"APA: We’re in ‘a dramatically better position than any of us imagined’ two years after American Airlines entered bankruptcy" November, 2013
"Neil Roghair, vice president of the Allied Pilots Association, sent out a message to American Airlines pilots Friday reflecting on what has happened in the two years since American and parent AMR filed for bankruptcy on Nov. 29, 2011.
All in all, it turned out not so bad for pilots, Roghair suggested, with pay raises coming, a merger with US Airways and a new management team about to take over American.
Here’s his message:
Two years ago today, we woke up to the news of the AMR bankruptcy. That morning, we also received a “Dear Colleagues” letter from the new CEO, Tom Horton, advising us of the “significant cost disadvantage” he intended to fix through bankruptcy.
Weeks later, Harvey Miller told Bloomberg TV that for AMR to survive, there was no option but to terminate employee pension plans. On Feb. 1, 2012, we were presented with an 1113 term sheet, which would have eviscerated our contract and which management insisted it needed in order to survive and be competitive.
In the months that followed, APA made history on many fronts. We learned valuable lessons from pilot groups that had gone through Chapter 11 before us. Prior to bankruptcy, we hired the best bankruptcy attorneys and financial advisers in the industry. When the opportunity to talk with US Airways arose, we engaged and negotiated the historic Conditional Labor Agreement, which changed the course of this bankruptcy. We put together a strategy and then executed that strategy to not only improve our contractual outcome but also replace the management culture that had brought us to this point.
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Neil Roghair
Immediately after the bankruptcy filing, we fielded scores of phone calls and emails from line pilots. These were painful and emotional conversations as pilots reflected on whether they would be able to keep their homes or keep their children in school. We had all seen the scorched-earth path of destruction bankruptcy had inflicted on other pilot groups.
But along the way, other industry developments helped our strategy. The Southwest–AirTran integration led to a sale of 717s to Delta, which led to an expedited new-pilot contract. A new contract at Delta triggered an agreement-in-principal for the pilots at United, which helped improve the market comparisons being used at our negotiating table. In short, the bar was raised, and though sacrifices were made in the way of changes in our productivity, as well as our medical, disability and pension benefits, we did not pull the market down with our bankruptcy/merger contract. Instead, we moved into a position where we will actually assist other pilot groups with pattern bargaining going forward.
Five weeks from now, after an 8 percent pay raise, our hourly pay rates will be 12.3 percent higher than when AMR filed bankruptcy. In January 2015, we will receive another 3 percent raise followed by a January 2016 move to the average of pay rates at Delta and United, which we estimate to be another 15–16 percent improvement. With 3.5 percent raises in 2017 and 2018, our pay rates will be higher than those at Southwest, Delta and United, and our 777 captain rates will be 10–12 percent higher than the highest pay rates currently at FedEx and UPS. Our 16 percent pension contribution will match United and will exceed the 15 percent contribution at Delta. Our vacation-accrual steps improve from the worst in the industry to among the best, which will be especially helpful for our pilots returning from furlough.
We are already off to a positive and cooperative start with the pilots of US Airways, and we look forward to a successful integration of the two pilot groups. And most important, we look forward to sitting down with a new management team, negotiating a Joint Collective Bargaining Agreement and working to change the culture of this airline.
Naturally, as any pilot group would do, we will debate the “woulda coulda shoulda’s” for years to come. But today, as the bankruptcy nears a close, we should all be proud of achieving an outcome that puts us in a dramatically better position than any of us imagined two years ago today.
On the day AMR filed Chapter 11, Mr. Horton ended his “Dear Colleagues” letter with the following line:
I am confident that your courage, determination and ingenuity will assure that our company reaffirms its position among the world’s premier airlines.
We are sure Mr. Horton had a very different outcome in mind when he wrote that sentence. In a case of powerful irony, we can all be proud of how our “courage, determination and ingenuity” dramatically altered the course of this bankruptcy and the future of this airline."