American Airlines 2005 Annual Report Download - page 10

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7
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 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 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 adverse impact on the
Company. See Note 4 to the consolidated financial statements for additional information.
Labor
The airline business is labor intensive. Wages, salaries and benefits represented approximately 32 percent of the
Company’s consolidated operating expenses for the year ended December 31, 2005. The average full-time
equivalent number of employees of the Company’s subsidiaries for the year ended December 31, 2005 was
88,400.
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 (RLA). 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 agreed to by the parties. Under the RLA, 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 in its discretion 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) (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 contract discussions in 2006
under the Labor Agreements, the agreements do not become amendable until 2008.