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†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 Americanís own executives have derisively described their pre-bankruptcy strategy as a ìlimp alongî plan.† But how is the current ìstand-stillî 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-‡-vis the other network carriers in the near term, then the merger option ñ which American concedes will eventually occur, but does not model in the current plan ñ 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 Americanís 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 Companyís 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 ñ 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 ñ the union reps ñ 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 AAís business plan.
AA says:†During Glading's testimony... APFA <agreed> 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, weíll 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!
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?
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 for American. 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 weíll 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 theyíll 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. Weíre getting the 1113 process behind us, we will have the upper hand with labor once that occurs, and weíll 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, letís not deviate from it, and weíll 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.
Executive Committee Meeting
The First Quarter 2012 Executive Committee Meeting will be held on Thursday, May 31 - Friday, June 1 at the Marriott Courtyard Boston Logan Airport Hotel. Members in good standing are welcome to attend the open portion of the meeting.
Go to†apfa.org†and†download the bagtag†insert we recently uploaded in support of the AA/US AIrways merger. Bring extras for your crew and show your support for a better way of doing business.†
On this Memorial Day weekend as we remember and honor those who died in the service of our country, we would like to remember one our own heroes, Betty Ong. The Betty Ann Ong Foundation is a non-profit charity created in her honor to improve the quality of life for children. For more information or to make a donation visit†www.bettyong.org. There is also a†facebook group†called "Betty Ann Ong Chinese Recreation Center.
May 2012 marks the 35th year of APFA as the union representing the AA Flight Attendants and the largest independent flight attendant union in the country. Happy Birthday APFA!
And finally, please take a moment to remember the crew of AA flight 191 who lost their lives on May 25, 1979.
APFA's office will be closed on Monday, May 28th in observance of Memorial Day. It will open again Tuesday morning at 9:00 a.m. Central.
Thanks for calling the APFA Hotline.