2.01.12 – (LAA) – Headcount Reduction, Term Sheet Proposed by Company

February 1, 2012

Following the meetings with management today, we can now confirm the following information:

As you read this information, please keep in mind the Negotiating Team expected this to look ugly, yet it has exceeded all of our expectations. The betrayal of our Flight Attendants began in 2003 and continues today.

According to AMR management, the company needs $3.1 billion in annual cuts, with $1.25 billion coming from labor which is disingenuous at best, as the real benefit American will realize from the contract gutting is worth $2.8 billion. The company expects to accomplish this by terminating employee pensions and shifting to a defined contribution plan, abandoning our retiree medical benefits, and reducing the size of the company’s workforce by approximately 14,000.

The company’s proposal is even more extreme and despicable than we had anticipated, however, just as I expected and not surprisingly, the justification from management simply isn’t there. They failed to justify the $800 million cost disadvantage figure they pulled out of the air and claimed to have for the past three years. Now they’ve more than tripled that amount. It’s outrageous and I’m not going to accept it. We have the facts on our side, and if necessary I will reiterate them to the creditors” committee and the court. Management has given us absolutely no credit for the concessions we made and continue to make and now they want another bailout. Frankly, they’re not entitled to it. I am committed to fighting them on every misleading or inaccurate statement they made today. Our aggressive negotiation strategy will remain unchanged, and we will pursue an early-out option to take care of any reduction.

Headcount reduction breaks down by the following high-estimates:

Management: 1400
Pilots: 400
Flight Attendants: 2300
Mechanics: 4500
Fleet Services: 4300
Gate Agents: 1300

We’ve posted the Flight Attendant “Term Sheet” proposed by the company on the Bankruptcy Page of APFA.org. Again, keep in mind as you read the document that we have no intention of coming out of this with anything resembling this term-sheet.

Although this is a part of the 1113 process and this is their first 1113 proposal, the Bankruptcy Code does not impose any time table for the negotiations that will now follow. It is not until the company determines that further bargaining would be futile and files a Section 1113 motion with the court for authority to reject the collective bargaining agreement, which the Bankruptcy Code provides for any time limits. The first deadline is that the Court has to schedule a hearing on the motion within 14-21 days after the motion is filed or longer if the parties agree. In addition the court is required to make a decision on the Section 1113 motion within thirty days from the start of the hearing. This deadline can also be extended if the parties agree.

I wish I had better news, but you can be sure that we are not going to take this laying down. There is still much work to do to ensure the best outcome.

Additional updates will be sent via this Hotline and posted on APFA.org.

In Unity,
Laura Glading

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Representative George Miller, senior Democrat on the House Committee on Education and the Workforce, asks pension agency to protect American Airline retirees, employees and U.S. taxpayers

As I make final preparations for our meeting today with AMR management, I am encouraged by the outpouring of support from our friends in Washington, DC.

Both Congressman George Miller and PBGC Director Josh Gotbaum have weighed in and demanded that AMR meet its pension obligations. This is a testament to the APFAís relentless work on the Washington front.

As many of you have heard me say in recent base meetings, Julie Frederick, Patrick Hancock and I have made engaging government officials a priority throughout this bankruptcy and today it is paying off when we need it most.

I will be issuing additional hotlines throughout the day to keep you up to the minute with any developments.

In unity
Laura Glading

WASHINGTON Rep. George Miller (D-CA), the senior Democrat on the House Committee on Education and the Workforce, asked the Pension Benefit Guaranty Corporation today to avoid a potential termination of American Airlinesí pension plan that may leave taxpayers on the hook and threaten the retirement security of thousands of current and future American Airline retirees.

“Termination should only be a last resort and not part of any business strategy to exploit the bankruptcy process and dump pension liabilities onto the taxpayer,î Miller wrote to Josh Gotbaum, PBGC’s director. ìTo protect the taxpayer and plan participants, I urge you to avoid allowing a repeat of United Airlines. American Airlines employees and retirees, like those at United, have mortgages, tuition payments, and other financial obligations to meet. Participants in the American Airlines retirement plans made countless life choices in relying on the promise that a career with American would provide benefits adequate for them to comfortably live out their retirement years.”

In 2005, the PBGC and United Airlines ultimately agreed to terminate United Airlines’ pension plans. The PBGC also ceded its right to ever restore the plans to United Airlines, as well as its right to seek additional assets from United, should the company ever become profitable again. Not only did United reap profits in subsequent years, a GAO investigation found that leading up to and through the termination of United Airlines’ four pension plans, the airlines’ CEO at that time and two other executives received a total of about $55 million in salary, benefits and other compensation.