American Airlines 2003 Annual Report Download - page 10

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In April 2003, American reached agreements with its three major unions - the Allied Pilots Association (the APA),
the Transport Workers Union of America (AFL-CIO) (the TWU) and the Association of Professional Flight
Attendants (the APFA) (the Labor Agreements). The Labor Agreements substantially reduced the labor costs
associated with the employees represented by the unions. In conjunction with the Labor Agreements, American
implemented various changes in the pay plans and benefits for non-unionized personnel, including officers and
other management (the Management Reductions). The Labor Agreements will not become amendable until 2008.
The Air Line Pilots Association (ALPA), which represents American Eagle pilots, reached agreement with
American Eagle effective September 1, 1997, to have all of the pilots of the American Eagle carriers covered by a
single collective bargaining agreement. This agreement lasts until October 31, 2013. The agreement provides to
the parties the right to seek limited changes in 2004, 2008 and 2012. If the parties are unable to agree on the
limited changes, they also agreed that the issues would be resolved by interest arbitration, without the exercise of
self-help (such as a strike). ALPA and American Eagle negotiated a tentative agreement in 2000, but that
agreement failed in ratification. Thereafter, the parties participated in interest arbitration. The interest arbitration
panel determined the limited changes which should be made and these changes were appropriately effected. The
Company expects to begin negotiations under the agreement in the first quarter of 2004.
The Association of Flight Attendants (AFA), which represents the flight attendants of the American Eagle carriers,
reached agreement with American Eagle effective March 2, 1998, to have all flight attendants of the American
Eagle carriers covered by a single contract. The agreement became amendable on September 2, 2001. However,
the parties agreed to commence negotiations over amendments to the agreement in March 2001. The mediation
assistance of the NMB was requested and mediation commenced in November 2003; mediated negotiations
continue. The other union employees at the American Eagle carriers are covered by separate agreements with the
TWU, which were effective April 28, 1998, and were amendable April 28, 2003. American Eagle and the TWU
have commenced negotiations. American Eagle cannot predict the result of the mediation or these negotiations.
The non-union employees formerly with TWA LLC have been integrated into American's work force. With respect
to the integration of unionized employees formerly employed by TWA LLC, American reached integration
agreements with the APA (with respect to pilot integration) and the APFA (with respect to flight attendant
integration). American and the TWU participated in arbitration and resolved certain unionized ground employee
integration issues in late February and early March 2002. In early April 2002, the NMB declared American and
TWA LLC a single carrier for labor relations purposes and designated American's incumbent unions as the
collective bargaining representatives of the relevant work groups at both American and TWA LLC. Since
American's unions thereafter represented the relevant employees at both carriers, the integration mechanisms
applicable to the unions at American could then begin to be effected. The integration of the unionized work groups
is occurring in accordance with those mechanisms.
E. Fuel
The Company’s operations and financial results are significantly affected by the availability and price of jet fuel.
The Company's fuel costs and consumption for the years 2001 through 2003 were:
Year
Gallons
Consumed
(in millions)
Total Cost
(in millions)
Average
Cost Per
Gallon
(in cents)
Percent of
AMR's
Operating
Expenses
2001 3,461 $ 2,888 81.4 13.5
2002 3,345 2,562 76.2 12.3
2003 3,161 2,772 87.7 15.2