7.26.12 – (LAA) – Letter from APFA National President Regarding Key Points of the LBFO

Dear APFA Member,

July 26, 2012

These are extraordinary and unprecedented times for our union and our company. Never before, in decades of collective bargaining, has our union been in such a challenging position. As you know, APFA’s negotiating team worked tirelessly over the past several weeks to hammer out a contract with American Airlines management under Section 1113 of the U.S. Bankruptcy Code. Bankruptcy law gives the Debtor a tremendous amount of power and leverage in negotiations. It is designed to allow the bankrupt company to extract as much as possible from its unions.

Last week, our team secured a Last Best and Final Offer (“LBFO”) from the Company. Given that the bar for negotiations was set by the Section 1113 Term Sheet of March 22nd (“Term Sheet”), this LBFO is a vast improvement. Voting to accept or reject the LBFO is open until August 19th, 10am Central Time, for members in good standing. Below are the facts you should have in order to make an informed decision:

Key LBFO Points:
–       LBFO contains approximately 34 percent less in concessions than American’s Term Sheet. The Company moved from its original ask of $230 million annually to one of $168 million.
–       LBFO includes an Early Out Program with a $40,000 payment. Term Sheet has no such option.
–       LBFO includes signing bonus of $1500. Term Sheet has no signing bonus.
–       LBFO includes a wage increase at date of signing of 3 percent. Term Sheet includes no increase.
–       LBFO improves on TAFB. Term Sheet includes no improvements.
–       LBFO provides for an adjustment to industry average pay rates 36 months after date of signing. Term Sheet provides no adjustment.
–       LBFO includes Critical Coverage Pay Premium at 150 percent. Term Sheet has no Critical Coverage Pay Premium.
–       LBFO retains G Time without change. Term Sheet reduces G Time.
–       LBFO includes Sequence Pay Protection. Term Sheet does not include Sequence Pay Protection.
–       LBFO includes bankruptcy claim for 3 percent equity of post-emergence Company. Term Sheet does not include an equity claim.

As you can see, our negotiating team made significant progress during the negotiations, despite American’s legal advantages. Although far from the deal we were close to reaching prior to bankruptcy, the Company’s LBFO is far better than the Term Sheet. Should we reject the LBFO, the Court will likely grant the Company’s Section 1113 motion. Management knows that should this happen, they will have legal permission to put in place the more concessionary Term Sheet (whether the Company will be allowed to impose even worse concessions than in the Term Sheet is an open legal issue). There is a remote possibility that the Court will not grant the Company’s motion, but even then the judge would likely only ask American to make minor adjustments to the Term Sheet. Our legal team can say with certainty that should the Court issue a ruling on the Section 1113 motion, whether it be to grant or deny it, our contract would be far more concessionary than this offer.

Additionally, should the Company impose the Term Sheet, it will include no wage increases, no defined contribution plan to replace our current pension plan, and no profit sharing. Although each of these items is in the Term Sheet, they are contingent upon reaching a consensual agreement.

Although no carrier has emerged from bankruptcy without labor agreements, there is no legal barrier preventing it. If we reject the LBFO, and the Court allows American to impose the Term Sheet, the flight attendant costs in American’s business plan would be $84 million less than the US Airways plan. That would give American a serious advantage over US Airways, and one that they will exploit when convincing creditors their standalone plan is stronger.

In the event that we vote to reject the LBFO, and the Court grants the Company’s Section 1113 motion, and the Company imposes its Term Sheet, our subsequent negotiations would be governed by the Railway Labor Act. Unfortunately, at that point the Company will already have such advantageous terms that there will be little to no incentive for it to negotiate any changes. We are all very familiar with American’s stall tactics, having seen them first hand from 2008 until the bankruptcy filing. I have no doubt that management would make as little progress as possible during National Mediation Board negotiations. Instead, I would expect American to drag out each subsequent contract negotiation for as long as possible, preferring instead to keep the awful provisions of the Term Sheet in place. Furthermore, the NMB has not triggered a cooling off period for a major airline in over eleven years, and is even less likely to do so during a Presidential election season. Our attorneys and I do not believe the RLA bargaining process is a viable option for us at this time. Make no mistake, our singular focus continues to be achieving a merger with US Airways and I am confident in our ability to do that. The momentum has shifted to our side. Analysts, public officials, and the media are all calling for a merger in bankruptcy. Approving this LBFO is a step in that process. Our colleagues at APA and TWU are in the same situation. Their leadership and I agree that the best path forward is to approve new contracts and allow American’s management to complete their standalone plan. This will allow the US Airways team to develop and present their merger plan, which they are eager to do. In fact, US Airways CEO Doug Parker has said publically that approving new labor contracts is the fastest way towards achieving a merger.

The tremendous pain and frustration we have all endured makes this vote a tough one. Indeed, the disrespect and aggravation the negotiators and I felt is part of what made achieving this offer so difficult. Though still unpleasant and very concessionary, the LBFO represents an enormous effort on the part of our negotiating team and its terms are far better than those we were handed on March 22. Please consider the offer carefully before casting your vote. As always, APFA’s resources are available to answer any questions you may have.  

In Unity,

Laura Glading
APFA President