Pilots board approves proposal 9-7...now what?

[signals]

Someone might be wrong, let's dogpile on his ass.

I've been enjoying summer, or global warming.

 

[TWU informer]

The Unsecured Claim Process: An Introduction​

In Chapter 11, unsecured creditors such as APA are often able to recoup some of their losses due to the bankruptcy process through an “unsecured claim.” The tentative agreement on which you will soon be voting includes an unsecured claim that entitles APA to 13.5 percent of the equity in a newly reorganized AMR.* As described in more detail below and in future updates, this claim has two main benefits: it has significant financial value and also gives APA a voice in the direction of the bankruptcy.

The claim amount was negotiated to compensate APA for all collective bargaining agreement and pension modifications made during bankruptcy, as well as APA’s pre-bankruptcy causes of action against AMR (which are automatically permanently discharged when AMR emerges from bankruptcy). After the tentative agreement is ratified by the APA membership, the claim and tentative agreement will be brought before the bankruptcy court for approval. APA’s unsecured claim and the tentative agreement are tied together – if anyone were to try to take away or reduce our unsecured claim, our tentative agreement would be nullified.

Most often in bankruptcies, an unsecured claim is negotiated in the form of a specific dollar amount – for example, a creditor might receive a claim for $1 billion. That amount, once allowed by the court, is then added together with all the other allowed unsecured claims into a general unsecured claims pool. The assets available to satisfy those general unsecured claims are then distributed proportionally among the claims pool creditors. In most cases, the available assets are less than the total amount of claims, so that a claim of $1 billion might ultimately equate to $700 million in actual value. Thus, creditor recoveries in a bankruptcy are typically expressed in “cents on the dollar.” Unsecured claim recoveries in past airline bankruptcies have ranged from pennies on the dollar to as high as 100 cents in some unique small airline cases. APA’s advisers have received periodic updates reflecting what certain financial institutions are offering to pay for unsecured claims in the AMR bankruptcy. Those purchase prices have fluctuated significantly during the course of this bankruptcy and have ranged from the low 20s to the high 40s (cents on the dollar). A higher price can sometimes be negotiated in a private transaction involving large claim amounts.

APA has negotiated something slightly different. It is anticipated that in the AMR Plan of Reorganization, general unsecured claims will be satisfied largely through the distribution of equity in the newly reorganized corporation. We have gone straight to an equity stake of 13.5 percent. In other words, rather than gambling on the ultimate size of the claims pool, we have used our very substantial claim to achieve certainty in what we receive at the end of the process.

We will not know the precise value of our claim until the end of the bankruptcy when the value of the company is estimated as part of the plan solicitation process. After emergence, the value of AMR claims (and AMR’s new equity) will be determined by the market. This value will be influenced by a number of factors including, but not limited to, the state of the economy, fuel prices, AMR performance, industry performance and more broadly, the prospects for industry consolidation.

As important as the economic value of the 13.5 percent stake is the fact that it makes APA one of the largest (if not the largest) voting blocs in the AMR bankruptcy. Put simply, APA will have the largest seat at the table when the time comes to vote on whether a "stand-alone" reorganization of AMR or a combination with US Airways represents the best path to AMR emerging from bankruptcy as strong and competitive as possible.

APA has not yet conducted any study of allocation methodology thus far to determine how a claim would be divided among our pilots. The allocation discussion will not occur until well after contract ratification. In all circumstances, APA will be focused on maximizing the value of its claim for the benefit of its members. Finally, it is important to note that in the event that AMR enters into a consolidation transaction with another airline, members of another airline’s pilot union will not be entitled to share in our claim.

In future member communiqués, we will detail other aspects of the claim process, including what other pilot groups received with respect to their unsecured claims in prior airline restructurings, dilution provisions, and material updates on the status of our claim as AMR’s bankruptcy case progresses.

What is important for all pilots to understand is that being the largest creditor in this bankruptcy gives us significant influence on the Unsecured Creditors’ Committee (UCC). Having a dominant position on the UCC is vital to our ability to have a meaningful say in the future of this airline. According to the current state of bankruptcy law, without a consensual deal we have no claim. Certainly, should this occur, APA would litigate the issue. But there is no guarantee that APA will be able to obtain a claim or what the value of that claim would be.

Without a claim, it can be asserted that APA is no longer a creditor and APA could end up relegated to “observer only” status. This would be a tremendous impediment to our ability to influence things such as a merger with US Airways.

Having a large unsecured claim is vital to APA’s ability to have a meaningful impact on our destiny.

 

[Bob Owens]

Pilots just seem to love the idea of being "owners".

Funny, for mechanics the big sell was "Early Out" for Pilots its deeper in.

Should be interesting.

 

[TWU informer]

Pilots just seem to love the idea of being "owners".

Funny, for mechanics the big sell was "Early Out" for Pilots its deeper in.

Should be interesting.

The way I read it this is just a way to attempt to regain some of what was lost.

Are you saying the M&R early out is in lieu of a claim like this in our case in BK?

 

[Bob Owens]

The way I read it this is just a way to attempt to regain some of what was lost.

Are you saying the M&R early out is in lieu of a claim like this in our case in BK?

No, I'm pretty sure that all the groups proposed such claims just as employees at other carriers have done. IMO the pilots are more likely to bite on Equity than we were, so the company didnt even bother to offer it to us, and five groups accepted deals without it. Bad move on their part because as you said at least there's a chance a recouping some of the losses if you have it. Of course when they voted they assumed that the BK was legit and were unaware that the business plan was calling for wortkers to give back $1.25billion so they could make $3 billion in profits while at the same time buying over $500 new airplanes and adding all sorts of luxuries for the passengers.(Imagine what the profits would be when that stuff is paid off!)

I'd be asking, if I was in one of those groups that accepted, how does the Equity stake factor into the Me-Too clause? Since its equity, like how they pay executives, and not cash coming out of the coffers it has no effect on the value of the "ASK".

 

[frontline]

Pilots just seem to love the idea of being "owners".

Funny, for mechanics the big sell was "Early Out" for Pilots its deeper in.

Should be interesting.

Bob, this could be a very sweet deal for them. With that large of a stake, if we recover and do well on our own again that will mean a rising stock price. If we get purchased after bankruptcy that will mean they get to cash that chip in for a pretty penny.

It's always better to be an owner AND an employee than just an employee.

 

[Birdman]

It's always better to be an owner AND an employee than just an employee.

There are many at United that would disagree.

 

[eolesen]

Those at UA probably forget why the ESOP failed. They took the stock, and then demanded higher pay five years later. Contract 2000 started the downfall of the stock, and 9/11 finished it off.

If you want to be employee owned, you have to be willing to live with the risk and responsibility that ownership brings.

 

[TWU informer]

Those at UA probably forget why the ESOP failed. They took the stock, and then demanded higher pay five years later. Contract 2000 started the downfall of the stock, and 9/11 finished it off.

If you want to be employee owned, you have to be willing to live with the risk and responsibility that ownership brings.

I agree Eric, but ownership in this Airline is not on my top priority list, I would take the equity stake and sell it at my discretion though. In fact, it is kind of a hedge your bet idea, if they are going to rape the employees in an attempt to make $3Billion, which I doubt will ever happen, then why not have some shares to counter your losses?

It is funny how the business plan is always to make billions and then when the fare wars begin, the fuel goes up, or employees ask for a raise, the whole idea tanks. Not to mention to deregulated industry that is propped up by Corporate Welfare handouts, and unlimited trips to this Bankruptcy Scam backing up those that cannot compete.

It is like a hybrid form of Socialism backing up an entire failing industry in a Capitalist Society.
Unreal is what I call it.

I doubt that any Major College in this Country teaches this form of economics and competition.
No wonder it is failing, every business leader is educated to operate in a society that is diffferent than the Airline Industry is in reality. Most if not all of these business plans would work if your competition was actually allowed to fail and then had to leave the game. But not in this industry, that will never happen.

 

[Buck]

Somebody at some business school needs to teach those in the cubicle that they are not the airline by themselves.