FLT CREW FAILED TO NOTE AUTOPLT MALFUNCTION RESULTING IN 700' EXCURSION FROM ASSIGNED ALT.

Narrative

IN THE COCKPIT OF THE MLG WITH ALL AIR VENTS OPEN IT'S VERY NOISY WE WERE CLRED TO FL330 BY ZME AND WE ACKNOWLEDGED. WE WERE TALKING WITH EACH OTHER; THE ALT ALERT WENT OFF AURALLY AND WE MISSED IT. WE WENT THROUGH OUR ALT. WE TOLD THE CTLR WE WERE AT FL336 AND WERE IMMEDIATELY DSNDING TO FL330. THERE WAS NO CONFLICT. THE WX CONDITIONS WERE CLR AS A BELL. WE WERE DISCUSSING THE MERGER OUR COMPANY IS GOING THROUGH AND THE FACT THAT IT'S BEEN 2 YRS AND WE STILL DO NOT HAVE A SENIORITY LIST. THIS TENDS TO ALWAYS LEAD TO HEATED CONVERSATIONS. WE WERE SIMPLY DISTRACTED BY THE CONVERSATION. THIS IS AN ITEM WHICH IS WEIGHING VERY HEAVY ON OUR SIDE OF 2500 PLTS. THE COMPANY HAS CHOSEN TO TAKE SIDES IN THE MERGER AND CONTINUES TO PROMOTE THEIR PLTS ONLY--FOR THE LAST 2 YRS WE HAVE BEEN DOWNGRADED IN STATUS. ANYWAY; THAT'S WHAT WE WERE TALKING ABOUT! UPON BOTH OF US DISCOVERING THIS INCIDENT WE NOTIFIED CENTER AND DSNDED BACK TO FL330 WITH NO CONFLICT. SUPPLEMENTAL INFO FROM ACN 89649: ZME CALLED AND ASKED FOR OUR ALT. I LOOKED UP AT MY ALT AND READ 33700'. WE HAD BEEN ASSIGNED FL330. I TOLD THE F/O ABOUT IT AND HE BEGAN TO CORRECT BACK TO FL330.