Bankruptcy InformationAPFA Early Out Proposal - 2.15.12TERM SHEET - 2.01.12 Court DatesJanuary 27, 2012 at 10:00 a.m. (Eastern Time) Hotline Update - January 20, 2012BANKRUPTCY UPDATE
Hotline Update - January 15, 2012 Last week you read about a historic partnership between the US Pension Benefit Guaranty Corporation (PBGC) and this union. Weekly HotlineFor the week ending Friday January 13, 2012 This week, I spoke with well-known and respected aviation reporter Ted Reed with TheStreet.com. Mr Reed published the article “AMR Union: Don’t Fix Airline ‘On the Backs of Labor’” in which I stated that I don’t see where the Flight Attendants have anything left to give. In 2003, we went through a virtual bankruptcy. We gave then and that was supposed to be enough. Yet still, after a decade of management failures, some still insist on blaming labor for American’s troubles. We know better. Take a look at the numbers. American’s total operating cost – measured in Cost per Available Seat Mile (CASM) – is lower than Continental, United and Delta – its three largest competitors. Domestic flight attendant costs rank sixth among major carriers, international flight attendant costs rank second, and American’s total Flight Attendant costs rank third overall behind United and Continental. What has become abundantly clear is that what American has is a revenue problem not a cost problem. In other words, the problems lie with failed management, not hardworking Flight Attendants. American ranks fifth in terms of Revenue per Available Seat Mile (RASM) behind United, Continental, Delta and US Airways. The company’s revenue per seat mile has trailed the industry average for other legacy carriers every year since 2002, and the revenue gap between American and its competitors has grown to 17 times what it was in 2003. In the wake of 9/11, we did our part by giving back one third of our pay and benefits to avoid bankruptcy and give management the tools they needed to ensure American’s continued success. But as they have time and time again, inept management squandered the massive contributions of this labor force, failed to implement a cohesive strategy, and led this once great company into bankruptcy. Meanwhile, as pay and benefits lagged for American workers, these same managers rewarded themselves with hundreds of millions of dollars in exorbitant bonuses. And a lot of you have been asking what you can do to help. In addition to staying strong and keeping informed, you can help make sure the public knows the truth about American Airlines and the sacrifices Flight Attendants have made. I want to assure you we are taking an aggressive role in these proceedings and will continue to fight for you and to do our best to ensure the best possible outcome for you and your families. For the majority of our passengers, we are the face of the airline. I can’t imagine that this company could turn around without the support of the Flight Attendants. The value of the Flight Attendant morale is priceless In Unity, ASSESSING BIDS FOR AMR There were reports this week of possible bids for AMR. We are confident there will be others that will ‘assess bids’ for American during this process. The court has procedures for this and whoever decides to actually proceed will need to produce a viable business plan that makes sense and present it to the Creditors’ Committee for evaluation. APFA and PBGC both Issue Press ReleasesCalling on AA to Honor PensionsAPFA RELEASE: American Airlines Flight Attendants Echo PBGC’s Call for American Airlines to Honor Obligations and Retain Pension Benefits for Current Employees “We support the PBGC’s call to retain these benefits. American Airlines Flight attendants have earned their pensions, and we have sacrificed wages and other benefits in exchange for them, including voluntarily giving back one third of our pay and benefits in 2003, cuts which remain in effect today.” said Laura Glading, president of the Association of Professional Flight Attendants. “For decades we have dutifully done our part to support this pension plan by paying into it with our hard earned wages, and we expect it to be there for us when we retire. Anything short of this is a betrayal.” Flight attendants in particular present a relatively small pension cost to American Airlines. Their wages are comparatively low as are their pension obligations. The impact of a pension termination or freeze on the company’s aging workforce – the average age of an American Airlines flight attendant is 51 years old – would be particularly devastating on a human scale. Employees nearing retirement would have little opportunity to save the additional amount necessary to make up for the loss of their pension benefits. “It is in every party’s interests to ensure that American Airlines pension plans are not terminated or frozen,” said Glading. For American Airlines the difference between the cost of maintaining its defined benefit plans for current employees and the cost of terminating these plans in favor of defined contribution is not significant. And Gerard Arpey, former CEO of American Airlines, agrees. He stated several months ago that the amount American’s competitors are paying to fund their defined contribution plans is not markedly different from the cost to American of maintaining its defined benefit plans. “When you look at structural benefits, the biggest place where we are off market, is actually not pensions,” said Arpey on a July 20, 2011 earnings call. “If you look at our defined benefit pension plans over the long-run, and you take their cost as a percentage of salary, you will find that math leads to about 5 to 6 percent in terms of pension cost over time. If you look at what former bankrupt companies have put in place that terminated or froze their [defined benefit] plans, many of them are approaching matching [defined contribution] kind of contributions that are headed in that direction.” Furthermore, if the company were to terminate the plan it would have to pay PBGC $1250 per participant for three years after emerging from bankruptcy. With nearly 130,000 participants spread over four pension plans, this would amount to a total cash payment of $480 million. Taking into account these additional costs, the savings, if any, the company would realize by freezing or terminating employee pension plans is not significant. For unsecured creditors, termination would substantially reduce their recovery. The PBGC has estimated that the claim resulting from the termination of American’s four pension plans would add $10.2 billion to the pool of unsecured claims, which would significantly dilute the recovery of other unsecured creditors. For employees, termination would mean the decimation of the benefit for which we have worked the longest and fought the hardest to improve and preserve. Indeed, over the past forty years flight attendants devoted substantial amounts of their negotiating capital to their retirements rather than to their wages or other benefits. For the public, if the pension plans are terminated it would significantly add to the PBGC’s deficit. “The termination or freezing of the pension plan would not only harm employees, the company, its creditors, and put taxpayers at risk; it would undermine a shared concern of all these interests by jeopardizing the successful reorganization of American Airlines,” said Glading. The company acknowledged this at the outset of the bankruptcy when it argued in court documents that the mere delay in benefit payments would “irreparably impair the Employees’ morale, dedication, confidence, and cooperation.” The company also recognized that since the employees are the face of American Airlines, their support for the reorganization efforts is critical to its success. “At this early stage, the Debtors simply cannot risk the substantial damage to their business that would inevitably attend any decline in their Employees’ morale attributable to the Debtors’ failure to pay wages, salaries, benefits and other similar items,” wrote the company. There should be no doubt that if the withholding or untimely payment of wages and benefits could irreparably damage employees’ morale, then the freezing or terminating of their pension benefits would surely have a catastrophic impact on their “dedication, confidence and cooperation” and therefore jeopardize the successful future of American Airlines. About APFA - Founded in 1977, the Association of Professional Flight Attendants (APFA) is the largest independent Flight Attendant union in the nation. It represents more than 16,000 Flight Attendants at American Airlines. APFA Members live in almost every state of the nation and serve millions of Americans as they travel the nation and the world. In 2003, APFA played a major role in keeping American Airlines solvent and out of bankruptcy by giving back an employee bailout of $340 million in annual salary and benefits, for a total of over $2 billion and counting. APFA had been in negotiations with American for almost four years when the carrier filed for chapter 11-bankruptcy protection on November 29, 2011. Laura Glading is serving in her first four-year term as president of the union. PBGC RELEASE: PBGC Director Josh Gotbaum on the Importance of American Airlines’ Pension Plans FOR IMMEDIATE RELEASE WASHINGTON—Pension Benefit Guaranty Corporation Director Josh Gotbaum released the following statement today on the American Airlines' pension plans: Some have suggested that American must duck its pension commitments and kill its pension plans in order to survive. We think that commitments to 130,000 workers and retirees shouldn’t be disposable, that American should have to prove in court that this drastic step is necessary. For other airlines, it hasn’t been. American’s competitors found ways to increase revenues and get competitive costs while honoring pension benefits. Delta maintained its non-pilots plan, and both Northwest and Continental kept their plans going after their bankruptcies. Counsel for American claims that it needs to kill its employees’ pensions in order to be competitive with other major carriers. The numbers tell a different story: Delta Airlines, which reorganized in bankruptcy, pays an average of $13,210 per employee in pension costs – almost 2/3 more than American’s pre-bankruptcy cost of $8,102. (Source: 2010 annual reports) American has more than $4 billion in cash; some of that money should already have been paid into its pension plans. However, Congress, hoping to preserve plans, allowed American to defer the payments. It would be a tragedy if American repaid Congress’s generosity by turning around and killing the plans anyway. PBGC is always ready to provide a safety net to employees whose companies can no longer afford their commitments, but that doesn’t mean that it’s good for employees and retirees when we do. There are legal limits to the amounts we can pay, and we don’t cover retiree health care. That's why PBGC always tries first to preserve plans. We will continue to encourage American to fix its financial problems and still keep its pension plans. We stand with American’s workers and retirees who are concerned about their futures. Many of the airline’s employees took lower wages so the plans could continue. Now, it’s American’s turn to step up so workers aren’t short-changed. About PBGC PBGC protects the pension benefits of 44 million Americans in 27,500 private-sector pension plans. The agency is directly responsible for paying the benefits of more than 1.5 million people in failed pension plans. PBGC receives no taxpayer dollars and never has. Its operations are financed by insurance premiums and with assets and recoveries from failed plans. — ### — Hotline UpdateJanuary 10, 2012 Bankruptcy Update Weekly HotlineFor the week ending Friday, January 6, 2011 BANKRUPTCY UPDATE Monday, January 9 – MIA Monday, January 16 – LAX Tuesday, January 17 – SFO During these meetings, we will share what we know now and what to expect; we will address your concerns and answer your questions. I’ll be joining members of the APFA Negotiating Team, Retirement Department, Legal Counsel and your Local Base Leadership. As some of the bankruptcy proceedings may be scheduled suddenly and we can expect last minute changes, additional Bankruptcy Information Base Visits will most likely be announced on short notice. Hotline UpdateJanuary 3, 2012 SFO Base Vist ScheduledThe SFO Base Meeting has been scheduled: ----- Below are the Bankruptcy Information Base Visits currently scheduled: During these meetings, we will share what we know now and what to expect; we will address your concerns and answer your questions. I’ll be joining members of the APFA Negotiating Team, Retirement Department, Legal Counsel and your Local Base Leadership. As some of the bankruptcy proceedings may be scheduled suddenly and we can expect last minute changes, additional Bankruptcy Information Base Visits will most likely be announced on short notice. In unity, Hotline UpdateJanuary 2, 2012Friday’s Bankruptcy Update ended with the following message - “the value of the Flight Attendants’ morale is priceless.” We all know it's true but surprisingly, so may American. In a motion seeking authority to pay pre-petition wages and benefits the company supported its request by stating the following,
Apparently, American appreciates that any delay in paying the wages of its employees would cause the airline to suffer irreparable harm. Similarly, it should understand that trying to yet again reduce our wages and benefits will have exactly the same effect. ------------------------- During these meetings, we will share what we know now and what to expect; we will address your concerns and answer your questions. I’ll be joining members of the APFA Negotiating Team, Retirement Department, Legal Counsel and your Local Base Leadership. As some of the bankruptcy proceedings may be scheduled suddenly and we can expect last minute changes, additional Bankruptcy Information Base Visits will most likely be announced on short notice. Weekly HotlineFor the week ending Friday, December 30, 2011 BANKRUPTCY UPDATE Below are the Bankruptcy Informational Base Visits currently scheduled: Tuesday, January 3 – DFW Monday, January 9 - MIA Monday, January 16 - LAX 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 communications@apfa.org so that eligibility can be verified in advance. Only Retired Flight Attendants need to contact APFA prior to the meeting. During these meetings, we will share what we know now and what to expect; we will address your concerns and answer your questions. I’ll be joining members of the APFA Negotiating Team, Retirement Department, Legal Counsel and your Local Base Leadership. As some of the bankruptcy proceedings may be scheduled suddenly and we can expect last minute changes, additional Bankruptcy Information Base Visits will most likely be announced on short notice. Q. WHY DID I GET AN EMAIL ABOUT CHANGES TO RETIREMENT BENEFITS? Hotline UpdateDecember 29, 2011 As I have stated in previous Hotlines, APFA is devoting all of its resources to defend our contract during this bankruptcy; to that end we have assembled a team of experienced professionals to represent APFA and protect the Flight Attendants’ interests. As part of that effort APFA has retained Jefferies, a highly regarded investment banking firm to serve as our financial advisors. Like the Creditors Committee, APA and the Company, who have all retained their own investment bankers, we realized that our bankruptcy team had to include Jefferies. It will provide invaluable and essential services - from analyzing the Company’s collective bargaining proposals, to providing support throughout the Section 1113 proceedings, to assessing the effect of motions filed in court. We have posted on the Bankruptcy Information page at APFA.org information describing the full scope of Jefferies’ retention, the breadth of its airline experience and the key members of its restructuring and recapitalization group. Jefferies' most critical function will be its in-depth analysis of American’s business plan which will undoubtedly be the centerpiece of this case. Based on that plan, American will attempt to justify whatever demands it may make of labor. The business plan, American will claim, dictates the concessions it needs. However, the Company has yet to present its plan to the Unions or any other interested party. Once it does so, the financial advisors of the Creditors Committee, APA as well as APFA will fully assess its validity. We must have someone in our corner who is performing that task solely on behalf of the Flight Attendants. Equally important, if APFA and the Company cannot reach an agreement during the negotiations required by Section 1113 and we wind up in a hearing before the bankruptcy court judge on the debtors’ motion to reject our contract, APFA must be able to offer testimony that can credibly challenge the conclusions of the Company’s financial advisors. To do so we must have a firm of the same stature as Rothschild, Moelis and Lazard, the advisors selected by the Company, the Creditors Committee and APA, respectively. There is no doubt that Jefferies is as respected and experienced as any of these other financial advisors. In sum, there is no shortcut; there is no alternative; we have but one choice - to be equipped to fight as hard and as well as the circumstances demand. Below are the Bankruptcy Informational Base Visits currently scheduled: Tuesday, January 3 – DFW 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 communications@apfa.org 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 – dues1@apfa.org. During these meetings, we will share what we know now and what to expect; we will address your concerns and answer your questions. I’ll be joining members of the APFA Negotiating Team, Retirement Department, Legal Counsel and your Local Base Leadership. As some of the bankruptcy proceedings may be scheduled suddenly and we can expect last minute changes, additional Bankruptcy Informational Base Visits will most likely be announced on short notice. In unity, Hotline Update December 28, 2011Dates have been scheduled for the Base Visits at MIA and LAX. Tuesday, January 3 – DFW BANKRUPTCY UPDATEDecember 23, 2011 Today, during a one-hour hearing, 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. --------------------------------------- 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 communications@apfa.org 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 – dues1@apfa.org. 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 been posted as a stand-alone document - ‘How Safe is My Pension Plan?’ - on this page. Hotline UpdateDecember 21, 2011 Today’s first Bankruptcy Informational Base Visit in NYC went extremely well. Flight Attendants from all seniority levels attended. The meeting is 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 communications@apfa.org |
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