The AA/APFA Tentative Agreement — 2003 All Over Again

The Art of Using Hysteria and Fear Mongering
to Reorganize an Airline

I'm Voting NO on AMR's LBFO!

August 7, 2012



There's a fascinating email circulating, which suggests that AMR's Vice President of Flight, Captain John Hale, and Senior VP of Operations, Jim Ream, met with a group of pilots for dinner in Los Angeles and Captain Hale told the pilot group that AMR's goal through all of this is to buy JetBlue.

At first I dismissed the email as just another letter circulating the internet until I read two articles in the Dallas News which confirmed (1) that the letter was in fact circulating heavily, and (2) that Vice President of Flight, Captain John Hale, is trying to clean up the mess created by the email. It's a very interesting email that I recommend everyone read before casting a vote for concessions. I pasted it below.

There's also an article from Associated Press that tells a story of how AMR's Tom Horton and US Airways Doug Parker had a secret meeting in Wyoming whereby the two hatched a plot to merge the two carriers together by creating the illusion that it was a hostile merger. The article refers to the two as "'conquistadores del cielo,' or the conquerors of the skies." What's so fascinating about the article, aside from the fact that it SCREAMS ethics violation, is the fact that the meeting took place just two months before AMR filed for bankruptcy. Shortly thereafter, "Parker started to publicly call for a merger to which Horton publicly called it a media stunt." Here's the excerpt from the AP article:

"Horton and Parker started their airline careers together in the 1980s, sitting practically side-by-side in cubicles at American Airlines' headquarters in Fort Worth, Texas. And they've remained friends.

"The first conversation the two had about a possible merger took place in September, when Horton was still just American's president. Horton wouldn't say where they met but two people familiar with the situation said it was at the A Bar A Ranch, a 100,000-acre retreat in southern Wyoming during an exclusive gathering of top airline executives informally known as "conquistadores del cielo," or the conquerors of the skies. The people spoke on the condition of anonymity because the executive meeting is supposed to be a secret. The discussion between Horton and Parker occurred during a barbeque lunch along the banks of the North Platte River.

"'I said to Doug, standing by the river, I think there could be the potential for value creation in a combination,' Horton recalled. 'I made that pitch. We nodded heads to one another.'

"Two months later, on Nov. 29, American's parent company, AMR Corp., filed for Chapter 11 bankruptcy protection. On the same day, former CEO Gerard Arpey stepped down and American named Horton as its new CEO.

"Within weeks, Parker started to publicly call for a merger. But Horton remained steadfast: his airline would emerge from bankruptcy independent."

Myself, when looking over the AA/APFA "Tentative Agreement" otherwise know as the company's Last Best and Final Offer (LBFO), the first thing I notice is that there's very little information that defines what exactly it is that we're being asked to vote on. It's not only vague, but at times it actually contradicts both itself and also what we're being told by the company/union. Even as recently as today, the language surrounding duty rigs appears to still be in question, however, the APFA Bankruptcy Update from February 18, 2012 clearly shows that the issue of Duty Rigs in the Term Sheet were resolved almost 6 months ago. Here's the language:

Earlier this week the APFA Negotiating Team including our airline economist, Dan Akins, met with American. During the meeting Dan described a number of concerns he had about the way AA had costed-out its term sheet and the assumptions it had used in determining the values of its demands. Yesterday, in a late afternoon meeting, Taylor Vaughn announced that American agreed with Dan and that it had to recalculate its terms sheet. Simply put, the Company recognized that it was demanding too much from the Flight Attendants.

Consequently, we were provided a supplement to the Term Sheet that withdraws its proposal to gut our duty rigs by eliminating E Time (Duty Rig), F Time (Trip Rig), and G Time (Average and Minimum Day). Now, it is proposing to leave E and F time unchanged from the current agreement, to reduce the average day from 5 hrs. to 4:30 hrs., and the minimum day from 3 hrs. to 2 hrs. We applaud Dan Akins, who once again has proven that he is an absolutely invaluable member of the APFA team. Be assured that we will continue to fight to stop American from extracting a penny more than is fair or necessary to a successful reorganization.

When I look at the Early Out, the first thing I noticed is that there's no numbers attached to it. While we're told that this offer will be extended to "all who qualify," the letter states that the offer is based on "operational requirements." Given that American just recalled all those on Overage Leave, one can only wonder how the company can afford to promote flight attendant attrition when Scheduling is having trouble meeting the current manning demand.

Another thing I noticed in the Letter of Agreement authorizing the union to send out the Tentative Agreement is that there's a reimbursement clause that allows APFA to collect up to $5 million in expense reimbursements associated with the company's reorganization. Simply put, APFA was able to negotiate a blank check that pays all of the union's consultants provided that the union can deliver a YES vote. We know this was negotiated because the language states:

"It is expressly understood and agreed that if the Tentative Agreement does not become effective, all of the terms contained in this Letter of Agreement are inapplicable and will be of no force or effect."

APFA even agrees to promote the Tentative Agreement:

"The APFA agrees that it will recommend the Tentative Agreement and this Letter of Agreement to its membership for ratification. "

The most important question raised by this $5 million reimbursement clause is the question of whether the consultants were fighting tooth and nail for the membership, or whether they were negotiating a meal-ticket for themselves. Were they hungry tigers fighting over every scrap and morsel, or were they comfortable knowing that the company was preparing a steak for them to be delivered on APFA's best china? Again, the language:

"3. Administrative claim for fees and expenses. The Plan of Reorganization shall provide that subject to Court approval APFA shall have an allowed administrative expense claim which shall be paid in full on the effective date of the Plan of Reorganization ("APFA Allowed Administrative Expense Claim"). The amount of the APFA Allowed Administrative Expense Claim shall be equal to the amount sufficient to reimburse APFA for all reasonable fees and expenses incurred by APFA lawyers, experts, and financial advisors in the Bankruptcy Cases in connection with the negotiation and/or litigation related to the Tentative Agreement, this Letter of Agreement, and Plan of Reorganization. The APFA Allowed Administrative Claim for fees and expenses, however, shall not include any fees or expenses incurred with respect to any services rendered in connection with consideration or pursuit of any potential third party purchaser of the Company or merger partner (including but not limited to US Airways) and shall be capped at $5 million."

Another issue is the Indemnification clause. AMR agrees to indemnify APFA in the event that members sue over the union's handling of the Tentative Agreement. The company hereby agrees to protect the union so long as APFA promotes and pushes through a YES vote. From the Letter of Agreement:

"4. Indemnification. The Company will indemnify and hold harmless APFA and its current or former (a) members, (b) officers, (c) directors, (d) committee members, (e) employees, (f) advisors, (g) attorneys, (h) accountants, (i) investment bankers, (j) consultants, (k) agents, (I) actuaries, (m) financial advisors, (n) professionals, (0) agents and (I) other representatives its officers, agents, employees, counsel, and representatives (each an indemnitee) from fifty percent of any liability, loss, damages, fines, penalties, taxes ,expenses, and costs (not including any income or excise taxes or similar amounts imposed by any governmental agency) relating to, concerning or resulting from any and all third party claims, lawsuits, or administrative charges of any sort whatsoever, including fifty percent of the reasonable attorney's fees and costs, arising in connection with matters relating to, concerning or connected to the negotiation or establishment of (a) the Tentative Agreement and this Letter of Agreement, (b) any amendment of any benefit plan or program concerning flight attendants or other participants in such plan made pursuant to or as a result of the Tentative Agreement and this Letter of Agreement, and (c) any other document or agreement forming part of the Tentative Agreement and this Letter of Agreement. This fifty-percent sharing arrangement will exist until APFA's financial exposure reaches $5 million. Any exposure exceeding $5 million will be the responsibility of the Company."

Another issue is the gag order clause. If flight attendants vote YES to the Tentative Agreement, they forfeit their right to complain or object to issues of executive compensation associated with the company's emergence from bankruptcy as the "New American." Flight attendants will be forced to sit silent while AMR's execs dole out hundreds upon hundreds of millions in bonuses to themselves, and these bonuses will make the $400 million over the last nine years look like chickenfeed. As the New York Times reported, "AMR executives might receive $300 million to $600 million in AMR stock when the company emerges from bankruptcy." The gag order language:

"Subject to the foregoing, APFA agrees not to object to or contest the issuance of equity or other consideration in the Bankruptcy Cases to the Company's non-union and management employees, in respect of the sacrifices made by them in furtherance of the Company's effort to restructure or as incentive for the non-union and management employees' future service to the Company."

And then there's the issue of why we're voting on a Tentative Agreement due August 19th when Judge Lane has committed himself to making an abrogation ruling on August 15th and AMR has stated to the media that it wants the abrogation of our contract. Why are flight attendants voting on something that is going to be decided by the judge 4 days earlier? Better yet, why is AMR pushing for an abrogation when the company supposedly negotiated a Tentative Agreement in good faith?

And what about the merger with US Airways. How does a floundering airline with outstanding labor contracts and an unfinished merger buy an airline that boasts $5.8 billion in cash, record-breaking revenue, and an order for 543 new aircraft? Honestly, I see no way that they could. It's just not logical. If anything, this seems like another corporate ruse to keep employees focused on everything but the cuts at hand.

Now it's common knowledge that US Airways Doug Parker and Tom Horton know each other. And there's no doubt that the two have maintained that friendship as recently as July because the two were spotted having breakfast together in Washington D.C. These two are good friends, not rivals. I wrote Doug Parker a short while ago to inquire about some of the rumors regarding their rivalry and never received any sort of reply — not even a generic one. CLICK to read my letter.



              US Airways CEO Doug Parker and AMR CEO Tom Horton



       US Airways CEO Doug Parker and APFA President Laura Glading

In closure, what I see here is 2003 all over again; it's APFA once again telling members that they need to concede in order to save themselves from an even greater threat. And just like 2003, there's not proof that the concessions are even needed or that that they're even being demanded. Remember, the Letter of Agreement refers to the off as a "Tentative Agreement," not the company's "Last Best and Final Offer." the reason for this is because it's not the company's last, best, or even final offer. Until AMR reaches a consensual agreement with APFA, one that is either ratified by APFA members or forced upon them as a Side Letter of Agreement as was done in 2003, AMR is legally bound to negotiate. Even if the Term Sheet is imposed, AMR will still have to negotiate until an agreement is reached.

If I'm to be subjected to what is to be another corporate flogging, I prefer to take my beating standing up with my boots on. I will not volunteer to gut our contract and subject us to 10 years under the Tentative Agreement -- 6 under the contract and 4 years of negotiations. For me that will equate to 27 years without a pay raise. As a unionized worker, that is simply unacceptable. That said, I'm willing to take my chances by either forcing the company back to the negotiating table or by forcing the company to deal with us in a post bankruptcy environment whereby the company will be reporting record revenue as a result of the reorganization.

For us, this Tentative Agreement represents the absolute decimation of our work rules and benefits. To accept this Tentative Agreement will mean that our careers are finally finished. 10 years from now, 50% of us will be gone, either from natural attrition ( our current median age is 52) or through the draconian Attendance Policy accepted by APFA and incorporated into the Tentative Agreement. Under this agreement, those who go beyond 10 days absence go on to a billing process whereby if a payment is missed, that individual is removed from active medical and forced onto COBRA. If a flight attendant exhausts his/her Sick Bank and goes on to Unpaid Sick, a clock starts whereby the individual has 12 months to return to work or be terminated. This language is broken up into two sections in the Tentative Agreement so as to go virtually unnoticed. I would have missed it myself had someone not brought it to my attention:

PART 1:

"18. Minimum Hours to Maintain Employment:

"In order to maintain employment, a flight attendant must be paid: 1) a minimum of 420 hours, or 2) be paid an average of 35 hours per active month if the flight attendant has been inactive due to unpaid status during the preceding 12 months. The annual look back period for employment will be consistent with the medical benefits look back."

PART 2:

"Attendance Policy

"Active Medical while on Paid or Unpaid Sick or Injury

"1. Flight attendants may remain on active medical coverage paying active medical contributions for up to 12 months per injury/illness as defined below:

"a. On the 10th day of a continuous absence due to injury/illness, the flight attendants' 12 months of active medical coverage will begin. Flight attendants will pay their monthly active medical contributions through the direct bill process established by the company. If payment is not received, medical benefits will terminate and the flight attendant will be solicited for COBRA continuation if eligible at the normal COBRA rates.

Lastly, I see no incentive to vote YES; therefore I'm voting NO.

Rock Salomon
BOS

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

Notice the positive outlook Tom Horton has for the company even without amending the airlines’ union contracts:

A Message from Chairman and CEO Tom Horton

Dear American Team:

Today, we reported significantly improved financial results for the second quarter of 2012. This improvement is further demonstration that we are, thanks to all of you, well on our way toward building the new American. Here are some of the highlights:

* $6.5 billion in quarterly revenue, the highest in company history and a 5.5 percent increase over last year

* 9.1 percent increase in consolidated unit revenue, with increases across all five of our hubs and all international entities

* $95 million profit before reorganization and special items, our first second-quarter profit in five years and a $381 million improvement over the same period last year

* All-time-high consolidated load factor of 84.5 percent

* Ended quarter with approximately $5.8 billion in cash and short-term investments

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

Letter form Captain Graeham White LAX

Fellow APA Pilots,

We have less than a week before the final tabulation results of American Airlines Last Best Final Offer is revealed. I would be terribly remiss if I did NOT disclose to the membership a dialog session which transpired in Marina Del Rey, CA. The locale was the Warehouse, a restaurant, and I was accompanied by 15 fellow pilots of the LAX domicile, ranging from line pilots, check airmen, Flight Department Pilots who all dined with Captain John Hale and Senior VP of Operations, Mr. Jim Ream.

The meeting occurred on the eve of July 26th. Captain Hale was the financial host of the get together which was arranged specifically to give both Captain Hale and Mr. Ream a cross stratification from the most Junior in our base ranks to the most Senior, from managerial types to union advocates, for the sole purpose of edifying where the rank and file actually stand on this LBFO.

Once dinner was concluded, the small talk ceased as we moved to a more private setting in the restaurant where Captain Hale delivered some opening remarks then handed off the dialog to Mr. Ream who gave us a Macro Economic overview of American Airlines and the goals and Objectives he and others are trying to achieve.

After an opening question by one of our former negotiators was posed regarding the culture of distrust and apparent over reach of this TA, I followed on to ask Mr. Ream a multi faceted question relevant to his Macro vision, which is the heart of my post today.

I stated to Mr. Ream, since it is the public posture of APA for regime change with US AIR being the desired player, that the equity ploy (including F/As & mechanics) would still leave organized labor 15% short of a blocking vote. I felt the POR blocking strategy was indeed a long shot and would very possibly still find us working under a very draconian TA for the next 10 years.

I further stated, I feel American would pursue purchasing JetBlue. Therefore, the existing TA as it stands, leaves the American Airline pilot exposed.

In short, I explained that I felt manipulated and used by BOTH sides and he would not achieve labor peace with the pilots when the depth of deception was revealed. He appeared surprised by how much push back he was sensing from the pilots for he had been led to believe that this TA was a good deal for the pilots inside of bankruptcy.

My question was could He alter the TA before the vote was tabulated, if we could propose a viable argument for why such amendment was necessary.

Mr. Ream responded:

(Not exact quotes, but accurate content, vetted by three other pilots present.)

1) It is the desire of AAL to purchase JetBlue. This would be completed through a complex deal including debt, private equity and preferential shares. He explained that we are far along the road to negotiating this deal and the critical part is HAVING Contracts in place with LABOR. He further acknowledged that the same people that would be loaning us the money for Americans desired POR were consolidating Americans debt. By doing this, they are buying debt at a discounted rate, gaining power on the UCC and have little exposure for they know the financing is viable to emerge from BK.

2) IF the TA were to be voted down by a close margin, they would immediately RE-negotiate to gain a speedy solution with labor. Time being the critical factor to American Airlines due to the in place financing. He stated, the labor stress just ADDS to the Cost of Financing.

3) IF the TA passes, they have done their job for the creditors and have achieved the best deal possible for the debtors.

4) He indicated that changing the TA at this late stage was problematic. The money factor being locked and reported to the UCC. However, he wanted to hear what the pilots felt were the problem areas of the TA.

Dinner was concluded and some very valuable information was exchanged between all parties in attendance. The remainder of the eve was spent discussing the TA and how it affects the pilots. Mr. Ream asked those in attendance to send him 5 bullet points they would want to see in TA #2.

Friday / 27 July:

I was informed that a pilot who was present, had written a debrief and forwarded it to Negotiating Chairman Neil Roghair as well as both LAX Base Representatives.

The remainder of my day was spent sending the attendees 5 Bullet points to Captain Hale and Captain Smith.

Saturday / 28 July:

Captain Hale informed me he was going to be addressing MR. Horton, Ms. Denise Lynn (HR) and would be informing them of the pilots view of this TA from our dialog session.

I assured Captain Hale I would not disclose nor campaign the content of the Warehouse Revelations for five days to allow him to possibly get an internal solution to the very defective TA.

In Conclusion,

True to my word, I promised not to disclose nor discuss the events of 26 July 2012 in order to allow Captain Hale to affect an amendment. Nothing has transpired from either Captain Hales focused efforts, nor has the APA in any official capacity commented on these developments.

PLEASE, Understand this.

1) Americans Stand Alone Plan is fictitious JetBlue is their goal.

2) The APA is so myopic on management change that we are continuing a course of action, so shaky and anemic in terms of substantiation to the failed logic of you wont have to fly under it.

3) If you Vote YES / In favor of this LBFO, you will likely suffer under its compromised content for a minimum of six years.

4) If you elect to REJECT this TA, American will renegotiate to gain a labor agreement.

5) Last, but certainly not least, I am staking my own personal reputation behind stating these facts of the evenings dialog. My passionate pursuit of doing what is right has led me to revealing these details to you today.

Ladies and Gentlemen of the APA, look within your soul and please find the strength to vote with your dignity intact and overcome your fear.

Respectfully and In Unity,
Graeham White
LAX 767 FO International

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

Letter of Agreement Between AA and APFA

Laura R. Glading, President
Association of Professional Flight Attendants 1004 West Euless Blvd.
Euless TX 76040

July x, 2012

Subject: Settlement Consideration and Bankruptcy Protections

Dear Laura:

The modifications to the collective bargaining agreement between American Airlines, Inc. ("Company") and the Association of Professional Flight Attendants ("APFA") reached in connection with the Company's Chapter 11 Restructuring embodied in the Tentative Agreement dated July x, 2012 were agreed to in furtherance of the Company's effort to restructure its capital structure and operations, and in consideration of the terms of the Tentative Agreement and this Letter of Agreement. This Letter of Agreement will be binding on any Chapter 11 trustee that may be appointed in the Company's present bankruptcy cases, In re AMR Corporation, et 01., Chapter 11 Case No. 11-15463(SHL), or other entity operating with the equivalent authority of a Chapter 11 trustee.

The Company and APFA agree as follows:

1. Settlement Consideration. In full and complete satisfaction of any and all claims APFA has or might arguably have, on behalf of itself or the flight attendants represented by APFA pursuant to the Railway Labor Act ("RLA") and the terms of the CBA, against the Debtors (or any of them) in the jointly administered Chapter 11 Case No. 11-15463 (SHL) (hereafter "Bankruptcy Cases"), and subject to the approval of the Court, APFA will receive under a plan or plans of reorganization of the Debtors equity in the reorganized entity (the "APFA Settlement Consideration") equal to 3.0% of such equity issued to the holders of allowed prepetition unsecured claims (including APFA) against the Debtors (including any equity issued with respect to other unions) (collectively the "Unsecured Claims"). The APFA Settlement Consideration fully, finally, and completely extinguishes any and all claims, interests, causes or demands (including any and all pending grievances, excluding grievance SS-2006-APFA-003, and discipline and termination cases) APFA has or might arguably have, on behalf of itself or the flight attendants represented by APFA pursuant to the RLA and the terms of the CBA, against the Debtors arising prior to the effective date of this Letter of Agreement as described herein. The APFA Settlement Consideration will not be diluted by any subsequent events other than (1) equity consideration given to holders of interests in another entity in the event of a merger or consolidation as provided below; (2) an equity offering approved by the Bankruptcy Court in conjunction with confirmation of a plan of reorganization; (3) equity consideration granted to management in connection with incentive plans approved by the Bankruptcy Court; and (4) any post-emergence equity issuance.

Subject to the foregoing, in the event of a reorganization plan for the Debtors that provides for the consolidation of the Debtors with a third party, the APFA Settlement Consideration shall be equal to 3.0% of the total consideration distributed with respect to the Unsecured Claims, and shall be issued contemporaneously with the consideration distributed under the plan with respect to the other Unsecured Claims.

The APFA Settlement Consideration will confer upon APFA all statutory rights to vote on any plan or plans of reorganization presented by the Company or any other entity. In the event that the APFA Settlement Consideration has not yet been actually issued, it will be estimated for voting purposes as if the APFA held allowed unsecured claims in an amount that would entitle it to the APFA Settlement Consideration. Neither the APFA Settlement Consideration nor any rights under this Letter of Agreement may be assigned or transferred (including the granting of any participation) prior to the effective date of a plan of reorganization, except with the express written consent of the Company exercised in its sole discretion.

Debtors and APFA will discuss in good faith whether, and if so on what terms, a portion of the APFA Settlement Consideration shall be in the form of cash or debt (based on the value of the equity otherwise to be received).

The APFA agrees that it will recommend the Tentative Agreement and this Letter of Agreement to its membership for ratification.

2. Effective date. This Letter of Agreement shall not become effective until the last-occurring of these events:

(1) The Tentative Agreement is ratified by the flight attendant membership pursuant to procedures determined by the APFA Board of Directors;

(2) The Tentative Agreement and this Letter of Agreement are approved by a final order of the United States Bankruptcy Court for the Southern District of New York.

It is expressly understood and agreed that if the Tentative Agreement does not become effective, all of the terms contained in this Letter of Agreement are inapplicable and will be of no force or effect. At such time as the Tentative Agreement becomes effective, but prior to the approval of any Plan of Reorganization in these cases, this Letter of Agreement shall constitute a binding and enforceable post-petition agreement between APFA and the Company.

3. Administrative claim for fees and expenses. The Plan of Reorganization shall provide that subject to Court approval APFA shall have an allowed administrative expense claim which shall be paid in full on the effective date of the Plan of Reorganization ("APFA Allowed Administrative Expense Claim"). The amount of the APFA Allowed Administrative Expense Claim shall be equal to the amount sufficient to reimburse APFA for all reasonable fees and expenses incurred by APFA lawyers, experts, and financial advisors in the Bankruptcy Cases in connection with the negotiation and/or litigation related to the Tentative Agreement, this Letter of Agreement, and Plan of Reorganization. The APFA Allowed Administrative Claim for fees and expenses, however, shall not include any fees or expenses incurred with respect to any services rendered in connection with consideration or pursuit of any potential third party purchaser of the Company or merger partner (including but not limited to US Airways) and shall be capped at $5 million.

4. Indemnification. The Company will indemnify and hold harmless APFA and its current or former (a) members, (b) officers, (c) directors, (d) committee members, (e) employees, (f) advisors, (g) attorneys, (h) accountants, (i) investment bankers, (j) consultants, (k) agents, (I) actuaries, (m) financial advisors, (n) professionals, (0) agents and (I) other representatives its officers, agents, employees, counsel, and representatives (each an indemnitee) from fifty percent of any liability, loss, damages, fines, penalties, taxes ,expenses, and costs (not including any income or excise taxes or similar amounts imposed by any governmental agency) relating to, concerning or resulting from any and all third party claims, lawsuits, or administrative charges of any sort whatsoever, including fifty percent of the reasonable attorney's fees and costs, arising in connection with matters relating to, concerning or connected to the negotiation or establishment of (a) the Tentative Agreement and this Letter of Agreement, (b) any amendment of any benefit plan or program concerning flight attendants or other participants in such plan made pursuant to or as a result of the Tentative Agreement and this Letter of Agreement, and (c) any other document or agreement forming part of the Tentative Agreement and this Letter of Agreement. This fifty-percent sharing arrangement will exist until APFA's financial exposure reaches $5 million. Any exposure exceeding $5 million will be the responsibility of the Company.

Such indemnification and hold harmless obligation will not apply to: 1) any claim, lawsuit or administrative charge resulting from the willful or intentional conduct of any indemnitee; 2) any claim, lawsuit or administrative charge asserting that APFA violated its By-Laws or other organizational requirements by entering into the Tentative Agreement and this Letter of Agreement; 3) any claim, lawsuit or administrative charge resulting from any statement made by any indemnitee that incorrectly describes the Tentative Agreement or Letter of Agreement or the modifications made thereby; 4) any claim, lawsuit or administrative charge related to allocation among American flight attendants represented by APFA of any claim or any proceeds or distribution received in connection with the APFA Settlement Consideration or 5) any claim, lawsuit or administrative charge related to any disposition by APFA or flight attendants represented by APFA to third parties of the APFA Settlement Consideration or any proceeds or distribution received in connection therewith.

An indemnitee seeking to be indemnified and held harmless pursuant to this paragraph must provide to the Company written notice within seven business days of the indemnitee learning of the claim, lawsuit or administrative charge as to which the indemnitee seeks to be indemnified and held harmless. The Company will have the right to conduct the defense of such matter with counsel of the Company's choosing and enter into a settlement of such matter. The Company will give reasonable consideration to the wishes of the indemnitee in connection with the matters described in the foregoing sentence.

5. Exculpation. The Company agrees that it will not propose or support any Plan of Reorganization that does not contain an exculpation or release provision for APFA and each of their current or former members, officers, directors, committee members, employees, advisors, attorneys, accountants, actuaries, investment bankers, consultants, agents and other representatives at least as favorable as any exculpation or release provisions provided for the Company's officers, directors, employees, advisors, attorneys, accountants, actuaries, investment bankers, consultants, agents and other representatives.

6. Bankruptcy protection. From the date of this Letter Agreement until a date three years from the date of this Letter], the Debtors will not file or support any motion ("Motion") pursuant to 11 U.S.c. Sections 1113, 1113(e), or any other relevant provision of the Bankruptcy Code, seeking rejection or modification of, or relief or interim relief from, the Tentative Agreement or this Letter of Agreement and the finalized documents implementing the Tentative Agreement or this Letter of Agreement. The Debtors will actively oppose any such Motion if filed by another party.

Notwithstanding the foregoing, the Debtors reserve the right to file or support any Motion if there is a material deterioration in the Company's financial condition or financial prospects, whether because of general economic conditions or otherwise. All requirements and provisions of section 1113 will also remain applicable to any such Motion. APFA reserves its right to object to such Motion and nothing in this Letter Agreement shall be construed as an agreement by the APFA to such modifications or relief.

7. Court approval. With the full and active support of APFA, the Company will file and prosecute a motion for approval and assumption of the CBA as modified by the Tentative Agreement and this Letter of Agreement under sections 363 and 1113 of the Bankruptcy Code and any other applicable sections thereto if the conditions set forth in Paragraphs 2(1) and 2(2) are satisfied. Both the motion and the proposed order attached thereto (the 363 Order) shall be in form and substance reasonably acceptable to APFA. Both the Company and APFA will use their reasonable best efforts to obtain the support of the Official Committee of Unsecured Creditors and other parties and stakeholders for the Tentative Agreement, including this Letter of Agreement, and to seek entry of the 363 Order.

9. Issuance of equity. Subject to the foregoing, APFA agrees not to object to or contest the issuance of equity or other consideration in the Bankruptcy Cases to the Company's non-union and management employees, in respect of the sacrifices made by them in furtherance of the Company's effort to restructure or as incentive for the non-union and management employees' future service to the Company.

10. Damages. Other than the APFA Settlement Consideration and the claims reserved in Section 1 above, the APFA shall not have any claims as a result of the Company's requests for relief under Section 1113 of the Bankruptcy Code or the parties' entry into the Tentative Agreement or this Letter of Agreement.

Very truly yours,

Laura A. Einspanier
Vice President
Employee Relations

Agreed:

Laura Glading
President
Association of Professional Flight Attendants

*********************

Letter to Doug Parker

From: rock salomon <rocksalomon@hotmail.com>
Date: Wed, 30 May 2012 16:07:31 -0400
To: douglas parker <douglas.parker@usairways.com>
Cc: us airways customer relations <customer.relations@usairways.com>
Subject: The alleged hostile merger

Dear Mr. Parker

I'm writing you as an American Airlines employee with regard to some concerns I have with what is being referred to in the media as a "hostile merger" of AMR by US Airways. I'm hoping that by writing you directly I can get some clarity as to what your intentions are and also what the pros would be of merging the two carriers' workgroups together.

As you surely know, there's yeasayers and naysayers on both sides of the fence with regards to this merger proposition. While American's three labor unions have spoken out overwhelmingly in favor of a merger, some on the US Airways lot have raised eyebrows as to how US Airways can afford to buy another airline when it's having trouble finalizing agreements stemming from the merger with America West. If a merger is such a good deal for employees, why then are some of US Airways' labor unions in opposition to it?

Another question is how US Airways can afford to buy an airline that claims to have finished the 2Q with $4.8 billion in cash and is self-financing it's own bankruptcy when US Airways can't afford to reach agreements with its current unionized employees. As I recall, the US Airways pilots took out a newspaper ad last year accusing the company of forcing pilots to fly unsafe aircraft. While this was considered to be union rhetoric by management, the idea that pilots would make such a drastic statement in the media speaks volumes about the current state of US Airways' labor relations.

One of my biggest concerns is what US Airways plans to do with AMR's pensions. Understanding that US Airways dumped its employee pension obligations on the PBGC, how can US Airways now afford to assume the frozen plans of American's employees? I can only imagine that US Airways employees are asking the same question seeing how there would be two different retirement plans working under any future contract.

As far as your approach to bringing these two carriers together, may I say that I can honestly think of no other merger situation where the CEO of a smaller company made a play for the assets of a larger company by going directly to the other company's labor unions. This strategy seems to be an anomaly. Why I mention this is because the Wall Street Journal noted that you worked with Tom Horton in AMR's finance department in the late 1980s, and by all accounts worked only one cubicle apart. This has led to speculation that you and Tom Horton may actually be friends and not the business rivals that employees are being led to believe. This speculation is also fueled by an Associated Press report, which refers to Tom Horton and yourself as being part of AMR's so-called "Brat Pack" — four executives groomed under Robert Crandall who have now ascended to the positions of running airlines of their own.



(Tom Horton (R), chief financial officer of American Airlines, grimaces as he listens along with American West Airlines President and CEO Douglas Parker to opening statements at the House Transportation Committee hearings on the airline crisis, September 19, 2001 in Washington, DC. The nation's airlines are expecting to lose billions of dollars in the aftermath of the airborne terrorist attacks on New York and Washington, DC. (Photo by Mike Theiler/Getty Images))

So as to not beat around the bush, Mr. Parker, my concern is that AMR's Tom Horton is orchestrating this so-called "hostile merger" and not you. While this statement can resonate on ears like some kind of conspiracy theory, in reality it's well within the realm of possibility. When I consider a role reversal, that being AMR approaching US Airways for a merger, what I see is an impossible endeavor. I see two airlines with labor contracts that are apples and oranges. I also see unions on both sides of the fence demanding contract enhancements in exchange for their support. Simply put, it could never happen because the cost of bringing the merger together would far exceed the value delivered by it.

Please know that I'm not suggesting that anyone is intentionally violating SEC rules with regard to the trading of inside information because that would be an unfounded accusation. But let's not overlook the fact that one of AMR's most prominent directors was recently indicted for allegedly passing on inside information, and that the person he allegedly passed it on to was recently convicted. As much as we hate to believe it, insider trading does happen — probably more often then we'd like to think. That said, when I consider that one of US Airways directors was a former senior executive with Rothschild and take into account that Rothschild is handling AMR's reorganization, the idea that there's a lot more going on behind the scenes becomes much more plausible.

Now consider the idea that Tom Horton took AMR into bankruptcy without ever having shown the employees any actual need for bankruptcy, and then consider that Mr. Horton hit employees with Term Sheets that far exceeded anything that the company demanded in negotiations — one can only assume that the strategy here is to aim low and shoot high. By offering employees something horrendous, Mr. Parker, anything above that threshold would seem good. Had AMR simply handed flight attendants your "bridge" to certification offer, almost certainly flight attendants would have balked at it. It's only when the "bridge" is compared to something God-awful does your offer appear somewhat palatable.

As a former auto salesman, the first lesson I learned was the "good cop, bad cop" strategy. This strategy works by hitting the customer with a lowball value on their trade and then introducing the manager who then comes in to seal the deal with a slightly better offer. I think the technical expression was "hitting them with reactors," reacting the customer right out of their chair and then calming them with something considerably better but still within the parameters of what is considered a good deal for the house. What I see here, Mr. Parker, is "good cop, bad cop" being played on American's employees. What I see is AMR hitting employees with a Term Sheet and then US Airways stepping in with a slightly better offer. Let's face it, what better way to make an impossible merger possible then by getting the unions to do all the dirty work; what better way to make an impossible merger possible then by creating the illusion that the employees are in control of a situation for which they have no control. If AMR can get employees to voluntarily concede, then the two carriers can merge amicably and everyone can benefit off the backs of employees. We saw it with Donald Carty. While we were told that he was "ousted," in reality he "retired" and was considered a hero in the corporate sector for gutting AMR's labor contracts without ever showing proof of necessity. I'm no betting man, but if I were to place a wager on this hostile merger, I would say that Tom Horton likely orchestrated it and that whole thing is a corporate ruse.

Please know, Mr. Parker, that I sincerely hope that I'm wrong. But given what AMR's executives did to employees in 2003, and taking a moment to reflect on how they did it to us, one can only come to the conclusion that none of this is accidental. And with billions at stake, there's plenty of money on hand to make the illusion seem real.  Without going into too much detail about American's 2003 Restructuring, let me just say for the record that the whole thing was made up. In Jeffery Brundage's own words, the money demanded from employees had nothing at all to do with bankruptcy; the $1.6 billion demanded annually from employees was simply a figure taken from a low-cost carrier labor comparison AMR did in an effort to align American with Southwest. No one would even have known had members from APFA and TWU not initiated litigation to get to the bottom of it. It was only after Discovery concluded that employees learned the real truth — WE WERE HAD. (*Note that AMR claimed $2.1 billion in cash during the 2003 Restructuring; AMR now claims $4.8 billion in cash in the 2Q12 during bankruptcy)

In closure, having lived through one fraud with American, I'm hesitant to embrace what I feel could be another; having worked under the abuse of a management team that admittedly lied to employees about the airline's true financial condition, I have no interest in running into the arms of another abusive employer voluntarily.

That said, how do we know that Tom Horton isn't behind this merger offer and what guarantees can you give that will assure American's employees that AMR's corporate governance will play no role whatsoever in any US Airways/American Airlines alliance? How do we know that this is a real business proposition that's good for everyone and not another corporate ruse designed to grossly enrich executives at the expense of shareholders and employees?

I look forward to your reply.

Respectfully,

Rock Salomon
American Airlines Flight Attendant BOS
Association of Professional Flight Attendants Member since 1990