American Forgives Pilots' "Sick-Out" Fine

Money that Should have been Shared with All Employees
Was Given Back to APA as a Reward for Promoting the "Turn-Around Plan"

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May 1, 2003

Re: Agreed Settlement

The discussions between the Allied Pilots Association (the "Association") and American Airlines, Inc. ("American") concerning modifications to the collective bargaining agreement of May 5, 1997 have resulted in a tentative agreement dated March 31, 2003, which is subject to ratification by the membership. The Association and American also are currently parties to a Settlement Agreement relating to payment of the damages assessed in American Airlines v. Allied Pilots Association, et al. by the United States District Court, Northern District of Texas, Docket No. 7:99-CV-025-X ("Settlement Agreement"). Under that Settlement Agreement, the parties agreed to a schedule for payment of the unpaid amounts of the damages award. The Settlement Agreement also discusses the remedies in the event of non-payment, including a continuation of liens against property of the APA until the payments described in the Settlement Agreement are made and completed and the judgment is satisfied.

The parties agree that if the tentative agreement of March 31, 2003 fully ratifies and goes into effect, all remaining payment obligations described in the Settlement Agreement will be deemed to have been satisfied. American will thereupon take those steps needed to release all liens against the property of the APA.

If this letter accurately describes our understanding with respect to its subject matter, please sign it below in the space indicated and return a signed copy to me.

Mark L. Burdette
Director, Employee Relations, Flight





John Darrah
Allied Pilots Association

P.O. Box 619616 DFW Airport, TX 75261-9616


July 19, 2003

American waives rest of fine
Pilots union's had still owed $26 million from penalty for 1999 sickout
By ERIC TORBENSON / The Dallas Morning News

American Airlines Inc. said Friday it has forgiven $26 million of the $45.5 million fine levied against the Allied Pilots Association after its members conducted a 1999 sickout.

The amount represents what the APA still owed the carrier. A federal judge imposed the fine as punishment for the sickout.

The airline waived the $26 million during concessions talks this spring that saved the airline from bankruptcy. But the move wasn't made public until Friday, when American's parent company, AMR Corp., filed its quarterly Securities and Exchange Commission report.

The APA – which agreed to $660 million in annual pay and benefits cuts in April – told its 12,000 members about the fine in the spring. American spokesman Todd Burke acknowledged the move Friday but wouldn't comment further.

The pilots launched the sickout to protest American's handling of the December 1998 acquisition of Reno Air. They were upset about how the airline integrated Reno pilots into the American seniority list.

The 12-day sickout cost the carrier $200 million to $225 million.

American sued the pilots union, alleging it had violated the Railway Labor Act, which also applies to the aviation industry. Under the law, neither management nor unions are allowed to take "job actions" outside of contract talks – and only then if the parties are released from negotiations.

U.S. District Court Judge Joe Kendall of Dallas found the union and its officers in contempt because the pilots didn't comply with a back-to- work order and assessed the $45.5 million fine. Many labor experts said at the time that the amount was excessive.

AMR also disclosed in its quarterly SEC filing Friday that its pension obligations would increase sharply next year. The Fort Worth-based company said it paid $186 million to its pension funds this year but that the amount would rise to $600 million in 2004.

"However, based on the current regulatory environment and market conditions, the company expects its 2005 minimum required pension contributions to significantly exceed its 2004 minimum required pension contributions," the company said in the filing.

Also, AMR said it had renegotiated lender agreements on some of its Fokker 100 airplanes that are being retired from its fleet this year. The company expects to recognize a "significant gain" as a result of the new deal on the Fokkers by transferring ownership of 33 of the planes in the current quarter.

A company spokesman couldn't comment on how much AMR would gain. Of the 74 Fokker 100s in AMR's fleet, 45 have been taken out of service and the balance will be out by next year.

AMR shares dropped 17 cents to $10.59 in trading Friday. E-mail