American Airlines 2004 Annual Report Download - page 11

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8
In 1999, American was ordered by the New York State Department of Environmental Conservation (NYSDEC) to
conduct remediation of environmental contamination located at Terminals 8 and 9 at New York’s John F. Kennedy
International Airport (JFK). American is seeking to recover a portion of the JFK remediation costs from previous
users of the Terminals 8 and 9 premises. In 2004, American entered a Consent Order with NYSDEC for the
remediation of a JFK off-terminal hangar facility. American expects that the projected costs associated with the
JFK remediations will be immaterial.
In 1996, American and Executive, along with other tenants at the Luis Munoz Marin International Airport in San
Juan, Puerto Rico (SJU) were notified by the SJU Port Authority that it considered them potentially responsible for
environmental contamination at the airport. In 2003, the SJU Port Authority requested that American, among other
airport tenants, fund an ongoing subsurface investigation and site assessment. American denied liability for the
related costs. No further action has been taken against American or Executive.
American Eagle Airlines, Inc. (American Eagle) has been notified of its potential liability under New York law at an
inactive hazardous waste site in Poughkeepsie, New York. Pursuant to an Administrative Order on Consent
entered into with NYSDEC, American Eagle is implementing a final remedy to address contamination at the site.
The costs of this final remedy are immaterial.
The Company does not expect these matters, individually or collectively, to have a material impact on its financial
condition, results of operations or cash flows. See Note 4 to the consolidated financial statements for additional
information.
D. Labor
The airline business is labor intensive. Wages, salaries and benefits represented approximately 36 percent of the
Company’s consolidated operating expenses for the year ended December 31, 2004. The average full-time
equivalent number of employees of the Company’s subsidiaries for the year ended December 31, 2004 was
92,100.
The majority of these employees are represented by labor unions and covered by collective bargaining
agreements. Relations with such labor organizations are governed by the Railway Labor Act. Under this act, the
collective bargaining agreements among the Company’s subsidiaries and these organizations generally do not
expire but instead become amendable as of a stated date. If either party wishes to modify the terms of any such
agreement, it must notify the other party in the manner described in the agreement. After receipt of such notice,
the parties must meet for direct negotiations, and if no agreement is reached, either party may request the National
Mediation Board (NMB) to appoint a federal mediator. If no agreement is reached in mediation, the NMB may
declare at some time that an impasse exists, and if an impasse is declared, the NMB proffers binding arbitration to
the parties. Either party may decline to submit to arbitration. If arbitration is rejected by either party, a 30-day
“cooling off” period commences. During that period (or after), a Presidential Emergency Board (PEB) may be
established, which examines the parties’ positions and recommends a solution. The PEB process lasts for 30
days and is followed by another “cooling off” period of 30 days. At the end of a “cooling off” period, unless an
agreement is reached or action is taken by Congress, the labor organization may strike and the airline may resort
to “self-help”, including the imposition of any or all of its proposed amendments and the hiring of new employees to
replace any striking workers.
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) (previously described as 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). While the parties may begin discussions
in 2006, the Labor Agreements do not become amendable until 2008.