American Airlines 2006 Annual Report Download - page 12

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In April 2003, American reached agreements (the Labor Agreements) with its three major unions - the Allied Pilots
Association (the APA) which represents American’s pilots, the Transport Workers Union of America (AFL-CIO)
(the TWU), which represents seven different employee groups, and the Association of Professional Flight
Attendants (the APFA), which represents American’s flight attendants. The Labor Agreements substantially
moderated the labor costs associated with the employees represented by the unions. In conjunction with the
Labor Agreements, American also implemented various changes in the pay plans and benefits for non-unionized
personnel, including officers and other management (the Management Reductions). While the Labor Agreements
do not become amendable until 2008, they do allow the parties to begin contract discussions in or after 2006. In
2006, American and the APA commenced negotiations under the RLA. Also in 2006, American and the TWU
commenced negotiations with respect only to dispatchers, one of the seven groups at American represented by
the TWU. In January 2007, American and the TWU announced that in November 2007 they would commence
negotiations under the RLA with respect to TWU employees in addition to dispatchers. The negotiations between
American and the pilots and dispatchers are still in their early stages.
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 (currently
American Eagle Airlines, Inc. and Executive Airlines, Inc.) covered by a single contract. This agreement lasts until
October 31, 2013. The agreement provides to the parties the right to seek limited changes in 2000, 2004, 2008
and 2012. If the parties are unable to agree on the limited changes, the agreement provides that any 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 that should be
made and these changes were appropriately effected. In 2004, the parties successfully negotiated limited
changes that became effective on January 1, 2005.
The Association of Flight Attendants (AFA) represents the flight attendants of the American Eagle carriers. The
current agreement between the American Eagle carriers and the AFA is amendable on October 27, 2009;
however, the parties have agreed that contract openers may be exchanged 90 days prior to that date.
The other union employees at the American Eagle carriers are covered by separate agreements with the TWU.
The agreements between the American Eagle carriers and the TWU are amendable beginning with dates ranging
from October 1, 2007 to January 26, 2008; the parties have agreed that contract openers may be exchanged at
least 60 days prior to October 1, 2007.
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 2004 through 2006 were:
Year
Gallons
Consumed
(in millions)
Total Cost
(in millions)
Average
Cost Per
Gallon
(in cents)
Percent of
AMR's
Operating
Expenses
2004 3,264 3,969 121.6 21.1
2005 3,237 5,615 173.5 27.0
2006 3,178 6,402 201.4 29.8