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March 28, 2012

Memorandum Part II: American's rationale for rejecting pilots agreement

In addition to American Airlines' 6,500-page memorandum of law to support its motion to reject its union contracts, the Fort Worth-based carrier also filed four additional memorandums to cover each workgroup.

In Part II, which can be found here, American addressed the Allied Pilots Association's contract negotiations, outlining to the court how it believed the pilots were being unreasonable. When contract talks between the pilots union and American began in 2006, the carrier said the pilots asked for 54 percent pay raises and the end to codesharing rights.

In the fall of 2011, the two sides were close to agreement, but American said they could not agree on productivity work rule changes and that the pilots rejected two proposals less than a month before the carrier filed for bankruptcy.

At the time, some pilots voiced concerns that even if they agreed to the concessionary contract, American would file for bankruptcy anyway. In the court filing made on Tuesday, American admitted that its pilot contract proposals would not have helped keep the carrier out of bankruptcy.

"APA rejected pre-petition proposals with which American believed it could survive, but that, it is clear in retrospect, were too generous to permit American to thrive. From the outset, American’s pre-petition proposals had been premised on hopeful assumptions: that the economy would improve (or, after the economic collapse of 2008, recover steadily); that the price of fuel would stabilize; and that American’s competitors would, in relatively short order, agree to substantial increases in the wage rates they pay and the benefits they provide to their unionized employees, a process of “convergence” that would reduce American’s cost disadvantage.

"For the most part, “convergence” never occurred, the economy has remained weak and at risk, and fuel has reached and remained at historically high levels. As described infra, the Company’s Section 1113 proposals have been based on post-petition realities and thus are more extensive: they seek greater concessions in work rules, scope, and benefits. These changes have become critical to the Company’s successful reorganization."

Other tidbits from the APA-related memorandum:

-the pilots and American met 65 times since February 1 and some proposals were modified including withdrawing a change to the way Check Airmen are paid and increasing first year pay to $40 an hour (currently $35.37)

-American says its pilots are the least productive in the industry as work rules for the carrier to pay more per "block hour" of pilot work.

-The carrier wants codesharing restrictions lifted and wants to be able to fly more regional jets with commuter partners, up to 255 aircraft with as many as 88 seats.

In a letter to pilots sent out on Wednesday, APA president Captain David Bates said the union will likely file its response to the Section 1113 motion on April 10. When that response is filed with the court, we will write a similar post on Sky Talk, citing APA's objections.

-Andrea Ahles


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casual observer

So AA's previous proposals were too optimistic. Now they have a new team in place that is not going to be like the fleeting optimist Arpey, but are going to be far more prudent and plan for the worst case scenarios. This is how successful businesses thrive, however, by not over-extending themselves and clinging to dreams rather than realities. Looks like Horton and company are doing just that. Guess it is time for the APA to follow suit.


By ensuring (per their term sheet) that American union-represented personell remain nearly the lowest paid in the industry, Horton is not doing the company any favors. People tend to react when backed into a corner.

5 paid holidays, indeed. Why would anyone, barring the type of person one WOULD NOT want working at their company, hire on with those terms with what will be a relatively low rate of pay for many years not to mention poor benefits?

Some (like the Horton, our resident soup sandwich) believe the only important people within any busness are those in the offices and management positions. Fine - fire all the mechanics and hire more managers to take their places - let's see how far that gets him.

Many people within American would have worked their tails off for the company had there been a shred of consideration given rather than the years of lies by both the company and its defacto wholly owned subsidiary, the Transport Workers' Union.

Most have had enough and, while not doing anything overt to hasten American's ultimate demise, most certainly aren't going to go too far out of their way to assist in its survival by any action other than showing up at work and taking their money, riding the last of the small wave 'til it's time to dismount.

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