4.04.06

This is an APFA Hotline Update regarding one item. Today is Tuesday, April 4rd, this is Tommie Hutto-Blake, APFA President.

Late yesterday Arbitrator Robert O. Harris released his ruling in the APFA, TWU & APA vs. AA Consolidated Grievance concerning executive compensation. As reported last Friday, following Arbitrator Harris’ deferral of issuing his opinion, the AMR Board of Directors moved to amend two long-termed executive cash compensation plans to conform with the Unions’ position that these Performance Unit Plans (PUP) violated the limitations contained in the Annual Incentive Program (AIP) as agreed to in April 2003.

I quote directly from Harris’ Opinion: “The genesis of the AIP is that during 2003, American, like other airlines, was in financial difficulty, and in an attempt to avoid filing for bankruptcy, negotiations were undertaken to modify the collective bargaining agreements with its unions. Modifications of each of the collective bargaining agreements with the unions involved in this case were reached; however, before the Restructuring Agreements were finalized . . . “it was disclosed that a Supplemental Executive Retirement Program (SERP), and Retention Agreements existed . . . “The reaction by the unions was immediate. They forced the resignation of the chief executive, Donald Carty, and also negotiated the AIP. . . “The grievances filed by the unions complain that the payout to be given to management employees under the 2003-2005 Performance Unit Plan (PUP) for officers and key employees violates the limitations contained in the AIP.”

The entire text of this seven-page Appointment and Order will be published on the members-only section of the APFA Web site shortly.

The three unions will not know how many millions of dollars this joint grievance prevented from being withdrawn from the AA general fund until April 19th – the day of payout. We do know that the payouts will be via AMR stock awards, with limits of cash to conform with the 2003 AIP. Without a doubt, the three AA unions influenced the AMR Board of Director’s recent action to alter and amend the executive compensation plans by filing this consolidated grievance. Which means AA’s cash balance will be stronger on April 19th than it otherwise would have been. We have helped to preserve AA’s critical cash reserve by protecting the liquidity of our company in a time of financial distress.

Management has publicly announced that their objective in making these changes is to “endeavor to resolve the grievances brought by American’s unions and to support management, the unions and all employees in their efforts to work collaboratively to restore the company to financial health and avoid the confrontational path taken by other airlines.” I hope management has also learned that the unions on this property will fight to preserve AA’s cash flow during this critical fiscal crisis.

The unions are serious about being treated as true business partners. We have a long way to go. We have given up so much in wages, benefits and work rules. We have every intention of working to restore our airline to viability. However, APFA must stay focused on protecting the interests of the American Airlines Flight Attendants.

This will not be the last time we, as union members, will speak our minds and use the grievance procedure to restore order concerning negotiated agreements. Without a doubt we are working in very challenging times. Be proud that you have a union to protect your interest. Be proud that the three AA unions stood firm in a difficult time to make our voices heard together. There is no doubt this joint action has rightfully earned the attention of management and the industry. Know that your union, the APFA, is focused on making certain the AA Flight Attendants have a sustainable career.

On behalf of all of the APFA membership, I wish to thank Arbitrator Harris, APFA System Board Counsel Mark Richard, as well as Ed James and Richard Edelman, counsel for APA and TWU respectively; as well as the three union System Board Members – particularly IMA Flight Attendant Anne Loew, APFA’s System Board advocate. The arbitrator and the advocates worked hard to resolve this dispute. Arbitrator Harris has retained jurisdiction of this grievance for sixty (60) days. His decision states that due to “the actions taken by the AMR Board of Directors (to) eliminate the possible violation of the AIP” on Friday, March 31st, with the amendments of the PUP, the grievances have now been rendered moot. By maintaining jurisdiction he may resolve disputes which may arise regarding his April 3, 2006, Order.

With the AMR Board’s recent action only time will tell if the broken trust can be rebuilt between AA’s labor and management in order to stay focused on the need to continue efforts to stabilize and rebuild our airline.