Following up on yesterday’s bankruptcy court decision on the APA’s contract being abrogated in the Dallas Morning News blog and the Article referencing that the Creditors Committee statement that “American Airlines must have a pilots deal before leaving bankruptcy” (also below).

First, the comment about needing an agreement with the pilots to exit bankruptcy was not part of the judge’s decision or made from the bench, and that is who will rule on whether AA can exit bankruptcy.  Second, and more important, the UCC is also on record stating that it would not authorize adding any further value to any of the labor agreements including the pilots. They can’t have it both ways. The position of the UCC unfortunately doesn’t give the pilots any leverage if the same body is saying it won’t approve any additional value. In the meantime, the pilots, as we warned, are without a contract and will be working under twenty percent concessions.

As I stated – I have attached below today’s article on the APA’s contract being abrogated by the court along with the Article referencing the Creditors Committee request to American that the APA must have an agreement prior to exiting bankruptcy and also attached to the email is the statement sent out August 16, 2012 from the Creditors Committee regarding 1113c matters.  In that statement they stated  “The Committee has concluded that there is no additional economic value beyond the current company offers that can be provided to the company’s labor organizations without endangering AMR’s reorganization and the rights and economic interests of nonunion creditors and parties in interest. Accordingly, the Committee decided today that it will oppose any new efforts to transfer additional economic value from general unsecured creditors to American’s unionized employees.” And they further stated “”However, the Committee’s support will continue only to the extent that consensual agreements are reached promptly. And they also stated “The Committee will not support equity stakes or claims for any labor organization that does not ratify a collective bargaining agreement nor will the Committee support any further economic value to labor organizations beyond the current proposals”.

I guess we will see in time what the final results will be.

Fraternally,

Don V

Judge lets American Airlines toss out its pilots contract

 

By tmaxon
tmaxon@dallasnews.com
4:17 pm on September 4, 2012 | Permalink

U.S. Bankruptcy Judge Sean Lane ruled Tuesday that American Airlines can abrogate its collective bargaining agreement with the Allied Pilots Association.

The judge rejected the APA’s arguments that American hadn’t made its case that it needed to toss out the contract to proceed with its bankruptcy reorganization.

Section 1113 of the federal bankruptcy code allows companies to throw out its collective bargaining agreements if it meets a number of requirements. The judge ruled that American had met those requirements.

“We appreciate Judge Lane’s thoughtful consideration of our renewed Section 1113 motion regarding the pilot contract,” American spokesman Bruce Hicks said after the hearing.

“But, there is no sense of accomplishment in this outcome. We worked very hard to reach a consensual deal with our pilots, just as we did with each represented employee group. However, the pilots rejected the tentative agreement on August 8, so it is time to move forward,”

“Judge Lane’s ruling is very important because it will allow us to implement the changes that are necessary for our successful restructuring. We will be sharing the implementation plan with the APA, and will communicate details of the plan to pilots in the coming days.,” he said.

“Our goal remains to reach a consensual agreement with our pilots, and we are resolute in our efforts to put American Airlines in a position to win and create new opportunities and a brighter future for our people,” Hicks said.

The judge encouraged both sides to get a consensual deal, noting that he can’t do it for them.

“That’s something that you will have to do. I have a lot of sympathy for employees, the pilots, just as I did when we had the original trial… I wish you good luck in working out an agreement,” Judge Lane said after issuing the decision.

He indicated he will sign an order on his decision Tuesday evening or Wednesday morning.

 

 

Creditors committee: American Airlines must have pilots deal before leaving bankruptcy

 

By tmaxon
tmaxon@dallasnews.com
1:50 pm on September 4, 2012 | Permalink

 

NEW YORK – There has been debate about how important it was to have a new contract with the Allied Pilots Association before American Airlines and parent AMR exited Chapter 11 bankruptcy proceedings.

On Tuesday, attorney Jack Butler for the Unsecured Creditors Committee gave his opinion – the airline must have a deal before exiting bankruptcy.

“Let there be no mistake” that AMR has to have a contract with pilots, Butler told U.S. Bankruptcy Judge Sean Lane.

“The committee is going to require that before there is any reorganization,” Butler said. “There has to be a deal.”

His statement carries great weight because the Unsecured Creditors Committee must give its blessing to any plan of reorganization put forth by AMR, American and subsidiaries, or competing plans if it comes to that.

Butler made his comments as American and the Allied Pilots Association were battling it out in Judge Lane’s court about whether American had made its case that it could reject its contract with the pilots.

The pilots’ union is arguing that there have been enough changes in American’s business plan, its actions and the industry that the court must consider American’s motion in light of what has happened since American on April 19 proposed the terms it wants to impose on the pilots.

The Allied Pilots Association rejected a tentative agreement Aug. 8 that were less concessionary than the April 19 terms. On Aug. 15, Lane rejected the company’s motion to throw out the contract, citing problems with the company’s proposals on furloughs and codesharing. Two days later, American filed a new motion that addressed Lane’s points: it dropped any changes on furloughs and put limits on codesharing.

American wants to restrict Tuesday’s discussion only to the two items it changed. “In American’s view there’s very little left to done on American’s Section 1113 motion,” said Neal Mollen, American’s counsel.

The APA’s attorneys want to broaden it.

After 1 ½ hours of debate, the judge called a recess to let American’s and the union’s attorneys discuss how they want to move forward. But he made clear, just before the recess, that he won’t brook any raising of issues that were raised during three weeks of hearings in April and May and decided in his Aug. 15 decision.

“Let me make it very clear. You had your shot,” he told the union’s counsel, Kathy L. Krieger. He added, “I will stay here all night. I am not going to revisit issues that have been decided.”

One point of debate is the union’s desire to use the tentative agreement as a baseline for anything imposed by American, not the harsher terms of the April 19 term sheet.

The tentative agreement cut pilot costs by 17 percent, not the 20 percent of the term sheet. The agreements with the Association of Professional Flight Attendants and seven units of the Transport Workers Union reduced employee costs 17 percent as well.

Mollen protested that the tentative agreement came from negotiations outside the court, and bankruptcy court rules are supposed to protect those confidential talks from being used against any party – American, in this case.

Mollen said American does not have a new business plan compared to April, although it is in the process of updating its business plan, but the inability to get a pilots’ contract has slowed that process. Krieger said she believes that the metrics on what American is expecting from revenue increases and cost savings have changed American’s business plan.

UPDATE, 5 p.m. EDT: The two sides spent the afternoon arguing over the 17 percent cost-cutting and whether it changes American’s business plan. Beverly Goulet, the airline’s chief restructuring officer, was in town and hustled to the courthouse in lower Manhattan to testify about American’s new business plan.

While the APA believes the new labor deals with other unions has brought about a new business plan, Goulet said the airline is still using the business plan from last spring and hasn’t updated it since all the union groups except the pilots approved their deals.

Why is that important? A new business plan justifies a fresh look at American’s economic justification for cuts in the pilot contract.

 

AMR Creditors’ Committee Statement re Section 1113 Matters – in PDF