This update will be somewhat longer than normal as we try to give you as much information and perspective as possible regarding the current circumstances.
Sometimes, at the end-game, things tend to get quiet, as the parties struggle to determine whether a deal is genuinely attainable. Dynamics at the negotiating table are an endless emotional rollercoaster. Sometimes things get so contentious that we need to take healthy breaks and park certain subjects and even change up the personalities on both sides to keep things moving forward in a professional manner. At other times, we build momentum and a healthy amount of progress is made.
Suffice it to say that we (the Negotiating Committee, National Officers and Board of Directors) hear you loud and clear. With your vote, you are the final authority in the decision-making process. We are mindful of that fact every day we spend at the negotiating table.
In this current round of negotiations, we have confirmed what many of you believed — that there are improvements to be had compared to management's “last, best, final offer” (LBFO). A number of those improvements have already surfaced at the table. By rejecting the original TA, the membership gave us the tools to be able to go further in the bankruptcy process than any other pilot group has dared to go. Ultimately, we believe management will make the moves they need to make on the remaining key deal points so we can embrace an industry-standard contract and look forward to rebuilding our careers.
Reaching a deal in bankruptcy means we strive to achieve the maximum value possible in a process where an agreement must ultimately be approved by a bankruptcy judge. Before approving an agreement, a judge must evaluate a number of legal standards and inputs from the debtor and the Unsecured Creditors’ Committee (UCC). On a number of issues, the UCC recognizes our genuine concerns and they continue to confirm their commitment to our 13.5 percent equity claim, as long as an agreement is reached “promptly and such agreement is within reasonably justifiable economic parameters.”
To receive bankruptcy court approval for our claim, we need to reach an agreement approved by the bankruptcy court judge. If no agreement is reached, AMR has the right to impose work rules and we must litigate for our claim. While we may be ultimately successful, this approach carries risks, especially without the weight of the UCC on our side and in light of some difficult case law.
So what are the options ahead?
At the risk of stating the obvious, that "Green Book with Delta Rates" or "Delta Rates on Date-of-Signing With No Gives on Scope" are things we would love to deliver in this process, but not anything we can realistically expect the UCC to support or the bankruptcy judge to approve. The only path to those goals would be to acknowledge that we won't achieve an agreement inside bankruptcy, and that we are willing to accept whatever rocky ride lies ahead and whatever time it takes to reach those goals. That is a potential path, but it carries with it a great deal of risk and uncertainty. We must all decide on our path together. We should be mindful that our advisers tell us the current market appears to value our equity claim at a level that would provide a six-figure cash payout per pilot on average. Our advisers anticipate that such a payout could be realized at or near AMR’s emergence from bankruptcy for those pilots who elect for a payout at that time. We’re unwilling to accept any deal based solely upon an equity stake, but part of the decision involves weighing the potential "bird in hand" against the "path less traveled" where we would have to litigate for the claim.
Is an industry-standard contract achievable inside bankruptcy? Our opinion is yes. But we don't want to play cute with words or try to spin things, so let's review the surreal process over the past 12 months and examine what "industry standards" include.
When AMR filed Chapter 11 bankruptcy, we were flooded with phone calls and e-mails asking us how much we thought the pay cuts would be. After negotiations with AMR in February and March 2012 failed to produce any results, US Airways management entered the picture and we negotiated a conditional labor agreement (CLA) with them that served several purposes. The CLA preserves a very substantial amount of the Green Book, with nearly half of the concessions accounted for by freezing our defined-benefit pension plan. The CLA is a historic document and puts more tangible pressure on AMR management than any other labor group has ever been able to exert on a management inside the bankruptcy process.
Following a very contentious court process in May 2012, we entered into court-directed mediated talks with AMR. No agreement was reached and we were left with an LBFO to take to the membership for a vote. The overwhelming “no” vote was less about the contents of the potential contract ― and more a collective decision to go down a different path than the one put in front of us. We are now approaching the point where we will need to collectively make another major decision together.
"Industry standard" likely connotes different things to different pilots. Universally, we all seem to agree that we want Delta pay rates—pay rates that more appropriately compensate us for the enormous responsibility we assume each time we sit down in a cockpit. From there, it gets more complex.
The following are elements of the tentative agreement we all recently voted upon that could be fairly characterized as industry standard:
- Green Book duty rigs (close to Delta)
- No night pay (same as Delta and United)
- International override only paid for trips flown (same as Delta and United)
- Frozen defined benefit plan with 14% follow-on plan (vs. terminated plan and 15% at Delta, terminated plan with 16% at United, 9.2% 401(k) match at Southwest)
- Distance learning paid at 1 for 3 rate (same as Delta)
- Sequence protection notification and obligation period (close approximation to Delta provisions)
- Rapid reaccrual limited to hours used (same as carriers who have rapid reaccrual)
- Elimination of 46-hour max sick charge on reserve (other carriers charge for trips missed. Delta has a unique annual sick program)
- Sick sellback at retirement to a health retirement account up to $25,000 (no retiree medical at Delta)
- PBS (Delta, United, Continental, America West)
- 84-hour monthly average line value (same as Delta, lower than United, Southwest, FedEx, UPS, US Airways and America West)
- Active medical cost-sharing approximately 20% (same range as Delta)
- Pay banding (yes at United, no at Delta)
- We were the only pilot group with no contractual sick verification
- Total vacation value at 10-year point and 24-year point, in line with industry average for legacy carriers
- Reserve 18 days for 73 hours (most carriers 18 days or more. Industry average 18.6)
- Scope: 79-seat jets (Delta, 76-seat jets, 86k max MTOW)
- Codeshare: 50% limit of domestic ASMs (Delta fairly restrictive, United must only notify union of code-shares)
Our point is that a pursuit of Delta pay rates must be accompanied by an intellectually honest acknowledgement that many provisions in the Delta contract (and most likely the new United agreement) are concessions from the Green Book. We encourage all pilots to review the Delta Contract Comparison for more details on what constitutes “industry standard.”
So what’s next?
There is potential for an agreement with AMR in the days ahead, but it all comes down to a number of moves management will need to make on key deal points to bring us into the realm of industry standard. If an agreement comes to fruition and is approved by the membership, we would secure the claim. We would also strengthen our position on the UCC to influence strategic alternatives, the selection of future management and the makeup of the reorganized airline’s board of directors. Our advisers have had extensive discussions with large financial creditors that hold substantial unsecured claims and are confident in the alignment of interests around the need for the appointment of a new board of directors at the airline. The board would then appoint management to lead the reorganized company.
We all need to evaluate any agreement on its merits and as something we might live with for some time. We also need to view an agreement as a potential path to the US Airways CLA. Your Board of Directors has given the Negotiating Committee clear guidance on what to pursue at the bargaining table. The onus is now on management to take the conversation where it should have gone a long time ago.
We are proud to represent all of you at the negotiating table in this very challenging process.
Your APA Negotiating Committee