17% vs 10%

Bob Owens

Sep 9, 2002
This is from the APA filung. It refers to the Hostess case where the Judge rejected Hostess's motion to abrogate their contracts.

In his May 14, 2012, decision, Judge Drain rejected the debtors’ motion to reject certain

collective bargaining agreements.

See Hostess1113 Op. at 99-133. In particular, Judge Drain

held that the union had good cause to reject the debtors’ proposals and the debtors’ proposals

sought concessions beyond those that were necessary for reorganization where the unions’

counterproposals would have led to the Debtor to achieve an EBITDA margin one percentage

point less than the EBITDA margin sought by the Debtor—9% rather than 10%.
1 The debtors

were unable to show that the one percentage point difference in profit margins generated by the

union’s counterproposals was material to the purposes of Section 1113.
Hostess 1113 Op. at


Judge Drain’s analysis in
Hostess applies with full force to the facts here and should

therefore be considered supplemental authority. In particular, American seeks $370 million in

average annual savings from the pilots in order to achieve an EBITDAR margin of REDACTED (Staements from the hearing indicate AA is seeking in excess of 17%) by 2017.