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Buck

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[SIZE= 26pt]American[/SIZE][SIZE= 26pt]Airlines[sup]®[/sup][/SIZE][SIZE= 26pt][/SIZE]


April 8, 2003



Mr. James C. Little
Director Air Transport Division
International Administrative Vice President
Transport Workers Union of America, AFL-CIO
1791 Hurstview Drive
Hurst, TX 76054


Dear Jim,

Variable Wage Adjustment Provision

This provision is in addition to the planned contractual structural increases of 1.5% annually starting May 1, 2004.

At the union’s option this provision may be invoked annually on or after January 1, 2006, but not later than ninety (90) days prior to the exchange of Section 6 notices between the parties (10/03/08).

This Variable Wage Adjustment Provision may be triggered at any time during the period described above provided American’s debt rating returns to the lowest level of investment grade as rated by Standard & Poors (BBB-) or Moody’s (Baa3).

Upon receipt of written notice by the Company of the union’s intent to invoke the Variable Wage Adjustment Provision, direct negotiation shall commence forthwith on any contractual matter brought forth by either party and may last for a period not to exceed thirty (30) days after the date of receipt of the notice, unless an extension of the thirty (30) day period is agreed to in writing by the parties.

Should agreement not be reached by the parties, an arbitration panel shall be convened consisting of a neutral member, a union appointed member and a Company appointed member to address the sole issue of a Variable Wage Adjustment as set forth below:

If the parties are unable to agree on the neutral member the neutral selection
provisions of the collective bargaining agreement shall be used to select the
neutral
[SIZE= 12pt][/SIZE]

The process to select a neutral may begin at the request of either party any
time after notification by the union of its intent to invoke this Variable Wage
Adjustment Provision

The parties may agree to waive any portion of the thirty (30) day negotiation period
and commence the arbitration process

A period of sixty (60) days shall be provided for the arbitration process, including
the hearing and award issuance, unless extended by written mutual consent
of the parties

The question posed to the arbitrator shall be: What is the appropriate Variable Wage Adjustment pursuant to the criteria stated below?:

The Variable Wage Adjustment awarded shall not cause American’s unit
labor costs (wages, work rules, and benefits) for the Transport Workers Union,
AFL-CIO (TWU) class or craft to exceed the unit labor cost (wages, work rules
and benefits) of the six (6) largest domestic passenger air carriers excluding American for the same class or craft

The Variable Wage Adjustment awarded shall not be greater than a 4.5%
increase calculated on the “chart†rate

The Variable Wage Adjustment will not become part of the “chart†rate, or be
considered in subsequent valuations

Any Variable Wage Adjustment awarded shall become effective no earlier
than the date of the award, and shall continue for the succeeding 12-month
period, paid in equal installments in the normal payroll cycle


If the above accurately reflects your understanding of our agreement, please indicate by signing below. If you should have any questions, please contact me at 817-967-1447.


Sincerely,


James B. Weel
Director
Employee Relations



[SIZE= 12pt][/SIZE]

Agreed to:



_________________
James C. Little
Director Air Transport Division
International Administrative Vice President
Transport Workers Union of America
AFL-CIO


________________
Date



cc: J. Brundage
 

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