This is Captain John Darrah, APA President, with the APA Information Hotline for Friday, April 25 at around 11 AM Central.
CURRENT SITUATION: As I described in my system-wide e-mail message late yesterday, we reached an agreement with management yesterday afternoon on a series of enhancements to our original agreement. The TWU also reached a similar agreement. The APA Board of Directors proceeded to authorize me to sign our agreement based on these enhancements, which I did.
Also late yesterday, AMR announced that Don Carty resigned as Chairman and CEO, and that the AMR Board of Directors had appointed Gerard Arpey to serve as CEO and President, and longtime Board member Edward Brennan to serve as Chairman.
When I sent out my e-mail last night, we were awaiting word from the APFA about how they intended to proceed. We have just been informed that the APFA approved their agreement a short time ago, which means that all three labor groups now have finalized their agreements with American Airlines management. We have also learned that American Airlines management will refrain from filing bankruptcy.
I’d like to take this opportunity to recap the enhancements that we were able to secure in our agreement. First of all, we shortened the duration to five years. The effective dates are now May 1, 2003 to April 30, 2008. We also secured the right to reopen the agreement three years from now on April 30, 2006.
The Annual Incentive Program that the APA Board of Directors approved replaces the Variable Wage Adjustment Provision that was previously contained in our agreement. In the APA leadership’s view, the Variable Wage Adjustment Provision did not provide adequate value to our pilots, and it failed to align the interests of labor and management. In contrast, the Annual Incentive Program is designed to foster much-needed cooperation between management and rank-and-file employees.
The new plan is based on the one designed by AMR’s Board of Directors for management incentive compensation. This program permits the AMR Board of Directors to set reasonable performance targets incorporated into a formula encompassing financial, employee and customer satisfaction measurements. Under this plan, bonuses for management and all other employees will be tied to reaching the same goals. If the performance goals are met, management will receive their traditional bonuses, and labor will be rewarded with bonuses ranging from 2.5% to 10% of wages. If the performance goals, including profitability, are not met, neither management nor labor will receive any bonus under this plan.
Additionally, our agreement now provides APA with the ability to alter one contractual item, if necessary, and to replace that item with another of equal value. The aggregate annual cost savings under the agreement must still total $660 million. At this juncture, APA does not have a contractual item that it intends to address under this provision.
Please check this hotline later in the day for further information. Thank you for calling.
