The Advantages and Disadvantages of LOA 93
The MEC resolution passed on October 5, 2004, states that the Tentative Agreement will be sent to the
membership for consideration and possible ratification, “including a detailed position paper listing
advantages, disadvantages and the alternatives of the major Tentative Agreement provisions.”
Enclosed for your consideration is the Tentative Agreement Summary. Each major area of the TA is
reviewed. The major points are highlighted. You should carefully review this document. If you have
questions, you should attend one of the Negotiating Committee Road Shows or contact your LEC
Representatives.
Those who support the TA concede that this is not pretty. There are huge concessions in this
document. There are many key contract provisions that we gave up in order to reach this agreement.
However, there are no reasonable alternatives. If we go into the bankruptcy court “naked,” we are at
the mercy of the Court in a hearing under Section 1113(c) of the Bankruptcy Code. That hearing could
take place in a matter of weeks. The bankruptcy Judge is not concerned with the fine points of a labor
contract. He is concerned only with having the Company survive and protecting the creditors.
The MEC Negotiating Committee told the MEC that this TA is the best available. Every proposal
from the Company has gotten worse as time went on, likely reflecting worsening business, economic
and competitive conditions.
It is also likely that the “ask” will increase if we do not have a deal. The Company will approach the
Court and request that the Judge agree to all of the requests that they have made—and more—in order
to insure the success of the Company. Items that the Company asked for in these negotiations, but did
not achieve, such as furlough out of seniority, could reappear as an “ask” in the bankruptcy
proceedings. And if the Company’s Transformation Plan is successful, the pilots will reap some of the
benefits through the Profit Sharing Plan and the Equity that we will receive. Supporters point out that
the Profit Sharing Plan provides a substantial return of profits if the Company exceeds its profit targets
under the Transformation Plan. Of course, if the Transformation Plan is successful, there will also be
the opportunity to maintain this company, and possibly to realize future growth or stability.
Those who support the TA also have stated that it is important to have the pilots onboard to retain our
present financial supporters and to attract additional equity to the Company in order to emerge from
bankruptcy and avoid a liquidation. Without support from us, it is unlikely that outside investors will
want to support this enterprise. Capital is not attracted to an airline that is unable to achieve consensual
agreements with its pilots union. Supporters state that it is unlikely that the ATSB will leave its cash in
the Company if that agency sees a continuation of a dispute between the Company and its pilots.
Regarding the fact that we received no “credit” in the “ask” for the Scope concessions, those who
support the TA remind the MEC that the Company did not charge us when we negotiated and achieved
these provisions. For example, when we increased fragmentation protections in the first Restructuring
Agreement, it was not a cost item that we paid for. The “ask” was established to reduce the
Company’s costs, so that the Company could be competitive with our low-cost competition. The
scope protections relate to revenue; without these changes, the Company’s revenue plan could fall
short and we would be looking at a larger ask in the cost column.
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Finally, those who support the TA state that without this TA, the Company’s ultimate survivability is
at stake. Clearly, in order for the Company to survive and prosper, major changes are necessary.
Without ratification, the future of this enterprise is at risk. Thus, while it is not pretty, it is a necessary
evil. We must accept these concessions so that we can live on to restore our contract when the
Company’s problems are healed.
Those opposed to the Tentative Agreement state that we would be accepting a document that has a
long duration. We will be binding ourselves through December 31, 2009 (and later if a new agreement
is not reached at that time). There are a lot of concessions in the TA—and we will be voluntarily
accepting these terms for many years. We will not be able to reopen the Agreement. What if the
industry turns around in this period? We may be creating huge profits for others—even if we share in
the profits and equity! For example, there are no increases in pay rates during the entire duration.
Another criticism is that our Scope Clause is negatively affected through this TA. Although we are
retaining our basic scope protections, and Jets for Jobs, we are giving up Fragmentation in bankruptcy
(until one year after we come out), Contingent Acquisition Rights (until one year after we come out),
Minimum Aircraft (until one year after we come out minus 10%), major ratios in the Code Share
provisions (until one year after we come out with new ratios established) Change of Control (during
bankruptcy) and liberal use of “mainline sized” Small Jets. The Company even demanded that this TA
limit MDA displacements. Once these contract provisions are modified, they are difficult to recoup.
We received no credit for these items in the costing of the Company’s proposal. Thus, it is argued, the
Association should not have given them up.
The fact that we are being asked to give up our fragmentation rights for a specified period shows that
we are being charged for having them. When we received increased fragmentation rights, it was during
earlier concessionary negotiations, so we did pay for them as the fragmentation increase was part of
the “quid pro quo” in those negotiations.
There also is uncertainty as to what the Judge will do in the bankruptcy proceeding. ALPA will
oppose the 1113 filings wherein the Company asks for permanent relief. If the Court finds that the
Company is asking for more than is necessary, it is possible that the relief requested may not be
granted. Those who oppose the TA point out that even after an 1113 rejection of an agreement, there
is bankruptcy court precedent under the National Labor Relations Act stating that the debtor still had a
continuing duty to negotiate in good faith with the Union towards achieving a new labor agreement.
The duty to bargain in good faith, however, does not require management to agree on any particular
union proposal or to change its proposal.
Further disadvantages include, with the virtual elimination of the bid sheet (AIL list), all but
eliminating the ability to maximize pay to the cap limits, that is, with no time to pick up, we will be
limited to time in our line.
Reserves having the new bucket system will not be able to break guarantee or call out of time.
Limiting Reserves’ work days by matching available days to trip days does not make us productive.
Rather, it has Reserves sitting around in anticipation, when trips are available.
The sick and vacation procedures institute the PTO system without calling it PTO, i.e., 21 days of
vacation + 60 hours of sick (12 days at 5:00/day) = 33 days annual paid time off days.
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Changes to the DC Retirement Plan, while detrimental to everyone, hit hardest the pilots who have a
larger current contribution rate.
With up to 571 less positions, the entire agreement has the largest effect on the junior pilots.
Eliminating retiree health care benefits is another hit (each of us will get there), at a time when pilots
need those benefits the most. Forcing retirees to pay 100% of health care benefits with reduced
retirement income should go against all of our consciences.
The alternative to this Agreement is that if it were turned down during the ratification process, we
would be subject to the current 1113(e) motion: 23% pay cuts, 10% DC contribution rate (already in
TA), and fleet reduction (already in TA).
Then the Company could file an 1113(c) motion to reject our working agreement. If they did so, there
is a risk to the Company winning such a motion because of the uncertainties that would result from the
process. During this entire process, arguments have been raised that we have not received proper
credit from the Company for our concessions and this alternative could, under optimal circumstances,
give us more time in order to achieve proper valuations and credit going forward and giving the
Company necessary short term relief.
The first few pages of this document discuss the reasons why supporters would support the passage of
the TA. The next few pages contain arguments made by those opposed to the passage of the TA. The
MEC did not take a public position on the TA, and looks to you, as a pilot in good standing, to make a
decision based on the MEC documentation that has been presented to you. Please take this
responsibility seriously and remember to vote. The electronic balloting period will begin on Saturday,
October 9 at 10 a.m. ET and end on Thursday, October 21 at 10 a.m. ET. Balloting information is
being mailed and e-mailed, and is also being posted on the pilots only website.
