News Column

American Airlines Pilots Accept Contract Offer

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Dec. 08-- Bankrupt American Airlines' Allied Pilots Association has accepted the company's latest contract offer that includes 31 percent to 39 percent wage increases over six years and a 13.5 percent equity stake in the reorganized company, APA executives said Friday.

In balloting that began last month and concluded at noon Friday, a majority of 8,000 APA members reversed course from their rejection in August of the company's previous contract offer.

The results of the balloting were: 5,489 votes (74 percent) for the contract agreement, 1,951 votes (26 percent) against.

APA President Keith Wilson said 96 percent of eligible APA members participated in the ratification balloting.

"I want to thank everyone who took the time to cast a vote in this important ratification process," Wilson said in an email message to union members. "APA will now turn its focus to helping to ensure that full consideration is given to strategic alternatives before American Airlines' restructuring concludes. The APA leadership continues to support a merger with US Airways as the best path to a stronger, more competitive American Airlines that will in turn enhance our pilots' long-term career prospects."

APA executives said the contract would eventually raise pay in line with pilots at United Airlines and Delta Air Lines.

In exchange, American received more flexibility to outsource flying to other airlines.

All three of American's labor unions now have ratified contracts.

"This agreement addresses the priorities identified by the APA during collaborative talks," said Denise Lynn, American's senior vice president -- people. "Today's ratification gives us the certainty we need for American to successfully restructure, providing opportunity and growth for all of our people and stakeholders. The modernization of our company is well under way, and we remain focused on emerging as a competitive, world-class airline."

Following the ratification vote, lawyers for American parent AMR Corp. filed a motion in U.S. Bankruptcy Court to shorten the notice period and authorize American to enter into a collective bargaining agreement and settlement letter with the APA. The company requested a hearing on the matter at 10 a.m. Dec. 19.

American executives said the company worked with the APA to develop an agreement that includes items important to pilots while keeping within economic parameters endorsed by the Unsecured Creditors Committee that support American's successful bankruptcy reorganization.

Before the ratification vote, the Transport Workers Union, including more than 5,000 mechanics and related workers at American's Maintenance & Engineering Center in Tulsa, and the Association of Professional Flight Attendants ratified their contracts in August.

In a letter to American employees, Chairman and CEO Tom Horton said the agreement with the pilots is an important milestone. Along with the new labor agreements, the company is introducing 60 new aircraft to its 600-aircraft fleet in 2013 as well as new products and services, American's CEO said.

"As we bring our restructuring to a close, we are also completing our review of strategic alternatives," Horton said. "As you know, we have been evaluating the merits of a combination under a non-disclosure agreement with US Airways. While we are confident the new American will be very strong, we are evaluating whether such a combination could create value for our owners and a positive outcome for our people and our customers. We expect to have a conclusion on this soon."

Gov. Mary Fallin hailed American's contract agreement with the APA as important for the company and the state.

"With valuable passenger service at three airports and over 6,000 employees at the Tulsa Maintenance & Engineering base, American is a major contributor to our state's success," Fallin said. "Congratulations to union leaders and the management team at American that have successfully negotiated nine new contracts in just over one year. Oklahomans hope this new momentum will mean a quick exit from reorganization and a bright future for one of Oklahoma's most important employers."

The ratification vote followed a summer and early fall of discontent and disruptions at American, sparked by negotiations between the APA and American management.

Since American's parent, AMR Corp., filed for bankruptcy on Nov. 29, 2011, the company has sought to trim its labor costs by $1 billion a year.

After the APA rejected the company's tentative contract offer in August, a bankruptcy judge in September granted American's motion to nullify the APA's collective bargaining agreement.

Within days, flight delays and cancellations at American rose sharply as pilots submitted reports of mechanical and equipment failures.

Although pilots said the problems were due to mismanagement of aircraft maintenance and the advanced age of American's fleet, the company said they were due to organized job actions. American was forced to cancel up to 2 percent of its remaining schedule in September and October.

Yet, in the weeks leading up to the ratification vote, some pilots were still angry with the company, as Wilson, the APA president, said in an email message to APA members recently.

He said a pilot told him he'd rather see American liquidate than approve the company's contract offer.

Wilson said an inflexible stance by pilots would lead to the fate of airlines long gone that had been crippled by labor strife.

"While martyrdom in the manner of Eastern Airlines is one option, I do not believe that the majority of our pilots would prefer to embark on a path of self-destruction in order to make a political point or poke management in the eye," Wilson said.

The APA president said he had voted against the August contract offer, but he said the latest contract was much improved and he intended to vote for it. Highlights of contract ratified by American Airlines' Allied Pilots Association Duration: six years

Wage increases: 4 percent raise on date of signing; 2 percent increase in 2014; 2 percent increase in 2015; mid-contract adjustment of 17 percent to 24 percent increase in 2016; 2 percent increase in 2017, 2 percent increase in 2018.


Active pilots: $750 deductible medical plan

Retirees under age 60: pay 100 percent for retiree medical coverage

Retirees over age 60: pay 100 percent for retiree medical; however, retirees over 60 who give four months' notice of retirement can cash out their sick time at retirement into a Health Retirement Account that can be used for medical premiums

Pension: 14 percent contribution to 401(k) plan

Miscellaneous --13.5 percent equity stake in reorganized company

--APA can protest management compensation

--APA reimbursed $5 million for bankruptcy expenses

Sources: AMR Corp., Allied Pilots Association, U.S. Bankruptcy Court for the Southern District of New York


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