Bankruptcy Updates

Bankruptcy Update – June 1, 2012

Today, mediated talks between AA and APFA broke off in New York without a deal. APFA is disappointed, but not surprised.

So, what’s next? The pilots will meet with AA and Judge James Peck who is mediating these sessions beginning Monday, June 4th. Following that, TWU will attempt to reach a deal under the same circumstances. If no deal is reached before June 22, Judge Lane will render a verdict regarding AMR’s 1113 request to abrogate our contracts and impose its Term Sheet.

If the judge chooses to grant AMR’s request, the timing with which management will implement Term Sheet changes is, as yet, undetermined. AA has not shared that information with us. We remain hopeful that the judge will see what AA’s labor leaders, industry experts and the Wall Street analysts already know: AA’s standalone business plan isn’t the answer to American Airlines’ future success; a merger with US Airways is. A copy of all of the court transcripts beginning with AMR’s Opening Statement on April 23rd and ending with APFA, TWU, APA, the Creditors’ Committee and AMR’s closing statements on May 25th can be found on the bankruptcy page at www.apfa.org. Click here to download.

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Bankruptcy Update – May 26, 2012

This is Leslie Mayo, National Communications Coordinator, with the APFA Hotline for the week ending May 26, 2012.

Bankruptcy Hearings Update
This week, we saw the conclusion of AA’s 1113 case in U.S. Bankruptcy Court for the Southern District of New York. As you know, AA is seeking to abrogate its contracts with APFA, APA, and TWU-represented Mechanics and Related, and Store Clerks. Closing arguments were presented Friday morning into the early afternoon. The judge has asked for briefs to be submitted by Monday, June 4, and his decision is expected on June 22, 2012. APFA has uploaded yesterday’s closing arguments on its Twitter page. We will upload the public transcripts for the entire hearings next week on www.apfa.org.

APFA’s Attorney Carmen Parcelli, of Guerrieri, Clayman, Bartos and Parcelli delivered the closing arguments on behalf on our behalf. Carmen’s delivery was precise and the content, compelling. In it, she highlighted three primary arguments for management’s 1113 request to be denied: 1) The merger argument; 2) An arbitrary EBITDAR target; and 3) AA’s “ask” that puts flight attendants below market rate. An excerpt from APFA’s merger argument follows:

“Now, in this proceeding American’s own executives have derisively described their pre-bankruptcy strategy as a “limp along” plan. But how is the current “stand-still” plan any better? How is it worth the huge sacrifices that the Company is demanding from its flight attendant work-force?

“If, as it now appears, the Company is incapable of devising a stand-alone plan that begins to take on its deficiencies vis-à-vis the other network carriers in the near term, then the merger option – which American concedes will eventually occur, but does not model in the current plan – becomes all the more imperative.

“APFA has not lightly embraced the alternative of a merger. There is no doubt that a merger raises a number of difficult issues that the combining employee groups must work through. However, in the final analysis, APFA finds that the proposed merger with US Airways offers greater job security for its members, will require less sacrifice, and a surer path to make American a premier airline once again. Unlike American’s Section 1113 proposal which will force 2,000 flight attendants onto the street, the US Airways term sheet does not require any flight attendant job cuts. Significantly, the US Airways agreement also includes an early out program which APFA firmly believes is a win-win proposal for the company, as well as many off the other creative solutions proposed by APFA during Section 1113 negotiations, but which American unfortunately refused to seriously entertain. And perhaps most importantly the US Airways term sheet provides for a process that will ultimately lead to a long-term agreement based on market rates.

“For all these reasons, the merger question could not be more relevant for the Association in this proceeding. The Company’s argument that this Court should simply ignore the entire merger issue is not supported by either the facts or the law.”

Management’s response as stated by Jack Gallagher, AA’s atty, to the idea of a US Airways merger (followed by what would be the obvious loss of control of American Airlines) was by calling it “smoke and mirrors, “a distraction” and “a red herring.”

Mrs. Parcelli finished her closing with the following statement: “Mr. Gallagher remarked in his opening statement that with a Section 1113 motion there are no winners. As a general proposition, I probably agree with that statement. However, each one of these cases is unique to its particular facts – this case even more so than most. Now, undoubtedly if the motion is granted, both employees and the Company will lose. But if the motion is denied, there is a sound prospect for a win-win outcome for employees, the Company, and all of the stakeholders in this case. That opportunity lies in all parties coming together to determine the best strategy for this Company going forward. That is the road that we should have been on from the commencement of this bankruptcy proceeding, and it is a path still open to us at this time.”

On Friday after leaving the proceedings, Laura Glading said, “This morning, a SFO crew on layover came to the courthouse to watch the closing arguments. I want to thank them for being there. They were so professional and so knowledgeable about the 1113 process. With the membership behind us, the ride has been so much smoother than it could otherwise have been. The American Airlines Flight Attendants are the solid foundation – the union reps – the building blocks that have put APFA in the forefront of this battle against AMR management. Without this foundation, we would crumble.”

The parties have been asked by Judge Sean Lane to meet with Judge Peck, a fellow judge within the U.S. Bankruptcy Court of the S. District of New York , to mediate talks between the parties in an effort to reach consensual deals. APFA’s meetings begin on May 31st in New York.

We Say/They Say
On Friday, May 18, AA sent out their Flight Service Update where they misrepresented their summary of APFA President Laura Glading’s testimony. Following are the corrections to AA’s misstatements.

AA Says: Glading testified that the union agreed to $153M in annual cost reductions in its term sheet with US Airways, without any evaluation of a business plan for the merged entity or an understanding that further cost reductions would not be needed. APFA has not reviewed or been provided key information from US Airways including: No revenue plan, no fleet plan and no financial analysis or performance metrics.
APFA says: This is a complete fabrication. First, the terms reached with US Airways is a Bridge Agreement – to hold us over until improvements can be made immediately upon approval of the single carrier petition. No further reductions will be required – the parties agreed to binding arbitration based on market rates (as opposed to AA terms that put us well below market rate). IF we do not reach an agreement on a contract with US Airways within 60 days. Laura, our experts, the negotiating team and the APFA Board of Directors were given a high-level business plan presentation and concluded without doubt that it is a viable plan that would return AA to its premier position as number one again. Once AA opens its books to US Airways, APFA will be able to do an even more thorough analysis with a clause to withdraw from the deal should it not be representative of what was communicated by USAirways. Furthermore, the Unsecured Creditor Committee has NOT endorsed AA’s business plan.

AA says: During Glading’s testimony… APFA to a number of contractual items with US Airways that it rejected in its negotiations with American: APFA agreed to a six-year duration with US Airways, but rejected a six-year term with American. APFA agreed to a Preferential Bidding System without condition with US Airways, but their proposal to AA requires union approval of the PBS system before implementation. APFA agreed to a single pay-scale for domestic and international flight attendants, with an international override with US Airways, but rejected American’s proposal to combine the currently separate domestic and international pay scales into a single consolidated pay scale.
APFA says: We will be bargaining over the specific terms of preferential bidding when we enter into direct bargaining with US Airways after the merger is complete and we begin bargaining for a single contract. We rejected a six-year agreement because we know it will take AA several years to bargain a new contract. A six year agreement with this management team will likely be an 8 to 10-year agreement. US Airways agreed to leave many aspects of our Contract at current book value – AA was asking for more than they claim to need.

Plane Business Banter
Holly Hegeman, everyone’s favorite airline blogger and the founder of PlaneBusiness Banter, published a doozy this week that we couldn’t not mention. Her weekly report is an online-paid-subscription publication, but Holly has given us permission to use this week’s role-play mocking in our hotline message. Thanks Holly!

“Doing What We Do Best”: A One Act Play Starring Tom Horton, Bev Goulet and Virasb Vahidi

Tom Horton: Underlings, we must quickly conclude our bankruptcy so that we can emerge as a standalone carrier, award ourselves new shares of equity in the newly reorganized company, and then analyze other opportunities. While we do that work, much as we have done over the past decade, we’ll continue to exist in our own universe and not pay attention to anything else that is going on in our industry. After all, we ARE American Airlines!

Underlings: Roger!

Tom Horton: Also, we know we will start to get increasing pressure from our Creditors Committee and especially from those pesky bondholder groups to analyze alternate plans that create value for them. In fact, I’m told they’re organizing themselves now. Morons. Why won’t they just take our word for it? We’re American Airlines! Doing what we do best!

Bev Goulet: Yes, those bondholders are going to expect us to look at alternate strategies that provide more recovery to them. I get tired of hearing about how we defaulted and how open-minded we should be about looking at other plans. They just don’t understand how hard it is to run an airline.

Tom Horton: Yes, it is, Bev. It’s like running a marathon.

Bev Goulet: …and if we tried to do a merger while in bankruptcy?!

Tom Horton: …why that would be like trying to run a marathon with a backpack on!

Laughter all around.

Virasb Vahidi: Revenues are on the recovery for us, boss, but unfortunately, it’s only due to decreased capacity in some of our key markets. Lucky for us most of our employees don’t even understand what that means, let alone know how to fact check it.
Tom Horton: Right. But it isn’t helping that some of the Wall Street analyst types are doing that analysis and writing about it. I tell you, we simply must move faster! We must emerge as fast as we can so Parker’s plan to merge does not gain any more traction. Anybody got any ideas?

Silence.

Tom Horton: Well, I do. We have to set up a protocol. That’s the name. Yes, a protocol. We all know we have no intention of opening up our books, or even entertaining a conversation with Parker. But that will show everyone that we are willing to do what is the best forAmerican. It doesn’t mean we have to do it — it just makes it look like that is what we want to do.

Our keyword is “speed.”

For now we’ll just keep kicking the can (chuckle chuckle) and talking about a protocol without putting anything into action. And before you know it, September rolls around, and we’ll have the bondholders right where we want them and we will have planted enough doubt in their minds about the uncertainty of a merger with US Airways that they’ll be more than willing to accept less recovery with our “Standalone Plan” than with a merger….and we can emerge by early 2013!

Bev Goulet: What about the labor contracts, boss?

Tom Horton: Labor Schmabor. We’re getting the 1113 process behind us, we will have the upper hand with labor once that occurs, and we’ll be able to pay below market rates because, well, the standalone plan can only support below market rates. Pretty cut and dried if you ask me.

Applause in the room.

Tom Horton: Seriously, this is the plan, let’s not deviate from it, and we’ll all be fine. Remember, we’re American Airlines — something special in the air. Doing what we do best.

[Lights fade to the sounds of “Happy Days are Here Again.]”

Proof of Claim
Earlier this week, APFA published a hotline addressing the recently-mailed “Proof of Claim” sent via US Mail by AA attorneys. This document drew attention from far more members than it will effect. In short, filing a Proof of Claim is required to preserve the right to collect from the Company payment on a claim that arose prior to the bankruptcy filing of November 29, 2011. Please be advised that APFA will be submitting a blanket Proof of Claim covering all Flight Attendants who have claims against the Company arising from grievances or from any type of Contract (CBA) violation. Flight Attendants with such claims need not (and should not) file separate Proofs of Claim.

If you have a different type of claim against the company (unrelated to a CBA violation), which arose prior to the bankruptcy filing, it is your responsibility to file a proof of claim according to the directions in the packet. For example, if you have a lawsuit or workers compensation claim that was pending before the bankruptcy filing you must file a proof of claim to preserve your claim. Only those persons who have formally filed proofs of claim will be eligible for payment of pre-petition claims once the bankruptcy process is concluded. You may wish to consult with an attorney concerning your potential claims, although you do not need to do so in order to submit your claim.

If you have questions about whether you should complete the claim form, email [email protected] or leave a voicemail at 817.540.0108, ext 8212.

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APFA Special HotLine Update – May 22, 2012

This is Leslie Mayo, National Communications Coordinator, with a Bankruptcy Hotline update for May 22, 2012.

Tuesday saw the continuance of the company’s rebuttal case in the 1113 hearings in New York. You can read these tweets by clicking on the link from the front page of www.www.apfa.org. To follow APFA on Twitter, click here and select follow.

The tweets in this Hotline read from the bottom, up. Several comments include a link. This is because those tweets were too long to fit within Twitter’s 140-character limit. In that case, simply click on the link to read the comment in its entirety. Also, this is not meant to represent a transcript of the hearings. It is simply a casual summary of the testimony and should not be construed as anything but an unofficial account.

Please note: These tweets are by no means meant as an official record of the testimony. They are intended as a summary of the proceedings and likely contain typos and even an error or two!

People and Entities involved in Tuesday’s proceedings:
Rob Clayman, APFA Attorney
Carmen Parcelli, APFA Attorney
APA Attorneys
TWU Attorneys
AA Attorneys
Hon. Sean Lane

Monday’s Witnesses, AA’s Rebuttal Case:
Daniel Kasper, Senior Consultant for Compass Lexecon, (AA)
Jeff Brundage, AA Senior Advisor, (AA)

Tuesday’s Witnesses, AA’s Rebuttal Case:
Jerrold Glass, President of F&H Solutions Group, (AA)
Dennis Newgren, Managing Director of Flight, (AA)
Bruce Richards, Partner and Chief Actuary, Mercer Health and Benefits, (AA)
David Resnick, Managing Director, Chairman, Rothschild, Inc, (AA)

Rebuttal Witness Scheduled for Wednesday:
Alex Dichter, Director, McKinsey & Company (AA)
Beverley Goulet, AA Chief Restructuring Officer, VP Corporate Development, Treasurer (AA)

Read more…

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This is Leslie Mayo, National Communications Coordinator, with the APFA Hotline for Monday, May 21, 2012.

Bankruptcy
Last week was labor’s turn to present its cases in The U.S. Bankruptcy Court of the Southern District of New York. After APA presented its case, it was APFA’s turn to take the stand. President Laura Glading led off, followed by Lead APFA Negotiator Anne Loew, Adam Condrick with The Segal Company, Airline Financial Consultant Dan Akins and finally Leon Szlezinger, a managing director of The Jefferies Group, APFA’s advisors on the Creditors’ Committee. APFA’s portion of the testimony including cross examination by AA’s counsel finished on Friday before noon. Our experts, along with Laura and Anne, performed confidently and convincingly. TWU began their presentation on Friday for the two remaining locals who did not ratify their “Last Best Offer (LBO).” The following statement regarding five of seven “LBOs ratified earlier in the week” was made by Attorney Sharon Levine, on behalf of TWU during her opening statement on Friday, May 18th: “None of those votes should be taken as an affirmation of this process or of this business plan as fair or appropriate. Quite simply, they’re not. Our members have been faced with a horrible Hobson’s choice, a Sophie’s Choice. Either they take huge concessions, face huge layoffs and potentially get early out remediation, or they are fired. There is no middle ground. We are facing 9,000 jobs lost, 4600 with the two groups who actually voted no.” The judge did comment that in no way did he take the voting as speaking for or against AA’s business plan.

The following excerpt was written by APFA Vice President Marcus Gluth who had the opportunity to see our three experts testify on Thursday and Friday of last week:

“In the two days of testimony I witnessed, the company used four different attorneys to cross examine three witnesses. These are not ordinary attorneys, these are senior partners, former federal prosecutors and all extremely high-priced. Several of them also worked for Frank Lorenzo and Texas Air. They now work for the Los Angeles-based [union-busting] law firm Paul Hastings. Each one of these attorneys has a group of associates who helps them prepare for each question. The associates sit in the gallery with iPads and are constantly communicating with the main attorney. I was told they each make upwards of $800 – $1,000 per hour, not including their associates and expenses. If you check the AA bill for Paul Hastings in December and January alone, it totaled $2.9 million; and this was prior to the 1113 trial. Can you imagine what that bill is now? It was at this point that I realized how bankruptcy really is a David vs. Goliath. Not just with us, but with all unions and individual creditors involved in bankruptcy.

“We are very well represented by Rob Clayman, Carmen Parcelli [of the Washington, D.C. firm Guerrieri, Clayman, Bartos and Parcelli] and their team. All three labor groups have similar-sized legal teams. Personally I felt that, in the process, I was represented very well. Not only because our people held their ground against the company’s hired guns. But also because in regular negotiations, the company rarely uses its hired guns. Instead, it uses employee relations representatives who have climbed the corporate ladder, along with an attorney or two. Flight Attendants often remark to me they envision AA having this huge team of top attorneys at the negotiating table, but we all know that is not true. However, in bankruptcy court, it is much different. AA actually does have the highest-paid attorneys in the country ready to do battle; a battle that may allow management to possibly erase 50 years of collective bargaining. And they know the odds are on their side. I witnessed Rob, Carmen and our professionals shine and prove they are proud to represent our members. Listening to different members of the Jefferies Group, they are showing me they are starting to feel like they are one of us, not just corporate suits. Dan Akins has a head start with his honoree APFA membership following our Strike, but the smirk he gave to the company officially makes him one of us.

“TWU began their case Friday morning with Jeff Brundage. He started out almost bubbly about describing how since he had last testified, he had retired and was so happy to be replaced by Denise Lynn as Senior VP and that he is now an advisor to the company. At one point, when TWU asked him about executive cash bonuses, he stated they never took one dollar in bonus money, but rather stock options, in accordance with the “executive retention program”. By the way, it actually took Brundage at least 10 minutes to explain that sentence.

“Leon [Szlezinger] took the stand on Friday morning. When Carmen asked Leon on direct testimony to clarify his experience in order to qualify him as an expert witness, I was shocked at his extensive background. For example he represented a bank that Enron was about to put the screws to. Leon and his team were the first to identify the problem and rescue most of his client’s money. When we first met with him in December, he was obviously modest about his background. For the court, he was much more detailed and it was very impressive. Leon was confident and spoke with authority. He testified that AA’s future business plan was so poor, he was forced to advise his client (APFA) to consider other options. This crushed the company. You could see the Senior VP’s squirming in their seats, uncomfortably. Here is a guy who was one of the first in identifying Enron as a major problem now saying that AA’s business plan is seriously flawed. The company tried to go after Leon on cross examination with no success. Leon went on to state that if he had used the same math and “back of the envelope” calculations that AA and the McKinsey group had made regarding the business plan, he would be fired. AA was stoic, but a room full of Attorneys and Financial wizards buzzed and snickered. I looked right away at the Judge and he was staring straight down taking notes. We are well represented.

“Among Dan, Rob and Leon, I know we have the right professionals representing us. Over the years, I have heard Dan talk and explain his position and views on AA and the airline industry. After hearing both Leon and Dan and their collective views, it was even more powerful.”

Bankruptcy Court May 21-25
The coming week in Bankruptcy Court will be a busy one. TWU is scheduled to wrap up their presentation on Monday, at which point the company begins their rebuttal where they will be recalling witnesses in an effort to discredit the Unions’ testimonies. Also, the next Omnibus Hearing, which is designated for a variety of different matters relating to the bankruptcy case to be heard, is scheduled for Thursday, May 24. APFA will once again be live-tweeting directly from the open session of the 1113 hearings this coming week. If you would like to follow along, APFA’s Twitter feed is @APFAunity. We will include a summary on the hotline and also on APFA’s Facebook page.

1113 Decision Delay
There is one important change to the 1113 calendar: Judge Sean Lane initially set June 6th as the date he would make the decision whether or not to grant the company’s motion to impose the 1113 Term Sheet. However, the Judge expressed concern that the case was taking longer than expected and because of that he has set a new date of June 22 to render his decision.

Here are a few interesting articles written about the bankruptcy hearings last week, including this one published in USA Today following Dan Akins’ testimony on Thursday. Note: Bill Swelbar, who is mentioned at the bottom of the USA Today article, and is widely believed to be a consultant for AA. He is also the only “analyst” anywhere that appears to support AA’s Standalone business plan.

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 4.27.12

Since 10:00 a.m. Monday morning, AMR’s bankruptcy attorneys spent all day every day trying to convince a judge that they have no choice but to secure the abrogation of our contracts and recover $1.25 billion annually in order to successfully emerge from bankruptcy as a standalone company. Keeping in mind that this “business plan” was designed by and would potentially be implemented by the same management team that has all but thoroughly ruined this company is nothing short of pathetic.

Back at Centerport, management’s PR machine is working overtime to protect AA executives’ top-paying jobs by spearheading a campaign to throw labor under the bus. Some news writers, in reviewing the hearings this week, felt compelled to bash AA’s flight attendants, pilots and ground workers. One in particular stooped extra low; a contributor to Forbes online whose name isn’t worth mentioning. His sloppy article confirmed any doubts that management is doing all it can to try to keep labor “in its place.” Nice try AA. Unfortunately for you, it isn’t working. Thanks to all the flight attendants who’ve sent copies of comments you posted online so far. Your comments are making a difference. Keep up the good work!

Also, if you haven’t already done so, please take a minute to visit the Wall Street Journal poll that asks the question: “What do you think of a potential AA/US Airways Merger?”

AA BANKRUPTCY HEARINGS

The following is a brief synopsis of this week’s court proceedings: During the 1113 hearings held before U.S. Bankruptcy Judge Sean Lane, American presented its affirmative case for why it thinks it needs to reject its collective bargaining agreements in order to achieve successful Chapter 11 reorganization. After each Company witness took the stand, our lawyers, Rob Clayman and Carmen Parcelli, conducted cross-examination that proved extremely helpful in building our case that American failed to comply with 1113’s requirements for a Collective Bargaining Agreement (CBA) rejection.

American began its case on Monday, calling two hired consultants (Daniel Kasper and Jerrold Glass) as expert witnesses. They testified generally about airline economics and collective bargaining in the industry, but cross-examination revealed that neither one had any knowledge about American and APFA’s pre-bankruptcy proposals nor the 1113 proposal and comprehensive APFA counterproposal at issue in the 1113 case. Next up was Beverly Goulet, American’s VP for Corporate Development, as well as its Treasurer and Chief Restructuring Officer for purposes of the bankruptcy. On cross-examination Goulet said she agreed with AMR CEO Tom Horton’s statement on the importance of American merging with another carrier in the foreseeable future.

David Resnick of Rothschild & Co. was the Company’s key expert witness on the development of the 1113 proposal “Business Plan.” On cross, Resnick admitted that the Business Plan was built as a “base case” against which to compare alternative business plans, including, for instance, potential mergers or acquisitions with other airlines. Resnick even said the company had a responsibility to evaluate alternative scenarios like a merger and that the “base case” did not actually need to be implemented for it to do so. This was a significant acknowledgment, particularly in light of subsequent expert witness Alex Dichter’s (McKinsey) testimony that American had specifically directed McKinsey not to model any alternatives to the standalone Business Plan.

The labor portion of the Company’s 1113 case included testimony by American’s Senior VP for Human Resources, Jeffrey Brundage, and American’s Managing Director of Employee Relations Taylor Vaughn, the Company’s lead flight attendant negotiator. Brundage described the Company’s pre-bankruptcy business strategy – during which time it reached TAs and made proposals to the unions that together would have increased American’s labor costs by roughly $300 million per year – as “the limp along plan.” Then Vaughn struggled to defend charts he had created for purposes of the 1113 which misrepresented flight attendant productivity and pay.

As currently scheduled, APFA’s 1113 briefs and supporting exhibits will be filed a week from today, and will be followed up by hearings one week later in which APFA and the other unions will put on our own witnesses and other evidence.

Nothing that happened in court this week would in any way hinder the prospect of a merger with US Airways. The flight attendants, the pilots and the ground workers recognize the possibility of a merger with US Airways as the best answer for our futures and our company’s future.

This portion of the hearings concluded today. Labor now gets two weeks to prepare its case. Meanwhile, we encourage all members to not engage in discussions with management unless you have a union rep present. Please tell upper management that “My Union Speaks For Me.”

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APFA HotLine Special Update – 3.28.12

WHAT HAPPENS NOW?

Following filing of an 1113 motion, the judge will schedule a hearing to hear evidence and arguments from the Company and the Unions related mainly to the business need for the Company’s requested contract changes and the fairness and equity of the Company’s proposals. This hearing is typically scheduled to begin14-21 days following the Company’s filing, as required by the Bankruptcy Code, but it will be up to the judge to decide when the hearings will occur and when they will end.

The Company must prove each of the following:

• The changes are fair and equitable to all parties;
• The company provided all of the relevant information necessary to evaluate the proposal;
• APFA rejected the contract proposal without good cause; and
• The balance of the equities clearly favors the changes being proposed.
• Under the Code, if the judge has not issued a decision within 30 days from the first day of the hearings, the Company may unilaterally begin to implement its proposal pending a decision. However, this period may be extended by agreement of the parties.
• If the judge finds that the Company’s 1113 proposals are both fair and equitable and necessary to AMR’s successful restructuring, and that the unions rejected the proposals without good cause, he can grant the Company’s motion to reject the current collective bargaining agreements, which would allow the Company to implement contractual changes it has proposed during 1113 negotiations.
• If the judge finds the Company’s proposals are either not necessary for successful restructuring or not fair and equitable, he can deny the motion and our current collective bargaining agreements will remain in place.

What happens when the judge’s decision is made?

• If the judge grants the motion, he authorizes the company to reject the contract and usually to implement its 1113 proposal or its last offer, depending on the case. Changes may not happen immediately across the board, and in any event changes can only be prospective. Whether and at what pace to implement changes would be at the company’s discretion if the motion is granted.
• If the Company does succeed in rejecting the contract, the parties will still be in negotiations to reach a new contract. The Company’s proposal does not become a new collective bargaining agreement, but rather just becomes the baseline from which the negotiations will be taking place.
• If the judge denies the motion all parties will also return to the negotiating table and the process continues with the current agreement in force. If the motion is denied the Company may still come back later and file a further motion to reject if it believes it has corrected any problems identified by the judge in denying its original motion.

We hope to be able to give you a more complete timeline in Friday’s weekly hotline.

Click here to view the Flight Attendant portion of the 1113 filing.

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APFA HotLine Special Update – March 27, 2012

AMR files 1113 motion

We learned last week that an 1113 motion was imminent, but have suspected for months that AMR would go this way. Horton’s outright refusal to consider our early-out proposal, which would have saved money and mitigated layoffs, was a strong indication of his plan. Flight Attendants’ concerns have fallen on deaf ears for over a decade. Horton even admitted to ignoring the voices of his employees in an interview last week. We had hoped he would use this reorganization to reset AMR’s relationship with its workforce, but that doesn’t seem to be a priority. Of course, the APFA will continue to negotiate with management, as we have been throughout bankruptcy, but we cannot be asked to give up more than is necessary and fair.

APFA will fight the effort in court and will do all we can to preserve Flight Attendants health care, wages and benefits. We have the right team in place, we are prepared, and most importantly, we have the facts on our side. Through all our industry’s problems and our company’s mismanagement, the Flight Attendants have been the outstanding, committed, and dedicated employees that keep American Airlines moving, and we won’t give up on it now.

APFA will lead the way in fighting American’s overreaching in court. The company can succeed only if it convinces the judge that the contract changes it seeks are necessary, fair and equitable. In reality, its draconian demands are none of those things. We will use every available resource to preserve Flight Attendants health care, wages and benefits. In the end, we believe that we will force the company back to the table to negotiate and reach an agreement.

In Unity,
Laura Glading

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APFA HotLine Special Update – 3.26.12

Court orders formnation of “Retiree Committee”

On Friday, March 23, the Bankruptcy Court issued an order regarding the formation of a “Retiree Committee” concerning medical benefits for currently retired American Airlines employees. Section 1114 of the Bankruptcy Code provides that a debtor may not modify retiree benefits without first negotiating with the Authorized Representative of retirees, both unionized and non-represented, and if necessary going through a court approval process similar to the contract rejection process of Section 1113. Under Section 1114, the unions which represent active employees can choose whether or not to serve as the Authorized Representative of its retirees. If a union elects not to serve as the Representative, the United States Trustee will appoint one or more people to serve in that capacity.

It is typical in large bankruptcies for the Court to order the formation of a Retiree Committee consisting of the Authorized Representatives of all the retirees. This Committee is formed with the input of the United States Trustee, and it hires its own counsel and advisors.

The order issued on March 23 directs the U.S. Trustee to begin the process of forming a Retiree Committee and determining who will serve on that Committee. Each of the unions, including APFA, will be asked whether it elects to serve as the Authorized Representative for its retirees. Under the order, APFA retains the right to later withdraw from the Retiree Committee if it so chooses.

To see the court order click here.

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APFA HotLine Special Update Thursday, March 23, 2012

AA announces intent to file Section 1113 motion

During a Bankruptcy Court hearing this afternoon, AMR’s attorneys announced that the Company will file a Section 1113 motion next week unless substantial progress is made in negotiations over the next few days. Considering that the Company has been unwilling to reduce its demand of $230 million in annual Flight Attendant concessions, we expect a Section 1113 motion covering the Flight Attendants will be filed the week of March 26.

Section 1113 of the Bankruptcy Code allows the debtor (AMR) to petition the court to scrap the existing collective bargaining agreements with its workforce. Once the debtor files the Section 1113 motion with the court, a hearing will be scheduled to begin on an expedited basis, as early as within 14 days of the filing date unless the parties mutually agree to a later date or the judge determines an extension is necessary based on the case’s particulars. Following the hearing, the bankruptcy judge will make a determination within 30 days. Discussions between the Company and the Unions may continue in an effort to reach an agreement prior to the judge’s ruling. No schedule has yet been set by the Court for its consideration of the anticipated motions.

The APFA is disappointed that the Company believes negotiations are stalled to the point that this drastic action is necessary. Our negotiating team has been working with the Company steadily since we received management’s term sheet on February 1. Our team has offered significant efficiencies to the Company in the hope that a truly equitable path forward could be found. For example, we have presented an aggressive early-out proposal that our financial experts estimate could save the Company over $100 million.

Most importantly, the Company’s demand of $230 million is totally divorced from the market rates or contract costs of Flight Attendants at other airlines. Over the past decade, the Company has constructed and implemented a business plan that has produced a much-publicized $10 billion hole, and now management expects labor to fill it.

Time and time again we have proven to the Company that the cost of our CBA has converged with those of our peers. In fact, after years of improving the Flight Attendants terms of employment, the average of our competitors’ CBAs will soon be far more expensive than American’s contract. Nonetheless, in an extraordinary effort to reach a consensual agreement, APFA proposed substantial savings to specific areas where American is not in line with its competitors. Management’s response was to repeat its mantra: “If it’s not $230 million in annual savings, we’re not interested.”

In addition, APFA, APA and TWU have been working to resolve our disputes fairly and equitably. Each union offered binding arbitration as the least disruptive path to an agreement, but that idea was summarily dismissed by Jeff Brundage. Apparently, American has no interest in achieving a constructive relationship with labor, based on trust and respect. Instead, it is perpetuating its long-standing practice of preferring contention over consensus. That is truly regrettable.

The Company appears intent on converting the Section 1113 process from one that focuses exclusively on negotiations to one that seeks rejection of our entire CBA. Now, as management tries to map its way out of bankruptcy, they are resorting to the take it or leave it tactics which never result in real success but only resentment and turmoil. Apparently, in preparing its business plan, American has left out one of the elements most critical to a successful reorganization – treating its employees with decency and respect. New aircraft, lie-flat seating, and elegant first class meals do not an airline make. It takes 80,000 workers. Should American continue to forget that fundamental principle it will be left with only the shell of a company.

In Unity,
Laura Glading

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Bankruptcy Update – Hard Freeze Follow Up Hotline – 3.08.12

This morning the company notified the APFA of an update to their term sheet. The company changed their proposal from terminating the pensions to a ‘hard freeze’ of the pensions. Although we are encouraged that AMR management has made a small first step towards compromise, APFA’s professionals will evaluate the impact of a hard freeze on our membership’s unique demographics and interests. American Airlines Flight Attendants have sacrificed a great deal for this company and they each deserve fair treatment throughout reorganization. To that end, the APFA will perform our due diligence and continue to negotiate an early-out package to mitigate the proposed layoffs with a dignified solution. APFA is taking these negotiations very seriously and we look forward to resolving this dispute outside of bankruptcy court.

What is a “Hard-Freeze” for the pension?

Typically, a Hard-Freeze stops any future growth in a pension. All benefits accrued up to the negotiated Freeze-Date are protected. However, we have yet to receive a full explanation of how the Company defines a “hard freeze”. Also it remains to be seen if the current pension plan can be maintained without being more costly than a hard freeze along with the company’s proposed defined contribution plan.

We will continue to provide updates via this Hotline as additional information becomes available.

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Bankruptcy Update – March 7, 2012

This morning the company notified the APFA of an update to their term sheet. The company changed their proposal from terminating the pensions to a ‘hard freeze’ of the pensions. A follow up Hotline will be sent shortly defining what this will mean for the Flight Attendants.

APFA did not respond to their proposal but is meeting internally to evaluate the proposal.

We will update you via this Hotline as additional information becomes available.

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Bankruptcy Update – March 3, 2012

In yesterday’s Negotiations Update American criticizes APFA for “opting” to attend an annual Board of Directors meeting and being insufficiently committed to reaching a consensual agreement. The company’s opinion has to be separated from the facts that actually comprise the events of the last several weeks. First, American claims that it is “negotiating” over its Section 1113 term sheet. Bargaining assumes flexibility not intransigence. A stance of “take or leave it” is rarely a formula for success. Yet that is precisely how the company is acting. In response to APFA’s proposals AA has just said “no” and not made a single counter-offer. Our “face time” with the company has indeed been short but that is attributable to American’s disinterest in discussing our proposals. Silence or unfairly debunking our ideas is not a constructive bargaining tactic.

APFA’s ability to make proposals depends in large part on having adequate information to determine what is truly necessary and fair and equitable. However, many of American’s responses to APFA’s information requests are incomplete, or have yet to be answered at all. For example, although we asked for American’s analysis of the cost difference between a pension freeze and termination weeks ago, we only received it late on March 2. A letter we e-mailed on February 22 detailing other inadequacies in American’s responses remains unanswered. In responding to our inquiry about the sacrifices management and non-represented employee will make, American has yet to identify the first penny these work groups will contribute. Instead the company has only indicated that changes will be made to their benefits and staffing that will purportedly equate to the requisite cost reductions. In contrast, the Flight Attendants, the Pilots and all the TWU-represented workers, American has specified every contract modification and calculated to the dollar their savings. Finally, we have yet to see a single analysis showing that the company’s demands are in line with the labor costs of its competitors.

Contrary to American’s claims APFA has responded to virtually all of the items in AA’s term sheet; and next week we will make other proposals assuming we have the necessary information and analysis. A consensual agreement is of course our objective, but if it is to be realized American must acknowledge that its term sheet is not written in stone but can and must be molded and transformed by creative and mutually beneficial solutions.

Finally, American’s criticism of the Negotiating Team choosing to attend a Board of Directors meeting is particularly ill-founded. American knows that membership ratification is essential to the success of these negotiations. In turn, if approval of a tentative agreement is to take place, we must meet with our leaders, keep them informed and respond to their questions and concerns.

By next week we hope American has provided complete responses to all our requests for information and has abandoned its “take or leave it” approach to negotiations. If they have done so, it is far more likely that we will achieve a consensual agreement.

In Unity,
Laura Glading

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Bankruptcy Update – 3.01.12

• APFA’s attorneys appeared in the Bankruptcy Court in Manhattan today at a hearing on the company’s motions to spend tens of millions of dollars on additional consultants. APFA was the only union to challenge the company on several of these motions, and even before today’s hearing achieved some changes to the terms of payment for some of the consultants which addressed concerns raised by both us and the Creditors’ Committee. Our basic position at the hearing was that, despite those changes, the bankruptcy court should allow APFA and other parties to seek court review of any lump sum payments (called “completion fees” or “transaction fees”) based on legal standards of “reasonableness.” The Court denied that request, based in part on the company’s agreement that the United States Trustee could seek such review.While we did not get everything we asked for, our opposition helped to preserve the funds available for improving the company, rather than lining the pockets of high-priced consultants. In addition, our continued vigilance in the court case and in negotiations helps to ensure that any contract changes we may ultimately agree to will be on terms that are fair and equitable, and truly necessary for the successful reorganization of the company.
• Yesterday APA filed a lawsuit against American claiming that Section 1113 of the Bankruptcy Code does not apply because there is no labor contract in place, which the company could reject. Instead APA contends that its collective bargaining agreement expired when negotiations began under the Railway Labor Act more than four years ago. The company will counter that contracts under the RLA do not expire but become amendable. At that time when bargaining begins the company and union are required to honor the “status quo”, defined by the terms of employment that comprised the CBA.As it has done since November 29, when AMR filed for bankruptcy, APFA constantly assesses its negotiations and litigation strategies so that the interests of the Flight Attendants are protected and our wages and benefits are preserved to the greatest extent possible. While APFA, APA and TWU maintain very close communications and have the same goals, each union must independently decide the best way to achieve these objectives. In the situation here APFA will carefully and fully consider what, if any, actions it should take in response to APA’s lawsuit.

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Bankruptcy Update – 2.26.12

February 26, 2012

APFA learned of AA’s rejecting our early-out proposal as most of you did – via a late in the day update on the company’s restructuring related website. When last we met with the company, although not embracing the proposal with resounding joy, there was not an official dismissal.

As has been the case for the past four years, APFA remains committed to reaching an agreement that considers all the Flight Attendants have sacrificed since 2003. At the same time it is very much aware that certain difficult steps must be taken to ensure that AA successfully reorganizes.

By rejecting APFA’s early out proposal American has turned its back on similar plans it has embraced in the past as well as the early out plans recently endorsed by other airlines, which obviously believe in their economic efficacy. With this rejection, AA appears intent on forcing 2300 Flight Attendants out of their jobs and onto the street. Instead, it should find a way where the same number of Flight Attendants could leave or retire voluntarily if given an appropriate financial incentive.

Of course there’s an up front cost, but the savings it provides over the contract’s term should be very attractive to a forward-thinking management team. And the up front cost is minuscule compared to how much AMR is paying lawyers and financial advisers to find creative ways to exploit our membership.

We will continue to press the company on the early out. We have also presented the proposal in detail to the Unsecured Creditors’ Committee and the PBGC. APFA firmly stands by the proposal as a creative and efficient alternative to any head-count reductions while providing long-term savings for the company, and allowing Flight Attendants who have devoted much of their lives and sacrificed so much already to leave with dignity.

Negotiations will resume on Wednesday February 29, 2012.

In Unity,
Laura Glading

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Bankruptcy Update – 2.21.12

Negotiations with the company continued through the weekend. The discussions centered on the scheduling portions of the company’s Term Sheet. Roy Everett has been instrumental in evaluating the company’s proposal.
I’m sure most of you recognize the name. Prior to his retirement from American Airlines, Roy Everett was the Managing Director of Crew Resources. Upon learning that Roy created his own consulting firm after leaving AA, APFA jumped at the chance to have him on our side. Roy is invaluable to the APFA Team. He knows exactly what will and will not work in the company’s proposals, their true value – both in productivity and in actual dollar amount – and what will be the real impact of their proposals on the Flight Attendants. Roy’s knowledge of the company’s scheduling and crew resources is incomparable. For many past negotiations we have sat across the table from Roy – to have him on our side now is priceless.
Yesterday, APFA requested again a response to our Early Out Proposal presented to the company last week. American is still analyzing the proposal.

Dan Akins continues to dissect the company’s Term Sheet for inaccuracies in their cost-outs.

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Bankruptcy Update – 2.18.12

Earlier this week the APFA Negotiating Team including our airline economist, Dan Akins, met with American. During the meeting Dan described a number of concerns he had about the way AA had costed-out its term sheet and the assumptions it had used in determining the values of its demands. Yesterday, in a late afternoon meeting, Taylor Vaughn announced that American agreed with Dan and that it had to recalculate its terms sheet. Simply put, the Company recognized that it was demanding too much from the Flight Attendants.

Consequently, we were provided a supplement to the Term Sheet that withdraws its proposal to gut our duty rigs by eliminating E Time (Duty Rig), F Time (Trip Rig), and G Time (Average and Minimum Day). Now, it is proposing to leave E and F time unchanged from the current agreement, to reduce the average day from 5 hrs. to 4:30 hrs., and the minimum day from 3 hrs. to 2 hrs. We applaud Dan Akins, who once again has proven that he is an absolutely invaluable member of the APFA team. Be assured that we will continue to fight to stop American from extracting a penny more than is fair or necessary to a successful reorganization.

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Bankruptcy Update – 2.17.12

Day two of the 10-day scheduled meetings began with a review of the Tentative Agreements reached during the last four years of negotiations.

In the afternoon, APFA heard a presentation by the company on some of their scheduling proposals.

The day ended with APFA requesting additional information from the company.

Meetings will resume Friday morning.

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Bankruptcy Update – 2.09.12

The APFA Negotiating Table Team began today’s meeting with the National Mediation Board (NMB). Later in the day, the session included the company where the first order of business was to discuss protocol for the meetings.

Next up APFA asked many questions pertaining to the company’s term sheet proposed last week. And additional information was requested.

Tomorrow we will meet with the NMB and the company for a presentation by the company on their Pension, Benefits and Sick proposals.

At the request of the NMB, both parties agreed to an initial 10 days of meetings. We will begin next week on Wednesday February 15 through Friday February 24.

Next week we plan to begin these meetings going over each tentatively agreed to article that was achieved during the last almost three years of negotiations. In addition, we intend to present to the company our Early-Out Proposal.

As we have mentioned in previous communications, the Bankruptcy code does not impose any timetable for these negotiations. Only when negotiations are exhausted, and the company files a section 1113 motion with the court to reject our collective bargaining agreement, is a time limit imposed.

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.

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Bankruptcy Update – 2.07.12

After last week’s proposal from the company, and subsequent cost-out meetings, APFA continues to gather information about the company’s business plan and proposal both through our written information request as well as in meetings with AA. That effort will continue this week. We will meet with the NMB Thursday morning to go over protocol and then with the company in the afternoon as we continue our efforts to gather information, and in particular on Friday as the company will present information concerning pensions and benefits.

We continue to receive questions regarding the 1113 process. Although the company did present a ridiculously insulting proposal last week, the Bankruptcy Code does not impose any timetable 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 that the Bankruptcy Code provides for any time limits. The first deadline is that the Court has to sc