-Paul Moseley, Star-Telegram photographer
In a bankruptcy filing made on Thursday, AMR amended its request to the bankruptcy court to extend its deadline to file a reorganization plan.
Earlier this year, AMR asked the court to extend its exclusivity period until April 1 from its current deadline of March 11. On Thursday, the carrier said it now needs until April 15 to file its reorganization plan.
The judge had not yet ruled on its earlier request and the new amended motion is also supported by the Unsecured Creditors Committee.
If it is approved by the court, it would be the fifth time that American has been granted an extension to submit its restructuring plan.
Although American Airlines already released its fourth quarter results, the carrier filed its monthly operating report with the bankruptcy court on Thursday, saying it had a $773 million profit for December.
Excluding $69 million in reorganization fees and a $569 million benefit from income taxes, the Fort Worth-based carrier would have posted a monthly net profit of $273 million. During the bankruptcy process, AMR is required to file monthly financial reports with the court. American also benefited from a $280 million gain from its settlement of its anti-trust lawsuit with Sabre.
The company said it spent $15 million on aircraft financing renegotiations and rejections and $18 million on professional fees during the month. It also spent $36 million on "other" reorganization items which are not detailed in the report.
AMR also said that its mainline carrier, American Airlines, had passenger revenues of $1.8 billion with its regional affiliates, including American Eagle, bringing in $226 million in revenues. Total revenues for the month were $2.05 billion.
The company ended the month with $480 million in cash and $3.4 billion in short-term investments for a total of about $3.9 billion on hand. That number is down from $4.0 billion in November and does not include $850 million in restricted cash.
In a note to members on Wednesday, the Allied Pilots Association explained to pilots why they haven't gotten their 13.5 percent equity stake in American yet and what happens if a merger with US Airways goes through.
The lengthy question-and-answer document reiterated that pilots will get their 4 percent raise from the newly ratified contract in their February 25 paychecks. It also explained that pay raises in the early years of the contract would be higher if a merger occurs but in turn, the mid-contract adjustment raise would be lower.
Keep reading for the full message from the APA.
As APA continues receiving questions regarding implementation-related issues, a potential American Airlines-US Airways merger, monetization and distribution of the 13.5 percent equity stake and other timely topics, our subject-matter experts (SMEs) will continue providing answers. Here are some of the latest questions your APA leadership has been receiving, along with answers from the appropriate SME.
COLLECTIVE BARGAINING AGREEMENT IMPLEMENTATION
Q: When will we see our 4 percent date of signing pay raise and at what point will our paychecks reflect the increase in our medical costs?
A: Date of signing for our current collective bargaining agreement was Jan. 1, 2013. All flying done in January will be paid out on your Feb. 25 paycheck and will reflect the 4 percent pay raise. This pay raise will also apply to any future CPA and vacation payouts. The medical cost increase likewise took effect on Jan. 1, 2013 and can be found in the pre-tax column on the payroll payment portion of your pay stub beginning with the Jan. 25, 2013 checks.
Q: Why would the mid-contract pay adjustment be lower if we merge with US Airways in bankruptcy?
A: The pay raises in the earlier years that are part of the memorandum of understanding are larger than what was originally bargained for in the collective bargaining agreement with American Airlines. Therefore, the percentage amount required to meet the mid-term adjustment would be smaller if American Airlines merges with US Airways while still in bankruptcy.
Q: Why do the bid sheets still reference sections and provisions of the 2003 contract like Secondary Trip selections (18.B.3.a.) and Schedule Enhancement Period (19.B.2)? Were these provisions not eliminated with the new contract? Also, when will the 12-year captain rates be updated on the bid sheets?
A: Until the implementation of certain provisions of the 2012 CBA such as preferential bidding and the new trip trading system (TTS) projected for 2014, some former provisions of the 2003 CBA (e.g. Secondary Trips and SEP) will remain in the interim. Starting with the March 2013 bid sheet, the updated 12-year captain rates will be reflected in the bid lines.
IF AMERICAN AIRLINES AND US AIRWAYS MERGE
Q: If American Airlines and US Airways merge before American exits bankruptcy, how soon do we begin negotiating for a Joint Collective Bargaining Agreement (JCBA)?
A: Joint negotiations toward a JCBA would begin as soon as practicable following the bankruptcy court’s approval of a Plan of Reorganization (POR). Completion of the JCBA negotiations could occur anytime between the POR being approved, but no later than 30 days past the National Mediation Board’s legal finding of a “Single Carrier.” The filing for “Single Carrier” status must be made within four months after the POR is approved. The approval of “Single Carrier” status by the NMB is expected to take roughly six to eight months after that filing. In the event we are unable to complete JCBA negotiations, any remaining items will be submitted to binding interest arbitration.
Q: What would the impact be for granting length of service for pay, etc. for furloughees if there is an upcoming seniority integration? If we do not receive credit for LOS, could it negatively affect us in a seniority integration?
A: The determination of longevity for pay and benefit purposes should have no impact one way or the other on the seniority list integration under the McCaskill-Bond “fair and equitable” standard. Historically, a seniority list integration has determined only “competitive” or “bidding” seniority, in which you exercise your seniority in relation to the seniority of other pilots. Longevity for compensation purposes has historically been treated as a separate matter to be determined through contract negotiations.
Q: If I opt for deferred status on furlough recall, could it negatively affect my seniority in a merger scenario?
A: If you opt to defer recall from furlough and allow a more junior AA pilot to return from furlough, it will not affect your placement on the pre-merger list AA seniority in a seniority integration. The internal order of the pre-merger seniority list cannot be changed. In addition, the memorandum of understanding contains traditional “no bump/no flush” provisions. Therefore, if you are on furlough when the integrated seniority list is implemented, you will not be able to displace a more junior active pilot, but will have to wait for an open job to which you are entitled.
In the seniority integration negotiations and/or arbitration, there may be some arguments about what “pre-merger expectations” you would have as a pilot in a deferred status. While some might argue that a “deferred” pilot should be treated as if he is on furlough, others would argue that a pilot who exercises a negotiated, contractual right to defer recall and keep his recall rights should be treated like any active pilot since he had sufficient seniority to return to work. In an arbitration, how those issues get resolved is ultimately up to the arbitrator. You can expect APA to advocate vigorously for the interests of the pilots we represent.
Q: How will the equity distribution be handled with regard to pilots retiring after Jan. 1, 2013, prior to age 65, and before the equity stake is actually monetized and distributed? Will they qualify for any and all silos?
A: A pilot who is in a status qualified for the distribution as of the initial eligibility determination date (Jan. 1, 2013) will remain qualified regardless of subsequent changes in status.
Q: Why do we have to wait until the end of the year to receive our share of the 13.5 percent equity stake? I want this money now.
A: The money doesn’t actually exist yet, since our equity stake is in the reorganized American Airlines. Timing of the monetization and distribution is subject to several factors and considerations. Some of those factors include the timing of the exit from bankruptcy, tax ramifications and deferral strategies, sale timing to maximize price and value to the pilot, and the lead time required by management to distribute the proceeds as compensation to the individual pilots according to APA’s instructions.
The monetization timing is being driven largely by whether American Airlines exits bankruptcy as a stand-alone entity or as an entity resulting from a merger with US Airways. The merger process is likely to move the exit date and subsequent monetization out several months.
Q: What happens to the B Plan unit value while the plan is frozen? Will the unit value reflect the recent stock market increase when it’s finalized?
A: The bulk of the equity securities in the B Plan were liquidated during a three-week period beginning around mid-October 2012. If you can visualize an “average world equity value” during that period, that’s effectively where we locked in. The funds are now in short-term Treasury securities, with the current value varying only a very small amount. Also, more to the point, we know that we will “get out whole.” That is, assuming the U.S. government does not default on its debt obligations. This means that your B Plan benefit will not participate in any significant moves in the world equity markets between November 2012 and June 2013, whether those moves are positive or negative.
The final audited B Plan unit value will be established in the next several weeks. The final distribution should take place in late June 2013 and will include any interest accrued since the plan was frozen—approximately 0.05 percent annualized, or around five basis points.
As merger talks progress between American Airlines and US Airways, there has been quite a bit of discussion about who should run the combined airline.
In a research note sent out on Wednesday, Buckingham Research Group analyst Dan McKenzie gave investors three reasons why he thinks US Airways chief executive Doug Parker should take the helm.
McKenzie first questioned American management's plan to grow capacity by 20 percent in the next five years after it emerges from bankruptcy, saying that strategy would hurt the whole airline industry. He then pointed out that American's labor unions do not have a favorable view of AMR chief executive Tom Horton, delivering a "no confidence" petition to Horton's office last year.
I called the Allied Pilots Association on Tuesday to ask the union what it thought of Horton possibly sticking around post-merger and they politely declined to comment.
And McKenzie's third point:
"Bondholders report the leader must have a demonstrated ability to maximize shareholder value, which is a nod to US Airways mgmt. in our view. Our view aside, we’ve had a hard time finding investors in favor of AMR mgmt, hence our conclusion is that a consensus is in favor of an US Airways led mgmt. team running the merged airline," McKenzie wrote.
The Wall Street Journal is reporting that AMR chief executive Tom Horton is in talks to become chairman of the new carrier if American Airlines and US Airways merge.
"The negotiations are fluid and might not result in Mr. Horton's assuming that role, which he currently holds at AMR, the people cautioned. He could become a vice chairman, senior adviser or take on another role, some of the people said," the article said.
AMR's board is meeting this week, possibly as early as Tuesday, to discuss the potential merger. One of the issues they are likely to debate is who should run the carrier if it merges. Most industry analysts have suggested that US Airways chief executive Doug Parker would likely run the combined airline.
It is not uncommon in mergers to have one CEO become chairman while the other runs the company. For example, when United Airlines and Continental Airlines merged in 2010, United chief executive Glenn Tilton became chairman of the merged carrier while Continental chief executive Jeff Smisek kept the CEO and president title. Tilton stepped down as chairman at the end of 2012.
The Dallas/Fort Worth Airport said its safety personnel removed a smoking bag from the cargo hold of an American Eagle aircraft at Terminal B on Tuesday afternoon.
Airport spokesman David Magana said the incident resulted in the temporary closure of four gates at Terminal B this afternoon.
"Firefighters responding to the aircraft reported a smoking bag inside the cargo hold, prompting a further investigation," Magana said.
American Eagle flight 3302 arrived at DFW from Moline, Illinois with a report of smoke in the cargo hold. The Embraer E-145 had landed safely with 44 passengers and four crew members and all deplaned safely, he added.
The bag was removed at 3:15 p.m. for further investigation and all of the gates have since reopened.
American Airlines announced on Tuesday that Dave Campbell will oversee the carrier's operations and crew scheduling as the vice president of safety and operations performance.
Campbell adds the duties of operations after Jon Snook was appointed senior vice president of customer service. Snook was replacing Craig Kreeger who left American to become the new chief executive of Virgin Atlantic.-Andrea Ahles
It's the all American-US Airways edition.
As merger speculation ramps up between the two carriers, with a decision possibly in the next two weeks, here's what the media is buzzing about. (And of course, check out the story, the Star-Telegram ran on Sunday that was in a previous blog post here on Sky Talk)
-Reuters reported on Friday that a deal is close as negotiations continue. Citing several sources, the news agency said progress has been made towards a deal and an alternative plan for AMR to exit bankruptcy as a stand-alone company appear less likely.
-The Detroit Free Press speculates on what a merger would mean for the city of Detroit.
-And Terry Maxon at the Dallas Morning News (subscription required) examined how American fared with its previous mergers and surmises that the carrier had little to show for its Reno Air and TWA combinations.