Sat, Jun 30, 2012
Tentative Agreement Vote Will Be Counted August 8th
The APA Board of Directors voted nine to seven Thursday to approve a tentative contract offer from American Airlines' management. The vote of approval triggers the membership ratification process, which at the direction of the bankruptcy judge will follow a moderately compressed schedule relative to the normal process. Within the next few days, the APA board will disseminate information detailing the schedule for the coming weeks that will culminate in the vote tally on Wednesday, August 8.
In a letter to the APA membership posted on the union website, APA President Capt. David Bates (pictured) said that before the APA Board of Directors voted, APA’s advisers—including financial restructuring experts at Lazard and bankruptcy attorney Fil Agusti of Steptoe and Johnson—were emphatic in recommending approval of management’s final offer as a tentative agreement. In particular, the advisers focused on the significance of the provision that gives APA a claim in the form of a 13.5 percent equity stake in a newly reorganized American Airlines. They also stated that a 13.5 percent equity stake should make APA the largest equity holder in the company. As a result, the union would be able to influence key decisions from our seat on the Unsecured Creditors’ Committee that will take place for the balance of restructuring such as the makeup of the reorganized airline’s board of directors and other key strategic considerations.
The advisers also noted that if a merger between American Airlines and US Airways takes place—whether during restructuring or after AMR emerges from bankruptcy—the value of that equity stake should increase, since the overall enterprise value would go up through the combination of the two airlines.
Bates said it is also important to recognize that the tentative agreement contains provisions that represent clear improvements compared with management’s 1113(c) term sheet, including enhanced pay increases; preservation of our duty rigs; some furlough protections; limits on Scope; an early-opener provision at year four; and indexing to Delta, United and US Airways pay rates at year three.
"Our advisers told the APA Board of Directors about the substantial downside risk associated with rejecting management’s final offer, including the legal “gray area” that we would enter into if the court were to grant management’s request to abrogate our contract," Bates wrote. "At that point, we would be required to resume negotiations with the current management team. Negotiations could continue indefinitely as we exit bankruptcy and enter back into protracted Section 6 bargaining trying to renegotiate a CBA from an abrogated position."
Bates said the agreement is "clearly not the industry leading contract we all want and deserve. However, it’s also important to recognize that if AMR management were to exit bankruptcy before engaging in any potential consolidation activity, our conditional labor agreement with US Airways will sunset and AMR’s stand-alone plan will have survived. The tentative agreement therefore represents a form of insurance that limits our downside risk while ensuring that we have a significant voice in the direction of American Airlines going forward," he said.
"Let me be clear. We have two choices in front of us—we either accept a near-term agreement with AMR management, or we risk abrogation and a tremendous amount of uncertainty about our terms of employment."
Meanwhile, Bloomberg News is reporting that AA has received court approval to negotiate new labor agreements with the five workgroups affiliated with the Transport Workers Union. U.S. Bankruptcy Judge Sean Lane in Manhattan gave the airline the go-ahead in a court hearing on Thursday. Some TWU groups, including baggage handlers, dispatchers, instructors, and other ground workers, have already settled with the carrier.
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