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Daylight Tim e on Wednesday, Aug. 8), we want to take this opportunity to recap recent events and some of the ramifications of a “yes” or “no” vote. Late last week it was announced that the United and Continental pilots have reac hed a tentative agreement for a new joint collective bargaining agreement. While details are not yet public, indications are that the agreement provides for sig nificant improvements in the compensation of the United and Continental pilots. I say congratulations to our fellow pilots at United and Continental for this im portant accomplishment. We have been in regular communication with the pilot union leaders at Delta, Uni ted and Continental in refining our strategy to transition from bankruptcy negot iations to arrive at an industry-standard pilot contract as quickly as possible. As you know, all of those pilot groups went through bankruptcy—and mergers—and have finally turned pattern bargaining in a positive direction. Last year when it became evident that a Chapter 11 restructuring of American Air lines was a distinct possibility, APA identified and retained a team of legal, f inancial and restructuring experts who are acknowledged leaders in their respect ive fields. Based on the recent experiences of other pilot groups, we were well aware that Chapter 11 is not a labor-friendly process. We knew that expert help would be absolutely vital. We have crafted a strategy to achieve the following objectives: 1) preserve your contract to the best of our abilities; 2) reinvigorate American Airlines throug h consolidation and create an airline with the route structure and revenue base essential to our long-term career success; and 3) negotiate to achieve industrystandard pay on par with the other network carriers in the shortest period possi ble. We believe we are on track to achieve all these objectives. A key APA priority is to arrive at pay parity with Delta and United approximatel y three years from a date of ratification. That is a far shorter period of time than it took those pilot groups to go from bankruptcy to their current compensat ion levels (Delta pilot contract and United-Continental TA). We recognize that many of the “no” arguments seem compelling: · “If AMR wants us to vote for this tentative agreement, it must be bad.” · “By voting no, we’ll go back to the table and management will sweeten the de al like they always have.” · “If we vote yes, we’ll end up working under this sub-standard contact for 10 years.” · “AMR must have consensual CBAs to exit bankruptcy.” · A “yes” vote would empower AMR management. By contrast, a “yes” vote can seem more like a leap of faith, with what sound like c ounter-intuitive arguments in favor of ratification. We’re also aware of the distr actions that have presented themselves during the voting period, including the v arying accounts of the recent meetings some pilots had with senior Flight Depart ment representatives. None of us were at those meetings, so we won’t try to revers e-engineer the conversation. This much we do know: as professional pilots, we’re t rained to filter out distractions and focus on the task at hand, which is what w e all must do at this critical juncture.
To summarize the choice confronting us: What happens if we vote “yes?” A “yes” vote transfers the provisions of management’s “last, best, final offer” into our c urrent collective bargaining agreement. Major highlights include the following: · An unsecured claim equivalent to 13.5 percent of the equity distributed by AMR to its creditors. Our advisers agree that this claim—likely making APA the airline’s largest stakeholder—would give us significant influence over key decisions to come concerning the future direction of American Airlines. This claim will e ventually be monetized and distributed to members as determined by the APA Board of Directors. · Pension contributions of 14 percent to a direct contribution pension pla n. · Hourly pay rate increase of 4 percent and subsequent pay increases of 2 percent, with a mid-contract market adjustment (36 months after date of signing, a percentage pay increase based on average of DAL, UAL/CAL and USA rates). · Current duty rigs preserved. · More favorable scope protections than the language contained in manageme nt’s April 19 term sheet. What happens if we vote “no?” A “no” vote likely results in the judge granting management’s motion to abrogate our c ontract. If the judge does so, management has stated that they will impose the A pril 19 term sheet, which would result in: · No unsecured claim. APA would seek recovery of an unsecured claim throug h negotiation and litigation, but based on recent airline bankruptcies our recov ery could likely be significantly less than 13.5 percent. No unsecured claim mea ns less influence for the remainder of the restructuring process and no ability to monetize that claim for the benefit of our pilots. · The pension contribution level contained in management’s April 19 term she et is contingent on reaching a consensual agreement, and it is not at all clear that management will continue the 11 percent current contribution absent a conse nsual agreement. · No hourly pay increases and no indexing to industry-average pay rates at year three. This change alone would cost American Airlines pilots more than $50 0 million. · Loss of current duty rigs—elimination of E and G time, F time reduced to 1 for 4 for layovers over 29 hours. This could significantly degrade our overall quality of work life. · Scope changes to include outsourcing of 88-seat and 114,500 lb. jets at commuter carriers, no restrictions on commuter, domestic or international code s haring in any market. · Loss of all furlough protection. A quick ramp-up of productivity and out sourcing could result in significant furloughs. · Large uncertainty as to the actual consequences of working without a con tract. Negotiations would resume, but there’s no way to predict how long it would take to achieve meaningful progress. The legal process we find ourselves in contains a lot of gray areas. We’re compell ed to use terms such as “likely” and “probably”—unfamiliar territory for pilots more accus tomed to dealing with the immutable laws of physics. On the other hand, we’re also trained to practice risk management to mitigate the risks associated with the u nforgiving environment in which we earn our living. As those who have attended the road shows understand, we have not made any perso
nal comments on how we plan to vote. Instead, we have tried to remain as neutral and objective as possible. Our goal has been to present as much information as we could so you have the same set of facts that your leadership has been absorbi ng during the past several months. Our advisers, however, have been adamant that the best way to have control over our own destiny is to put the 1113 process behind us and secure the claim, which will make APA the single largest stakeholder of American Airlines. Instead of t rying to parse the math, it is very illustrative that when corporate raiders go after control of a company, they often succeed by holding as little as 6 to 8 pe rcent of their target. In bankruptcy, labor is almost always faced with choices ranging from bad to wor se. Some within APA believe that our best hope lies in the resumption of Railway Labor Act negotiations after AMR emerges from bankruptcy. A key element of this strategy hinges on the operative word “hope.” What would be different about a new r ound of RLA bargaining compared with what we went through during the five years preceding AMR’s Chapter 11 filing? One big difference is that management would hav e a large cockpit cost advantage with an imposed April 19 term sheet. How eager would management be to give up their dream sheet of imposed terms of employment? We won’t speculate on that, but if past performance is any indication of future r esults, it would be unwise to expect much benevolence from AMR management. Inste ad, we recommend that we trust and heed the expert counsel we are receiving from our advisers. Chapter 11 restructuring is their area of expertise, not ours. Regardless of how the vote turns out on Wednesday, we thank you for this opportu nity to represent you during the most challenging period in our airline’s history. We have fought a hard fight—one that has gotten everyone’s attention. We have spent countless hours poring over information, documentation and briefings with our t eam of subject-matter experts who have helped us navigate this difficult process . We’ve agonized over decisions and the limited options before us, but have never wavered in seeking the best solutions for the pilots we represent. We have led y ou to what we believe is the best possible position in our current circumstances . Now the decision is yours and we have done our best to ensure you’re able to mak e an informed one. In unity, Your APA National Officers
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