10.07.05

Hello, this is APFA President Tommie Hutto-Blake with a hotline update for Friday, October 7, 2005.

This week your APFA leadership including the Executive Committee, Base Chairs, Vice Chairs and National Coordinators attended APFA’s annual constitutionally mandated training in Scottsdale, Arizona.

The purpose of this year’s training was to bring all of our leaders together to focus on the state of our industry, our Company and our Union, to both strategize and prepare for all possible scenarios in the months ahead.

During this very intensive three-day training, facilitated by labor attorney and strategist Mark Richard, we spent two days focused on internal union strategy and one day reviewing the joint process called the Performance Leadership Initiative (PLI). The Performance Leadership Initiative is an efficiency study mandated by the Joint Leadership Team – the labor/management council made up of senior officers of the TWU, APA, APFA and AA. The purpose of the PLI study is to collect data and shine the “spot light” on any inefficiency “from the shop floor to the sixth floor”.

The two days of internal union work allowed your APFA leadership to discuss labor strategies openly with labor attorneys, a top aviation economist, as well as one of the foremost bankruptcy professionals. This was solid work the best interest of the AA Flight Attendants. In the months ahead we must be prepared for any and all events.

During the one day of joint work, your leaders reviewed the data collection from the Joint PLI with leaders from APA, TWU, senior AA management and outside consultants working for this labor/management project. Again, the purpose of this work is to spotlight ways to reduce costs without impacting the labor agreements. The three unions on AA’s property are focused foremost on finding ways to reduce costs without impacting labor agreements. This will without a doubt be a challenging journey but it must be the next step if we are to be treated as real business partners.

While none of us knows exactly what the future holds we do know this: that when times get tough we need to stick together. If we do just that we become a much more formidable force.

Be assured that your Union leaders came away from this week’s training with a realistic view of our current challenge. We have surrounded ourselves with top labor counsel. We are preparing our union for whatever scenario we may face.

In the months ahead we will continue to fortify both paths in the best interest of the AA Flight Attendants. The duel path and the APFA internal path. It is important that you know that all three unions on our company’s property have joined forces with AA on a number of critical issues that affect everyone of us. As just one example of this hard work by all parties, we have already seen progress on the Hill in pension reform legislation and you will hear more about this from Leslie in her portion of tonight’s Hotline. You can stay informed on these important joint issues in a newsletter entitled, ” ON THE FLY “. It is currently available in PDF format on all union websites.

The fact that we are attempting this very different labor/management business model in the airline industry sets us apart from the others. It tells the financial community and AA employees that we are serious about keeping our company afloat and out of bankruptcy. Our collective goal is to remain in control of our own destiny.

On that note, I am extremely pleased to report to you that during this 3 day training your union leaders took a pledge to put all politics aside and focus on the welfare of the membership. It is no secret that our industry, our Company and the future of the Flight Attendant career is in serious trouble and we need all hands on deck in order to survive the challenges that we currently face. This is a time to be productive instead of destructive.

Tonight, I am asking each and every one of you to join your union leaders in taking this pledge. Put your individual politics and personal preferences aside as we focus together in doing everything in our power to protect and preserve our career and our future. We can do this together!

Thank you and please stay on the line for the rest of tonight’s hotline, Leslie…

This is Leslie Mayo, National Communications Coordinator, with the APFA Hotline for Friday. October 7, 2005.

We have 4,126 F/As on furlough, and 12 F/As serving in the armed forces full time. Please keep them in your thoughts.

As Tommie mentioned, the Board of Directors’ annual training took place in Scottsdale this past week. The primary topic of conversation was the state of the industry and in particular, the escalating cost of fuel.

FACT : Airlines are expected to pay twice the amount they did in ’03 for fuel. AA specifically expects to pay $1B more than in ‘04 for fuel. One of the terms we became all too familiar with this week in our BOD training was the term: “Crack Spread.” This is the price of refining crude oil into jet fuel. Crude is unrefined and heavy. “Jet A” fuel is much lighter following the refining process. Since AA is barely hedged on fuel prices, we are paying $60+ a barrel and then another $60 or so more for the Crack Spread, which equals the highest price ever paid for jet fuel. This is due in part to the damage done to refineries in the South following the hurricanes. In August the Crack Spread was $13. The Energy Dept. estimates that 15% of the US refining capacity may be on the blink for weeks. 11 major refineries as of this week remain closed – accounting for 18% of the nation’s total capacity. So for now, there is little relief in sight.

On Thursday, October 6, 2005, the price of one barrel of crude oil closed at $61 – up 20% from the same time last year. The crack spread hit $67 a barrel on Wednesday as opposed to $11 during the same time last year – up 600%. This means that the total cost for a barrel of refined jet fuel today is more than $120 – double the amount it was last year.

Where does that leave us? Bottom line: all three unions’ concessions in 2003 have gone to the oil companies instead of getting our own company back to profitability. A 600% increase in refining crude to jet fuel is unsustainable for any airline. That, coupled with competing with low-cost carriers and all but one of the majors in Bankruptcy makes for an enormous challenge ahead. And time is of the essence.

No airline – whether legacy, low cost or bankrupt – can blame labor costs for its lack of profitability at this point. Fuel prices are outrageous and the oil companies have never been more profitable.

Your union is preparing for every possibility that may come our way in the coming weeks and months. As Tommie said, your Union leaders have put politics aside in recognition of the struggle to remain out of bankruptcy. The company has not indicated its intention to attempt to extract more concessions from its union groups and other employees. At this point, with the cost of fuel, even if we worked for free, it would not be sufficient to get us out of the red.

Today, it is imperative that every single Flight Attendant get informed on the state of the airline industry. Join the InfoRep program (it’s as simple as sending an email to [email protected]), read Skyword , call or read the Hotline, visit www.apfa.org, call your Chairs, Vice Chairs or APFA Headquarters with questions or rumors you might have; attend local base meetings and most importantly: spread factual information to your coworkers and all employees of AA. Denise Pointer, DFW InfoRep, will be visiting all bases throughout October and November to recruit new InfoReps along with our Legislative Representative Rick Musica. October 11th they will be visiting Chicago Ops and October 12th, they will be in St. Louis Ops. Knowledge is power – misinformation is poison.

On a more positive note, this last week resulted in an amendment to the Pension Reform Bill in the Senate that allows AA and CO to qualify for the airline provision without freezing their plans. Your emails and letters to U.S. Senators helped make this happen. But our fight is far from over. Until the Pension Reform Bill comes up for a vote, it is crucial that we continue contacting our Representatives via Capwiz on the APFA website to ensure that AA isn’t punished within the Pension Reform Bill language for actually PAYING THEIR BILLS and staying out of bankruptcy. Next on the agenda: The House of Representatives!

In regular APFA news , Mexico and Canada are imposing a deadline of December 31, 2006, for entry – without a passport – into their countries. Flight Service began processing the reimbursement of all passports for domestic F/As this week. Reimbursement procedures can be found on aaflightservice.com. All questions should be directed to your FSM or the APFA Contract Department.

This week, New York City raised the terror threat level after receiving what they called credible information that an attack to their subway system was possible. Please continue to remain vigilant on the aircraft, and when traveling to and from work, especially via public transportation.

In rumor control this week : Several Flight Attendants have written asking whether the company has opened its books to the pilots’ union. Also, has the company asked us for concessions or let us know if bankruptcy is inevitable? Were the leaders of our union in Phoenix to discuss concessions?

So, let me break it into separate pieces:

First, during the 2003 RPA, AA committed to all three unions to keep an open line of communication regarding its finances. All three unions continue to participate in monthly meetings with senior management on several issues, including financial updates and “open books” with CFO James Beer. Second, as I mentioned, the Company has not come to APFA asking for concessions. All three unions and the company have been trying to find ways to save money outside of our bargained agreements and we will continue to do just that. One reporter misinterpreted Arpey’s request for more ways to save money within our company by working together to identify waste, with the call for concessions. Arpey was quoted as stating: “We have been, in my mind, continuously restructuring the company for many years now, and we’re going to have to continuously reconstruct the company going forward, and we need labor to be our partner in that process.” He went on to say, “We’re going to work together to find our way out of this situation.” So the answer to what APFA was doing in PHX is “No – our Union was NOT in PHX to discuss concessions and the company has NOT asked us for any.”

And finally, regarding Bankruptcy as being inevitable, the ever-rising cost of fuel will answer that question.

BANKRUPTCY UPDATE: Citigroup and JP Morgan provided $3B in financing United has been waiting for to finalize their exit strategy. Their plans are to leave bankruptcy in February ’06 after more than three years of protection. Part of UAL’s proposal for exiting bankruptcy includes unrealistic fuel prices that are much lower than today’s cost of crude, including the crack spread. The Citigroup/JP Morgan deal is pending approval by the Bankruptcy Court on October 21, 2005.

Northwest Airlines is expected to ask the Bankruptcy Judge overseeing its reorganization to abrogate the contracts between the company and all of its unions within days and impose new ones that will include hefty cuts in pay, work rules and most probably pensions. This action is always anticipated once a company enters the protection of bankruptcy since the unions are now considered creditors. NW will still be required to attempt to reach an agreement between its unions, however, the likelihood of this happening doesn’t look so great considering NW’s proposals in the past few months have been blatant deal breakers. Proposals such as laying off more than 50% of its mechanics, or halting the payment clock upon first impact in the event of a crash for Flight Attendants will be nearly impossible to get ratified by union members. So far, NW has secured $35m in cuts from management and salaried employees in the past three years, and $250m from its pilots. It is also saving $205m under the recent contract it imposed on the NW mechanics. On a side note, it appears that the hiring of scab mechanics at NW isn’t paying off: the FAA reports training problems and staffing shortfalls within the mechanic workgroup at NW Airlines since the Strike began.

Delta Airlines is looking at just under $1B in paycuts from its employees including 1/3 of that from the pilots alone.

That’s it for this week. Thank you for calling the APFA Hotline and staying informed.