Examples

The following examples illustrate the basic principles of identifying the BATNA and how to use it in
further
negotiations
to
help
value
other
offers.

[edit] Selling a car

If the seller of a car has a written offer from a dealership to buy the seller's car for $1,000, then the
seller's BATNA when dealing with other potential purchasers would be $1,000 since the seller can get
$1,000 for the car even without reaching an agreement with such alternative purchaser.
In this example, other offers that illustrate the difficulty of valuing qualitative factors might include:

An offer of $900 by a close relative

An offer of $1,100 in 45 days (what are the chances of this future commitment falling through,
and would the seller's prior BATNA (the $1000 offer from the dealership) still be available if it did?)

An offer from another dealer to offset $1,500 against the price of a new car (does the seller
want to buy a new car right now, and the offered car in particular?)

[edit] Purchasing
Buyers are often able to leverage their BATNA with regards to prices. This is done through buying
from
the
lowest
cost
or
best
value
seller.

[edit] More complex example

It is easy to overestimate BATNA and invest too little time to research real options. This can lead to
poor or faulty decision making and negotiating outcomes. 1987 saw the conclusion of a complex
series of negotiations between Southwest Airlines and two different pilot groups: Southwest pilots
and Muse/Transtar pilots. The Muse/Transtar pilots failed to properly analyze their BATNA: their
missteps and misfortune offer valuable lessons for anyone exposed to the risks of negotiating in a
volatile
industry.
TranStar began as Muse Air amid the 1982 air traffic controllers strike. By the end of 1984 the
company was still struggling, and actively looking for a merger to keep it afloat. At the end of the
year, Harold Simmons, president of the Amalgamated Sugar Company offered the airline the money
to continue, on the condition that Lamar Muse return as CEO. Despite the new influx of cash and new
leadership, the company was not able to generate a consistent profit despite its use of non-union
labor
and
competitive
fares.
In 1985, Southwest Airlines acquired Muse Air. The Muse pilots were initially unrepresented so
negotiations ensued between Southwest Airlines and the Southwest Airlines Pilots Association
(SWAPA). Complicating the always-contentious issue of seniority list integration was the large
disparity in pay at the two companies. The difference was so large that the Muse Air operation was
unable
to
support
the
Southwest
Airlines
pay
scale.
SWAPA pursued a strategy of integrating the Muse pilots to the bottom of the list, with pay parity in
five years combined with a card campaign to represent the Muse pilots. This strategy was rejected by
the company on the basis of Duty to Fairly Represent and SWAPA agreed to a one time, temporary
waiver of their scope clause. This allowed Muse to be run as a separate operation with numerous
caveats
and
protections
including
a
1:4
growth
ratio.
Muse became TranStar and chose independent representation through the TranStar Pilots
Association (TPA). Perceiving the dangers inherent in a wholly owned subsidiary the pilot groups
attempted to negotiate a combined master seniority list. In November 1986 an agreement was
reached.
This agreement placed a pilot hired in Jun of 1982 by Southwest senior to a TranStar pilot hired in
January 1981 and improved the relative seniority of all Southwest Airlines pilots. The agreement
included fences, Captain seat protections and brought the TranStar pilots to pay parity no later than
December
1990.
The TPA Board of Directors rejected the proposed Integrated Seniority List(ISL), apparently believing

that such rejection would create more leverage for their Merger Committee to obtain a more favorable
ISL.
What followed was a breakdown in negotiations and an angry exchange between union presidents.
"I can only conclude that your inner circle objects to the seniority settlement and engaged in a last
minute search for reasons to sabotage the agreement and rationalize the action within your
organization. This indicates a lack of good faith, which precludes any further dealings between our
two unions." SWAPA President Gerald Bradley to TPA President Captain Golich
"I have waited a few days to respond to your recent letter addressing our unsuccessful negotiations.
As you can imagine, it was difficult not to be angered by your groundless accusations, blatant threats
and
misleading
statements."
Captain
Golich
to
Captain
Bradley.
Negotiations were never resumed and TranStar was operated as a wholly owned subsidiary until the
9th of August 1987 when it closed its doors forever. 146 pilots who had seniority numbers at
Southwest Airlines, seat protection, and (eventually) substantial raises now had no jobs. Excerpts
from
a
letter
Captain
Golich
wrote
to Herb
Kelleher on
August
2:
"As you know, the TranStar pilots are in their darkest hour I therefore request first right of hire,
subject to Southwests normal screening, in seniority order, for the TranStar Pilots request some
form of assistance be provided relative to the requirement for a 737 type rating the TranStar
pilots
will
provide
their
own
ground
school."
The TPA BOD assessed their BATNA as superior to the agreement their merger committee was able
to negotiate. Unfortunately for the pilots they represented this was a gross overestimation, and the
actual BATNA turned out to be inferior not only to the negotiated agreement, but even to SWAPAs
opening
position
of
staple.
Unfortunately the mistakes made by the TPA Board of Directors are not unique. The Airline industry is
littered with examples of misapplied or overestimated BATNA. BATNA isnt a walk away position or an
assessment of the lowest acceptable offer. It is a tool to assess the certain gains presented in a
negotiated agreement against the uncertain risks of the alternative. The uncertainty of those risks can
lead
to
outcomes
that
are
surprising
and
devastating.

[edit]