AA-TWA acquisition - the truth!!!

L1011Ret

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Oct 31, 2002
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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.
 

Winglet

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Aug 20, 2002
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Yea, and I''m the Easter Bunny too. This drivel is so far out of reality that it could have been spoken by . . . . . . well, the TRUTH is that the TWA acquisition was a very expensive blunder in a series of terrible blunders by the AMR management team. As American sheds aircraft and capacity like crazy, lots of senior TWA captains remain while AA pilots hit the streets. If I was one of those TWA captains, I could scarcely believe my good luck.

BTW, I wonder how much the pay raise is from TWA compensation, even after the 23% pay cut?
 
OP
L

L1011Ret

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Oct 31, 2002
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It will undoubtly be testified to in court. They will not let Easter Bunnies in so I guess you will never know and have to operate with bad data the rest of your life. Good luck.bbb
 

MrMarky

Advanced
Get your facts straight Winglet. If not for the TWA pilot group, a ton of AA pilots would have been out on the street long ago. Not one single AA pilot that I know of is furloughed because of the small percentage of TWA senior Captains who were feathered in at far less than their actual seniority. But there were lots of one-year AA kiddies who kept their jobs because 10 and 15 year TWA pilots were stapled below them. And you''re complaining???
 

Winglet

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Aug 20, 2002
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With 2500+ more furloughs, there's sure gonna be. When it's all done I'll bet Carty parks (this round) about the same number of leased planes that it acquired from TWA. I'll say one thing, though, aside from the loss of jobs, I won't be sorry to see those POS F-100s go. The B717 was expotentially a much better airplane.

Not to worry, I'm sure we'll all have $55 an hour AE RJ jobs to come back to in a couple of years, if we're lucky.
 

mistified

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Mar 31, 2003
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On 4/8/2003 6:23:52 PM L1011Ret wrote:

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.

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And it sounds to me like your loving every minute of it!
 

lownslow

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Aug 19, 2002
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On 4/8/2003 11:57:47 PM Winglet wrote:

With 2500+ more furloughs, there''s sure gonna be. When it''s all done I''ll bet Carty parks (this round) about the same number of leased planes that it acquired from TWA.

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Winglet -

No one is contending that there won''t be *any* furloughs hitting the aa pilots. Even if you are right in your contention that Carty will end up having a number of planes in storage equal to the number they received from TWA, that still would result in an airline approximately equal to the size of AA prior to the acquisition. Meanwhile, most every other major has cut back 12-20% in the same time frame. Most people believe that had AA not acquired TWA, they would have been forced to the same cutback from their original size, rather than the same cutback from the combined size. That would correspond to cuts all coming from the AA workforce, rather than the current situation which has cuts heavily weighted towards the TWA side (as it should be IMO, even though I would like to see TWA employees keep their jobs with full seniority). Think of it this way: say you have 10,000 employees, and you buy a company with 2,000, giving you 12,000 total. Then cut back 20%, with the cuts coming half from the new and half from the old employees. That means 1200 new employees are out, 1200 old employees are out, leaving 9600 total, of which 8800 are original employees.

Now, as an alternative, cut back on the 10,000 the same 20%, but don''t have any buyout. That leaves 8000 employees. So the buyout could actually save 800 original employees, even while others lose their jobs. This isn''t that far from what is happening now, though in many cases the balance is far from 50-50... I would say it should be weighted more towards TWA employees, as an outsider, but not 100-0 (keeping an aa employee hired on 4-9-01 while dropping a twaer from 1982 is shameful, IMO).
 

kirkpatrick

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Aug 20, 2002
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Long Island, NY
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On 4/8/2003 9:34:44 PM L1011Ret wrote:

It will undoubtly be testified to in court. They will not let Easter Bunnies in so I guess you will never know and have to operate with bad data the rest of your life. Good luck.bbb

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Har! That was so funny I almost forgot my plight for a moment. Thanks.

MK
 
OP
L

L1011Ret

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Oct 31, 2002
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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.
 
OP
L

L1011Ret

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Not your computer. When the letter was copied and pasted from another site, some of the punctuation turns to question marks. Does not appear to happen on other sites. I have corrected it from the original sent by Bob Pastore. Thanks.
 

MiAAmi

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Aug 21, 2002
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On 4/8/2003 6:23:52 PM L1011Ret wrote:



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.


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So what? If TWA was in such fine shape then why was AA floating them money prior to the approval of the buyout? And as far as the source of this letter, do you really think this is an impartial view?
 

JFK777

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Aug 20, 2002
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The TWA merger was a good thing as things stood in early 2001. No one knew 9/11 was coming or this WAR in Iraq would keep people away. SARS wasn''t a word people outside the medical world knew. 3 years ago Carty did the right thing, don''t punish him for it today, he trying to save jobs. If he is only successful at saving 75,000 jobs instead of all 100,000 pre war he still gets a A in my book. An American - TWA with 75,000 employees is better then none and 100,000 lost jobs. 25,000 is sad but that''s Washington''s problem. Carty''s problem is, " what is ggod for AA".
 

FibberMcGee

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Aug 20, 2002
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On 4/9/2003 6:13:23 PM MiAAmi wrote:

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On 4/8/2003 6:23:52 PM L1011Ret wrote:



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.


----------------​

So what? If TWA was in such fine shape then why was AA floating them money prior to the approval of the buyout? And as far as the source of this letter, do you really think this is an impartial view?


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If TWA was in such a bad state, then why did AA think it was worth acquiring?
 

kirkpatrick

Veteran
Aug 20, 2002
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Long Island, NY
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On 4/9/2003 6:13:23 PM MiAAmi wrote:


So what? If TWA was in such fine shape...

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No one said TWA was in "fine" shape. We''ve said that TWA was not bankrupt until AA made it a condition of the acquisition. America West has survived 9/11 so far; why is it such a reach to speculate that a combined TWA/AWA might not have survived also?

But that didn''t happen; this did, and we all have to live with it.

MK
 

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