03.11.05

This is Tommie Hutto-Blake with the APFA Hotline for Wednesday, March 16, 2005.

Today, all three of the unions on this property, along with American Airlines CEO Gerard Arpey, issued a press release announcing a Joint Pension Reform Statement signed by the leadership of the three unions and management. APFA has been instrumental in the formation of this important document and I would like to share some information about it with you. You can find all relevant documents at www.apfa.org.

As you know, pension reform is an extremely important and timely topic. The Bush administration and Congress are currently examining this subject and have made it clear that they plan legislation to help stabilize the Pension Benefit Guaranty Corporation – referred to as the PBGC – the government’s “pension insurance program”. The Bush administration has prepared a 33-page proposal, which focuses on three areas:

1. Reforming the funding rules to ensure that employers fully fund their retirement commitments,

 

2. Increase and restructure the premiums paid by private sector employers to the PBGC,

 

3. Increase disclosure to workers, investors and regulators to ensure greater transparency and accountability.

This urgent need to pass legislation has been brought on, in part, by the current financial crisis and subsequent default on pensions by some of the weaker airlines and similar problems in the Auto and Manufacturing sectors. In the last year several of the pension plans at US Air and United Airlines have been taken over by the PBGC because of their severely under-funded status, and management’s decision to stop making required contributions.

We agree that these issues and others should be addressed but some of the administration’s proposals would actually hurt us. The Unions and management at American recognize that we are unique in a number of ways.

1. We are in the enviable position of having a pension fund, which is better funded than any other Airline.

2. Gerard Arpey has repeatedly stated he believes that companies have a MORAL obligation to try to protect the retirement benefits that have been promised to their people.

3. The three Unions and management are working together to resolve issues, such as this one, that affect all of us.

4. Most importantly, through large sacrifices in wages, benefits and work rules the employees have entered into a partnership with this employer to return to profitability and retain our defined benefit plans. Management has responded by making all of the required contributions to our pensions. Last year AA made payments of $461 million to our pension funds during very difficult times.

As we have been spending time in Washington watching this debate unfold, we have had numerous questions from representatives asking what we at American could support. It was very important to be able to answer that question in a way that would protect our employees and our unique position.

In January, the three unions met to determine if we could find mutually agreeable ideas that would protect all of our benefits. Although each group has unique areas of concern we were able to find mutually satisfactory concepts that protected the foundation of all of the plans on the property.

APFA, APA, TWU and American Airlines support pension reform that does not discriminate based on the credit rating of the plan sponsor, and that better protects employees’ retirement benefits by making it more flexible and affordable for companies to fund them.

What are we saying? Our joint position on pension reform can be found at www.www.apfa.org In layman’s terms, here is what we are saying:

We are saying that we support pension reform. Unfortunately, the Bush Administration’s proposal would consider the corporations’ credit rating to evaluate the security of the plan. We see no need for that! Airline bond ratings are notoriously cyclical and low and this would unfairly impact airlines over other industries. Besides, the real issue here is how much money is in the plan, not whether it’s a good year for the company sponsor.

We are saying that we want to continue with our defined benefit plan. Some of the proposals on Capitol Hill have addressed totally freezing all defined benefit plans, everyone at American agrees that we do not want our pension plan frozen as a mandatory part of reform.

We are saying that we support reasonably extending the number of years companies would have to make up the under-funded portions. Currently, Congress has put into place a temporary extension on funding. However, we support permanent rules for extensions.

We are saying that we support a reasonable interest rate to determine plan liabilities. Right now there are different rates used by each Company, the PBGC, the IRS and the auditors to evaluate a Plan’s soundness. Therefore, each review shows a different level of funding. There needs to be consensus on one rate.

We are saying that Pension Plan data needs to be user friendly. Right now the data is reported in the annual IRS filing, which is due in September of the following year. So, right now, we are working with information reported at the end of 2003. In this electronic day and age, the deadlines for reporting should be improved dramatically,

We are saying that we support flexibility to fund more in a good year without penalties for doing so. Under the current rules, a corporation cannot make “extra” contributions to the pension funds in a good year without tax penalties.

And finally, we are saying that pension premiums should be adjusted associated with a Plan. Currently every employer pays insurance premiums of $19.00 a year per employee to the PBGC. We believe the premium should be tied to the stability of the Plan. Think about the insurance you buy for your home, if you are in Florida, where the risk for hurricanes is high you pay more for windstorm insurance than say your cousin in Ohio. We believe that healthy plans should not pay the same rates as sick ones pay.

A point on Supplemental Executive Retirement Plans: The parties are in agreement that the minimum annual contributions to all corporate defined benefit plans must be made prior to any funding of executive supplemental plans.

And finally, we are saying that we support legislation that would also provide pension relief to companies that freeze their Plan through the collective bargaining process rather than terminate them in bankruptcy. Make no mistake; we are not discussing terminating or freezing our Plans. Some companies are faced with no other options in bankruptcy but to terminate their plans. We think there should be another alternative to termination, and a freeze is usually better for the employees. In addition to saying that we DO NOT support legislation that makes it mandatory to freeze all plans, we also want to ensure that when a corporation does approach this path that they do so through collective bargaining NOT through bankruptcy!

We are very proud of this collaborative position, the document, and perhaps more importantly, that the Unions and American are approaching very real concerns jointly with substantive solutions.

We will be visiting Washington DC on May 11th to discuss this and other issues with Congress, It has never been more important for each of you to join us and make your voices heard.

Hello, this is Cathy Lukensmeyer, Treasurer of APFA, and today is Friday March 11, 2005.

For months we’ve been gearing up for the annual convention and it is finally upon us. It will be hosted in Chicago beginning Monday the 14th and concluding Friday March 18th. This year we have taken great strides to make this convention “member friendly” and interactive. Workshops and training sessions have been scheduled as well as booths set-up to disseminate information to you.

The APFA Communications Dept., Health Dept., Hotel Dept., Safety Dept., Contract Dept. and Scheduling Dept. will all be represented. Very exciting this year: We will have our own retirement specialist on hand. She will be conducting seminars that will prove invaluable to those of you looking to retire. Additionally, the APFA Legislative Action Committee, working for us on Capitol Hill, will present programs in which you can and should become involved. Remember, there is strength in numbers and your involvement is crucial. All of this takes place on the first day, Monday, beginning at 9:00 a.m. and lasting throughout the day. During the remainder of the week we welcome, no we ENCOURAGE you to come by; PARTICIPATE and watch your union at work. Some sessions are closed but most are open to the membership. Early in the week the delegates (the Board Members) will elect Ad Hocs to fill two vacancies and appointments to the Budget Committee and National Ballot Committee will be approved. My department will present the new Fiscal Year budget to the Board for approval. Monday evening The Honorable Claire McCaskill, Democrat representative from Missouri is our keynote speaker at the awards banquet that, by policy, is fully funded by the APFA representatives and donations from outside vendors and consultants.

And later in the week a real coup; we’ve been able to get Bradley Belt, Executive Director of the PBGC – Pension Board Guarantee Corp. to make a presentation. It will be in joint session with upper management from American Airlines along with all 3 unions on the property – APFA, TWU and APA. The week will be packed full of great information for you. Please make note of the location. It will be held at the Embassy Suites – Lakefront, which is located at 511 N. Columbus Dr. between Grand and Illinois Streets. For those of you on layover at the Allerton Hotel; it’s just a 20-minute walk at most. Just know that, walking toward the lake, you’ll come to Fairbanks Street. Turn right, as Fairbanks becomes Columbus Dr.

I know that the “long” layovers aren’t that long anymore; but hey, I’m from Chicago and we may get one of our famous Spring snowstorms grounding you there for a day or so. And now please stay tuned for the rest of our hotline. Leslie…

Thanks, Cathy. This is Leslie Mayo, Communications Coordinator with the rest of the APFA Hotline for Friday, March 11, 2005.

Please remember our 4,240 furloughed flight attendants and the 12 APFA members still serving in the military full time. Just a reminder, the lower number of full-time military flight attendants takes into account those who have returned from active duty.

Effective March 31, 2005, we will be changing long layover hotels in New York City. See the secure section of www.apfa.org for specifics. As we’ve mentioned in the past few hotlines, because of the fact that the current downtown layover hotel was no longer an option due to new ownership, our choices were hotels in Westchester County, Long Island or the hotel we agreed on. We heard you loud and clear when you told us you wanted to remain in Manhattan. This hotel has been partly refurbished and its management has assured us they will continue to do everything they can to keep us happy.

One final reminder, the APFA Annual Convention will be held in Chicago at the Embassy Suites Lakefront beginning Monday, March 14th and ending Friday, March 17th. All members in good standing are invited to participate in the seminars and watch the Board at work.

For the first time, we will have representatives from the Safety, Hotel, Scheduling, Retirement, Contract, Health, Communications, Archives and Legislative departments available on Monday, March 14th. There will be member workshops for retirement at 9 AM and 1 PM, and for Contract and Scheduling at 10:45 AM and 12:45 PM. In addition, there will be a Legislative workshop at 12:30 PM and again at 4:15 PM. These workshops will be extremely informative and we hope to see you there.

APFA and American Airlines retirement specialists are planning additional joint retirement seminars throughout the system this year. We are pleased to announce that in April we will be in LAX on April 20th at 9AM and noon, and in SAN on April 21 at 9AM and 3PM. Anyone interested in learning about retirement benefits is welcome to attend. If you are planning on retiring before July 31, this will be your opportunity to receive personal help with the necessary paperwork from AA retirement counselors. More details will follow as we get closer to the planned dates prior to the April bidding deadline.

AMR announced in a press release this week the goal of turning our Tulsa maintenance base into a profit center. Unlike many other big airlines, AA has not followed the trend of outsourcing maintenance work. AA hopes to generate $500 million in cost cuts and revenue at the base, which has 7,000 employees, and to turn a profit by the end of next year. In their press release, AA stated that the goal to generate profit at the Tulsa base is a product of a new labor-relations strategy that involves regular meetings among union leaders and local managers.

In industry news this week, the FAA has said it will charge British Airways with “careless and reckless operation of an aircraft” for allowing a 747 to complete a long flight from the U.S. to the U.K. after losing an engine. The FAA, which would normally allow the U.K. to handle such issues, will probably fine the airline. A British Airways official was surprised by the decision and noted the 747 is certified to fly on just three engines.

Delta Airlines announced this week that it will stop selling food on flights. The airline said just 25% of passengers purchased food, fewer than it expected. Delta will now offer free snacks, such as whole-grain chips, peanuts, animal crackers and granola bars. Also at Delta, the company has changed the way it determines whether executives will receive bonuses. The carrier must now earn $500 million on a pre-tax basis before executives get most of their annual bonuses.

Last week, crude oil prices increased to within 50 cents of October’s $55.67-a-barrel record. Oil closed last Friday at $53.78. Airline consultant David Swierenga of Vienna, VA, said that recent decisions by large airlines to raise fares by up to $20 round trip won’t cover the added costs in fuel prices. Despite an expected increase in passengers, Swierenga estimates the industry will lose as much as $2.5 billion this year, driving losses since 2000 to $33 billion. The surge in oil prices is already having an impact.

A week ago, US Airways, which is operating in bankruptcy protection, quit flying some routes it had just launched from Fort Lauderdale – to San Juan, Puerto Rico, Panama City and San Salvador. America West has also stopped flying three transcontinental routes it launched in fall 2003. Both airlines cited increased fuel costs as one of the deciding factors. Most big airlines lack the cash or financial credibility to hedge prices, or to lock in a future price by contract. Neither US Airways nor Delta Air Lines has fuel hedges this year. United, which is in bankruptcy protection, is 30% hedged this quarter. American has 15% of its fuel hedged this quarter. Among major carriers, only Southwest is well protected, with 85% of its fuel this year hedged at $26 a barrel.

Hawaiian Airlines plans to emerge from bankruptcy protection on March 31. It is shopping for new planes to replace the four airplanes shed during bankruptcy. The airline is also studying new West Coast markets for growth opportunities.

That’s it for this week. Thanks for calling the APFA Hotline and I look forward to seeing all of you at the Convention!