Ted Reed says AA can avoid a strike by TWU

[FWAAA]

And how many Majors have filed and liguidated?

None. My post has nothing to do with an AA liquidation, and I don't expect it to happen. I was simply listing the airline bankruptcies that occurred after the 2005 Bankruptcy Code amendments - as The Goose had posted that there was very little history on which to draw.

 

[The Goose]

And how many Majors have filed and liguidated? Small airlines going bankrupt and liquidating is hardly a rare occurance, In my career Ive worked for Capitol Air, Air Florida, New York Air, Arrow Air and AirBourne Express. I never expected a lifetime career out of any of them, It was simply a matter of putting in time to get the experience the Majors required. I remember a few of the Capital Air DC-10s turning up at LGA in AA paint schemes, people werent the only things that got sucked up.

If AA liquidated the economy would take a $60 billion hit. Would Capital risk it? Maybe, the chilling effect might quiet down workers in the rest of the industry for a year or so, but then again maybe it wont. If anything an AA liquidation would futher consolidate the industry, giving labor an even greater advatnage.

That was my exact point, Bob - inconsequential (at least for the overall econ) carriers come and go almost daily it seems, but nobody has a clue as to how a major airline would be handled in the bankruptcy court (regardless of what the "businesspeople" think or say). I believe the simple fact no majors have filed since 2005 (not to mention the "under-the-wire filing by DL and NW) is rather telling as to the effect of the newer law.

I'm not trying to say the workers will emerge unscathed - but I do believe the days of the executive BK piggybank are over. The execs won't get their payoffs for retention (unless they can show a job offer from another company but the judge can still tell them to take the offer and leave) and there are protections built in for the workers that weren't there before - not earthshaking, but better than before - not to mention the SOBs in Centrepork would lose their control of the company. I'll not get into the BOD as I have less respect for that group of "diversity" than I do Arpey and crew.

The one point of leverage that's still being used is this pension we have - if vested, we will not lose that. It will be paid either by the company as it has been, or by the PBGC (worst case, to the extent of the pension's funding). FWAAA has bee proud in saying that funding of late has been 86% or so. Everybody needs to understand the pension WILL NOT go away. The company and our "representation" hasn't been very forthcoming about how this works.

Personally, I would be willing to take a pension freeze and begin a matching-funds (from the company) 401k if those in the middle (the most vulnerable) were allowed to choose either a pension or a 401k - I haven't a problem with the new hires getting a 401k as that's one less thing this company can't hang over their heads as a bargaining chip in the future. Besides - the company wants it and it would cost them more in the long run - I'll bet they don't think we'd bite - the union won't have it as it removes much fear from the workforce.

One nice thing about history is there are many examples of how people were controlled by entities they believed were there for their good - think of the middle ages in Europe and the control over the people exerted by the Catholic Church. While this is in no way a religious matter (obviously) nor am I suggesting such a thing, the tactics are identical. The bastards running the company and TWU obviously learned how to control the majority from history - we should pay attention and use the same history to negate their BS.

It seems many on the company side are putting on quite the show for our benefit to instill more fears of bankruptcy - perhaps it is them trying to pass their fears on to us? I thought for a while that was Horton's intent but now see it only as a threat - a BK filing would kill their Golden Egg supply. After being bent over the proverbial barrel in 2003, my BS detector is now fully functional.

 

[eolesen]

Goose, call it what you will, but I have no reason to try and instill fear or doubt. Just stating the landscape as I see it.

Y'all are correct that the last "major" liquidation took place in 1991 with Eastern. Since then, there was either a bank standing by with money to lend, or another airline with cash on hand willing to buy them outright.

And let's not overlook the fact that the last true recession we had was in 1991. Not a small coincidence in my book, and this recession is far worse and reaching than what we saw in 1991.

The examples of bankruptcy filings above seems pretty complete for North America, but left out a few -- MaxJet, Tradewinds, and Gemini Air Cargo.

ABX didn't liquidate, but they pretty much stopped being a US operator, and now just wet and dry lease their 76F fleet out to third parties.

Midwest wasn't a publicly traded company, but I'd consider them as having been liquidated as well. They exist as a brand only today.

Internationally, we saw Oasis Hong Kong, Zoom, Silverjet and Eos shut down and not be sold. There are lots of others.

What all of those have in common is that they've all shut down large parts of their operation since the beginning of 2008...



Re: my comments earlier about the foreign ownership cap... I was going off early reports which claimed the caps were being eliminated. That was later clarified as not being true. Fact is that the current administration and Congress will never sign off on the draft agreement unless you have a situation where United is on the ropes, and Lufthansa is the only one standing by with a lifeline. Even there, it's unlikely, but stranger things have happened.

If United, American or US filed for bankruptcy, I don't know who domestically would have the cash to step in and purchase them, nor do I really think any of the banks right now going out on a limb.

 

[Kev3188]

Personally, I would be willing to take a pension freeze and begin a matching-funds (from the company) 401k if those in the middle (the most vulnerable) were allowed to choose either a pension or a 401k - I haven't a problem with the new hires getting a 401k as that's one less thing this company can't hang over their heads as a bargaining chip in the future.

I think this is a great idea. In fact, it was the *only* idea I actually liked in NW's last proposal to us prior to going into the 1113 process. I understand why the pension is a sacred cow to so many, but (as someone said a long time ago on here) I've always seen it as a sort of sword of Damocles hanging over us. I think the option of a one time choice (401k or pension) for the existing workforce is a good idea. Someone'll correct me if I'm wrong, but I believe this was negotiated over at AS?

 

[Bob Owens]

That was my exact point, Bob - inconsequential (at least for the overall econ) carriers come and go almost daily it seems, but nobody has a clue as to how a major airline would be handled in the bankruptcy court (regardless of what the "businesspeople" think or say). I believe the simple fact no majors have filed since 2005 (not to mention the "under-the-wire filing by DL and NW) is rather telling as to the effect of the newer law.

.

The one point of leverage that's still being used is this pension we have - if vested, we will not lose that.

The bastards running the company and TWU obviously learned how to control the majority from history - we should pay attention and use the same history to negate their BS.

It seems many on the company side are putting on quite the show for our benefit to instill more fears of bankruptcy - perhaps it is them trying to pass their fears on to us? I thought for a while that was Horton's intent but now see it only as a threat - a BK filing would kill their Golden Egg supply. After being bent over the proverbial barrel in 2003, my BS detector is now fully functional.

I dont share your faith in the new law, but I do as far as history.

The company is going to focus all their fear mongering on Tulsa. but lets look at a few facts about whats going on in Tulsa.

The company has never stated that it costs them more to do OH in house, in fact the company recently stated that thier non-labor costs were among the lowest in the industry despite buying up new aircraft, doing expensive mods on the aircraft they have, buying back parts for dollars on the penny after selling them for pennies on the dollar and other capital improvement projects. Then they complained that their labor costs were the highest. Well that makes sense, how could it be any other way? The fact is that our wages are much closer to the bottom than the top. By doing the work in-house and not sending it out and paying vendors to do it AA obviously saves money. They save it by not providing vendors a profit margin, by having a central point where they do most of the work, by getting a better product back out to the field and by being able to stock fewer parts (and aircraft) because of the faster turn around time. I worked for AAR, the stuff they turned out was crap. They refused to buy proper tooling, provide training and really didnt care if the stuff worked or not. I think I was there less than 3 months before I quit. Clean it up, make it look nice and ship it out. We see it with the outsourced MD-80 APUs. From what I've been told the failure from stock rate is extremely high, the ones they put in from stock are often worse than the ones they take out. So if they save $1000 on the rebuild but it fails after installation and they lose a trip that would have brought in $100,000 and they have to pay two mechanics to take it back out and put in another one,( $500), how much do they save?

When asked directly whether it costs more to do our own OH Arpey said "The jury is still out on that". Now if it was more expensive dont you think Arpey would have said so? You cant expect us to believe that 7 years into this they still havent been able to figure out if it costs us more to do it in house than outsource it. After all hasnt it been a long standing part of our contract that if we cant show that its cheaper to do it in house than what they pay to send it out that they can send it out? In fact prior to 2003 we used to send out more work than just about any other major carrier except SWA.

So is in house OH a liability to the company, so great a liability that we should accept $14/hr, (not counting benifits etc) less than what other A&P mechanics are getting, or not? I say NO.

I'll admit that if they brought all of OH up to the $47/hr that UPS is offering their guys it may change that but is the companies position of no pay raises for 6 years reasonable? The fact is that we will do whatever can to make sure that AA never goes higher in the performance rankings than we are in the pay rankings. If bottom of the industry is good enough for us then its all they are going to get from us.

The Pension is their other big fear factor. Well if you look at the workforce at AA, where the average age is 46, a large number are people who dont really trust the idea of a DB anymore. Many saw theirs dissapear with their previous employer. Since ours is funded, and the company has Billions in the bank, maybe now would be a good time to freeze the DB and go with a portable defined contribution like Fed EX or a 401k match like SWA, however we should demand at least what SWA is getting and not based on a 40 hour week. With so few others out there with the DB plan how likely is it that we will keep it till the average 46 year old retires and is it really worth $14/hr less in wages? Recently, the company claimed that the 5% 401K they were offering would be 'cost neutral", (then they admitted that in the short term it would cost them more than the DB plans because they actually have to put cash into it but over the long haul they expect that it would start to save them money). Considering the history for DBs among our peers the "in hand" portability of a DC is now worth more than the "promised stability" of the DB, just like the bird in the hard is worth more than two in the bush. DB guarantees turned out to be not so. If you polled all the guys from Pan Am, EAL and TWA and asked them if they would have rather have had a 401K match from day one in the industry or their DBs my guess it would be near unamimous they would opt for the 401K match.

To me the pension has become too expensive, not for the company but for us. Saving the pension was the main push behind the 2003 Concessions that took a minimum of $160,000 out of my pocket and sent us to the bottom of the industry in pay, benifits and working conditions. If they had frozen our pension in 2003 and we kept our wages like SWA, Jet Blue UPS and Fed Ex, I could have maxed out my 401k and opened and dumped some in an IRA, that $160,000 could have been around $250,000 by the time I retire, and its portable. In the meantime, over that seven year period, my pension probably only increased by around $200/month, according to the companys own figures they only put in around $12,000 to my pension since 2003. I would have to be retired for around 100 years to collect the difference.

So in reality they dont have too much to threaten us with and nothing to gain by taking on a strike. They have the bankruptcy plan already as far as wages and benifits so we really dont have anything to lose, so they freeze the pension, go ahead, what else are they going to get? If you notice the big threat they use is not that they can beat and replace us in a strike (they cant, too many are leaving the industry as it is, as the economy recovers the trickle will become an Exodus on a biblical scale)but that they would file for BK in the event of a strike. Well let them file, why wait? If they could save money by going BK then why havent they done it already? I've had enough. Like I said if AA liquidated it could be a $60 billion hit to the economy depending on the multiplier it could be even higher. If they liquidated then my wife could put me through school while I collect unemployment and maybe I'll put away my tools forever. We have nothing to lose by pushing for what we need even if it means strike or liquidation, what AA is offering is just as bad as either of those options. Six years with no pay raise, that comes out to around another 18% cut in real earnigs on top of the 40% we already lost, then tack on increased medical costs. It really wouldnt be worth it anymore when you can get a regular job with regular hours, be home on the weekends and holidays and be earning more in less than two years than you would here after twenty.Best of all you wouldnt have to put up with half as much bullsh!t like that letter put out by the company last week that basically says that we had a free ride for the last twenty years. They get bonuses while losing money then accuse us of having a free ride!!!!.

Just ask the guys who already left.

 

[Birdman]

I hate to rain of some peoples' parades, but there was a change in the Chapter 11 bankruptcy laws as of 31 October, 2005. These were the changes DL and NW avoided by filing shortly before. Any bankruptcy history of other airlines can only be compared to events since that date, not ten years prior to today - only 5 years.

There's relatively little history to draw on.

From the legal opinions I've read, the working stiffs (us) may get a better shake than before but again - there's little history.

It's ok, I have an umbrella. Granted there is little history since 2005 with the exception of Frontier. They emerged and are now a subsidiary of Republic. The 2005 Bankruptcy Reform Act does not dictate instant "liqidation", as some might believe. My assertion remains that AA would only use the threat to gain a negotiation advantage. They have not used that threat, but to my knowledge have not rebutted the incessant rumblings of those analytical talking heads.

 

[Boomer]

Bob Owens,
"...The Pension is their other big fear factor. Well if you look at the workforce at AA, where the average age is 46, a large number are people who dont really trust the idea of a DB anymore. Many saw theirs dissapear with their previous employer. Since ours is funded, and the company has Billions in the bank, maybe now would be a good time to freeze the DB and go with a portable defined contribution like Fed EX or a 401k match like SWA, however we should demand at least what SWA is getting and not based on a 40 hour week. With so few others out there with the DB plan how likely is it that we will keep it till the average 46 year old retires and is it really worth $14/hr less in wages? Recently, the company claimed that the 5% 401K they were offering would be 'cost neutral", (then they admitted that in the short term it would cost them more than the DB plans because they actually have to put cash into it but over the long haul they expect that it would start to save them money). Considering the history for DBs among our peers the "in hand" portability of a DC is now worth more than the "promised stability" of the DB, just like the bird in the hard is worth more than two in the bush. DB guarantees turned out to be not so. If you polled all the guys from Pan Am, EAL and TWA and asked them if they would have rather have had a 401K match from day one in the industry or their DBs my guess it would be near unamimous they would opt for the 401K match.

To me the pension has become too expensive, not for the company but for us. Saving the pension was the main push behind the 2003 Concessions that took a minimum of $160,000 out of my pocket and sent us to the bottom of the industry in pay, benifits and working conditions. If they had frozen our pension in 2003 and we kept our wages like SWA, Jet Blue UPS and Fed Ex, I could have maxed out my 401k and opened and dumped some in an IRA, that $160,000 could have been around $250,000 by the time I retire, and its portable. In the meantime, over that seven year period, my pension probably only increased by around $200/month, according to the companys own figures they only put in around $12,000 to my pension since 2003. I would have to be retired for around 100 years to collect the difference..."
__________________________________________________________________

Bob,

I'll agree that the DBP is being used by AMR as a weapon and a wedge against the TWU; and, I'll agree that a DCP is preferrable for portability for the average airline worker.

I do not agree that a voluntary freeze of the DBP for a change to a DCP is in anyones' interest unless the funding of the DBP can be contractually obligated to the 100% mark and segregated for the purposes of the PGBC rules.

In other words: everyone that voluntarily freezes their DBP and converts to the DCP should actuarilly be considered to have attained the PBGC legal minumums for full age and funding status with a charge against future earnings, 100% not the 80% recognized by the PBGC as underfunded, so that the DBP is fully funded and segregated from those that choose to remain with AMR and the DBP and that the age 60 AMR retirement is not counted as a discount against a PBGC payout as is currently the practice.

Further, I do not agree that AMR should be allowed to increase the match point for the DCP year over year. If AMR wants me to freeze my DBP and convert future retirement in a DCP: pay the minimum 5% match from day one. Using the AMR formula for 1% increase year over year until the 5% figure is reached forces us to finance what AMR desires.

 

[eolesen]

Further, I do not agree that AMR should be allowed to increase the match point for the DCP year over year. If AMR wants me to freeze my DBP and convert future retirement in a DCP: pay the minimum 5% match from day one. Using the AMR formula for 1% increase year over year until the 5% figure is reached forces us to finance what AMR desires.

I agree that the match should be what it is from Day One, but can understand why the company would want to ease it in -- absent a ramp-up, they're going to be funding both the DCP and DBP during the first few years.

If it's only for newhires, there's no double funding. If they could take a current-day value out of the DBP and seed that into a 401K, then again, there wouldn't be any double funding.

Not saying it's a good reason, but if they have to fund both, they're going to be expending a lot more cash while the transition takes place, and keeping the cash outlays to a minimum is critical for every airline at the moment...

 

[Boomer]

I agree that the match should be what it is from Day One, but can understand why the company would want to ease it in -- absent a ramp-up, they're going to be funding both the DCP and DBP during the first few years.

If it's only for newhires, there's no double funding. If they could take a current-day value out of the DBP and seed that into a 401K, then again, there wouldn't be any double funding.

Not saying it's a good reason, but if they have to fund both, they're going to be expending a lot more cash while the transition takes place, and keeping the cash outlays to a minimum is critical for every airline at the moment...

____________________________________________________________________

eolesen,

AMR has a lifelong pattern of asking the employees to fund management miscalculations.

The DBP is underfunded because AMR chose an "assumed rate of return" that was unrealistic according to Warren Buffet who said that anyone willing to garauntee a return over 5% would invite him to invest more money than they were willing to accept.

The PBGC calculates the funding of surrendered plans differently than the airlines are allowed.

The airlines are allowed to calculate an "assumed rate of return" on plan assets despite the actual rate of return, this is the so-called smoothing of the rates assumed versus actual rates of return over a defined number of years. In accordance with a law passed by the Clinton Administration, DBP Participants are legally prevented from seeing the actual data for assumed versus actual rates of return in any individual year.

The PBGC does not take into account the airlines contractual retirement age, or "assumed rate of return," when calculating the percentage reduction of benefits, so if airline "X" allows retirement at 60 and "X" income, the PGBC uses their retirement age of 65 and calculates the deduction differently and using the actual surrendered DBP funds from the individual airlines.

The Company should be required to fund 100% of all retirees and all FREEZE participants despite their individual age at a rate no less than that held by the US Treasury 30 Year Bond during any average of that period with the payout expectation being 100% of promised payouts.

I'm willing to freeze my DBP but, I'm not willing to finance the change-over.

 

[Bob Owens]

It's ok, I have an umbrella. Granted there is little history since 2005 with the exception of Frontier. They emerged and are now a subsidiary of Republic. The 2005 Bankruptcy Reform Act does not dictate instant "liqidation", as some might believe. My assertion remains that AA would only use the threat to gain a negotiation advantage. They have not used that threat, but to my knowledge have not rebutted the incessant rumblings of those analytical talking heads.

The company doesnt need to say it, they have people on the committee who constantly bring it up for them.

Boomer; Not sure I got all of what you were saying but I agree that a freeze and conversion to a match or DC plan would require that all incumbants on the DB plan be considered to have reached retirement age (no 1.5% /year penalty) and the funding would have to be satisfied up to 100% not the legal 20% underfunding that the PBGC allows (based on unrealistic returns as well so the percentage thats its underfunded is probably much higher), it would also require that we be paid a wage like UPS so we would have the money to contribute to it.. Right now thats not even on the table, the company wants to continue underfunding our pensions and convert new hires, if they ever see them, to a 401K match, they havent mentioned a freeze yet probably because they are aware that then they wouldnt have anything on the table anymore and it would cost them more to convert.

Many of our coworkers are unaware that when the company says our pensions are "fully funded" thats not true, they are only funded to the point where the PBGC doesnt consider them to be underfunded, and we were asked to lobby to lower that point a few years back, but we are not fully funded in that there are enough funds to fund future obligations based on realistic projections or assumptions. Back in the 90s, a period of exceptional growth in the stock market (remember how some said the business cycle was over and recessions were a thing of the past?), AA pension fund earnings outpaced what was needed, not only did AA get a free ride but they withdrew some of those excess funds to buy back stocks, essentailly raiding our pension fund and giving shareholders the profits. I could never understand why the government would allow that because history has proven that no matter how high confidence gets(like in the 20s and the 90s) sooner or later its bound to go the other way as reality sets in. I guess they allow it because unlike a 401K thats ours, the pension really belongs to the company, not us.

 

[Birdman]

The company doesnt need to say it, they have people on the committee who constantly bring it up for them.

I have to assume the "they" on the committee are the TWU negotiators. It only confirms my lack of trust in the leader(less)ship to negotiate in the memberships best interest.

 

[The Goose]

It's ok, I have an umbrella. Granted there is little history since 2005 with the exception of Frontier. They emerged and are now a subsidiary of Republic. The 2005 Bankruptcy Reform Act does not dictate instant "liqidation", as some might believe. My assertion remains that AA would only use the threat to gain a negotiation advantage. They have not used that threat, but to my knowledge have not rebutted the incessant rumblings of those analytical talking heads.

I didn't mean for my comments to sound like "new" chapter 11 filings would be a guaranteed trip to chapter 7 court. Under the October 2005 Reform Act, however, the way I read it and the way some legal "eagles" interpreted the reform seems to make it much more possible to slip into a Chapter 7 filing than under the older law - as it should be.

 

[eolesen]

Goose, the new law actually makes it harder for Chapter 7 filings. The previous version allowed people with the means to actually pay off their debts to wind up in a Ch.7 vs. a Ch.13, but that was abused mostly by individuals and small/medium businesses.

The only material change I recall from the 2005 reform affecting corporate filers was modifying the amount of time management had exclusivity on coming up with a reorganization plan. United got so many extensions it was ridiculous, and neither the employees or creditors could step in with Plan B. Now, the current management gest 18 months to come up with a plan and get it approved; after that, it becomes open season for outside parties to come forward with alternative proposals.

There's a little bit of window dressing as well, i.e. more transparency in the reporting process, and having to further justify key employee retention programs, but it doesn't stop retention bonuses from being granted, and it doesn't force the current management out.

None of the changes would prevent even the most control obsessed management team from filing for bankruptcy. If Mesa can do it, anyone can.

 

[The Goose]

Goose, the new law actually makes it harder for Chapter 7 filings. The previous version allowed people with the means to actually pay off their debts to wind up in a Ch.7 vs. a Ch.13, but that was abused mostly by individuals and small/medium businesses.

The only material change I recall from the 2005 reform affecting corporate filers was modifying the amount of time management had exclusivity on coming up with a reorganization plan. United got so many extensions it was ridiculous, and neither the employees or creditors could step in with Plan B. Now, the current management gest 18 months to come up with a plan and get it approved; after that, it becomes open season for outside parties to come forward with alternative proposals.

There's a little bit of window dressing as well, i.e. more transparency in the reporting process, and having to further justify key employee retention programs, but it doesn't stop retention bonuses from being granted, and it doesn't force the current management out.

None of the changes would prevent even the most control obsessed management team from filing for bankruptcy. If Mesa can do it, anyone can.

The opinions I've read seem to be a bit different than those you choose to relate.

According to what I've read, the failure bonuses given "key" personnel will not happen unless they have received a viable job offer from outside the filing company, at which time the BK judge will decide if the "key" person hoping to receive the failure bonus is actually needed for the company's recovery. The judge has the power to tell the "key" person to take the other job and not to let the door hit him/her in the ass on the way out. This is as it should be - far too much executive garbage has enriched itself in this manner.

You say "None of the changes would prevent even the most control obsessed management team from filing for bankruptcy." OK - then why hasn't it been business as usual? Why, then, the "under the wire" filing for both DL and NW? It was rather evident there was colusion between the two, but the courts couldn't do anything about it - I believe now they can.

It's rather evident by the actions of the companies in question there's much more to the new law than you're willing to talk about. Considering the present downturn and the lack of limits re: Chapter 11 filing frequency (companies could file weekly the way the law is written assuming a filing could be cleared in that one week timespan) and the lack of a "need" test to file, it is obvious what would happen to a company filing for strategic purposes as was such a common occurance in the past.

The company and union both lost my support when they took a select group, swore them to secrecy, and "opened" their books showing they "could file for Chapter 11 in 2003. Again - there is no test - the way the law is written, a healthy company can file for reorganization. It was a lie and I told people that - I even went so far as to print out the law from the US Code but most prefered to be lied to by their supposed union "representation" and the company that pays for every union decision/position.

We will see - this hasn't played out yet. I do expect, however, for all unions,excepting the pilots, become greatly involved in trying to sell another load of pure BS to their respective memberships as was done in 2003 after suitable payoffs from the company are made.

"Share the Pain, Share the Gain"
"Work together, Win Together"​

LIES!​

 

[jimntx]

Thanks, E. There was a time that a friend of mine here at AA used to say that "AMR execs are too Theory X-obsessive control freaks to ever file for bankruptcy." I would not be surprised if they did file this time around because they are finding out that simply sitting on their hands, offering the same crappy proposals, and walking out of mediated sessions is not working this time around.

And, making reasonable offers to the unions is, of course, out of the question. Bankruptcy may be their only hope.