More Pilots Furloughs?

[TWAnr]

Captain Jim Sovich, APA Boston Domicile Chairman, and Captain Gary Boettcher, APA Washington Domicile Chairman, warned of additional impending furloughs of American Airlines pilots.

Captain Sovich wrote the following to the Boston domicile:

One of our more junior First Officers sent an e-mail lately asking if, in my opinion, he should be seeking other employment. My response, at this point in time, is to start looking for a job. If it were me and a job was offered, I would try to delay acceptance in order to receive my furlough pay [11/2 months pay for four years service, two months for five years service (page 17-14 of the 2003 contract)]. If I could not delay, the decision would be difficult. Make no mistake, I fully expect AA to announce more furloughs in the very near term. The number of furloughs will depend on whether they are solely efficiency driven or also include parking aircraft.

Captain Boettcher sent the following comments to the Washington domicile:

With the two weakest quarters facing AA, fuel prices that are nearly 400% higher than last September (meaning more than a BILLION dollars in unplanned expenses) and the devastating effects of four back to back hurricanes in the Caribbean and Florida, combined with the fact that AA is about 100% leveraged and has little spare cash, I'll dare to say that all is not well. The news next Wednesday when AA corporate releases our 3Q04 results and speculates about 4Q04 futures will look much like a wilted rose. Two months ago things looked fairly rosy for American Airlines. This rapid slide back into the red should make you appreciate how fragile the future of AA really is. You've heard rumors about more furloughs and potential a/c groundings. I can't tell you today if the rumors are true or not, but from my research and reviews throughout the APSEA negotiation process I can't imagine how AA could NOT furlough and ground some a/c in the relatively near future.

 

[ntm]

Just a rumor for now. Ialso read somewhere else that up to 1,000 are rumored to be affected.
Either way, it sucks to even have to consider it. At a time where other carriers are recalling their drivers. Despite the high fuel prices etc...
Something is not right !?!
But we will soon know for sure.

 

[jimntx]

At a time where other carriers are recalling their drivers. Despite the high fuel prices etc...
Something is not right !?!

[post="192599"][/post]​

To be fair, it must be recognized that the recall of drivers at other airlines is not due to improving financial positions of those airlines. It is due to the droves of senior pilots who are retiring in anticipation that the pension plans are about to get trashed for those not yet retired--particularly at UAL and DAL. DAL's pilots have a really sweet deal right now that the company is trying to do away with.

 

[Winglet]

No doubt there will be further furloughs. The present group of APA leadership is concessionary and senior-protective in nature. Several very fundamental issues are coming to a head . . . . . 100 seat aircraft, outsourcing, scope, further wage decreases, and pensions.

I expect management to transition in to phase II of the "new reality." Phase I was a pretty straightforward pay and working conditions cut as well as getting rid of that pesky "no furlough" agreement that Carty signed to buy TWA assets. That was just the softener and to get the employees to get used to the idea that they are going to be moving backwards in status and compensation.

Phase II (probably by Feb/Mar) will be more focused on scope and again the threat of BK. The most important thing that Arpey wants is 100 seat jets either flown by Eagle (his preference), or by a D-scale AA pilots . . . . with a very long contract. He'll probably leave pay alone, but he'll come after hours . . . he'll want 90 hour months, so he can furlough 1000 more pilots. The game will be played . . . "well, give AA a D-scale 100 seat airplane and we'll try and mitigate the 1000 number, and we'll try and leave the pension alone for now, but I can't budge on 90 hour/20 day months.

I think the APA knows that if they give away 100 seat airplanes that a third of the MD-80 fleet will be parked as the 100 seaters come into the inventory.

Phase III - Defined Pension Plan (late 2005) is attacked as unsustainable give the fact that UAL will be on commuter compensation by then as will US Airways (on the BIG assumption that U is hasn't shut down), and DAL.

The desired end game for management is 100 seat airplanes flown by American Eagle commuter pilots and FAs for RJ compensation, AA just a transcon and international (and about half it's present size, say 5500 pilots total), no DBP except for maybe a watered down B-fund and 401k, compensation and workrules at JetBlew levels.

 

[L1011Ret]

Gosh, you are really optimistic...

 

[Oneflyer]

I think you are seriously over stating AA's desire for 100 seat planes.

As for the rest, there really isn't much choice. Whether the union management is concessionary or not ,if fuel prices stay high wages are coming down and the pensions are done. Quite frankly, at $50 plus a barrell oil I don't see how that will be enough.

 

[amcnd]

I think they are going to go after the Pention and get 70-100 seat jets at Eagle. With a new J4J deal with Eagle pilots to alow some AA pilots in the left seat of these aircraft.

 

[Bagbelt]

My boss was supposed to go down to Dallas with his budget this week, but was told to stay home. I can only speak for main., but the plan to shut all class 2 stations to eagle is allready underway. CLE, DTW, PHL, and now BDL are going eagle. The ramp, aircraft and auto/ fac. work will be done by them. If you take into account the vast difference in wages/ benes.- it will more than make up for $50 a bbl. oil. It doesn't seem to matter what employee group you're in anymore, what happens to one happens to all now. The pensions are far more than a billion a year.

 

[Oneflyer]

CLE, DTW, PHL, and now BDL are going eagle.

I know for a fact PHL will continue to have AA TWU ramp in 2005.

 

[JXCAP]

Here's more good news at AA.

This is an excerpt from Ralph Hunter's (APA president) email he sent yesterday to the membership.

It is abundantly clear that with oil at $54/barrel, there is some amount of our domestic narrowbody flying that simply doesn't make sense. I think we owe our honest assessments to our junior members. If they're junior to First Officer F.L. Steed, they should carefully consider their options. If they have viable alternatives now that may disappear, they should seriously consider leaving. Our industry and our profession clearly has some more trouble spots in the future.

 

[FWAAA]

My boss was supposed to go down to Dallas with his budget this week, but was told to stay home. I can only speak for main., but the plan to shut all class 2 stations to eagle is allready underway. CLE, DTW, PHL, and now BDL are going eagle. The ramp, aircraft and auto/ fac. work will be done by them. If you take into account the vast difference in wages/ benes.- it will more than make up for $50 a bbl. oil. It doesn't seem to matter what employee group you're in anymore, what happens to one happens to all now. The pensions are far more than a billion a year.

[post="192822"][/post]​

You have been greatly misinformed. The 2004 pension contributions totaled $460 million, and were all made by June 30.

The 2005 pension contributions are just over $400 million (confirmed by Arpey and Beer in today's conference call). I suspect that AMR will make that contribution, probably early in the year after the Orbitz cash is received; if they were planning to cancel the pensions, ala USAir and UAL, why on earth would they talk about next year's contribution??

 

[Bagbelt]

I stand corrected, however I was under the impression that $400 mil. was the amount allowed by the change congress granted, which backloads pension contributions several years out. AA has allways had a policy of grandfathering in people on the property. I will be greatly suprised to see the pension plan as it is extened to new hires after the 2006 opener. I believe any real increase in pay or benes. will be based on what retiree medical and pension language is kept. It could wind up a flex plan option. As far as station staffing, we heard that m&e is pulling out of BDL and others, I can't speak for the ramp or stores. Though stores positions offered at my station have been recinded. Anyway, some changes are coming, I wish everyone the best.

 

[Winglet]

Make that 1300+ furloughs and the senior guys still won't save the A-fund. If I were a senior guy, I'd be putting in the ol' early retirement, even if it was 50 cents on the dollar. Expect BK threats right about the time US Airways sets all the parking brakes for the last time in January - February. After that, EVERYTHING'S on the table. And you can bet that AA isn't going after parity with SW, but JB or below, just to make up for the higher costs for running a hub and spoke international airline.

Like U, now's the time to watch how much money goes out the back door of Centerport in the form of bonuses, advance retirement bennies, etc. 90 days before BK.

 

[FWAAA]

I stand corrected, however I was under the impression that $400 mil. was the amount allowed by the change congress granted, which backloads pension contributions several years out. AA has allways had a policy of grandfathering in people on the property. I will be greatly suprised to see the pension plan as it is extened to new hires after the 2006 opener. I believe any real increase in pay or benes. will be based on what retiree medical and pension language is kept. It could wind up a flex plan option. As far as station staffing, we heard that m&e is pulling out of BDL and others, I can't speak for the ramp or stores. Though stores positions offered at my station have been recinded. Anyway, some changes are coming, I wish everyone the best.

[post="193129"][/post]​

You are correct; this year's contribution was originally planned to be about $600 million before the changes passed by Congress, and the statutory changes significantly trimmed the expected 2005 contributions, which earlier this year the company said would "significantly exceed" the $600 million expected for 2004.

From this year's 10-K (top of page 26):

In addition to the commitments summarized above, the Company is required to make contributions to its defined benefit pension plans. These contributions are required under the minimum funding requirements of the Employee Retirement Pension Plan Income Security Act (ERISA). The Company’s estimated 2004 minimum required contributions to its defined benefit pension plans are approximately $600 million. (This estimate assumes Congress passes legislation providing certain technical corrections to current ERISA funding requirements.) Due to uncertainties regarding significant assumptions involved in estimating future required contributions to its defined benefit pension plans, such as interest rate levels, the amount and timing of asset returns and the impact of proposed legislation, the Company is not able to reasonably estimate its future required contributions beyond 2004. However, based on the current regulatory environment and market conditions, the Company expects that its 2005 minimum required contributions will significantly exceed its 2004 minimum required contributions. Congress is also considering other legislation that, if passed, would further modestly reduce the Company’s 2004 minimum required contributions and significantly reduce its 2005 minimum required contributions.

Although from labor's perspective, deferring contributions to defined benefit plans is probably a cardinal sin, the actuarial computations that define AA's plans as underfunded are heavily influenced by the historically low interest rates of the past couple of years. Had Congress not granted relief, the inevitable rise in interest rates (it's only a matter of time until they increase) would have caused over-funding of many plans once rates rose. So I can sympathize with both views - why cause a cash crunch at AA in 2003-2004 by requiring it to make massive pension contributions that by 2005 or 2006 might not be necessary, or at least might turn out to be larger than necessary?

And continuing the "everything will be ok as long as everything goes according to plan" theme, if the equity markets make any real recovery, the actuarial underfunding will shrink even more, reducing the level of future required contributions. B)

The good news is that AA has made its contributions and is planning to make the contributions in 2005, while UA thumbed its nose at its employees. Although it is a common refrain that AA couldn't care less about its employees, its continued commitment to the pensions might keep morale and productivity out of the toilet, which is where UAL and USAir find themselves these days.

On new hires, I completely agree with you. As much as organized labor hates it, the new hires will probably have no DB plans, not to mention lower pay and less bennies. 401(k) matches will probably be the extent of the company's contribution to their pension.

Sad to hear of the pending layoffs. May AA pull out of its flat spin and recall the furloughed (all of them) before it's too late.

 

[eolesen]

Like U, now's the time to watch how much money goes out the back door of Centerport in the form of bonuses, advance retirement bennies, etc. 90 days before BK.

[post="193200"][/post]​

Unlikely on Arpey's watch. Even the more pessimistic analysts on Wall Street are saying it will take a year to burn thru the existing cash, barring something really bad happening...