12.23.11 – (LAA) – Message from the President, Bankruptcy Update, Retirement Briefings, Fatigue, Ballot Committee Update

December 23, 2011

Dear Fellow Flight Attendants,

This year has been one of the most difficult we have faced together.

We have weathered natural disasters, a continued cloud of economic uncertainty, and now the bankruptcy of a company to which we have all given so much of our lives.

My promise to you this season is that your efforts this year, your hard work and sacrifice, will not have been in vain. We will continue to stand together and fight for a shared cause and a common belief that the workers who make this company great should not be made to shoulder the cost of management’s failures.

There is little doubt that difficult challenges are ahead for us all, but we believe that by being prepared for every eventuality and fighting hard for the best possible outcome for workers and their families, we can emerge from this unfortunate chapter with a stronger, more secure future.

As Flight Attendants we know this time of year can be anything but relaxing as we help millions of Americans make their way home to their loved ones. And as always you will do your jobs with great poise, kindness and dedication.

This season my hope for you all is that you may find time during this busy season to leave some of these worries behind, take solace with family and friends, and enjoy some much needed rest and renewal.

I assure you that your union will never stop working for you and we will take our fight into the New Year with more energy and determination than ever.

Best wishes from me and everyone at APFA for a safe and happy holiday season.

In Unity,
Laura Glading

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Weekly Hotline

For the week ending Friday December 23, 2011

BANKRUPTCY UPDATE

Today, during a one-hour hearing today, Bankruptcy Court Judge Lane considered twenty motions filed by American Airlines including requests to allow the Company to reject certain aircraft and engine leases and to continue to pay vendors, utilities and other businesses that are critical to its operations. All but two motions were uncontested – meaning no party to the case filed an objection to the relief American was seeking. Accordingly, Judge Lane granted the 18 motions, which were not disputed.

In one of the contested motions American sought authority to continue its use of its cash management system and to maintain its existing bank accounts. The only party to object was the U.S. Trustee, whose office is part of the U.S. Department of Justice. Counsel for the Trustee argued that American was not in compliance with a specific Bankruptcy Code provision that arguably limits the types of accounts in which it can deposit its cash and other investments. Most notably, he disclosed that American’s cash reserves have risen from the $4.1 billion American reported when it filed for bankruptcy on November 29 to $4.8 billion. The Court asked American’s attorney to explain the difficulty and risk the Company would undergo if it were to comply with this provision of the Code. American’s attorney responded that his client would prepare a declaration providing that information. As a result the Court made no decision on this issue and instead will continue the hearing on the motion on January 27.

The other disputed matter involved a request by American to allow it to pay critical vendors. One vendor objected, claiming that the court should not approve this relief unless American provided a list of those vendors it considered critical. The court disagreed with the vendor and granted the motion.

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The Bankruptcy Informational Base Visits are packed full of information from our Legal Counsel, APFA’s Negotiating Team, Retirement Specialists and EAP Representative. The meetings are open to all Members in good standing. Retirees wishing to attend one of the Base Meetings, and were dues current at the time of retirement, please send an e-mail to [email protected] so that eligibility can be verified in advance. Only Retired Flight Attendants need to contact APFA prior to the meeting. Active and Furloughed Flight Attendants wishing to verify their eligibility prior to a meeting, please send an e-mail with your name and employee number to the Dues Department [email protected].

The next scheduled Base Visits are:

Wednesday, December 28 – ORD
Hyatt Regency O’Hare
9300 Bryn Mawr Ave
Rosemont, IL 60018
1100-1400

Tuesday, January 3 – DFW
Yandry Center
DFW Airport, Terminal C
1100-1400

We are working to organize meetings for additional bases. As some of the bankruptcy proceedings may be scheduled suddenly and we can expect last minute changes, these Bankruptcy Informational Base Visits will most likely be announced on short notice.

A good portion of the questions asked at the Base Visit this week related to Pensions. Here are the most common questions and answers authored by DFW Retirement Specialist Jackie Phillips. This portion of the hotline has also been posted as a stand-alone document – “How Safe is My Pension Plan?” – on both the Retirement and Bankruptcy Information pages of APFA.org

 

How Save Is My Pension Plan?

Over the next few months you will hear discussions concerning American Airlines different pension plans, what American’s contributions are, what their long term liabilities are, and whether those plans are fully funded. These discussions will have a direct impact on what American will be allowed to do in bankruptcy with our plan, so it is good to understand what is meant by these terms. This discussion gives a brief overview of what American has said in their bankruptcy filing, what they said about how well the flight attendant plan was funded in the reports they are required to file about the flight attendant plan, and a little about what that means.

Below is an excerpt from their bankruptcy filing concerning their obligations covering 2011 to be paid in 2012:

“25. The Debtors maintain several defined benefits plans (the “Defined Benefits Plans”). The Debtors are responsible for making minimum funding contributions to the Defined Benefits Plans for, in part, past service of their Employees in accordance with the Internal Revenue Code of 1986, as amended, based on annual actuarial calculations. The Defined Benefits Plans are as follows:

-The Retirement Benefit Plan of American Airlines Inc. or Flight Attendants, which requires contributions for Plan Year 2011 of approximately $16 million payable on January 15, 2012 and $13 million payable on September 15, 2012.

-The Retirement Benefit Plan of American Airlines Inc. for Employees Represented by the Transport Workers Union of America, AFL-CIO, which requires contributions for Plan Year 2011 of approximately $37 million payable on January 15, 2012 and $19 million payable on September 15, 2012.

-The Retirement Benefit Plan of American Airlines, Inc. for Agent, Management, Specialist, Support Personnel and Officers, which requires contributions for Plan Year 2011 of approximately $22 million payable on January 15, 2012 and $23 million payable on September 15, 2012.

-The Pilot Retirement Benefit Program Fixed Income Plan, which requires contributions for Plan Year 2011 of approximately $24 million payable on January 15, 2012 and $50 million payable on September 15, 2012.
26.”

In addition to the annual contributions going into the pension funds, American has to pay for the administrative costs of the funds as well as pay insurance premiums to PBGC.

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Now let’s talk about what kind of shape the Flight Attendant pension fund is in. Each year American is required to take a snapshot of the condition of the fund and report on how it is doing. This snapshot is done at the end of the calendar year, so the picture we have available to us is almost a year old. The report was sent to you last year in the spring, which if you are like most people, you immediately put in the recycle bin. This information is for the plan year January 1, 2010 to December 31, 2010.

How Many Flight Attendants Are Covered By The Plan?

On the plan’s valuation date for 2010, there were 28,381 participants. Of this number, 17,759 were active participants, 3,952 were retired or separated and receiving benefits, and 6,670 were retired or separated from service and entitled to future benefits.

How Well Funded Is The Flight Attendant Pension Plan?

Funding target attainment percentage is a fancy term for taking how much money is in the Plan and dividing it by how much should be in the Plan to cover its Liabilities (or what it is expected to be paid out over time). On January 1, 2010, the plan had a little over $1.490 billion in assets and had liabilities of a little over $1.510 billion in liabilities. Dividing the two that means that the plan was 98.66% funded (the higher the percentage the better funded the plan). Under this model, American is expecting its assets to have investment returns of 8.25% each year so that the fund will have enough money to pay out to people 10, and 20 and 30 years down the road. If the fund doesn’t achieve those investment returns, then American must put in more money. If the fund earns more than 8.25% in a year, American has to put less money in their pension plans. American’s funding policy is to contribute at least the minimum amount required under ERISA, the law governing our pension plan.

How Does American Invest My Pension Fund?

Americanís Flight Attendant pension plan has an investment policy. The investment policy is a written statement that provides the Plan officials guidelines or general instructions on investment management decisions. All of the assets in the Plan are invested in a master trust which cannot be touched by the creditors of AMR in a bankruptcy filing. The investment policy has target allocations as follows:
35% in longer duration corporate and U.S. government/agency bonds
28% U.S. value stocks
20% international stocks (developed nations)
6% emerging market stock and bonds
11% private investments.

Why To I Hear The Plan Is Underfunded If We Are Funded At 98.66%?

There are two reasons there are discrepancies. One is that the quotes you hear are about all Americanís pension plans combined. Each plan is in a separate trust and has different funding levels, but reports when quoting American officials or looking at the company SEC filings will look at the plans as one huge entity (AMR pension plans) vs each individual plan. The bankruptcy judge and PBGC will be looking at each plan individually.

Secondly, other large firms and the PBGC normally adhere to what are called “generally accepted accounting practices” (GAAP) which require a more stringent funding of pension plans than what is being used at AMR. However, two laws allowed American to change how much they were required to put in their pension funds to keep them “fully funded” causing a difference between what is legally required under federal law and what an auditing company under generally accepted accounting procedures would call fully funded. One, the Pension Protection Act of 2007 allowed American to evaluate their funding status looking over a longer term vs a shorter term. It kept American from having to put more money each year in their pension plans and helped them to compete with airlines that had not gone into bankruptcy by smoothing out over a longer period of time the contributions they had to make. In addition, the Pension Reform Act of 2010 allowed American time to smooth out the big market drop that happened in 2008 and 2009. Because the market dropped so badly at that time, American’s contributions would have been huge. (Remember that American plans on making 8.25% a year not losing 40%). Because the market has since recovered, the plan did not require that huge contribution because the law gave American time to make up for that drop.

Because of these two things, you will hear funding discussed two ways: we are 98.66% funded based on what federal law requires, but much more poorly funded based on generally accepted accounting procedures. In addition, new information will be coming out for the calendar year January 1, 2011 to December 31, 2011. This could cause changes in this funding percentage.

If you have questions about this article or retirement benefits in general, you can email [email protected].

RETIREMENT BRIEFINGS

APFA Retirement Specialist Patrick Hancock will be in NY conducting two retirement briefings in January.

JFK – January 24 in the 4th Floor Conference Center (formerly knows as the Mark Dupont room) from 1100-1400

LGA – January 25 in the 3rd floor Conference room from 1100-1400

The seminars are open and useful to all Flight Attendants from all bases. To make the most of these briefings, print and bring your personal pension estimate and plan calculation formulas from JetNet.

FATIGUE

The FAA issued a long-anticipated final rule Wednesday on Pilot flight-time, duty and rest. The new rule requires, among other items, 10 hours rest period before reporting for flight duty ñ 8 hours of which must be behind the door and reduced rest was eliminated. Both the FAA’s Press Release and Comparison Fact Sheet are posted on the Safety and Security page on APFA.org.

“We are encouraged by the FAA’s new rule,” said APFA President Laura Glading. “It demonstrates thoughtful consideration and a move towards a more progressive safety culture in our industry. As you know, FA fatigue is among the key issues our legislative team is working on. We will continue to push for these regulations to be extended to the entire flight crew.”

FROM THE BALLOT COMMITTEE
[email protected]

Ballots for the APFA National Officer Election were mailed last week. Balloting opened 10:00am CST on Monday December 19, 2011 and all ballots must be cast by 10:00am CST on Wednesday January 18, 2012.

Should you have any questions, please contact the National Ballot Committee at 817-540-0108 ext 8311 or email at [email protected]

You must be dues current by 5:00 p.m. CST on January 13, 2012, and any dues promissory note/payment plan must be active by December 19, 2011 in order to have your vote counted for the APFA National Officer election ballot count on January 18, 2012.

For any questions concerning your dues status, please contact the APFA Dues Department at 817-540-0108 ext 8151 or email [email protected].
APFA National Ballot Committee

USE THEM OR LOSE THEM

Remember that your 2011 uniform points do not carry over into the new year. All points will expire on December 31, 2010. Place your order with VF Imagewear as soon as possible so that you donít miss the deadline.

HOLIDAY OFFICE CLOSURES

The APFA Headquarters office will be closed on Friday and Monday, December 23 and 26 in observance of the Christmas holiday. Regular office hours will resume on Tuesday, December 27. On behalf of all the APFA Representatives at Headquarters and in the field, the Communications office wishes everyone a safe and happy holiday.