General Lee
Well-known member
- Joined
- Aug 24, 2002
- Posts
- 20,442
From: Council Chairman
To: Council 20 Pilots
Date: March 26, 2006
RE: Perspective on the Restructuring Agreement Tentative Agreement (TA) Membership Ratification Vote; the Elements of the Ratification Decision; and the Objectives of a Possible Rejection; Vote NO Recommendation
The NWA MEC has decided to let the membership determine whether the Restructuring TA is unacceptable. It is my opinion that Judge Gropper (1113c Proceedings) will likely view a membership rejection more favorably than what may have been otherwise viewed as a political decision by the MEC, or political posturing for better terms. There had been some concern expressed by ALPA International, and echoed by some at the MEC level, that our pension relief legislation now before Congress might be adversely affected by a rejection of the Restructuring Agreement TA. It should be noted that our ratification vote will not be completed until AFTER the time when Congress is expected to have acted on the pension relief. Had the MEC voted on a straight "yes" or "no" on this TA, it would have been rejected. Both the Council 20 chairman and vice chairman are opposed to the TA and are recommending a NO vote to our pilots. Those on the MEC opposing the TA represent a majority of the elected representative and/or votes; we are not a disillusioned minority. We represent the majority opinion of the MEC.
Many pilots think NWA management is just waiting for almost any excuse to terminate our Defined Benefit Plan (DBP). However, if the pension relief legislation is passed, the justification for termination will be eliminated. NWA must justify termination to the bankruptcy court and to the PBGC. (Of course, if we do not get the legislative relief now before Congress, all NWA DBPs will almost certainly be terminated.) There are currently several reasons NWA management would prefer not to terminate our DBP, and all are related to the financial and self-interest aspects of these reasons. A DBP termination would also result in a major loss of equity in the "new" NWA to the PBGC. (UAL had to concede 24 percent equity to the PBGC due to pension plan terminations). In addition, management would be expected to contribute more to the employee contribution plans if the DBPs are terminated. Management's DBP is more underfunded than the pilots' Plan, and their Plan almost certainly is subject to termination if there was an effort to terminate our Plan. The future of our DBP is almost totally dependent on legislative relief and the survival of NWA. With relief, our DBP is relatively safe for the time being. Obviously, no one can predict the future with certainty. In my opinion, the security of our defined benefit plan is unaffected by the ratification or rejection of this tentative agreement.
As I have previously noted, I think we could have done better in our 1113c negotiations. I am disappointed in the results, and I think we can do better if we reject this TA. In my opinion, which was expressed to the MEC and the Negotiating Committee during the process, our strategy was seriously flawed. We conceded approximately $170M in revenue-enhancing concessions (including the controversial SJet Operation), and we received absolutely NO credit for these concessions. Had we negotiated even partial credit, we would have been able to avoid some of the deeper concessions with regard to pay, work rules, and benefits (including the totally inadequate contribution to the Defined Contribution Plan [DCP]).
The risks in a MEMRAT rejection of this TA, in my opinion, can be reasonably calculated. Judge Gropper, NWA management, and NWA ALPA all have a certain range of options, and some of those options are interdependent. Based on past 1113c cases and comments by the judge in the proceedings, it is my opinion that he is not likely to give NWA a blank check on imposed terms. He knows imposed terms are temporary and not a solution. NWA most likely needs a consensual agreement from all unions in order to obtain commitments for exit financing. Management may be very heavy-handed with any group that rejects a TA (if that is permitted by the judge), but at some point, they are going to have to return to negotiations. In the interim, operating an airline with a major labor group(s) working under imposed terms (and without a contract) would put NWA at a competitive disadvantage. Judge Gropper has indicated he would most likely determine the terms if he granted the current 1113c petition. Those terms would likely be something between the original 1113c proposal and the TA. In my opinion, the terms would be closer to the current TA than the original 1113c proposal. ALPA should never give up the right to self-help, but any attempt would most likely be blocked for an extended period by an injunction. NWA has indicated their response to a strike threat would be to seek an injunction.
This is the decision-making process, the options, and the objectives of a TA rejection:
FOR Ratification
TA is Best Agreement Available Under Circumstances
TA Provides Concessions Essential to NWA Reorganization $358M/year (plus $250M/year from Bridge Agreement) Minimizes the Risks Associated with Rejection Preserves Some Work Rules and/or Limits Work Rule Concessions Acceptable Level of Expectation Chapter 11 Conditions Consistent with Other Airlines Acceptable Impact on NWA Career Seniority, Age, and Retirement Accrual Ends (this) 1113c Process with Certainty (Ratified TA)
For Rejection (AGAINST Ratification)
Agreement Better than Current TA is Available Through Additional Negotiations TA Provides Concessions Above and Beyond Those Essential to NWA Reorganization Greater than $500M/year in value (plus $250M/year from Bridge Agreement) Calculated Risks Associated with Rejection Are Acceptable Scope, Pay, Work Rules, and Benefits Concessions are Unacceptable Unacceptable Level of Reduced Expectations Career Diminished Beyond Acceptable Limits Unacceptable Impact on NWA Pilot Career Seniority, Age, Quality of Life, and Benefit (including Retirement) Continues 1113c Process with Uncertainty (Rejected TA) Judge Gropper's Range of Options Approve NWA 1113c Petition, With/Without Restriction Disapprove NWA 1113c Petition Defer Decision, With/Without NWA/ALPA Negotiations NWA Management Range of Options If Judge Gropper Approves 1113c Petition Impose Terms Within Limits, if Limited Continue or Negotiate Interim Terms/LOA Negotiate with ALPA for Acceptable TA Refuse to Negotiate with ALPA If Judge Gropper Disapproves 1113c Petition File 1113e Petition for Emergency Concessions File (another) 1113c Petition for Concessions Negotiate with ALPA for Acceptable TA NWA ALPA Options (Dependent on Judge and Management Decisions) If Judge Approves NWA 1113c Petition Reserve Self-Help Options, Including Type and Time Immediate Self-Help Expect NWA to File for Injunction Deferred Self-Help Negotiate with NWA, Depending on NWA Terms Accept Terms as Temporary Terms of Employment Expect Negotiations Prior to Exit Financing Plan Self-Help upon Chapter 11 Exit
Post-Rejection Objectives
· Obtain Credit for the $170M/Year in Revenue-Enhancing Concessions
o Includes Credit for SJet Operation and Other Non-Credited
Concessions
· Obtain a Clearly DEFINED Credit for NWA Benefit Derived from DBP
Freeze
· Eliminate and/or Improve the Most Objectionable Sections of
Rejected TA
o Scope
§ Improve Larger SJ (77-110-seat) to Smaller SJ (51-76-seat) Ratio
§ Establish an Effective Mainline Floor to Prevent Erosion of
Flying
§ Transfer Pilot Longevity Credit with Flow Up/Flow Down to SJet
o Pay
§ Improve Scheduled Raises for Inflation and Industry Rates
· Estimated Cost is $5M/Year per 1 Percent Increase
§ No Pay Penalty for Any Justified Short-Term Sick Call
o Work Rules
§ Eliminate the Most Objectionable Changes in Work Rules
· DH at 50 Percent Pay
· Actual vs. Schedule Pay for Trip
· THC at 1:3.75
· No Domestic Downtown Requirement for Hotels
· Limited Domestic Requirement for Crew Meals
o Benefits
§ Improve Contribution to Follow-On Defined Contribution Plan
· Estimated Cost Is $5M/Year per 1 Percent Increase
o No/Low Cost Quids for Employee Sacrifices in Chapter 11
§ No Fee for Employee and Family, Low Fee Companion Passes
§ Companion Passes Without Employee Travel Restriction
§ Credit for Employee Parking if Parking at Base Is Not Used
Those who have had a good career, or those with most of their career at NWA behind them, are more inclined to limit their additional risk and accept this TA. Those who have the majority of their career ahead of them, and who will be MOST affected by this TA, are more inclined NOT to compromise their career expectations to the extent required by the TA; they will assume more risks in an effort to protect the value of their careers. Our more junior pilots have NO light at the end of the tunnel. They have no hope under this TA, except MUCH lower pay, MUCH worse work rules, and MUCH less in benefits, including a SUBSTANTIALLY diminished retirement. This six-year agreement, with no snapbacks, pay increases well below inflation rates, and a contribution that will never provide an acceptable retirement will likely dominate their lives for the next eight years, when the average time to negotiate a follow-on CBA (Section 6) is considered. This TA will have a lifelong effect on the quality of their lives and that of their families. Under the best of conditions, it will take 2-3 contracts to recoup what has been lost in this one negotiation, and that will far exceed the career span for many (if not most) of our pilots.
Continued on page 2
To: Council 20 Pilots
Date: March 26, 2006
RE: Perspective on the Restructuring Agreement Tentative Agreement (TA) Membership Ratification Vote; the Elements of the Ratification Decision; and the Objectives of a Possible Rejection; Vote NO Recommendation
The NWA MEC has decided to let the membership determine whether the Restructuring TA is unacceptable. It is my opinion that Judge Gropper (1113c Proceedings) will likely view a membership rejection more favorably than what may have been otherwise viewed as a political decision by the MEC, or political posturing for better terms. There had been some concern expressed by ALPA International, and echoed by some at the MEC level, that our pension relief legislation now before Congress might be adversely affected by a rejection of the Restructuring Agreement TA. It should be noted that our ratification vote will not be completed until AFTER the time when Congress is expected to have acted on the pension relief. Had the MEC voted on a straight "yes" or "no" on this TA, it would have been rejected. Both the Council 20 chairman and vice chairman are opposed to the TA and are recommending a NO vote to our pilots. Those on the MEC opposing the TA represent a majority of the elected representative and/or votes; we are not a disillusioned minority. We represent the majority opinion of the MEC.
Many pilots think NWA management is just waiting for almost any excuse to terminate our Defined Benefit Plan (DBP). However, if the pension relief legislation is passed, the justification for termination will be eliminated. NWA must justify termination to the bankruptcy court and to the PBGC. (Of course, if we do not get the legislative relief now before Congress, all NWA DBPs will almost certainly be terminated.) There are currently several reasons NWA management would prefer not to terminate our DBP, and all are related to the financial and self-interest aspects of these reasons. A DBP termination would also result in a major loss of equity in the "new" NWA to the PBGC. (UAL had to concede 24 percent equity to the PBGC due to pension plan terminations). In addition, management would be expected to contribute more to the employee contribution plans if the DBPs are terminated. Management's DBP is more underfunded than the pilots' Plan, and their Plan almost certainly is subject to termination if there was an effort to terminate our Plan. The future of our DBP is almost totally dependent on legislative relief and the survival of NWA. With relief, our DBP is relatively safe for the time being. Obviously, no one can predict the future with certainty. In my opinion, the security of our defined benefit plan is unaffected by the ratification or rejection of this tentative agreement.
As I have previously noted, I think we could have done better in our 1113c negotiations. I am disappointed in the results, and I think we can do better if we reject this TA. In my opinion, which was expressed to the MEC and the Negotiating Committee during the process, our strategy was seriously flawed. We conceded approximately $170M in revenue-enhancing concessions (including the controversial SJet Operation), and we received absolutely NO credit for these concessions. Had we negotiated even partial credit, we would have been able to avoid some of the deeper concessions with regard to pay, work rules, and benefits (including the totally inadequate contribution to the Defined Contribution Plan [DCP]).
The risks in a MEMRAT rejection of this TA, in my opinion, can be reasonably calculated. Judge Gropper, NWA management, and NWA ALPA all have a certain range of options, and some of those options are interdependent. Based on past 1113c cases and comments by the judge in the proceedings, it is my opinion that he is not likely to give NWA a blank check on imposed terms. He knows imposed terms are temporary and not a solution. NWA most likely needs a consensual agreement from all unions in order to obtain commitments for exit financing. Management may be very heavy-handed with any group that rejects a TA (if that is permitted by the judge), but at some point, they are going to have to return to negotiations. In the interim, operating an airline with a major labor group(s) working under imposed terms (and without a contract) would put NWA at a competitive disadvantage. Judge Gropper has indicated he would most likely determine the terms if he granted the current 1113c petition. Those terms would likely be something between the original 1113c proposal and the TA. In my opinion, the terms would be closer to the current TA than the original 1113c proposal. ALPA should never give up the right to self-help, but any attempt would most likely be blocked for an extended period by an injunction. NWA has indicated their response to a strike threat would be to seek an injunction.
This is the decision-making process, the options, and the objectives of a TA rejection:
FOR Ratification
TA is Best Agreement Available Under Circumstances
TA Provides Concessions Essential to NWA Reorganization $358M/year (plus $250M/year from Bridge Agreement) Minimizes the Risks Associated with Rejection Preserves Some Work Rules and/or Limits Work Rule Concessions Acceptable Level of Expectation Chapter 11 Conditions Consistent with Other Airlines Acceptable Impact on NWA Career Seniority, Age, and Retirement Accrual Ends (this) 1113c Process with Certainty (Ratified TA)
For Rejection (AGAINST Ratification)
Agreement Better than Current TA is Available Through Additional Negotiations TA Provides Concessions Above and Beyond Those Essential to NWA Reorganization Greater than $500M/year in value (plus $250M/year from Bridge Agreement) Calculated Risks Associated with Rejection Are Acceptable Scope, Pay, Work Rules, and Benefits Concessions are Unacceptable Unacceptable Level of Reduced Expectations Career Diminished Beyond Acceptable Limits Unacceptable Impact on NWA Pilot Career Seniority, Age, Quality of Life, and Benefit (including Retirement) Continues 1113c Process with Uncertainty (Rejected TA) Judge Gropper's Range of Options Approve NWA 1113c Petition, With/Without Restriction Disapprove NWA 1113c Petition Defer Decision, With/Without NWA/ALPA Negotiations NWA Management Range of Options If Judge Gropper Approves 1113c Petition Impose Terms Within Limits, if Limited Continue or Negotiate Interim Terms/LOA Negotiate with ALPA for Acceptable TA Refuse to Negotiate with ALPA If Judge Gropper Disapproves 1113c Petition File 1113e Petition for Emergency Concessions File (another) 1113c Petition for Concessions Negotiate with ALPA for Acceptable TA NWA ALPA Options (Dependent on Judge and Management Decisions) If Judge Approves NWA 1113c Petition Reserve Self-Help Options, Including Type and Time Immediate Self-Help Expect NWA to File for Injunction Deferred Self-Help Negotiate with NWA, Depending on NWA Terms Accept Terms as Temporary Terms of Employment Expect Negotiations Prior to Exit Financing Plan Self-Help upon Chapter 11 Exit
Post-Rejection Objectives
· Obtain Credit for the $170M/Year in Revenue-Enhancing Concessions
o Includes Credit for SJet Operation and Other Non-Credited
Concessions
· Obtain a Clearly DEFINED Credit for NWA Benefit Derived from DBP
Freeze
· Eliminate and/or Improve the Most Objectionable Sections of
Rejected TA
o Scope
§ Improve Larger SJ (77-110-seat) to Smaller SJ (51-76-seat) Ratio
§ Establish an Effective Mainline Floor to Prevent Erosion of
Flying
§ Transfer Pilot Longevity Credit with Flow Up/Flow Down to SJet
o Pay
§ Improve Scheduled Raises for Inflation and Industry Rates
· Estimated Cost is $5M/Year per 1 Percent Increase
§ No Pay Penalty for Any Justified Short-Term Sick Call
o Work Rules
§ Eliminate the Most Objectionable Changes in Work Rules
· DH at 50 Percent Pay
· Actual vs. Schedule Pay for Trip
· THC at 1:3.75
· No Domestic Downtown Requirement for Hotels
· Limited Domestic Requirement for Crew Meals
o Benefits
§ Improve Contribution to Follow-On Defined Contribution Plan
· Estimated Cost Is $5M/Year per 1 Percent Increase
o No/Low Cost Quids for Employee Sacrifices in Chapter 11
§ No Fee for Employee and Family, Low Fee Companion Passes
§ Companion Passes Without Employee Travel Restriction
§ Credit for Employee Parking if Parking at Base Is Not Used
Those who have had a good career, or those with most of their career at NWA behind them, are more inclined to limit their additional risk and accept this TA. Those who have the majority of their career ahead of them, and who will be MOST affected by this TA, are more inclined NOT to compromise their career expectations to the extent required by the TA; they will assume more risks in an effort to protect the value of their careers. Our more junior pilots have NO light at the end of the tunnel. They have no hope under this TA, except MUCH lower pay, MUCH worse work rules, and MUCH less in benefits, including a SUBSTANTIALLY diminished retirement. This six-year agreement, with no snapbacks, pay increases well below inflation rates, and a contribution that will never provide an acceptable retirement will likely dominate their lives for the next eight years, when the average time to negotiate a follow-on CBA (Section 6) is considered. This TA will have a lifelong effect on the quality of their lives and that of their families. Under the best of conditions, it will take 2-3 contracts to recoup what has been lost in this one negotiation, and that will far exceed the career span for many (if not most) of our pilots.
Continued on page 2
