1.30.12 – (LAA) – Procedures a Debtor Must Follow to Modify a CBA

Hotline Update

January 30, 2012

This week will hold the most significant developments in the AMR bankruptcy case since the November 29th filing.

According to the company, we will see a new business plan for American Airlines in a presentation on Wednesday morning in Dallas. Following that presentation, the major unions will see the company’s first proposal.

Over the past several days rumors have been circulating that are filled with misinformation and reflect a fundamental misunderstanding of the procedures a debtor must follow to modify a Collective Bargaining Agreement (CBA).

First, well in advance of filing a Section 1113 motion or application in which American asks the court for authority to reject the CBA, it must make a proposal to APFA that satisfies the requirements of Section 1113. The Bankruptcy Code explicitly provides, that, “prior to filing an application seeking rejection of a collective bargaining agreement the debtor shall make a proposal . . .”

It must be based on the “most complete and reliable information available at the time” such proposal is made and must be limited to ìthose necessary modifications in the employees benefits and protections that are necessary to permit the reorganization of the debtor and assure that all creditors, the debtor and all of the affected parties are treated fairly and equitably.î The company must also provide APFA with “such relevant information as is necessary to evaluate the proposal.”

In its attempt to comply with these procedures, AA will hold a meeting with APFA, APA and TWU on Wednesday, February 1. In the morning management will review its business plan and describe the contract proposals, which will be applicable to all three unions. Our experts and I expect the initial proposal to be a low baseline for the coming negotiations. In the afternoon we will meet separately with AA and receive proposals that specifically address each of our CBAs. On Thursday we will be meeting with the companyís finance team to review the costing assumptions underlying each proposal. On Friday, the company will hold an all-day meeting with the unionsí financial advisors to discuss the model and assumptions underlying the business plan. Finally, in order to ensure that we have all the information needed to assess Americanís proposal, we will give the company within the next week a list of the documents it must produce.

I will devote Monday, February 6 and February 7, to preparing for and attending a Creditorsí Committee meeting in New York. The earliest negotiations over the companyís proposal would begin is Wednesday, February 8.

Under Section 1113 American must “meet, at reasonable times” with APFA “to confer in good faith in attempting to reach satisfactory modifications of such agreement.” It is important to remember that the negotiations are not only taking place under Section 1113 of the Bankruptcy Code, but Section 6 of the Railway Labor Act. That is why the National Mediation Board (NMB) will continue to oversee these negotiations as it has since January 2009. An NMB-appointed mediator will participate in the sessions, which will follow the company’s proposal.

Only after the company concludes that further negotiation sessions would not yield a consensual agreement would it actually file the application to reject the CBA with the Bankruptcy Court. The hearing on the application has to be scheduled within fourteen days after it was filed, or twenty-one days if the court deems it to be appropriate or at a later date if American and APFA agree.

APFA, like the company, must negotiate in good faith. Should these negotiations fail, we must be able to show the court that we have in fact satisfied this obligation. Only if bargaining is unsuccessful will we have the opportunity to demonstrate to the court that American has not complied with each of the requirements of Section 1113 and that we had “good cause” to reject its proposal. We cannot simply refuse to bargain because we believe that the company’s proposal is deficient or that it has otherwise not satisfied Section 1113 procedures. Again the time for raising these arguments with the court is if and when the company moves beyond negotiations and proceeds to the filing of an application to reject the CBA.

As I have said publicly and during bankruptcy proceedings, the Flight Attendants at this airline are not the problem. Convergence, in terms of pay and benefits, has already occurred with our major competitors. The problem that plagues American Airlines is one of revenue, which is a product of management and organization. We need top-down improvements, not bottom-up cuts. The Flight Attendants have given up enough for this company already; it’s now time for management to do their part.

Although I am pleased that management is offering a business plan along with the contract proposal, as it shows a certain degree of deference to our demands, it will still need to be vetted by our experts. Until we are convinced that the plan will ensure the success of our company and will provide every Flight Attendant with both job and retirement security, AMR cannot and should not expect productive negotiations.

Following Wednesday’s presentation, I will bring the contract proposal to the APFA Board of Directors, who will help disseminate the information to the membership. Please remember, this will be a very preliminary proposal. There is still much work to be done by the court and the Creditors’ Committee, and our experts and I are prepared to fight in those venues to ensure the company’s success and the fair treatment of our membership.

In unity,
Laura Glading