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January 30, 2013

Pilots union answers a few questions about "if a merger, then..."

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.

-Andrea Ahles

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.

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.
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.


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