• Management's "Cuts Menu"
• Potential Contract Modifications/Savings to be Discussed
• Bankruptcy Q & A's
• PBGC Guarantee Maximums for Plans That Terminate in 2002

Following is a document prepared by US Airways management. It is a 'menu' of items that cost the airline money from the flight attendant Contract.

Your Negotiating Committee will ensure that any tentative agreement we reach with management over sacrifices also includes guarantees that flight attendants will be paid back once this carrier turns around. But also understand that management is asking for more out of every single work group at US Airways than has ever been asked before. 

Please read this company prepared document carefully. You may wish to print out the information and share it with your flying partners.

This is not a proposal from management of the cuts it wants from flight attendants. If we are able to reach agreement with management over our fair share of sacrifices, it will not encompass every item on this list. But the list does show that management considers everything in our contract that is a cost item to be open for discussion. There's that much at stake.

Keep working and doing your job to the high standards US Airways flight attendants are known for. Keep in mind that the AFA flight attendant contract remains in full force and effect. That means management cannot just make changes or unilateral cuts to our contract. Any and all changes must be negotiated for and approved of by the flight attendants in a ratification vote. You will get the final say in whether to approve the sacrifices management is requesting that the flight attendants make. 

Potential Modifications/Savings to the Collective Bargaining Agreement between US Airways, Inc. and the Association of Flight Attendants effective May 1, 2000 and amendable April 30, 2005 

Submitted by US Airways, Inc. May 21, 2002

Potential Contract Modifications/Savings to be Discussed

A. Scope 

* No-furlough clause
* Resolve future application of partial transactions clause 
* Other items as identified

* Roll back increases of May, 2000 and November, 2001
* Eliminate future increases
* Additional, temporary concession-related relief with snap-back in 2004 to address revenue degradation
* Night pay 
* International pay
* Holiday pay 
* Longevity pay 
* Reserve override 
* Senior/Aft Lead pay
* Galley pay 
* Training pay 
* Pay premiums for non-productive time
* Per diem 
* Crew meals 
* AFA flight pay loss
* Other items as identified

Scheduling/Hours of Service

* Replace the "Primary Lines/SAP/Secondary Lines" bid system with a "Preferential" bid system
* Modify the Reserve system
* Relax rescheduling restrictions
* Modify rescheduling pay to scheduled or actual, for segments that operate
* Eliminate the VM and reduce other rigs
* Eliminate crew substitution pay
* Eliminate pay protection for last trip of the month
* Pay actual time for trip splits
* Revise minimum duty break to 9:15
* Eliminate or modify the "Me-too" with pilots
* Other items as identified

Vacation 

* Reduce annual vacation accruals
* Limit vacation accrual while on LOA
* Reduce daily vacation rate Require vacations to be bid in seven-day blocks
* Other items as identified

Sick Time/OJI 

* Limit Salary Continuance
* Reduce sick accrual rate
* Limit sick accrual while on LOA
* Eliminate rapid reaccrual
* Cap pay at low end of option window in a month when
sick is claimed 
A flight attendant claiming sick leave may not split
a trip for overprojection -- must adjust sick bank
* Other items as identified

Health 

* Replace all health plans with a national PPO
* 80% in-network 
* Employee can buy up to 90% in-network
* Co-pays and deductibles increase to keep pace with medical plan cost increases
* Three-tier prescription drug plan
* Monthly contributions
* Spouses required to elect coverage through their employer 
* Medicare carve-out coordination policy
* Other items as identified

Life 

Reduction of Basic Life and AD&D Other items as identified

* Reduce/Replace Flight Attendant Defined Benefit Plan
* Other items as identified

* Profit Sharing 
* Steps to protect workforce levels -"Jets for Jobs"
* Other items as identified

Management has stated that barring a significant reduction in labor costs and a guarantee of a loan from the federal government, the airline will be forced to file for bankruptcy in the near future.

Our new CEO and his management team have given AFA, our consultants, and all other labor groups open access to the airline's books. In a meeting last week with all US Airways labor unions, each group stated their belief that management is telling the truth about our airline's precarious financial position.

The flight attendants elected to serve on your Negotiating Committee, AFA professional staff and advisors have begun discussions with management over possible sacrifices that will enable US Airways to survive. Our goal is to ensure that flight attendants are protected in the long-term, that we don't give anything more than is absolutely necessary, and that the airline is truly poised for success following the talks. All other labor groups stated their intention to do the same last week in our meeting. 

If your Negotiating Committee is able to arrive at a tentative agreement on sacrifices by flight attendants, you will get a chance to vote on it before it's enacted. With the possibility of bankruptcy in our company's future, we want you to have all of the information you need to make an informed decision. Please read the important information below.

Keep working and doing your job to the high standards US Airways flight attendants are known for. Keep in mind that the AFA flight attendant contract remains in full force and effect. That means management cannot just make changes or unilateral cuts to our contract. Any and all changes must be negotiated for and approved of by the flight attendants in a ratification vote. You will get the final say in whether to approve the sacrifices management is requesting that the flight attendants make. 

Q. What is a bankruptcy?

A. A bankruptcy is a legal proceeding with a special set of rules and standards governing a company's rights and obligations after the company files a bankruptcy petition. A bankruptcy also determines the rights and obligations of creditors and other parties. A creditor is an individual or business that has a claim against the bankrupt company (known as the debtor) that usually arises prior to the bankruptcy being filed

The laws governing a bankruptcy are contained in the U.S. Bankruptcy Code. Bankruptcy proceedings are supervised by the U.S. Bankruptcy Courts, which are divisions of the U.S. District Courts.

Q. What are the differences between a Chapter 7 and a Chapter 11 bankruptcy?

A. A Chapter 7 filing is a liquidation proceeding where a company terminates operations. A trustee liquidates assets and pays out available funds to various classes of creditors pursuant to rules provided in the Bankruptcy Code. 

A Chapter 11 filing is a reorganization proceeding that is intended to give a company an opportunity to restructure its operations and finances and emerge from bankruptcy pursuant to a plan of reorganization. In airline and other Chapter 11 bankruptcies, companies seek a seamless transition in operations upon a filing so customers do not recognize a break or difference in service. In a Chapter 11 bankruptcy proceeding, a company may attempt to reorganize its operations in a 'stand-alone' reorganization or to sell some or most of its assets as a going concern.

A Chapter 11 filing does not guarantee that a company will obtain the new funding that is often necessary for a company to continue operating. Though this kind of bankruptcy filing is structured to prevent liquidation, a liquidation can occur in a Chapter 11 proceeding if attempts to reorganize fail.

Q. What are the rights a company obtains when it files for Chapter 11? 

A. A company filing for Chapter 11 obtains the right to seek court authority to reject otherwise binding contracts. Pursuant to the automatic stay, which becomes effective immediately upon a bankruptcy filing, there is a suspension of most creditors' debt collection efforts and most litigation. Debts become what are called bankruptcy 'claims', which are usually dealt with in a plan of reorganization.

The purpose of the automatic stay is to ensure that virtually all cases that could be filed or has already been filed is dealt with in one place - the bankruptcy court. 

A.    Exceptions to an automatic stay include certain 'First Day Orders', which, if appropriate motions are filed and approved, may authorize the company to pay various bankruptcy claims as they come due. These claims might include certain employee wages and benefits, as well as claims by key vendors, foreign creditors, and, in the case of transportation companies, ticket holders. 

While most litigation is stayed, grievance and arbitration proceedings under a labor contract may go forward, although any monetary damages may be dealt with in the bankruptcy process.

Q. What happens in the Chapter 11 bankruptcy process?

A. When a company files a petition for Chapter 11, the automatic stay takes effect and the company immediately comes under the supervision of the bankruptcy court. The debtor may ask the court for the authority to reject or assume contracts.

The company ultimately negotiates a Plan of Reorganization (POR) with creditors and other involved parties in the bankruptcy. The POR is a legal document that provides how the company will pay creditors and how it will be governed following emergence from bankruptcy.

Q. How is the POR approved?

A. The company's management has the exclusive right to file a POR for the first 120 days after filing the petition, although the bankruptcy court may shorten or extend that 'exclusive' time period. Before a POR may take effect, it must be approved by the bankruptcy court and gain the required positive vote of various classes of creditors. There are usually prolonged negotiations over the POR between the company and various groups involved in the bankruptcy, as the approval of the POR comes towards the end of a bankruptcy proceeding.

Q. How is a company financed under Chapter 11?

A. A company filing for Chapter 11, now called the debtor-in-possession (DIP) because the debtor is still in possession of the business, usually seeks new financing. This is called debtor-in-possession financing and is used to pay for the operating needs of the company. As noted, the filing of a bankruptcy petition is not a guarantee that funding will be available.

Q. What is the role of the bankruptcy judge?

A. The judge oversees the process and must review the debtor's -non-ordinary course - decisions, which includes any requests for rejecting labor contracts or selling substantial assets. The judge will defer to the debtor's business judgment on many decisions. Many bankruptcy judges strongly encourage parties to settle legal disputes.
 

A. The creditors have a formal role in a Chapter 11 bankruptcy. An official body called the Unsecured Creditors' Committee, usually consisting of the seven largest unsecured creditors, is appointed by the United States Trustee, a government official, to represent the interests of unsecured creditors. Unions who have substantial bankruptcy claims are entitled to appointment to such committees. 

An 'unsecured creditor' is an individual or business whose claim against the debtor is not protected or secured by any collateral. A 'secured' creditor is an individual or business that has secured collateral from the bankrupt company (usually before the bankruptcy was filed), which protects the creditor in case the bankrupt company cannot pay the money it owes.

Each member of the Unsecured Creditors Committee receives one vote. This committee can hire professionals, often including lawyers and accountants or investment bankers, to monitor the company's actions. This cost is paid for by the debtor. 

Any party can appear on any matter before the bankruptcy court, and the court tends to pay special attention to the views of the committee.

Q. What can happen to our contract if US Airways files for Chapter 11? 

A. Under Section 1113 of the Bankruptcy Code, the debtor may ask the bankruptcy court for authority to reject labor contracts, and it can thereby seek to modify any provision in a labor contract.

The debtor must go through a negotiation and litigation process before it can obtain rejection of a labor contract. First, a proposal must be provided to the relevant union prior to the company's filing the motion to reject in court. 

Among the statutory requirements are that the proposal must provide only for 'necessary' modifications that are 'necessary' to permit reorganization and assure 'fair' and 'equitable' treatment of all parties. The Company must also provide the union with such relevant information as is necessary to evaluate the proposal. Then, within 2-3 weeks of filing this motion, during which negotiations take place, a full-scale bankruptcy court hearing is held where all interested parties can be heard. Negotiations often continue during the hearing. If no settlement is reached, the court's decision on rejection of contracts will be made within 40-51 days of the filing of the motion unless the debtor agrees to extend this period.

If the rejection of a labor contract is approved, it leads to the debtor's implementation of its last offer to the union. The union then has the right to strike.
 

Under Section 1113 (e) of the Bankruptcy Code, emergency short-term relief may be granted on an expedited basis without a full negotiating process if the court finds that the relief is 'essential' to the continuation of business or to avoid 'irreparable harm' to the bankruptcy estate.

Q. What happens to our retirement health and life insurance benefits under Chapter 11 bankruptcy?

A. Section 1114 covers union and non-union retiree health and life insurance benefits. Its procedures are similar to Section 1113. Pension issues are reviewed in the following section.

Retirement and Insurance bankruptcy questions

Q. Can the Retirement Plan be terminated?

A. Under the collective bargaining agreement, the Company may terminate the Retirement Plan only with AFA's consent. However, if the Company is in reorganization in bankruptcy and meets certain stringent conditions specified in the Bankruptcy Code, including in Section 1113, a bankruptcy court could allow abrogation of the collective bargaining agreement in this respect and permit the Company to terminate the Retirement Plan without AFA's consent. Even if a termination instituted by the Company (a so-called 'voluntary termination') is permissible under the foregoing, it may not occur unless it also meets the requirements for either a 'standard termination' or a 'distress termination', which are discussed in the following questions.

In addition, the Pension Benefit Guaranty Corporation (PBGC), the federal government agency that administers and guarantees certain pension benefits, could act on its own to terminate the Retirement Plan (a so-called 'involuntary termination'), if it determines that the plan has not met applicable minimum funding standards or will be unable to pay benefits when due, or if it determines that its possible long-run loss in providing guaranteed benefits under the plan will increase unreasonably if the plan is not terminated.

The Employee Retirement Income Security Act of 1974, as amended (ERISA), requires that the plan administrator provide 60-day advance written notice to all affected parties of its intent to terminate a plan. If the PBGC is advised that the proposed plan termination violates a collective bargaining agreement and that the termination is being challenged under procedures specified in the collective bargaining agreement, the PBGC will suspend the termination proceeding until resolution of the challenge. However, the PBGC still has the authority to proceed with an involuntary termination, if the requirements of an involuntary termination are met.
 

Q. What are the requirements for a 'standard termination' and how are plan assets allocated in that event?

A. If a pension plan's assets exceed its liabilities, it may be terminated in a 'standard termination'. In a 'standard termination' plan assets are used to purchase insurance company annuities designed to cover all liabilities of the plan (for all active, retired and terminated participants and survivors). The Retirement Plan provides that any assets remaining after such a fully funded termination would revert to the Company.

Q. What are the requirements for a 'distress termination'?

A: If a pension plan's liabilities exceed its assets, the Retirement Plan may be terminated only in a 'distress termination'. A 'distress termination' may occur only if the PBGC determines that the entity sponsoring the plan (i.e., the Company), as well as each entity in the sponsor's controlled group of entities, satisfies one of four alternate criteria for a distress termination, pursuant to Section 4041(c) of ERISA, as follows: the entity is in liquidation in bankruptcy, or the entity is in reorganization in bankruptcy, and the bankruptcy court determines that unless the plan is terminated the entity will not be able to pay its debts pursuant to a plan of reorganization and will be unable to continue in business outside the reorganization process, and the court approves the plan termination, or the PBGC determines that termination is required to enable the entity to pay its debts and continue in business, or the PBGC determines that termination is required for the entity to avoid pension plan costs that have become unreasonably burdensome solely as a result of a decline in the entity's workforce covered by all of the entity's pension plans.

Q: If the pension plan undergoes a distress termination or an involuntary termination - which means the plan's assets do not cover its liabilities - does the PBGC guarantee all the benefits to which a plan participant is entitled?

A: Generally, the PBGC will guarantee a maximum monthly benefit of $3,579.55 for a participant who retires at age 65. The chart below provides the guaranteed amount for various retirement ages. There are specific rules that determine whether other types of benefits are guaranteed by the PBGC and if so, to what extent.

Following are the PBGC guarantee maximums that are applicable to any defined benefit retirement plan that terminates in 2002. The following amounts reflect a single life benefit, payable for the retiree's life only. If, at the time of his retirement, the retiree elects to receive his benefit in some form other than a single life benefit, such as in the form of a 50% joint and survivor benefit, the amounts guaranteed by the PBGC will be less than those listed below. PBGC guarantee amounts for ages in between those listed below will be pro-rated to the nearest full month.

This chart is organized in three (3) columns:

(A) Flight Attendant's Age on Later of Benefit Commencement or Plan Termination Date
(B) PBGC Maximum Monthly Guarantee
(C) PBGC Maximum Annual Guarantee
 

Age (A)

Monthly (B)

Annual (C)

70  69  68  67  66  65 64  63  62  61  60  59  58  57  56  55

$5,942.05 $5,333.53 $4,796.60 $4,331.26 $3,937.51 $3,579.55 $3,328.98 $3,078.41 $2,827.84 $2,577.28 $2,326.71 $2,183.53 $2.040.34 $1,897.16 $1,753.98 $1,610.80

$71,304.60 $64,002.36 $57,559.20 $51,975.12 $47,250.12 $42,954.60 $39,947.76 $36,940.92 $33,934.08 $30,927.36 $27,920.52 $26,202.36 $24,484.08 $22,765.92 $21,047.76 $19,329.60

Don't pass rumors. Get the facts. Stay informed. Visit www.afausairways.org or call 800-531-3242.

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