AMR: Court approves new transport workers, flight attendants contracts

By Caroline Salls

Pittsburgh, Sept. 12 - American Airlines, Inc. parent AMR Corp. received court approval of the collective bargaining agreements and related settlements reached with the Association of Professional Flight Attendants (APFA) and the Transport Workers Union of America (TWU), according to Wednesday filings with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, the terms of the new collective bargaining agreement with the flight attendants include the following:

• The contract will expire six years from the date of signing, provided that either party will have the right to begin negotiations, with 60 days' advance notice, at any time following the fourth anniversary of the new agreement;

• Medical benefits will be preserved in line with those offered to other AMR employees, including the amount of employee contributions;

• Future retirees will have access to retiree medical coverage or Medicare supplement coverage at their cost;

• New retirement defined contribution benefits will be provided in line with those provided to peers at other network carriers, but the existing defined benefit retirement plans will be frozen;

• A lump sum payment of $1,500 will be made to every active flight attendant on the date of signing;

• An early-out program, with a $40,000 payout on acceptance, will be provided for eligible flight attendants with 15 or more years of company service at the company's discretion based on operational requirements;

• A structural base pay rate will increase in each year of the agreement;

• Pay rates will be increased to industry average at the mid-point of the term of the agreement;

• Improvements will be funded by reducing profit sharing to 5%, rather than the 15% first-dollar profit sharing program that was included in the company's initial proposal;

• Adjusted total cost savings will be $195 million per year or 17% of total flight attendant costs;

• Modifications will be made to overtime, vacation and sick leave provisions; and

• Changes to existing work rules will be implemented to increase the efficiency of the debtors' operations.

Flight attendants settlement

Under a related settlement, APFA will receive 3% of all of the equity in the reorganized company issued to holders of pre-bankruptcy general unsecured claims under American's plan of reorganization in exchange for most of the union's claims against the company.

The union will also have an up to $5 million administrative expense claim to pay for contract and settlement-related fees and expenses, as well as an up to $2 million administrative expense claim for payment of the fees and expenses of APFA's investment banker.

Transport workers contract

The specific terms of the new transport workers contracts include the following:

• The duration of the contracts will be six years, provided that either party can launch negotiations any time after the fourth anniversary of the agreements with 60 days' advance notice;

• Medical benefits will be preserved in line with those offered to other American employees, including the amount of employee contributions.

Future retirees will have access to retiree medical coverage or Medicare supplement coverage at their cost;

• New retirement defined contribution benefits will be provided in line with those provided to peers at other network carriers, but the contracts call for a freeze of the existing defined benefit retirement plans;

• The contracts provide for structured base pay rate increases in each year of the agreement and for pay rates to be increased to industry average at the mid-point of the agreement;

• The contracts provide for greater pay-rate increases in out years, than the originally proposed 1.5%. Those raises will be funded by reducing profit sharing to 5%, rather than the 15% first-dollar profit sharing program that was incorporated in the company's initial proposals;

• The contracts give American greater flexibility to outsource some aircraft maintenance work, in line with other airline practices;

• The agreements provide an adjusted total cost savings of $171.7 million per year or 17% of total costs for these two employee groups;

• The scope and requirements of some job titles will be expanded;

• Overtime, vacation and sick leave provisions will be modified;

• Changes to existing work rules will be implemented to increase the efficiency of the company's operations; and

• Some system and station job protections that limit the company's ability to effectively reorganize functions will be eliminated.

TWU settlement

Under a related settlement, the TWU will receive 4.8% of all of the equity in the reorganized company issued to holders of pre-bankruptcy general unsecured claims under American's plan of reorganization in exchange for most of the union's claims against the company.

American parent AMR Corp. said in the motion that it does not believe the claims excluded from the settlement will exceed $3 million of the roughly $2.2 billion of TWU-related claims.

The union will also have an up to $5 million administrative expense claim to pay for contract and settlement-related fees and expenses, as well as an up to $2 million administrative expense claim for payment of the fees and expenses of TWU's investment banker.

AMR, the Fort Worth-based parent of American Airlines, filed for bankruptcy on Nov. 29, 2011. Its Chapter 11 case number is 11-15463.

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