virgin America bases are wildly overblown and that the condition - and - restrictions agre ed to in mediation adequately address any potential harm to Virgin America Captains due to displacement. D. Virgin America Rebuttal Alaska Committee Proposal The Virgin America Committee argues that the Alaska Committee’s proposed IPSL is not fair and e quitable and overweights the greater longevity of Alaska pilots while largely ignoring classification/status and the career expectations of Virgin America pilots. The Alaska Committee proposal allows Alaska pilots to capture the premium flying and schedul es that Virgin America brought to the merger and effectively build s fences around the Alaska bases, excluding Virgin America pilots. The Virgin America Committee urges that the Alaska Committee’s proposal greatly increases the relative seniority of Alaska pilots and decreases the relative seniority of Virgin America pilots. The Virgin America Committee argues this change in relative seniority is not justified by the equities and is out of line with other recent IPSL decisions. The Virgin America Committ ee also criticizes the assumption by the Alaska Committee that the IPSL should be built assuming a static fleet count. The Virgin America Committee notes that both Alaska and Virgin America have projected fleet growth, so it is illogical and inequitable t o assume that the fleet of the merged airline will not grow. Finally, the Virgin America Committee notes that the time to upgrade to Captain at Virgin America took about five years. This progression contrasted with the more than 12 years for an Alaska Fi rst Officer to upgrade to Captain. This upgrade differential, along with the increased time in seat as a First Officer for Virgin America pilots in the merged airline, further illustrate the unbalanced and unfair nature of the Alaska Committee’s IPSL prop osal. Alaska/Virgin America Pilot SLI Arbitration – Opinion and Award Page 12 of 2 1 IV. OPINION A. Introduction ALPA Merger Policy requires the Merger Committees, and now this Board , to consider three factors in no particular order and with no particular weight: longevity, pilot career expectations, and status and category. Th e Board may also consider other factors relevant to achieve a fair and equitable list. The Merger Committees have worked cooperatively and made considerable progress to achieve such an IPSL. They adopted a common software program and measures for computi ng longevity They agreed the relative positions of each pilot on their separate lists shall not be changed. They have simplified the process by agreeing the Boeing and Airbus aircraft flown by the respective groups shall be deemed a single category for purposes of building the IPSL as well as to the method for “stovepiping” pilots and positions on the list. As reflected in their proposals, the Merger Committees agree that the IPSL should retain the pilots’ status (Captain or First Officer) as of the Sna pshot Date. The Board finds each of these agreements to be significant and entirely consistent with parties’ mandate under ALPA Merger Policy to establish a fair and equitable list. Despite their progress towards a shared goal, the Merger Committees hav e consistently viewed the career expectations of each pilot group, both pre - and post - acquisition, through vastly different lenses. They also differ widely on the weight to be accorded the substantial gap in longevity enjoyed by a sizable portion of the A laska pilot group when combining the IPSL in a fair and equitable manner. The task of this Board is to reconcile these sharply conflicting views and perspectives as fairly, equitably, and reasonably as possible on the basis of the evidence presented. In constructing the IPSL, the Board has considered the history, size, and operations of each pre - acquisition carrier as well their respective contributions to the combined enterprise as these facts inform the career expectations of each group. The Board h as also recognized the “sweat equity” as measured by longevity and its critical importance to every pilot in determining the emoluments of employment for bidding upgrades, displacements, equipment, bases, scheduling, and time off. While informed by the ex perience of prior mergers, the Board notes that each case turns on its own unique facts and recognizes that the result, no matter how well crafted, will not meet the expectations of each individual pilot. Because the focus of this examination is necessari ly on groups of pilots rather individuals, an integration of this magnitude will inevitably produce perceived disparities or mismatches at any given place on the list. Moreover, no pilot’s career expectations contemplate a particular merger or acquisition given the unknowns of who, when, and under what conditions one might occur in a volatile industry. T he prior career expectations of both pilot groups were irrevocably altered the day this acquisition Alaska/Virgin America Pilot SLI Arbitration – Opinion and Award Page 13 of 2 1 was announced. It is the Board’s responsibility to we igh all competing considerations and integrate the list as fairly and equitably as possible. Given the voluminous record and extensive arguments filed by the Merger Committees, it would serve no useful purpose to recite every fact or comment on every arg ument made by either Committee. Nor does the Board attempt to articulate with mathematical precision the weight to be assigned each specific consideration that is part of the Board’s determination of a fair and equitable seniority list. However, the more significant factors which drive the decision will be reviewed. In addition to the specific considerations discussed below, the Board analyzed many other relevant factors and performed an extensive balancing of competing interests that is implicit in deve loping a fair and equitable merged seniority list. B. Longevity Longevity is one of the three considerations enumerated in ALPA merge r policy. The most recent amendment to ALPA policy, following the experience of USAir and American West, added longe vity as one of the three specific factors that must be considered. Historically, longevity always has been a major consideration in the merger of pilot senior lists, but the record suggests the specific addition of longevity to ALPA policy was motivated i n large part by the significant weight that pilots assign to longevity. Longevity is particularly important to pilots because it is, for lack of a better term, “currency of the realm”. Longevity determines a pilot’s domicile, monthly flying schedule, the equipment flown, vacations and many other aspects of the pilot’s personal and professional life. Absent a merger between airlines, w hen a pilot leaves one airline to work for another, longevity from the old airline does not carry over to the new airline. Both Committees acknowledge the importance of longevity in determining the merged seniority list. Not surprisingly, however, the Committees assign longevity radically different weights. The Alaska Committee argues longevity should be given the prepo nderant weight, as contrasted with status and category. The Virgin America Committee argues the opposite, asserting career expectations and status and category should be given primacy over longevity in determining the merged list. The Board concludes th at longevity should be the single largest consideration in driving the method for merging the lists. The A laska group is more than double the size of the Virgin America group, and senior Alaska pilots have decades of hard earned sweat equity. That longev ity which allowed Alaska pilots to achieve their current status, domicile, and other longevity related benefits must be given significant weight. As of the snapshot date, the most senior Alaska pilot had 37 years of longevity while the most senior Virgin America pilot had slightly more than 10 years 64% of Alaska pilots had more than 10 years of longevity. Only 4% of Virgin America pilots had more than 10 years. Alaska/Virgin America Pilot SLI Arbitration – Opinion and Award Page 14 of 2 1 The Virgin America pilots, recognizing that longevity heavily favors Alaska pilots, urged the Board to consider their comparability in terms of age and overall flying experience. Those factors are not part of longevity as the parties have defined it pursuant to the ALPA policy, and we decline to use them to reduce the importance of longevity i n creating our integrated seniority list. The age and experience of the Virgin America pilots , however, are considered below in the context of their career expectations. C. Career Expectations Career expectations for steady employment and upgrade oppor tunities are a critical factor in balancing the equities that drive a merged seniority list. The two primary components of a pilot’s career expectations are job security and job opportunities , most importantly upgrades Both are largely determined by the strength, stability, financial health, track record, growth rate, and strategic success of the pilot’s airline. Pilots will obviously have greater career expectations at a financially stable and steadily growing airline than they would at a startup or at an airline with a history of financial cris e s. The Board finds that job security, the first component of career expectations, favors the Alaska pilots. Alaska Airlines has existed since 1935 and ALPA has represented its pilots since 1947. Alaska has s uccessfully negotiated the minefield of airline deregulation that sent most , if not all, of its competitors to bankruptcy, liquidation, or merger. Alaska has a strong balance sheet and earnings record. The price of Alaska stock has risen sharply as a res ult of its financial success and its consistent profitability. Alaska’s strategic planning resulted in a highly developed base of operations that has allowed it to fend off American, Delta and United, the three industry giants. Over the years, Alaska suc cessfully added equipment, focus cities and flight frequencies to its network, all in a way that contributed to the strength of its operations and its financial health. Virgin America was not a failing airline but neither, despite the public relations cam paign surrounding Alaska’s acquisition, was it an “equal” to Alaska. Virgin America was founded in 2007 and struggled to establish its identity and market share. It came to the market with a “buzz , ” low labor costs, new equipment and a very appealing pro duct, but financial success did not follow quickly. Virgin America lost money or was marginally profitable from its startup until 2015 when its margins finally grew to a respectable level. Beginning in 2012 and continuing over the next several years, Vi rgin America reorganized, conducted an initial public offering, and delayed or cancelled a significant number of aircraft orders. Those strategy adjustments generated profits that began in the last few years of its operation as a standalone carrier. In 2 015, when it became known that Virgin America was evaluating its strategy of standing alone versus being acquired, there were at least three Alaska/Virgin America Pilot SLI Arbitration – Opinion and Award Page 15 of 2 1 interested airline suitors. The successful buyer, Alaska, paid a premium price for