Sky Talk

Air Force to park most A-10s

Air Force brass may finally be about to get rid of those ugly but oh so effective A-10 Warthogs they never wanted in the first place.

One of the ways the Air Force plans to save money in the 2013 defense budget, Air Force Times reports, is parking most its A-10s in the Arizona desert and hope that it's not called on any time soon to provde much close air support to grunts on the ground.

The Thunderbolt squadrons to be stood down encompass one active-duty, one Reserve and three National Guard units. The remaining two squadrons disappearing are a Guard F-16 tactical unit and an F-15 training squadron.

While the A-10 is very good at providing close-air support, the Air Force needs aircraft that can do more than one mission, Adm. James Winnefeld, vice chairman of the Joint Chiefs of Staff, said Jan. 26 in an interview with Military Times reporters and editors.

“Is the F-35 going to be as good a close-air support platform as an A-10? I don’t think anybody believes that,” he said, “But is the A-10 going to be the air-to-air platform that the F-35 is going to be? So again, the Air Force is trying to get as much multimission capability into the limited number of platforms it’s going to have.”

Which reminds me of a long ago conversation with a Lockheed official extolling how in the future close air support would be the province of the F-35, from 30,000 feet. Probably not close enough for most soliders and Marines stuck on the ground in a firefight.

- Bob Cox

French fighters for India

Indian defense officials have announced that they have at long last selected France's Dassault Rafale fighter as the winner of that country's very long running Medium Multi-Role Combat Aircraft  (MMRCA) competition.

India had previously ruled out the Lockheed Martin F-16 and Boeing F/A-18 fighter jets, the Saab Gripen and Soviet Mig 35, narrowing the field down to Dassault and the Eurofighter Typhoon.

Dassault must still reach a contract agreement with the Indian government on terms for the planned purchase of 126 combat jets, which Aviation Week reports is not expected any time soon. AvWeek's Ares blog also has a post discussing the competitive and international implications.

- Bob Cox

American says it posted a loss of $904 million in December

According to a court filing made Tuesday afternoon, AMR Corp. posted a net loss of $904 million in December, its first full month operating under bankruptcy protection.

The Fort Worth-based carrier also ended the year with $4 billion in cash and short-term investments. During the bankruptcy process, AMR is required to file monthly financial reports with the court.

AMR also said that its mainline carrier, American Airlines, had passenger revenues of $1.4 billion with its regional affiliates, including American Eagle, bringing in $220 million in revenues. Total revenues for the month were $1.9 billion.

The company also spent $102 million on aircraft financing renegotiations and rejections and $14 million on professional fees during the month, according to the filing.

-Andrea Ahles

 

 

Southwest and AirTran flight attendants approve seniority integration agreement

Southwest Airlines said on Tuesday that its flight attendants and AirTran Airways flight attendants have voted in favor of a seniority integration agreement.

The Dallas-based carrier said Southwest flight attendants approved the new contract with 64 percent in favor while AirTran flight attendants approved the deal with 91 percent voting in favor.

"This is great news for our flight attendants at both airlines and for the passengers who will fly on the new expanded Southwest Airlines," said Thom McDaniel, president of the Transport Workers Union Local 556 which will represent the combined group of flight attendants.

Southwest purchased AirTran in May for $1.4 billion and is in the process of integrating the carrier into its operations.

-Andrea Ahles

PBGC files liens on American assets as the carrier didn't make its full pension payment in Jan.

The Pension Benefit Guaranty Corp. said it has placed liens on some of American Airlines' assets in Texas and overseas since the carrier did not make its full $100 million pension payment due in January.

The agency said it filed over 70 liens, totalling $91.7 million, on behalf of the four pension plans that American has.

The carrier made only a $6.5 million payment on January 15 instead of its full pension payment. At the time the Fort Worth-based airline said the partial payment allowed the company to preserve its cash during the bankruptcy process.

"That’s what we can do in order to protect the integrity of the ongoing contributions that companies are required to make," said PBGC director Josh Gotbaum on Tuesday. "It does nothing to change the fact that American is also getting ready to propose that its pension plans be terminated."

The PBGC,  which insures pensions based on employer contributions, has been publicly challenging American to keep its pensions ever since the airline filed for bankruptcy Nov. 29.

The agency said that American has made 37 years of premium payments to PBGC totalling $260 million to cover its pensions in the event the plans would be terminated. Gotbaum said that those payments cover the $9 billion in pension benefits that the PBGC will have to fund if the plans are terminated.

The PBGC estimates that American has $8 billion in assets in its pension plans to fund $18 billion in pension obligations, meaning there is a shortfall of $10 billion. Since the PBGC has maximum pension payouts, about $1 billion of the shortfall will not be covered.

Gotbaum pointed out that American and its labor unions lobbied Congress three years ago to get its pension funding requirements reduced, which Congress granted, reducing American's obligations by about $1 billion. When American filed for bankruptcy, the company stated it had $4 billion in cash on hand to use during the reorganization process.

"The case, if you will, that 130,000 people to have their pensions killed in order for American to survive is not a strong case," Gotbaum said.

-Andrea Ahles

APA won't speculate on Wed. AMR meeting but points to contract proposals management made in the fall

Allied Pilots Association president Captain David Bates told pilots that Wednesday's meeting with American Airlines executives will discuss the carrier's financial condition and changes that American wants to make to the pilots' contract.

Bates would not speculate on what contract changes American may ask for but he pointed to concession proposals that the company made last fall when the two sides were in intense contract talks prior to American's parent company, AMR Corp., filed for bankruptcy.

"While avoiding speculation about what contractual changes management may seek during the 1113 process, it’s worth reviewing what they focused on during Section 6 negotiations," Bates said in the e-mail sent out on Friday. "Some of management’s top priorities included relaxations to scope, enhanced productivity and a preferential bidding system, increases to cost sharing for both active and retired medical benefits, and a different pension structure for new hires. Recent comments by senior management indicate that pension changes for all employees will be a major issue."

The APA also sent out a PowerPoint that discussed how American's pilot contract matches up with other airlines' pilot contracts including FedEx and UPS.  Download APA Negotiating Committee Contract Comparison here.

Keep reading for the full e-mail from Bates.

-Andrea Ahles

Together, we will persevere

Fellow pilots,

Since the AMR Board of Directors chose the path of court-supervised restructuring, the Allied Pilots Association leadership has been compelled to make some difficult decisions. No doubt there will be many more to follow.

Management has scheduled meetings for Wednesday, Feb. 1 to brief American Airlines’ unions on the airline’s current financial condition and the changes they will be seeking to our respective collective bargaining agreements. Negotiations between APA and management will then resume. For the first time in more than a year, the National Mediation Board will participate in our talks. While avoiding speculation about what contractual changes management may seek during the 1113 process, it’s worth reviewing what they focused on during Section 6 negotiations. Some of management’s top priorities included relaxations to scope, enhanced productivity and a preferential bidding system, increases to cost sharing for both active and retired medical benefits, and a different pension structure for new hires. Recent comments by senior management indicate that pension changes for all employees will be a major issue.

Regardless of the changes sought, I want to emphasize that your APA leadership will do everything in our power to protect your interests as negotiations resume. Bankruptcy restructuring was clearly not our desired destination, but that’s where we’ve landed. We’re going to do our absolute best to ensure that the pilots of American Airlines are treated fairly and appropriately.

As we emphasized in our open letter to American Airlines’ passengers issued earlier this week viapress release and a USA Today advertisement, the pilots of American Airlines are uniquely positioned to provide front-line leadership. We will play a vital role in the restructuring of our airline and in its future success.

In the same message to passengers, we also stressed the importance of cultivating a more positive corporate culture at our airline—one that effectively engages the employees. Highly motivated employees provide exceptional customer service, which creates a kind of “virtuous cycle.” That strikes me as a vital component for achieving success and I am hopeful that American Airlines management agrees.

I want you to know that APA remains your strongest advocate. As I have said before, I believe that our best course of action right now is to pursue a cooperative approach with the new management team being formulated at AMR. In numerous conversations and meetings with top management, APA Vice President Captain Tony Chapman and I have expressed the critical importance of a productive relationship with the pilots of this airline and the value that creates. We’ve also emphasized that a cooperative approach is a two-way street—both parties must be willing to participate. So far, management has appeared receptive to our input.

I also want to take this opportunity to remind you that the status quo provisions of the Railway Labor Act remain in effect. In fact, the strongest message you can deliver right now is to reinforce for all concerned that the pilots of American Airlines are disciplined, resolute professionals who are committed to a successful financial and cultural restructuring of our airline. During times of stress, we must all remain extra vigilant in the cockpit and focus on the safe and efficient operation of the airline in which we’ve invested our careers.

Together, we will persevere. Thank you.

APFA lays out roadmap for flight attendants on what to expect from AMR/union meeting this week

In a hotline message sent to flight attendants on Monday, the Association of Professional Flight Attendants said it expects Wednesday's meeting with American Airlines executives to include an initial contract proposal that will "be a low baseline for coming negotiations."

The union told its members that this is the first step in contract negotiations during the bankruptcy process and that American can not outright reject its collective bargaining agreements right away. To dispel rumours, the APFA included a roadmap of sorts in its hotline to describe the Section 1113 process for its members.

And here's what it expects will occur at the meetings with management this week.

"In the morning management will review its business plan and describe the contract proposals, which will be applicable to all three unions.  Our experts and I expect the initial proposal to be a low baseline for the coming negotiations.  In the afternoon we will meet separately with AA and receive proposals that specifically address each of our CBAs.  On Thursday we will be meeting with the company’s finance team to review the costing assumptions underlying each proposal. On Friday, the company will hold an all-day meeting with the unions’ financial advisors to discuss the model and assumptions underlying the business plan."

Keep reading for the full hotline message from APFA president Laura Glading.

-Andrea Ahles

APFA HOTLINE

This week will hold the most significant developments in the AMR bankruptcy case since the November 29th filing.
 
According to the company, we will see a new business plan for American Airlines in a presentation on Wednesday morning in Dallas. Following that presentation, the major unions will see the company's first proposal.
 
Over the past several days rumors have been circulating that are filled with misinformation and reflect a fundamental misunderstanding of the procedures a debtor must follow to modify a Collective Bargaining Agreement (CBA).
 
First, well in advance of filing a Section 1113 motion or application in which American asks the court for authority to reject the CBA, it must make a proposal to APFA that satisfies the requirements of Section 1113.   The Bankruptcy Code explicitly provides, that, “prior to filing an application seeking rejection of a collective bargaining agreement the debtor shall make a proposal  . . .”
 
It must be based on the “most complete and reliable information available at the time” such proposal is made and must be limited to “those necessary modifications in the employees benefits and protections that are necessary to permit the reorganization of the debtor and assure that all creditors, the debtor and all of the affected parties are treated fairly and equitably.”  The company must also provide APFA with “such relevant information as is necessary to evaluate the proposal.”
 
In its attempt to comply with these procedures, AA will hold a meeting with APFA, APA and TWU on Wednesday, February 1.  In the morning management will review its business plan and describe the contract proposals, which will be applicable to all three unions.  Our experts and I expect the initial proposal to be a low baseline for the coming negotiations.  In the afternoon we will meet separately with AA and receive proposals that specifically address each of our CBAs.  On Thursday we will be meeting with the company’s finance team to review the costing assumptions underlying each proposal. On Friday, the company will hold an all-day meeting with the unions’ financial advisors to discuss the model and assumptions underlying the business plan.  Finally, in order to ensure that we have all the information needed to assess American’s proposal, we will give the company within the next week a list of the documents it must produce.
 
I will devote Monday, February 6 and February 7, to preparing for and attending a Creditors’ Committee meeting in New York. The earliest negotiations over the company’s proposal would begin is Wednesday, February 8.
 
Under Section 1113 American must “meet, at reasonable times” with APFA “to confer in good faith in attempting to reach satisfactory modifications of such agreement.”  It is important to remember that the negotiations are not only taking place under Section 1113 of the Bankruptcy Code, but Section 6 of the Railway Labor Act. That is why the National Mediation Board (NMB) will continue to oversee these negotiations as it has since January 2009.  An NMB-appointed mediator will participate in the sessions, which will follow the company’s proposal.
 
Only after the company concludes that further negotiation sessions would not yield a consensual agreement would it actually file the application to reject the CBA with the Bankruptcy Court. The hearing on the application has to be scheduled within fourteen days after it was filed, or twenty-one days if the court deems it to be appropriate or at a later date if American and APFA agree.
          
APFA, like the company, must negotiate in good faith. Should these negotiations fail, we must be able to show the court that we have in fact satisfied this obligation.  Only if bargaining is unsuccessful will we have the opportunity to demonstrate to the court that American has not complied with each of the requirements of Section 1113 and that we had “good cause” to reject its proposal.  We cannot simply refuse to bargain because we believe that the company’s proposal is deficient or that it has otherwise not satisfied Section 1113 procedures.  Again the time for raising these arguments with the court is if and when the company moves beyond negotiations and proceeds to the filing of an application to reject the CBA.

As I have said publicly and during bankruptcy proceedings, the Flight Attendants at this airline are not the problem. Convergence, in terms of pay and benefits, has already occurred with our major competitors. The problem that plagues American Airlines is one of revenue, which is a product of management and organization. We need top-down improvements, not bottom-up cuts. The Flight Attendants have given up enough for this company already; it's now time for management to do their part.
 
Although I am pleased that management is offering a business plan along with the contract proposal, as it shows a certain degree of deference to our demands, it will still need to be vetted by our experts. Until we are convinced that the plan will ensure the success of our company and will provide every Flight Attendant with both job and retirement security, AMR cannot and should not expect productive negotiations.
 
Following Wednesday’s presentation, I will bring the contract proposal to the APFA Board of Directors, who will help disseminate the information to the membership. Please remember, this will be a very preliminary proposal. There is still much work to be done by the court and the Creditors' Committee, and our experts and I are prepared to fight in those venues to ensure the company's success and the fair treatment of our membership.
 
In unity,
Laura Glading

 

Just another small F-35 problem

And the latest,a problem with ejection seats/parachutes on F-35A models, apparently leads to a stop flying order. Reuters reports:

The Pentagon grounded six Lockheed Martin Corp F-35 fighter jets at a California air base due to a problem with the parachutes packed under the pilot's ejection seat, two sources familiar with the issue told Reuters.

Richard Aboulafia, defense analyst with the Virginia-based Teal Group, said of the parachute problem, "There's a perception that they're moving too fast on production before ironing out all of the problems, and this is going to reinforce that perception."

- Bob Cox

 

Monday Midday Must-Reads

-A Southwest Airlines worker died on Friday after the baggage cart he was operating collided with a passenger shuttle bus at Dulles International Airport in Washington D.C. Here is the Washington Post's account of what happened that includes a statement from the Dallas-based carrier.

-An American Airlines MD-80 made an emergency landing in Boise, Idaho on Saturday after the pilot reported that an engine went out on the aircraft. The aircraft was carrying 145 passengers and crew members.

-And everyone is wondering what will happen at the big meeting at American Airlines headquarters on Wednesday between management and the unions. Terry Maxon at the Dallas Morning News, who airline reporters including myself consider the dean of airline coverage, decided to take a stab at predicting the outcome of the meeting. His thoughts can be found here in his blog post and then in this article (subscription required).

-Andrea Ahles

Australia to re-think F-35 acquisition plans

As was predicted by some more than a decade ago, the F-35 program is limping along, failing to meet deadlines and re-scheduled deadlines and breaking budgets. Now its beginning to put allies who long ago joined the Pentagon in committing to the F-35 as the centerpiece of their next generation air defense planning in a tight spot as they face up to issues of delays and rising costs.

Earlier today, the Associated Press reported that Australia's defense minister said that nation (an F-35 development partner) it will reconsider its near term F-35 buying plans in the wake of the Pentagon's plans to keep production rates low while Lockheed Martin and the military complete more of the developmental testing and solve design and performance issues that have arisen and that may yet arise.

Australian Defense Minister Stephen Smith said Monday that Canberra is only contractually obligated to take delivery of two of the warplanes. They will be based in the United States and be available from 2014 for training Australian pilots.

Smith said Australia is reconsidering its schedule of buying another 12 during the following three  years. “We will now give consideration to whether the timetable for the purchase of those 12 Joint Strike Fighters should occur on the same timetable,” Smith told reporters.

Smith is concerned that any decision by the U.S. to reduce the number of jets it produces for its own forces would create another cost blowout.

Smith said in August last year that he would announce in 2012 whether Australia will invest in an alternative fighter such as the Boeing Co. Super Hornet to ensure that schedule delays do not compromise Australia’s air force capabilities.

As Lockheed officials point out, it's hard to drive down production costs if you don't build higher volumes of planes. On the other hand, it seems foolish (Lockheed would argue otherwise) to build more planes before testing and development is much closer to being done. Too many real and potential problems to be fixed later at great added costs, as the Pentagon's F-35 boss recently pointed out.

Former in-house Pentagon analysts (and critic) Chuck Spinney opines on the F-35 program today at Time's Battleland blog where he writes:

The F-35 is on track to be the most expensive program in the history of the Defense Department, and it has repeated just about every mistake we invented since Robert McNamara concocted the multimission, multi-service TFX (F-111) — a program conceived with the same kind of fanciful one-shoe fits all imaginings as the F-35.

As Lockheed officials like to point out, the F-35 has been selected by Japan and Israel as their next generation warplane knowing full well, they say, all the problems and costs involved. Neither country has yet to place an order though and when they do one suspects those decisions may well be predicated on costs and development progress.

- Bob Cox