Dear Members of PHL Council 70,

To fully understand how I believe we may have been hoodwinked out of anywhere between $4.9 and $5.6 million during the previous concessionary negotiations, I will need to take you back in time to June & July 2002.

WHAT HAPPENED TO THE COMPANY’S PROMISE?

I am writing this News-Line in two parts, the first part gives a brief recall of what YOU were told and the second part goes into detail and the mathematics.

On July 1, 2002 at approximately 11:51 am

An AFA E-Line was sent to the US Airways Flight Attendants. At the top of that E-Line under the heading "Main Points of the Tentative Agreement" from the Negotiating Committee, it read:

(THE BAIT)* If the company agrees to a lower percentage of cuts with the pilots, our percentage will be reduced to match it.

For example, our July 1, 2000 Restructuring Agreement (RA) gives management $77 million of the original $90 million per year US Airways sought. That is 85 percent of the original target savings number management set for us. If the pilots strike a deal that provides the company with less than 85 percent of the original $595 million per year that the company asked for, the savings provided in our deal will be reduced to match the lower percentage -- meaning we will put money back in our pockets.

AFA originally said we were going to wait for the pilots to make a deal first, and then we would follow. However, we were able to get the company to sign off on this provision, so we were able to continue with negotiations and still be ensured that we are not going to pay a higher percentage than the pilots.

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Eighteen days later, on July 18, 2002, at approximately 8:49 pm, our NC sent this message out on the hotline:

Notes from the US Airways Negotiating Committee
Message to Members
7-18-02

Annual Savings cut to $75.8 million

The AFA Negotiating Committee and consultants have finished analyzing the pilots' tentative contract and have discussed it with management. Based upon our analysis and discussions with US Airways, our annual savings contribution will be cut by $1.2 million per year, from $77 million to $75.8 million.

Our tentative contract was contingent upon the pilots reaching a tentative deal that equaled 85% of the cost savings number management had calculated it needed over the term of the agreement. Once the pilots reached a tentative, according to our agreement, we analyzed the pilots' deal. 

The term of the pilots' contract is for 6.5 years, through 2008. The original annual savings numbers calculated by management ($90 million for flight attendants and $595 million for pilots) were calculated based upon a 7.5-year contract, through 2009.

Management recalculated the savings targets, using the same mathematical formulas developed to reach the original $90 million and $595 million numbers. ALPA's average annual savings target through 2008 was recalculated to be $547 million, and AFA's average annual savings target through 2008 was recalculated to be $89.2 million.

(THE SWITCH) The pilots' tentative (NOW) averages $465 million per year in cost savings. Our tentative averages $77 million per year in cost savings. Doing basic math ($465/$547), the pilots' deal equals 85% of their target number over the 6.5-year term of their agreement. Since the value of our deal over the same 6.5 year term ($77/$89.2) equaled 86%, management owed us money back. To get our deal down to 85%, management agreed to put $1.2 million per year back in our contract. The revised annual savings for our tentative is $75.8 million.

Since management's biggest need in terms of cost savings is in the first few years of the Restructuring Plan, we have added the $1.2 million per year back into our contract by changing the final two wage increases in our tentative from 2% increases to 2.9% increases. It also made sense to do this because putting the money back in up front would have only meant about a .3% decrease in the initial wage cut. Putting the savings at the end enabled us to get back close to 2% more in wages.

(THE STING)So, why did the pilots' number go down more than ours in proportion to their original number? It went down more mainly because of the actuarial calculations that have to be made when computing pension effect on wages. When a year was taken off of the term of the agreement, a huge chunk of pension credit got chopped off of the pilots' number. Essentially, in the seventh year, our pension credit as a part of the savings was minimal, whereas the pilots' pension is so disproportionately high when compared to ours (and every other US Airways employee) that the pilots' savings target dropped more than ours (and everyone else's). 

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So what we were led to believe is because the TERM of both the ALPA & AFA agreements were reduced from 7.5-years to 6.5-years on June 7, that our TA dated June 30, changed to mean something totally different on July 18!

Please note the significant differences in the message the Negotiating Committee (NC) sent to you the day AFTER the NC reached an agreement with the Company and the one they sent out on July 18, 2002, approximately 21/2 weeks later.

Both of the above referenced Hotline messages refer to the section of the Tentative Agreement (TA) called "Verification". FYI, although there were several proposals BEFORE this one, this was the ONLY proposal to mention the ‘relationship’ between ALPA & AFA. I was told the reason behind the language was to give us protection for ‘Going First’ in the event ALPA came in lower than we did. I asked the Negotiating Committee who wrote/designed the language? Their answer was "the Company." Here is EXACTLY what is written in the TA on June 30, 2002:

VERIFICATION

If concessionary negotiations with ALPA achieve less than 85% of its savings target (based on $90/$595 relationship), wage rates for the fight attendant group will be adjusted such that the flight attendant group achieves the same percentage of its savings target.

When we finally received the draft of the new (RA) TA language from the AFA attorney and the Negotiating Committee (NC), the ‘Verification Language’ had been changed to read:

“If concessionary negotiations with ALPA achieves less than the proportionate saving agreed to by AFA, wage rates for flight attendants will be adjusted such that the flight attendant group achieves the same percentage of its savings target.”

“In the event that the concessions agreed to by the Air Line Pilots Association are worth less that 85% of its Savings target through 2008 and as measured by the Company; the rates of pay for the flight attendants will be adjusted upward such that the flight attendant group achieves the same percentage of its Savings Target as the pilot group achieved of its Savings Target.”

As you can see, what was written AFTER the fact was VERY different from what I originally agreed to send out to you. Please know that both Council 40-PIT and Council 70-PHL objected to the change in language and had it returned back to it’s original intent.

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In my first News-Line to you, I stated that because the pilots did not reach 85% of the $595m target, we would see some money back in our pockets. And our wage returns did in fact increase in years 2007 & 2008 from 2.0% up to 2.9%. However, I soon realized that the increases did NOT take us down to the “SAME relationship” in our original target number of $90m as it did the pilots relationship to $595m. Simply stated the company and the NC are now saying it was their ‘intent’ and their ‘agreement’ that the pilot’s original $595 number changed to $547m because the term of their agreement changed. In order to keep this simple I will put it into bullet points. All numbers are approximates.

· Our TA came in at $77m. Our original target number was $90m. Therefore, our concessions equate to approximately 85% of our original target number.

· The pilots came in at $465m. This equates to 78% of their original target number of $595m.

· On June 7, 2002, the company changed all the labor agreements from a 7.5-Year term to a 6.5-year term.

· With the increased wage returns in years 2007 & 2008 up from 2.0 to 2.9%, our new concessionary number dropped from $77m to approximately $75.1m. This equates to approximately 83% of our original target number.

· The pilots were/are still at 78% and we were now at at 83%.

· In order to equal the pilots 78% we would need to drop our concessionary number to $70.2 m. Our new number with the adjustments is $75.1. The difference is $4.9m.

· When questioned about the disparagement between the two numbers and the percentages, the Company, The MEC President, the AFA International President, The AFA International Attorney, the AFA advisors and the majority of the members of the Negotiating committee stated the TA was just a ‘term paper’ and numbers were subject to change. This was NOT conveyed to the MEC on July 1, 2002 when we voted to send the TA out to the US Airways FA’s.

· On July 9, at the MEC meeting, both the LEC president from Council 40-PIT and myself (PHL-70) questioned the MEC President at that time(Karen Lascoli) and the NC committee on the differences. Those listed above stated the company changed the pilot’s concessionary number from $595m to $547m. BECAUSE the duration changed from a 7.5-year agreement to a 6.5-year agreement.

· Several weeks BEFORE the company and the NC agreed on the above language, ALL labor groups duration of agreement changed to reflect 6.5-years. If the duration was an issue, why was it NOT mentioned in the written language? Why was the AFA E-Line written the way it was? As I said, this was NOT a last minute change, this was known weeks BEFORE the company wrote the above ‘Verification’ language. As you can see, it does NOT speak to the term/number of years of the agreement; it does NOT speak to the newly adjusted number of $547m for the pilots or $89.2m for the FA’s.

· FYI $547 was an 8% decrease for the pilots and $89.2 was a 1% decrease for the FA’s. These numbers also do not show a RELATIONSHIP.

On July 9, the MEC directed the AFA International President, Pat Friend, the US Airways MEC President at that time, Karen Lascoli, and the PIT LEC President, Teddy Xidas to approach the company for discussions on correcting the disparagement in the above numbers. The PIT LEC President tried her best to fight the good fight however; the company sent them away with a resounding NO.

One of the main reasons I voted to send that TA to you was because of the ‘Verification’ protection. The odds of the pilot’s NOT reaching 85% of their original $595m target number were very much in our favor (which in fact they did NOT reach.) Therefore, the odds of us getting the TA back to decrease cuts, return wages and benefits were also in our favor.

As I stated on record at the MEC meeting, one of three things happened. 1. The company has changed their position on the agreement or

2. The company did not explain their intent clearly to the NC, or

3. The NC did not fully disclose the full information to the MEC voting members.

Regardless, we did NOT receive this credit, which I now believe may be as much as $5.6 million.

Take Care and Fly Safe,

Mollie McCarthy