What Happens if AMR wants to abrogate our contract

jimntx

Veteran
Jun 28, 2003
11,218
3,302
Dallas, TX
www.usaviation.com
(Got this from a union rep. I think she got it from union's website Q&A section.)

Section 1113 of the Bankruptcy Code establishes the method by which a debtor (here: AMR) can reject a Collective Bargaining Agreement (CBA). In considering a debtor’s Section 1113 motion, the bankruptcy court will review certain actions the debtor has taken since the filing of its bankruptcy petition. Before authorizing rejection of a CBA, the debtor must demonstrate to the court that it has satisfied each of the
following requirements:

1. The debtor must make a proposal to the union to modify the CBA. American has indicated that it intends to make such a proposal. In his letter to APFA, American’s Senior Vice President Jeff Brundage stated:
“American must now prepare to seek further changes to its APFA Agreement pursuant to Section1113 of the
Bankruptcy Code. We will notify you promptly when we are prepared to present new proposals which reflect
our changed circumstances.”

2. American’s proposal must be based on the most complete and reliable information available at the time of the proposal.

3. The proposed modifications must be necessary to permit American’s reorganization.

4. The proposed modifications must assure that all creditors, the debtor and all of the affected parties are treated fairly and equitably.

5. American must provide APFA such relevant information as is necessary to evaluate the proposal.

6. Between the time American makes its proposal and the time the hearing on American’s request to reject the existing CBA, it must meet at reasonable times with APFA.

7. At these negotiation sessions the debtor must confer in good faith in attempting to reach mutually satisfactory modifications of the collective bargaining agreement.

8. If an agreement is not reached, APFA must have refused to accept American’s proposal without good cause.

9. The balance of the equities must clearly favor rejection of the collective bargaining agreement.

10. From the day the Section 1113 court hearing begins, the bankruptcy court judge has thirty days to render a decision. If the court grants American the right to reject the CBA, it can at that time implement its proposal. Under Section 1113 (e) of the Bankruptcy Code, emergency short-term relief may be granted on an expedited basis without a full negotiating process if the court finds that the relief is “essential” to the continuation of business or to avoid “irreparable harm” to the bankruptcy estate.
(Bolding and italics are mine. I believe the phrase goes "we are screwed.")
 
Yes Jimntx what you posted is correct and can be found HERE Starting on page 8 the 9 steps are listed in great detail.
 
As an addition, I don't think you'll see any 1113 (e) motions for temporary changes unless it appears that the 1113 hearing/resolution will drag out. Generally companies first ask for 1113 (e) temporary changes to slow the outflow of cash while they develop any 1113 proposals if necessary. 1113(e) does not require all the steps required for abrogation so is a quick as getting the Judge to sign an order. Once the 1113 motions for abrogation are filed, it's highly unusual for 1113(e) motions to be filed.

Jim
 
Jim if I remember correctly, we did have a hearing on the 1113 e motions as the Judge reduced the percentage of the paycut the company was asking for at US.
 
Jim if I remember correctly, we did have a hearing on the 1113 e motions as the Judge reduced the percentage of the paycut the company was asking for at US.
Absolutely. Early in bankruptcy 2 (within a month at most) US filed 1113(e) motions for all the unionized groups and the judge approved them. For the pilots, it was in the middle of voting on LOA 93 so wasn't enforced since LOA 93 ended up passing. But US had the Judges ok to enforce temporary cuts if the LOA 93 voting had gone the other way.

But the 1113(e) filings came before the 1113 abrogation filings, not after. That's the norm - get temporary cuts via 1113(e) as quickly as possible while negotating permanent cuts. Since 1113(e) doesn't require the steps that abrogation requires, and certainly not the time that normal negotiations take, they almost always come first if the company wants temporary cuts at all. Which is why I don't expect AA to file 1113(e) motions if they're going to file regular abrogation motions next week.

Jim
 
The only type of situation I'd expect to see result in a 1113e filing would be if APA's motion over the legitimacy of 1113 vs. RLA is denied, and they decide to appeal it. If they're going to implement serious changes, it needs to be done during the fall & winter when things are slow and when cash burn is going to increase.

It's likely that AA should be close to cash neutral or positive over the next couple of months. That will fall off a cliff come Labor Day (again, the irony...)
 
Jim if I remember correctly, we did have a hearing on the 1113 e motions as the Judge reduced the percentage of the paycut the company was asking for at US.

What about outsourcing? Were you successful in reducing the amount of increased outsourcing US management wanted?
 
700 could address that better than I, but generally US went from no heavy maintenance outsourcing before BK I to the Airbuses being outsourced after BK II. The Boeings are still done in house I believe, but that's a shrinking portion of the fleet - by the end of this year there will be 32 737's, 24 757's, and 10 767's for a total of 66 planes out of a ~340 plane fleet.

Jim
 
The only type of situation I'd expect to see result in a 1113e filing would be if APA's motion over the legitimacy of 1113 vs. RLA is denied, and they decide to appeal it. If they're going to implement serious changes, it needs to be done during the fall & winter when things are slow and when cash burn is going to increase.

It's likely that AA should be close to cash neutral or positive over the next couple of months. That will fall off a cliff come Labor Day (again, the irony...)


I forsee all narrowbody's (save the 757) being flown as domestic, and at close to A/E rates.

75/76 and 777 flown as International and paid at close to current AA rates.

Eagle may "disappear", but the Eagle $$$ wont.

A situation like that would be a hybrid to what RLC predicted in the late 80's/early 90's !
 
I forsee all narrowbody's (save the 757) being flown as domestic, and at close to A/E rates.

75/76 and 777 flown as International and paid at close to current AA rates.

Eagle may "disappear", but the Eagle $$$ wont.

A situation like that would be a hybrid to what RLC predicted in the late 80's/early 90's !

A real hybrid would be a AA and WN merge
 
I forsee...

The mainline rates AA wants are in the APA term sheet for all to see - even the A320/321/7378/7379 rates look good to east US pilots (more than the A330 pays at US). I assume the Eagle term sheets will be available too.

Jim
 
700 could address that better than I, but generally US went from no heavy maintenance outsourcing before BK I to the Airbuses being outsourced after BK II. The Boeings are still done in house I believe, but that's a shrinking portion of the fleet - by the end of this year there will be 32 737's, 24 757's, and 10 767's for a total of 66 planes out of a ~340 plane fleet.

Jim
Yes and BK II took place after the largest carrier in the industry at the time, AA, was able to get 25% from their unions and keep low paid OSMs, something US did not have, in the OH shops.
 
What about outsourcing? Were you successful in reducing the amount of increased outsourcing US management wanted?

The scab union IAM probably promoted and encouraged outsourcing so long as the jobs stayed on the membership rolls.

Josh
 
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