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December 03, 2014

American, flight attendants union agree on all but three things: profit-sharing, health care plans and effective date for wages

American Airlines and its flight attendants union agree on everything in a proposed contract except for three big things, an arbitration panel was told Wednesday.

On the first day of arbitration hearings in Washington D.C., both sides agreed that a new joint contract should be valued at $112 million more annually than the current legacy contracts at American and US Airways, according to a filing made by the parties. They also agreed to include almost all of the language, with the exception of wage rates, from the tentative agreement that flight attendants narrowly rejected in November.

However, the union wants to add three items to the joint contract: “me-too” clauses for profit-sharing and health insurance and a Dec. 2 effective date for wages.

Laura Glading, president of the Association of Professional Flight Attendants, said she believes it wouldn’t be fair if other employee workgroups at American sucessfully negotiate profit-sharing plans in their new contracts and flight attendants don’t receive the same benefit. The APFA represents the 24,000 flight attendants that work at American and US Airways.

“I imagine the other workgroups will be demanding profit-sharing in their contracts,” Glading said in the hearing, the union tweeted. “Oil is lower than anyone imagined which makes profit-sharing even more attractive.”

Profit sharing has become an issue for several union groups at American as union leaders negotiated away profit sharing plans in exchange for wage increases prior to American’s merger with US Airways. Some flight attendants wanted to see it added back, now that the company is making hundreds of millions of dollars in profts, into the proposed joint contract but it was not. The proposed contract which was valued at $193 million more annually than the legacy contracts, failed by 16 votes out of over 16,000 cast.

GroupShotAAProtestShotAlso on Wednesday, a few dozen flight attendants picketed outside of American’s headquarters in Fort Worth, saying the company should negotiate with flight attendants instead of forcing the union into binding arbitration.

The three issues that American and the union want the arbitration panel to decide are:

-adding a "me too" clause if other employee groups at American receive profit sharing plans but that would reduce flight attendant wage rates equal to $50 million a year.

-adding a "me too" clause for health insurance plans that may be negotiated by other employee groups at American.

-making the modified wage rates retroactive to December 2, 2014 instead of in January 2015.

The company is expected to present its case on Thursday to the panel.

"'We continue to work through the process to reach joint labor contracts for all of our work groups, including our flight attendants who will realize significant wage increases when the arbitration is complete," said American spokesman Paul Flaningan on Wednesday.

The arbitration panel is expected to issue a binding decision early next year.

American is currently in contract talks with its pilots union with the Allied Pilots Association board expected to discuss a possible tentative agreement next week. The company has yet to reach joint contracts with any of its work groups since closing its merger with US Airways last December.

Keep reading for the live-tweets posted by the APFA on Twitter.

Photo courtesy of Trice Johnson.

-Andrea Ahles

Twitter @APFAUnity

Arbitrator Richard Bloch is making opening remarks prior to the beginning of the Interest Arbitration in Washington, D.C.

APFA will be presenting first with an opening statement by attorney Jeff Freund from Bredhoff and Kaiser in D.C.

Jeff Freund, APFA’s attorney is presenting APFA’s position, including a historical overview of the merger and the requirement for the arbitration back stop in order for the merger to proceed.

Freund is now commenting on our requests for a Me Too regarding Profit Sharing provided to any workgroup at AA as well as the Me Too for improved health benefits than we currently have.

Following Jeff’s opening statement, the arbitrators have called for a lunch break and we will reconvene at 1:15 p.m. Eastern time.

APFA and AA have stipulated to the $112 million per year above the current value of the combined contracts as market based in the aggregate. The outstanding items at dispute are the me-too clauses for health insurance and profit sharing as well as the request that increased wages be retroactive to December 2, 2014.

Joint Fact Stipulation for APFA/AA Interest Arbitration bit.ly/12uXzeH

APFA President Laura Glading has been called as the first witness.

Laura is giving her union experience over the past 29 years as both an elected and appointed representative for APFA.

Laura was Chair of APFA’s negotiations from ’99-01, ’03 and from ’08 to present.

One of the threats during the restructuring “negotiations” in ’03 was that if one union left the building, the company would file for bankruptcy the very next day.

Laura is being asked about the environment just prior to AA's Chapter 11 filing and the fact that AA had no viable business plan to make any real recovery for the airline

"Just prior to filing bankruptcy, I met with other labor leaders who'd been through bankruptcy and what they would have done/not done... the consistent message from these people was to try to get a seat on the Creditors Committee.

"Negotiations with management for the 1113 began on February 1st that included a 20% cut across the board for all 3 unions. AA asked APFA for more than $200 million in cuts."

"Dan Akins (APFA's Airline Financial Analyst) was the first person to tell the UCC that the Plan of Reorganization would have to include a merger. The UCC was not interested in any merger at that point."

"Dan Akins (APFA's Airline Financial Analyst) was the first person to tell the UCC that the Plan of Reorganization would have to include a merger. The UCC was not interested in any merger at that point."

"I got a call from Scott Kirby who said that US Airways was interested in putting forth a plan to do a merger with AA inside bankruptcy and that the goal of US was to get employees on board. They said they would do it if all three unions agreed."

"In the 3rd week of March 2012, Dan Akins and I met with Scott Kirby in New York following a UCC meeting to discuss a potential merger with US."

"I spoke with the other two union presidents and after a good amount of discussions we all agreed to pursue the possibility of a merger inside bankruptcy."

"APFA then traveled to Tempe to meet with US Airways management to discuss the possibility. The next day, we called the APFA Negotiating Committee to Tempe. Scott Kirby's overarching message about what needed to be accomplished was that the Agreement would still be concessionary but not as big of an ask as the 1113.

"At that point the UCC wasn't interested in anything outside of what the debtors were asking for.

"The whole plan that US wanted to put forward was based on a Plan that included arrangements with the three unions. If these plans weren't in place, the merger couldn't go forward."

"APFA's objective in Tempe was to save the company - I was concerned AA wouldn't survive. I saw Delta and UAL growing and AA not being able to compete. Yes we were seeking a new management team, too. We'd already had so many cuts from our previous restructuring. We'd already been through our own faux bankruptcy ('03). It was very attractive to us to have a guarantee to have an industry rate contract coming out of bankruptcy."

LG: "We agreed to have a CLA/bridge agreement with US Airways until such time that we would negotiate a JCBA" (he pilots already had a good comparator with the DL and UAL/CAL contracts that brought their aggregate up to standard. We didn't have that yet since DL is unrepresented and DAL/CAL didn't yet have a JCBA. That's why we agreed to a CLA and negotiations after the merger.

FREUND: See the exhibit 5 - MOU dated 12/31/12 LG: The MOU is a document containing clarifications of the CLA because we felt the UCC was accepting the merger as a real possibility and they needed two plans. They wouldn't accept the merger without two complete plans to put forward. The MOU made clarifications for the UCC. Jack Butler, counsel to the UCC, worked on this MOU along with the unions.

Laura reads an excerpt from the 12/31 MOU that clarifies the CLA from 4/12 and the single Medical Plan. FREUND: Is it fair to say that the single line about the active single health plan is embodied in that MOU? Laura says that she knew there would be one single plan, but that that plan wasn't yet in place. "Right now the plan was to go with the current AA plan, but that was meant as a placeholder."

FREUND: You told us during your general discussions in Tempe that APFA took a different approach to the 5-6 year labor cost stability than the pilots took. The pilots already had a higher standard they were shooting against as opposed to the flight attendants. How is theirs different than APFA's?

LG: APA's framework is the exact same cost that it was in Tempe. Their (APA) standard for arbitration was limited to THAT value as negotiated in Tempe. Our standard according to the CLA was the industry average at the time we ended negotiations/arbitration.

LG: It was important to come out of bankruptcy and not have Flight Attendants have to live under a bankruptcy agreement for a long period of time.

FREUND: Following the DOJ lawsuit that was eventually settled and the merger closed, the CLA as modified by the 12/31/12 MOU kicked in and those terms and conditions kicked in. I skipped over one thing. After you negotiated the CLA, you still had the bankruptcy proceedings that led to the LBFO, correct?" LG: Yes.

LG: When the LBFO balloting was going on, we assured the members that if they ratified the LBFO, we would immediately move to improvements under the CLA as modified by the 12/31/12 MOU on bankruptcy exit provided there was a merger. Yes, the LBFO was ratified.

FREUND: Describe the change that was made to the negotiations standard via the NPA from the CLA. LG: We added two prongs. we said it would be greater than the LUS and LAA contracts at the time, and we extended the negotiations to 150 days.

LG: With the negotiations, which were not section 6, we had Jim McKenzie from the NMB "on loan" to facilitate our progress.

"LG: When we were in the process of printing the resolution to have the T/A sent to the membership for ratification, we'd heard that Richard Anderson had given DL (FAS) a raise. He gave them a 3% raise eff. April 1, 2014. I picked myself off the floor and called Doug Parker and Scott Kirby and agreed to match that wage increase (once they verified there was in fact a raise by Anderson) eff. December 2, 2014."

FREUND: That then increased the value of annual improvements in the T/A to $193 million. LG: Yes.

FREUND: And the T/A failed by 16 votes? LG: Yes, over 16,000 voted, and it failed by 16 votes. FREUND: Did DL mgt increase the value of some of its FA workrules to raise the aggregate by $1million? LG: Yes.

FREUND: "We brushed over this earlier because the proposal is to include virtually everything in the T/A except for wage rates so we didn't spend time on the meat of the T/A. I take it that the work that was done by the nego teams was prodigious works. LG: It was a tremendous job by the APFA nego team. The APFA team was so tenacious, coordinated and unifed throughout the process it was very impressive."

FREUND: RE: The health insurance "me, too." from APFA's standpoint, was the loss of the LUS health insurance plan a major issue to deal with? LG: Yes, it was an incredible plan and a huge problem. They'd just ratified a deal and held onto their health plan.

FREUND: In the T/A there is a one-year lag for the LUS FAs to transition to the AA company plan correct? LG: Yes. All of the constituencies in the bankruptcy (UCC, company, creditors) had knowledge of the provision defining what the single health care plan was in the CLA, correct?

LG: I imagine the other workgroups will be demanding PS in their contracts. Oil is lower than anyone imagined which makes PS even more attractive. FREUND: Do you think it would be fair, just and appropriate for other workgroups to have PS plan and APFA not? LG: No. I do not think it would be fair.

FREUND: The 12/2 date for commencement of the wage rates in the proposal. We are not asking that the eff. date of the CBA be retroactive to 12/2. We are asking for wages rates to be effective retro to 12/2 correct? LG: Yes. FREUND: Why? LG: I think we all understood where we wanted to be. It doesn't seem fair for FAs to have to wait a month for those earnings. It doesn't make any sense to APFA to make them wait.

CROSS EXAMINATION BY AA: In the rejected T/A, the eff. date of the wages would be the first day of the bid month following DOS, correct? LG: Yes. AA: The effective date of the wage increase would've been 12/2. LG: Yes. AA: The T/A didn't say that it would become effective 12/2 - in other words it didn't name a date, correct? It referenced first day of bid month following DOS, correct? LG: Yes. AA: The eff. date of the contract was going to be same date as the contract went into place, correct? LG: Yes 

AA: Under the proposal, assuming we have a contract that comes out of arb and it becomes eff. on 1/2/15 for 5 years, your proposal would call for pay increases to become eff. on 12/2 prior to the 5-year CBA becoming effective, correct? LG: yes. AA: Counting the number of days it is approximately 30 days of pay added to the 5-year CBA. LG: Yes. AA: Wouldn't you think that 30-days of extra pay would represent value above the $112 million. LG: we would consider moving up the amendable date. It would seem only fair that whatever the pay rates were, they would be retroactive. 

AA: On the healthcare Me Too, with some of the documents in the exhibit book, there's a CLA dated 4/12/12. If I understand this correctly, this bridge agreement was to cover pre-merger AA FAs, correct? LG: Yes. AA: Pre-merger LUS still remained under the AFA CBA, correct? LG: Yes. AA: There was also an agreement pointing out the single company health plan - I take it that represents a rather short form description that would apply to pre-merger AA FAs under the CLA, correct? LG: Yes and No. management told us at the time that their intention was for everyone to be under the same single health plan once there was a merger. The process piece under the CLA also is the other piece that speaks to both parties - the process of ratifying a JCBA.

Laura is excused from the witness stand. Dan Akins, APFA's airline economist is now the 2nd and final witness for APFA on the stand. Roger Pollak (Bredhoff & Kaiser) is directing questions on behalf of APFA.

Pollak: Could you describe for the panel how the company costed out the work rules for DL and UAL/CBA contracts to assess the industry rate in the aggregate? Dan: Our efforts included a comprehensive effort of determining an analysis that took into consideration all cost implications of a contract to evaluate three other contracts. We were essentially looking at US Airways, United, Continental, AA and Delta's terms of employment. Each company's valuations vary so it took some time for us to come to an agreement with the company on these values.

Pollak: In the modeling process, was it a joint effort between you on behalf of the union and some at the company to arrive on agreed upon values? Dan: Yes. I was encouraged by AA's and APFA's efforts to seek actual analytical proof of the value. Now, the resulting model (version 5) has to be updated every time Delta adds contractual components. This is a highly detailed robust cost model for FAs.

Akins: Once we determined that the other contracts were more valuable than the LAA and LUS contracts by going line by line to determine how they accrued sick, vacation days/hours, premium pay, hourly rates, hotels, parking, per diem, 401k, etc... it was greatly a detailed analysis ... we added these values together then divided by 3 to come up with the total amount that we would compare to our current CBAs.


Akins: We started out at agreeing to $37 million and it eventually was elevated to $61 million. Then when DL improved FA training pay and other work rules, we added another million to bring it to what it is today at $62 million.


Pollak: did that include DL increases in the future? Akins: yes. Pollak: the $62 million is above the $1.62 b. value of the combined contracts, correct? Akins: yes. the contracts are somewhat close together now. You can see what's happening now and there's a labor cost convergence.


Akins - the easiest lever to pull in the T/A is the wage lever because it represents the majority of the improvements. No other change in the T/A could have gotten us $81 million. After a day or two we quickly realized that to pull things other than wages, the test of the 3 prongs in the NPA weren't met. The outcome of the T/A had to be more than the status quo provisions in their separate contracts. All the value is at the top of the scale. Most of it had to come from top of scale to find $81 million. We needed to ensure that none of the rates in our proposal were below the current rates.


Dan Akins is excused from the stand. Board and counsel will meet in chambers.


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why is the union proposing a 5 year contract?
a 5 year t/a was already rejected.

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