This letter is posted with permission of Captain Bob Pastore, now retired, who was the Airline Pilots Association Master Chairman and TWA Board of Directors Member during the time American Airlines purchased TWA. Considering all the misinformation and fantasies about the transaction, this clarification is welcome even though it is a bit of a bombshell. At least to me it was.
April 7, 2003
The Honorable Kay Bailey Hutchison
United States Senator
284 Russell Senate Office Building
Washington, DC 20510
Via Federal Express
Dear Mrs. Hutchison,
Please allow me to make some corrections to comments that you made on the Senate floor during the debate on the defense appropriations bill wherein Senator's Jim Talent (R-Mo) and Christopher Kit Bond (R-Mo) attempted to add legislation to assist airline workers in mergers and acquisitions. This missive is rather lengthy but its length is required by the circumstances.
I speak from the knowledgeable position of being the pilot representative to the Trans World Airlines, Inc. (TWA) Board of Directors and chairman of the TWA unit of the Air Line Pilots Association (ALPA) during the purchase of TWA?s assets by American Airlines, Inc.
Some of your comments are misleading or lack a factual basis. Please allow my perspective.
You said, in response to Senator Talent?s motion for a Sense-of-the-Senate Amendment, I am very sad and very sorry about the situation with the TWA employees. It was a difficult situation when TWA was in bankruptcy. A number of airlines sought to take over TWA. American was the one that was willing to do it.
TWA was not in bankruptcy prior to American?s purchase. The bankruptcy filing by TWA was a condition of the Asset Purchase Agreement as written and proposed by American. Both Boards of Directors accepted the Asset Purchase agreement at about 5p.m. EST on January 9, 2001 and in compliance with the terms and conditions of the Agreement, immediately filed bankruptcy later that evening or early the next morning. One purpose of the bankruptcy filing was to evict Carl Icahn's onerous Karabu Ticket Agreement. I have attached the Asset Purchase Agreement and call your attention to the Recitals.
At the time of the American purchase, TWA was in the midst of negotiations to merge with America West Airlines. The American deal was not mentioned to the TWA Board until January 9th, 2001 and came as a bit of a surprise, to say the least.
You said, American offered to preserve the jobs and pensions of the TWA employees at the time if the unions would agree to waive their seniority rights from TWA . That was the agreement.
You have oversimplified what was agreed to - and never carried out. It is true that the Asset Purchase Agreement called for the unionized employee groups to waive the Scope provisions of their contracts but at the promise of the reasonable best efforts by American Airlines to afford a fair seniority integration. If we knew at the outset that the totality of American?s best efforts was simply to hire a facilitator (as opposed to an arbitrator) to monitor the so-called merger talks between the groups there is no way that any employee faction would have surrendered its Scope clauses.
You further stated, If American had not stepped up to the plate, all of the TWA pilots, flight attendants, mechanics, and ticket agents would have lost their jobs immediately and their pension funds would have been wiped out. Instead, American not only persevered their jobs but fully funded the TWA pension funds.
April 7, 2003
The Honorable Kay Bailey Hutchison
Page 2
I can speak for the pilots. Our pension funds were never in danger or at risk. In the 1992 bankruptcy we were successful in extricating our Directed Account Plan (DAP) from TWA and self-manage it. Each TWA pilot has had direct control of TWA's contributions since that time ? a position that the United, USAirways and American pilots would now drool over.
TWA did halt the contributions to the DAP once bankruptcy was declared and American did make good on behalf of TWA. But that was for a brief period of time and all part of the bankruptcy plan as insisted to by the Asset Purchase Agreement. It was also a relatively small monetary commitment on American's behalf.
Our A Plan the Defined Benefit Plan was in the hands of Carl Icahn until September of 2000 at which time he allowed the Pension Benefit Guarantee Corporation to take it over. Each TWA pilot has been receiving his or her just due since that time from the PBGC. American Airlines has had absolutely no liability, contribution commitment or concern relative to this fund.
As to your comment that TWA would have gone out of business - that's the spin put on TWA's situation by American and its unions - just like the fallacy that TWA was in bankruptcy when American came along. TWA had 157 million in cash at the instant of the American Purchase. There had been times in TWA's past that they had less than 5 million operating capital and still succeeded because the true spirit of TWA lies in the brothers and sisters that worked there - the employees. They had given before and would have again. In addition, American gained a partial ownership in Worldspan, TWA's reservation unit, which American sold last month and netted them some 500 million dollars (this does not count the excess cash that Worldspan was forecast to distribute to the partners in 2001 and 2002). It is also far in excess of the bankruptcy value of $200 to $210 million placed upon it at the time.
You should also know that the TWA Board was in negotiations to replace its top management when the American purchase came along. On January 5, 2001 at a special board meeting a resolution was placed in front of the board to change out management, but withdrawn on the promise of a third party investor which turned out to be American. That saved management's rear end and they escaped with healthy golden parachutes leaving the employees to fend for themselves.
You said: 'Everyone hoped the aviation industry would recover and that everyone would stay employed. It is still the hope of every American employee that the TWA former employees who have been laid off will be hired back. American is committed to hire back former TWA employees before anyone else.
While American may be committed, it is only bound by its contractual agreements with its employees. In the case of the pilots, they have ten year recall rights and the flight attendants five. In my 36 years as a pilot for TWA I witnessed many recessions and many furloughs. The worst was the 1970 through the 1978 time period. That's eight years pilots were furloughed. This recession is the grand daddy of them all in my lifetime. While I firmly believe Mr. Bush will eventually get this country back on its financial feet, it will be some time before the recovery will allow recalls. This furlough then is nothing more than a termination notice to thousands of TWA employees.
You said, However, the TWA employees took this matter to the National Mediation Board. The National Mediation Board has rendered a decision reinforcing the original agreement. TWA pilots and flight attendants have appealed. That is their right.
You obfuscate the facts. As you know the National Mediation Board has a very narrow scope of official duties. The Board's jurisdiction is generally limited to certifying, or making a determination as to the correct representative of a class and craft of employee.
The TWA employees never petitioned the Board, they simply responded to petitions by the Allied Pilots Association and the Association of Professional Flight Attendants. Both of whom are and were American Airlines labor unions. American Airlines also supported their union's petitions.
This determination procedure is set into play when an un-represented group of employees petition the Board to make that determination, or when there is a dispute as to whom the correct representative should be, usually caused by two or more labor unions making such a representational claim for the same class and craft of employee. In NMB terms a representational certification is issued.
As the Board specifically states in several of their documents, specifically NMB correspondence to all parties dated March 5, 2001:
ALPA requests that the Board delay its determination until the issue of seniority integration is resolved either by the system board of adjustment or the parties. It is well established Board precedent that contractual issues arising from a single transportation system determination are outside of the Board's jurisdiction.
In other words the NMB declined to address the issue at hand, and stated in no uncertain terms it was out of their jurisdiction.
You said, Briefly, this situation is not easy for anyone and I recognize that. I emphasize that there are thousands of people who are in a uniquely difficult situation, people with 10, 15, 20 years seniority with a company.
With respect to the pilots, it will be 15 years as opposed to an American pilot hired less than three years ago. As for the flight attendants, every single former TWA flight attendant will be terminated (five year recall rights). TWA flight attendants with 40 years seniority are gone, just gone. Single mom's, homemakers trying to support their family unit, people with kids in college versus an American flight attendant in his or her early 20's hired in the year 2000.
I am now retired, but let me reflect once again on this entire matter from my perspective of 36 years in this business. American's management and its unions are like two pre-historic beasts mired in a swamp fighting to the death, neither realizing that their aggression will result in their extinction.
Respectfully and sincerely,
Robert A. Pastore
Former Member, TWA Board of Directors
Former Chairman, TWA Master Executive Council, Air Line Pilots Association.
Cc: Sen. Talent
Sen. Bond
D. Carty
Enc: (1)
One further part of this was Compton's testimony before Congress when he stated that the bankruptcy was AA's idea, not something TWA had been looking to declare. This is in the Congressional record.
April 7, 2003
The Honorable Kay Bailey Hutchison
United States Senator
284 Russell Senate Office Building
Washington, DC 20510
Via Federal Express
Dear Mrs. Hutchison,
Please allow me to make some corrections to comments that you made on the Senate floor during the debate on the defense appropriations bill wherein Senator's Jim Talent (R-Mo) and Christopher Kit Bond (R-Mo) attempted to add legislation to assist airline workers in mergers and acquisitions. This missive is rather lengthy but its length is required by the circumstances.
I speak from the knowledgeable position of being the pilot representative to the Trans World Airlines, Inc. (TWA) Board of Directors and chairman of the TWA unit of the Air Line Pilots Association (ALPA) during the purchase of TWA?s assets by American Airlines, Inc.
Some of your comments are misleading or lack a factual basis. Please allow my perspective.
You said, in response to Senator Talent?s motion for a Sense-of-the-Senate Amendment, I am very sad and very sorry about the situation with the TWA employees. It was a difficult situation when TWA was in bankruptcy. A number of airlines sought to take over TWA. American was the one that was willing to do it.
TWA was not in bankruptcy prior to American?s purchase. The bankruptcy filing by TWA was a condition of the Asset Purchase Agreement as written and proposed by American. Both Boards of Directors accepted the Asset Purchase agreement at about 5p.m. EST on January 9, 2001 and in compliance with the terms and conditions of the Agreement, immediately filed bankruptcy later that evening or early the next morning. One purpose of the bankruptcy filing was to evict Carl Icahn's onerous Karabu Ticket Agreement. I have attached the Asset Purchase Agreement and call your attention to the Recitals.
At the time of the American purchase, TWA was in the midst of negotiations to merge with America West Airlines. The American deal was not mentioned to the TWA Board until January 9th, 2001 and came as a bit of a surprise, to say the least.
You said, American offered to preserve the jobs and pensions of the TWA employees at the time if the unions would agree to waive their seniority rights from TWA . That was the agreement.
You have oversimplified what was agreed to - and never carried out. It is true that the Asset Purchase Agreement called for the unionized employee groups to waive the Scope provisions of their contracts but at the promise of the reasonable best efforts by American Airlines to afford a fair seniority integration. If we knew at the outset that the totality of American?s best efforts was simply to hire a facilitator (as opposed to an arbitrator) to monitor the so-called merger talks between the groups there is no way that any employee faction would have surrendered its Scope clauses.
You further stated, If American had not stepped up to the plate, all of the TWA pilots, flight attendants, mechanics, and ticket agents would have lost their jobs immediately and their pension funds would have been wiped out. Instead, American not only persevered their jobs but fully funded the TWA pension funds.
April 7, 2003
The Honorable Kay Bailey Hutchison
Page 2
I can speak for the pilots. Our pension funds were never in danger or at risk. In the 1992 bankruptcy we were successful in extricating our Directed Account Plan (DAP) from TWA and self-manage it. Each TWA pilot has had direct control of TWA's contributions since that time ? a position that the United, USAirways and American pilots would now drool over.
TWA did halt the contributions to the DAP once bankruptcy was declared and American did make good on behalf of TWA. But that was for a brief period of time and all part of the bankruptcy plan as insisted to by the Asset Purchase Agreement. It was also a relatively small monetary commitment on American's behalf.
Our A Plan the Defined Benefit Plan was in the hands of Carl Icahn until September of 2000 at which time he allowed the Pension Benefit Guarantee Corporation to take it over. Each TWA pilot has been receiving his or her just due since that time from the PBGC. American Airlines has had absolutely no liability, contribution commitment or concern relative to this fund.
As to your comment that TWA would have gone out of business - that's the spin put on TWA's situation by American and its unions - just like the fallacy that TWA was in bankruptcy when American came along. TWA had 157 million in cash at the instant of the American Purchase. There had been times in TWA's past that they had less than 5 million operating capital and still succeeded because the true spirit of TWA lies in the brothers and sisters that worked there - the employees. They had given before and would have again. In addition, American gained a partial ownership in Worldspan, TWA's reservation unit, which American sold last month and netted them some 500 million dollars (this does not count the excess cash that Worldspan was forecast to distribute to the partners in 2001 and 2002). It is also far in excess of the bankruptcy value of $200 to $210 million placed upon it at the time.
You should also know that the TWA Board was in negotiations to replace its top management when the American purchase came along. On January 5, 2001 at a special board meeting a resolution was placed in front of the board to change out management, but withdrawn on the promise of a third party investor which turned out to be American. That saved management's rear end and they escaped with healthy golden parachutes leaving the employees to fend for themselves.
You said: 'Everyone hoped the aviation industry would recover and that everyone would stay employed. It is still the hope of every American employee that the TWA former employees who have been laid off will be hired back. American is committed to hire back former TWA employees before anyone else.
While American may be committed, it is only bound by its contractual agreements with its employees. In the case of the pilots, they have ten year recall rights and the flight attendants five. In my 36 years as a pilot for TWA I witnessed many recessions and many furloughs. The worst was the 1970 through the 1978 time period. That's eight years pilots were furloughed. This recession is the grand daddy of them all in my lifetime. While I firmly believe Mr. Bush will eventually get this country back on its financial feet, it will be some time before the recovery will allow recalls. This furlough then is nothing more than a termination notice to thousands of TWA employees.
You said, However, the TWA employees took this matter to the National Mediation Board. The National Mediation Board has rendered a decision reinforcing the original agreement. TWA pilots and flight attendants have appealed. That is their right.
You obfuscate the facts. As you know the National Mediation Board has a very narrow scope of official duties. The Board's jurisdiction is generally limited to certifying, or making a determination as to the correct representative of a class and craft of employee.
The TWA employees never petitioned the Board, they simply responded to petitions by the Allied Pilots Association and the Association of Professional Flight Attendants. Both of whom are and were American Airlines labor unions. American Airlines also supported their union's petitions.
This determination procedure is set into play when an un-represented group of employees petition the Board to make that determination, or when there is a dispute as to whom the correct representative should be, usually caused by two or more labor unions making such a representational claim for the same class and craft of employee. In NMB terms a representational certification is issued.
As the Board specifically states in several of their documents, specifically NMB correspondence to all parties dated March 5, 2001:
ALPA requests that the Board delay its determination until the issue of seniority integration is resolved either by the system board of adjustment or the parties. It is well established Board precedent that contractual issues arising from a single transportation system determination are outside of the Board's jurisdiction.
In other words the NMB declined to address the issue at hand, and stated in no uncertain terms it was out of their jurisdiction.
You said, Briefly, this situation is not easy for anyone and I recognize that. I emphasize that there are thousands of people who are in a uniquely difficult situation, people with 10, 15, 20 years seniority with a company.
With respect to the pilots, it will be 15 years as opposed to an American pilot hired less than three years ago. As for the flight attendants, every single former TWA flight attendant will be terminated (five year recall rights). TWA flight attendants with 40 years seniority are gone, just gone. Single mom's, homemakers trying to support their family unit, people with kids in college versus an American flight attendant in his or her early 20's hired in the year 2000.
I am now retired, but let me reflect once again on this entire matter from my perspective of 36 years in this business. American's management and its unions are like two pre-historic beasts mired in a swamp fighting to the death, neither realizing that their aggression will result in their extinction.
Respectfully and sincerely,
Robert A. Pastore
Former Member, TWA Board of Directors
Former Chairman, TWA Master Executive Council, Air Line Pilots Association.
Cc: Sen. Talent
Sen. Bond
D. Carty
Enc: (1)
One further part of this was Compton's testimony before Congress when he stated that the bankruptcy was AA's idea, not something TWA had been looking to declare. This is in the Congressional record.