American Airlines 2007 Annual Report Download - page 11

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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. In early 2008, the APA asked that the
NMB appoint a mediator. In response, the NMB noted that it is required to docket all facially valid mediation
applications. The NMB also expressed an interest in exploring with the parties alternative methods of narrowing
the issues prior to entering formal mediation in light of the fact that as of January 29, 2008, no issues had been
agreed upon between the parties. 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 November 2007, American
and the TWU commenced negotiations under the RLA with respect to the other employee groups represented by
the TWU. The negotiations between American and the APA and TWU employees are still in their early stages. It
is anticipated that negotiations between American and the APFA will commence in the first half of 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 (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 quadrennial process described above is scheduled to
occur in 2008.
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 were amendable beginning on October 1,
2007. Negotiations commenced in that month and the parties have reached a tentative agreement on a number
of articles. Negotiations are ongoing.
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 2005 through 2007 were:
Year
Gallons
Consumed
(in millions)
Total Cost
(in millions)
Average
Cost Per
Gallon
(in cents)
Percent of
AMR's
Operating
Expenses
2005 3,237 $ 5,615 173.5 27.0%
2006 3,178 6,402 201.4 29.8
2007 3,130 6,670 213.1 30.4