FLIGHT ATTENDANTS EXPECTED TO RATIFY

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AMR Flight Attendants Expected To Okay New Contract


By Ann Keeton, Of DOW JONES NEWSWIRES
CHICAGO (Dow Jones)--Flight attendants at American Airlines are expected to ratify a new contract late Wednesday, reversing a vote Tuesday that likely would have forced the world's largest airline into bankruptcy.
In reports early Wednesday, analysts wrote that the flight attendants will probably join American's other two major unions, representing pilots and groundworkers, including mechanics, in approving cuts in wages and benefits. American has said it needs to save $1.8 billion in annual labor costs in order to avoid a certain Chapter 11 filing.
The company has said even if it gets labor costs down, it could still go bankrupt.
Tuesday, the 26,000-member Association of Professional Flight Attendants turned down the contract, which included a 15% pay cut, by about 500 hundred votes. After meeting with the company, union officials said they would vote again. During the voting process, some changes had been made in the contract, adding bonuses for employees if the airline' business turns around. Flight attendants, unlike the other labor groups, had not been permitted to change their votes during the voting period.
Voting Wednesday will end at 6:00 p.m. EDT.
Analyst James Higgins at Credit Suisse First Boston wrote in a report early Wednesday that he believes the flight attendants will ratify the contract. We have moved slightly toward a position that expects AMR to avoid a Chapter 11 filing. For months now, we had viewed the outcome as too close to call.
He said the new contracts would reduce American's labor costs by 21%, paving the way for the airline to renegotiate loan covenants for payments due June 30.
If AMR is to avoid a Chapter 11 filing, we believe the shares could jump into the $5 to $6 range. But he said if the flight attendants vote down the new contract and bankruptcy is inevitable, shares would likely drop to $1, Higgins said.
The analyst doesn't own the stock, but CS First Boston has a financial relationship with the airline.
Analyst Michael Linenberg at Merrill Lynch said he believes the flight attendants will vote for the new contract. Bankruptcy, he said, would be a far worse alternative than the concessions. Also, we believe the flight attendants will face tremendous pressure from the other employee groups to 'get on board.' As such, we expect AMR to narrowly avert bankruptcy, at least, for now.
The analyst, who doesn't own AMR stock, said shares could rise $1 on a favorable vote.
 

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WNP:

Question: Do you think that when the bankruptcy comes, management will use the bankruptcy only to renegotiate leases, vendor contracts, etc., or do you believe they will come back after labor contracts as well?

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WingNaPrayer

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My predictions remain unchanged. I believe the FA''s will ratify, and the company will still file bankruptcy before the end of Q2, or by the middle of Q3 at the very latest. This BK is going to happen . . .everyone has had plenty of warning, time to put yourself in a position to ride it out now rather than wait.
 

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On 4/16/2003 12:42:57 PM WingNaPrayer wrote:


My opinion is AA will seek additional concessions on top of what they already have and if they don''t get them, they will have no qualms whatsoever in asking the judge to just vacate/void the contracts, whether they sign off on S1113 or not.
I believe they have some of the more attractive aircraft leases already, but everything is on the table in a BK filing, you leave no stone unturned that may come back to haunt you later.

The one thing they may not be counting on is what the trustee will recommend doing with Eagle and Exec., and that will be to sell to the highest bidder.  If that happens, from what I''m seeing in the business world, I would not be a bit surprised if we see some former Western Pacific familiar faces start to crop up.

Although many will disagree, I believe the biggest threat AA has if it goes into BK is USAirways.

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Some excellent points! I hope your first one does not come to pass (I agree about the BK, but I hope it will be a "pre-packaged" type and not involve the labor contracts) but do agree that your scenario there is possible.

I think your speculation about Eagle/Executive has considerable merit. While I believe it would be an exceptionally bad idea for AMR to sell Eagle/Executive, I agree you are dead-bang-on on the potential buyers.

And I agree with your threat assessment. That house still has some problems, but they are being cleaned up quickly.

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WingNaPrayer

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On 4/16/2003 12:56:30 PM FA Mikey wrote:

They also expected it to ratify the first time. We know how that came out.

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It''s my best guess. If they vote no again, then the BK will occur earlier than I expected. I''ve long said Bankruptcy by June, August at the latest. If they end up going into BK in April, I''ll have missed it by 5 or 6 weeks, but I still don''t anticipate a filing until the end of Q2 if the FA''s ratify.

I do however, applaud them for previously standing their ground. It took big cajones to do that, but I feel if executive can look out for number one, then so can labor. It just strikes me as odd that the FA''s have long been the only ones at AA with any cajones at all! (not to discount the non-union employees who have no say at all).

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WingNaPrayer

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My opinion is AA will seek additional concessions on top of what they already have and if they don''t get them, they will have no qualms whatsoever in asking the judge to just vacate/void the contracts, whether they sign off on S1113 or not.
I believe they have some of the more attractive aircraft leases already, but everything is on the table in a BK filing, you leave no stone unturned that may come back to haunt you later.

The one thing they may not be counting on is what the trustee will recommend doing with Eagle and Exec., and that will be to sell to the highest bidder. If that happens, from what I''m seeing in the business world, I would not be a bit surprised if we see some former Western Pacific familiar faces start to crop up.

Although many will disagree, I believe the biggest threat AA has if it goes into BK is USAirways.

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