- Jun 10, 2011
- 313
- 206
After receiving management’s 1113(c) term sheet on Feb. 1, the APA Negotiating Committee and our subject-matter experts began analyzing and costing the various proposed changes. Negotiations resumed on Feb. 7 with management passing their only additional proposal to date—a 13-page work rule document that expands upon certain items in their term sheet.
All negotiating sessions are taking place in Dallas-Fort Worth, with at least one National Mediation Board mediator in attendance at each session. The Negotiating Committee has maintained regular, face-to-face contact with the APA Board of Directors, which has been providing ongoing guidance.
Scope: How Valuable?
One of the most bizarre developments in our negotiations thus far has been management’s refusal to assign value to the sweeping scope changes they have proposed. This refusal contrasts sharply with the Feb. 21 letter from American Airlines Chief Commercial Officer Virasb Vahidi, which indicates that management plans to “generate almost two-thirds of our $1B in incremental revenue” by “right-gauging.” He further elaborates by noting that “with the expected relaxation of limitations in our pilot agreement, and capitalizing on the new small narrow-body fleet and additional regional flying, we will be able to replace our current aircraft with those whose size better match the demand in our network.”
So which is it—does scope have value to the corporation or not? The answer is obvious and APA intends to seek meaningful value in exchange for any modifications to our current scope language. Despite management’s refusal to assign value to scope, they clearly believe their proposal would drive significant additional revenue for the airline, as evidenced by Mr. Vahidi’s claims in his letter.
In the coming weeks APA will highlight other incongruities in management’s 1113(c) proposals, and we will also illustrate where their proposals deviate from current industry standards.
APA’s Counter Proposals
Following management’s 1113(c) proposal, APA passed two comprehensive proposals. The first was a list of the 40 agreements-in-principle (AIPs) reached in Section 6 and APA’s desire to maintain all of those agreements. The second listed the 22 previous areas of agreement (not yet in AIP format) and APA’s desire to AIP those agreements.
APA’s counter proposals have been focused on what is industry competitive and operationally necessary for a successful reorganization, not an arbitrary “target” number determined by management. If a management proposal is assigned no value in their term sheet, it is our position that the proposal is not required for the airline to successfully reorganize.
Our negotiating team is aggressively defending against the onerous provisions in management’s term sheet, including the proposed elimination of duty rigs, flight time/duty time limitations, sick leave provisions, disability and the potential for significant outsourcing of AA flying. We have passed proposals on all remaining outstanding contractual issues, including scope, work rules, benefits, compensation and pension.
Upon presentation of the first APA counter proposals, management took a brief caucus and upon returning made the following declarations:
AIPs and other areas of agreements that occurred prior to Nov. 11, 2011 were no longer in effect.
There was a “target” in annual pilot cost savings tied to management’s business plan and APA had to negotiate to the “target.” If not, management says they will be unable to execute their business plan and emerge from bankruptcy.
These negotiations are not Section 6 negotiations, but 1113 negotiations—starting from a “clean slate.”
We responded by emphasizing that we designed our counter proposals to be industry competitive. In addition, we reiterated our commitment to the successful reorganization of American Airlines.
While we are working hard toward and hoping to obtain a consensual agreement, we continue to prepare for all contingencies, including the potential abrogation of our contract through the 1113(c) process if negotiations fail to produce a consensual agreement.
All negotiating sessions are taking place in Dallas-Fort Worth, with at least one National Mediation Board mediator in attendance at each session. The Negotiating Committee has maintained regular, face-to-face contact with the APA Board of Directors, which has been providing ongoing guidance.
Scope: How Valuable?
One of the most bizarre developments in our negotiations thus far has been management’s refusal to assign value to the sweeping scope changes they have proposed. This refusal contrasts sharply with the Feb. 21 letter from American Airlines Chief Commercial Officer Virasb Vahidi, which indicates that management plans to “generate almost two-thirds of our $1B in incremental revenue” by “right-gauging.” He further elaborates by noting that “with the expected relaxation of limitations in our pilot agreement, and capitalizing on the new small narrow-body fleet and additional regional flying, we will be able to replace our current aircraft with those whose size better match the demand in our network.”
So which is it—does scope have value to the corporation or not? The answer is obvious and APA intends to seek meaningful value in exchange for any modifications to our current scope language. Despite management’s refusal to assign value to scope, they clearly believe their proposal would drive significant additional revenue for the airline, as evidenced by Mr. Vahidi’s claims in his letter.
In the coming weeks APA will highlight other incongruities in management’s 1113(c) proposals, and we will also illustrate where their proposals deviate from current industry standards.
APA’s Counter Proposals
Following management’s 1113(c) proposal, APA passed two comprehensive proposals. The first was a list of the 40 agreements-in-principle (AIPs) reached in Section 6 and APA’s desire to maintain all of those agreements. The second listed the 22 previous areas of agreement (not yet in AIP format) and APA’s desire to AIP those agreements.
APA’s counter proposals have been focused on what is industry competitive and operationally necessary for a successful reorganization, not an arbitrary “target” number determined by management. If a management proposal is assigned no value in their term sheet, it is our position that the proposal is not required for the airline to successfully reorganize.
Our negotiating team is aggressively defending against the onerous provisions in management’s term sheet, including the proposed elimination of duty rigs, flight time/duty time limitations, sick leave provisions, disability and the potential for significant outsourcing of AA flying. We have passed proposals on all remaining outstanding contractual issues, including scope, work rules, benefits, compensation and pension.
Upon presentation of the first APA counter proposals, management took a brief caucus and upon returning made the following declarations:
AIPs and other areas of agreements that occurred prior to Nov. 11, 2011 were no longer in effect.
There was a “target” in annual pilot cost savings tied to management’s business plan and APA had to negotiate to the “target.” If not, management says they will be unable to execute their business plan and emerge from bankruptcy.
These negotiations are not Section 6 negotiations, but 1113 negotiations—starting from a “clean slate.”
We responded by emphasizing that we designed our counter proposals to be industry competitive. In addition, we reiterated our commitment to the successful reorganization of American Airlines.
While we are working hard toward and hoping to obtain a consensual agreement, we continue to prepare for all contingencies, including the potential abrogation of our contract through the 1113(c) process if negotiations fail to produce a consensual agreement.
