APFA could have opened negotiations in 2006 but opted to wait until 2008. Why?
AMERICAN AIRLINES LETTER OF AGREEMENT
Whereas, American Airlines, Inc. ("American" or "Company") and the Association of Professional Flight Attendants ("APFA" or Association") have agreed to resolve all disputes which exist between them related to the negotiation, ratification, and final effectiveness of the Restructuring Agreement, dated April 16, 2003 ("Restructuring Agreement"), and
Whereas, American and APFA (the "Parties") have each agreed that it is in their mutual interest to permit the Restructuring Agreement to become binding and effective.
Now therefore, it is this 25th day of April, 2003, hereby agreed that the following shall supplement, and, to the extent inconsistent, modify the following supplement, and, to the extent inconsistent, modify the Restructuring Agreement.
A. Duration of the Agreement. Contingent on approval of this Letter of Agreement by the Boards of Directors and the Parties, and without further ratification or approvals, the Restructuring Agreement will be effective beginning May 1, 2003, and shall remain in effect for a period of five (5) years and become amendable April 30, 2008.
B. Early Reopener. Either American or the APFA may elect to reopen the Restructuring Agreement and the Collective Bargaining Agreement by the service of notices pursuant to 45 USC Sec. 156, on or after April 30, 2006.
C. Special Procedures for Change.
1. Within 30 days of the signing of this Letter of Agreement, the Parties will meet and discuss the modifications(s) to the Restructuring Agreement (Offsetting Modifications(s)) that will be implemented if the APFA elects, pursuant to Procedure I or II below, to reinstate into the Collective Bargaining Agreement the Underfly Provision as it appears in the Basic Agreement between American and APFA dated September 12, 2001.
Following the Company's discussions with the APFA, the Union will identify the offsetting modifications(s). If the parties are unable to agree that the net economic result of the deleting or modification and substitution provides annual cost savings to the Company equal to the annual cost savings originally projected by the Company for the Underfly Provision, then the parties will use Procedure II to determine the offsetting modification of the appropriate value with APFA retaining the right to determine it's approval process under Procedure I or II.
2. Within 60 days of the signing of this letter of Agreement, the APFA will notify the Company of its selection between the alternative procedures described below for considering the "underfly" provision of the Restructuring Agreement. During the pendency of selected procedure the Underfly Provision in the Restructuring Agreement will remain in effect, unless otherwise agreed to by the parties.
APFA will make an election following a membership ballot or otherwise, either to restore prospectively the Underfly Provision, or a modification thereof, as it appears in the Basic Agreement between American and APFA dated September 12, 2001, or to retain the provision as it appears in the Restructuring Agreement. If the APFA elects to restore the Underfly Provision, or a modification thereof, from the Basic Agreement, the Restructuring Agreement will be amended to incorporate the offsetting modifications. Both amendments will be made concurrently. If the APFA elects to retain the Underfly Provision, the Restructuring Agreement will continue in effect.
3. For a period not to exceed thirty (30) days beginning on written notice by APFA on or after May 15, 2003, the Parties will meet and discuss the deletion or modification of a single item in their Restructuring Agreement, specifically the "underfly" provision , (the, "Original Provision"), and the substitution provides cost savings to the Company equal to the cost savings originally projected by the Company for the Original Provision.
4. If the parties cannot reach agreement during the thirty (30) day period on the Offset Modification(s) having the appropriate aggregate annual value described in C.3., above, they will select a neutral arbitrator in accordance with the System Board procedure in the Restructuring Agreement. Said arbitrator must be available to hear the matter with seven (7) days of selection and shall issue a decision within 21 days of selection.
5. The arbitrator shall conduct a hearing of no more than one day in duration. American and the APFA will each have a maximum of one-half day for its presentation, with appropriate procedural rules to be set by the arbitrator.
6. At the hearing, the APFA will identify one or more Offset Modification(s), the aggregate annual value of which must achieve the result described in C.3., above. For example, if the arbitrator determines that the proposed modification to the Original Provision has a cost of $10 million annually and the arbitrator values the Offset Modification(s) at $8 million annually, the APFA must identify some additional Offset Modification(s) with a value of $2 million annually.
7. The Parties' original valuation of the Restructuring Agreement will determine the value of the Original Provision. The arbitrator will determine the value of the changes to the Original Provision, as well as the value of all Offset Modification(s). If the arbitrator determines that the aggregate annual value of the Offset Modification(s) is less in aggregate annual value to the Company than the cost of the modifications or deletions to the Original Provision, the APFA shall select some additional Offset Modification(s) which achieves the result described in C.3., above, subject to the arbitrator's verification that the changes to the Original Provision compared to the aggregate annual value of the Offset Modification(s) achieves the result described in C.3., above. In the event the arbitrator determines there is excess credit, the APFA may apply that credit in that amount to a provision of the Collective Bargaining Agreement as selected by the APFA
8. The decision of the arbitrator will be final and binding on the APFA and the Company.
D. Annual Incentive Program. The Company will establish an Annual Incentive Program ("Program"), as set forth in Attachment A, that shall substitute for and replace the Variable Incentive Program included in the Restructuring Agreement.
E. Authority and Effective Date. Execution of this Letter of Agreement shall constitute a representation by each party that the terms of the Letter of Agreement and the Restructuring Agreement have been approved by their respective Boards of Directors. This Letter of Agreement will become final upon execution on this 25th day of April, 2003
For the Association of Professional Flight Attendants:
For the Association of Professional Flight Attendants:
For American Airlines, Inc.