February 4, 2003
Mr. James C. Little
Director Air Transportation Division
International Air Transport Division
Transport Workers Union, AFL-CIO
1791 Hurstview Drive
Hurst, TX 76054
Dear Jim:
Last year we began the process of working together to save American from the financial crisis confronting our industry. Thank you for your efforts to work with us during these challenging times, and for embracing the active engagement process to work collaboratively to seek mutually acceptable solutions to our problems.
As we expect your financial advisors have confirmed, our cost structure is simply not sustainable in today’s aviation marketplace, particularly as pricing actions by low-cost and bankrupt carriers continue to exert unrelenting pressure on our financial situation.
We took a different approach from other major carriers to respond to these and other industry altering dynamics. Before turning to our employees for financial help, we first implemented an aggressive restructuring plan to reduce costs and increase revenue. Through the plan, we have identified $2 billion in annual, permanent, structural changes – a cost savings greater than any other airline. In doing so, together we are making significant changes in our operation, our product and our service to build a more efficient and innovative airline.
But we need to do more, and we need to do it now. We continue to lose millions of dollars every day, forcing us to borrow vast sums of money just to meet payroll and stay in business. Now, our number one priority must be to deliver the additional $2 billion we estimate that we need to survive. Our financial results make it abundantly clear that American’s future cannot be assured until ways are found to significantly lower our labor and other costs. The recent experience of other high-cost carriers demonstrates that the longer we wait to take action, the action that is necessary will become increasingly more severe. Clearly it is not in our employees’ best interest to follow these examples.
Today, as a last resort, we are taking the difficult step of asking all of our employees to participate in American’s recovery by working with us to deliver $1.8 billion in permanent, steady-state savings. We hope to work collaboratively with you to restructure labor agreements to realize these permanent, annual savings and those needed to address our long-term financial health.
In response to your request, we have proposed the portion each work group would contribute toward our airline’s recovery. To be as fair and equitable as possible, the portions were based upon a combination of factors, including an alignment with American’s strategic restructuring plan, the competitive landscape and a review of industry labor costs.
Page 2 of 3
Based on this review, the TWU Represented employees portion is $620 million. We want to work with you to determine together how best to achieve these savings, and expect it would be through a combination of changes in wages, benefits and work rules.
The other work groups’ portions are as follows (in millions):
Pilots $660
Flight Attendants 340
Agents and representatives 80
Management and support staff 100
Be assured that management will continue to do its part. Today’s $100 million allocated to management and support staff is in addition to the over $200 million in savings already achieved through a 22 percent reduction in these positions and forgoing across-the-board management pay increases for a second straight year.
We have opened our books to review by your financial advisors, and we will continue to provide information necessary for you to reach an informed judgment on TWU’s participation in these fundamental changes in our business. Importantly, as we work toward our recovery, you have our commitment that all employees will share in the opportunities any successful restructuring might provide.
Given the urgency of our situation, we are moving as quickly as possible with our on-going restructuring efforts. We are currently:
Closing two of our ten domestic reservation offices: Norfolk, Virginia and Las Vegas, which will unfortunately impact approximately 910 reservation representative positions; and
Seeking to obtain accommodations from a number of our other stakeholders, including aircraft lessors, lenders and suppliers.
Unfortunately, we have little other choice. What we do have is an opportunity no longer available to our counterparts at United and US Airways: the chance to work together to find mutually acceptable solutions to our financial crisis in order to avoid the uncertainty of the courts and creditors determining our fate.
Given the magnitude of this request and the sacrifice we are asking of our employees, the importance and impact of your leadership during this pivotal time is critical to our success. In the face of difficult decisions, courage and vision must triumph.
Page 3 of 3
In our proud history, we have worked together to overcome many challenges and have earned a well-deserved reputation for innovation and superior service. This is a painful time, but we are confident that the men and women who have built their careers at American will recognize the gravity of the situation and work with us as we embark upon a difficult but necessary journey toward recovery. We are grateful for and inspired by the determination and dedication of the people of American and know that with your support, we will succeed.
Sincerely yours,
Donald J. Carty Gerard J. Arpey
Chairman and CEO President and COO
36 PM bagsmasher wrote: 
