Correspondence on the prefunding contributions and the 1114 process

AA-NewLook-LogoReply  from Paul D. Jones Senior Vice President and General Counsel, American Airlines

To David Virella , TWU-ATD  AA System Coordinator

This will respond to your letter dated June 24, 2014, to Steve Johnson and me regarding the employer-matching portion of the prefunding contributions that were made to the TWU VEBA. The employee-paid portion of the VEBA contributions were returned to active employees in accordance with the collective bargaining agreements the TWU reached with American Airlines in September 2012, and, by the terms of those agreements, the employer prefunding contribution is to be distributed to active employees only “upon successful resolution of the Section 1114 process … after termination of the Trust Agreement.” Neither of these preconditions to distribution of the employer match has been met at this time.

As you know, the Company filed an adversary proceeding with the bankruptcy court seeking a declaratory judgment that medical benefits offered to its retired employees were not vested and could be modified or terminated. A favorable ruling from the court would allow the Company to reduce or eliminate the cost of the medical coverage it pays on behalf of retired employees, including retirees from TWO-represented work groups. If it prevails in that litigation, the Company plans to distribute the employer-match portion of the prefunding contribution to active employees represented by the TWU if and to the extent those funds exceed what is necessary to pay for benefits for TWU retirees. In April2014, however, the bankruptcy court denied the Company‘s summary judgment motion in the adversary proceeding with respect to most groups of retirees, including the TWU retirees, and, to date, the Company has not been successful in eliminating or significantly reducing the medical expenses it pays for TWU retirees. That litigation is not yet concluded, and, if no settlement in that case can be reached, the Company will have to decide when and whether to request trial dates from the bankruptcy court.

In the meantime, as we mentioned when we met with you last week, if there is evidence that demonstrates that our interpretation of the CBA is wrong and that the Company is obligated to distribute the employer-match portion of the prefunding contribution regardless of whether it prevails in the adversary proceeding, we are willing to reconsider the position that we have taken in this matter. Please let me know if you would like to share any such evidence.

Thank you for getting together with Steve and me last week. We both enjoyed meeting you and your team.

 

Sincerely,

Paul D. Jones

+++++++++++++++++++++++++++++

Mr. James WeelTWU-Logo-NoShadow
Managing Director Labor Relations- Technical Operations
American Airlines
PO Box 619616, MD 5235
Fort Worth, TX 75261-9616

Dear Jim:

As a follow-up to our meeting with Steve Johnson and Paul Jones on Friday, July 11 , 2014, the purpose of this letter is to obtain updated information for our records.

Please provide the following specific data regarding our TWU participants:

  • Total TWU Supplemental Plan Cost as of December 31, 2013
  • Total TWU Supplemental Plan Income as of December 31 , 2013
  • Total TWU Supplemental Plan Employee Contributions as of December 31 , 2013
  • Total TWU Supplemental Plan Net Assets as of December 31 , 2013

In addition, I need the following information regarding the current status of the TWU Prefunding Trust:

  • Current Net TWU Assets (minus current TWU liabilities)
  • Current number of TWU members participating in the Retiree Medical Trust
  • Copy of the Trust Agreement

Since monies are held in a TWU – VEBA Trust, it should not be too difficult to obtain the requested information.

Respectfully,

David J. Virella
International Representative
AA System Coordinator

Full letters in PDF HERE: 2014_July_16 Prefunding Letters AA and TWU