Category Archives: American Airlines Group

Allied Pilots Association reject efforts to merge with ALPA

American Airlines’ pilot union APA-ALPA Merger Exploratory Committee rejected efforts to merge with the Air Line Pilots Association (ALPA).

The Allied Pilots Association (APA) board fell short of the two-thirds vote necessary to commence merger talks with ALPA, the world’s largest pilots’ union.

APA issued this report to its members in an open letter:

DCA Pilots,

The APA-ALPA Merger Exploratory Committee presented their findings this past Thursday and Friday. There was a significant amount of effort made to bring a comprehensive report to the Board. All 2,441 pages are available here. We wanted to explain why the motion, which required a 2/3rds vote (14 Members) to approve and continue the process, was voted down on a ten / ten split BOD vote.  

We will only be able to speak to what your DCA reps perceptions were, and we can further say that as many are aware, various people can be presented with all kinds of information and come to very different conclusions. While there are pros and cons to pursuing a merger with ALPA, many of which the committee outlined in the various areas examined all of which we carefully considered. We found that there are several overwhelming cons that made a “No” vote, at this time, for further merger exploration, our final decision.  

Your Right of Self Determination

First and foremost, the autonomy to chart our own path, forge our own direction, and represent our membership on ONLY the issues deemed important to our members and in the manner we determine to be best, is far too valuable to give up. That autonomy would be lost at ALPA, as the larger and overarching power structure of the ALPA Board of Directors would always retain final say on the actions of the individual airline MECs.  What is best for ALPA, and the 39 other airlines it represents, would likely take precedence over what might be best for an individual airline’s pilots.  We have already experienced situations in which APA and ALPA national have taken conflicting positions on issues relating to our industry and our profession.  While that does not occur frequently, if we are being candid, there would inevitably be a loss of some level of control and self-determination once you become part of the ALPA structure. Certainly some will belabor this point, but it is a fact that, based on the briefing given and the realities of how ALPA is structured, there is less control of an individual pilot group’s own destiny once you join ALPA.  That is one of the reasons APA was founded in the first instance and something that we value too much to agree to give up.

Your Benefits 

The Merger Exploration Committee concluded that our APA Benefits were far superior to ALPAs.  While many statements were made about what “might happen,” or “could happen,” or “would be expected to happen,” with our benefit plans in a proposed merger, this was another valuable aspect of APA we were not comfortable with putting at risk for any possible negative change at this time. 

Your Money

Additionally, the Committee also informed the Board that, under ALPA’s current dues structure, we would each be paying 1.85% dues, compared to the 1% we pay in non-Section 6 times and the 1.5% we pay during Section 6. In the last 23 years, APA pilots have paid an average of 1.32% dues. Using very rough math, with a constant 1.85% dues rate, in 2023 we would generate over $60.8M in revenue for ALPA, yet an AA MEC would only get back 38.5% of those funds, approximately $21.8M, according to the Committee. While it was reported that some of our APA Staff might be paid by ALPA A&S Funds in the event of a merger, that still would leave a shortfall in funding of over $7M from our current operating budget. 

Effectively, the larger airlines in ALPA are subsidizing all of the smaller ones. APA, if it merged with ALPA, would take over as one of the largest subsidizers. Another con is that local domiciles in ALPA are unable to give union time off for domicile volunteers doing important union work. This is a matter of policy, which APA would be subjected to and possibly, unable to change due to ALPA policy, if it were part of ALPA at that time. There are certainly other policies inconsistent with the way we are currently doing business, which goes back to the primary reason why we felt a “no” vote was necessary—preserving APA’s autonomy. Finally, further exploration of a merger would cost north of $200,000.

Merger Ahead?  

One of the more interesting briefing points we received from the committee, which was recorded in open session, was the following;

The Delta MEC and the Endeavor MEC have an Arrangement. It has been Initiated by the DAL MEC and mutually agreed on between the respective MECs.

• “WHEREAS the best way to ensure proper staffing for Delta’s regional flying is to bring those aircraft, and pilots, to the mainline”

• “WHEREAS the adage “a rising tide lifts all boats” certainly applies in the relationship between our two pilot groups interests, and goals…”

• The resolutions authorizing pursuit of the arrangement expressly provide that the working group established by the resolutions “will neither consider nor recommend any action that would result in any Endeavor pilot being placed on the seniority list ahead of Delta pilots …”

So, in the opinion of this writer, it certainly appears that based on the report given that the Endeavor Pilots have agreed to what some arguably could call a staple.  We should exercise extreme caution in the timing of any efforts to pursue any ALPA or other union merger until we see the results of the Delta/Endeavor MEC negotiations and the final seniority list for them – particularly with the possibility that AA could attempt to merge the wholly owned with mainline.  

In Closing

The bottom line is, we found the report useful in many ways, in that it showed us some important steps we might take to improve APA. Some structural, process, and governing document improvements are most definitely in order to improve our efficiency and effectiveness, and the Board has already taken steps to commit to consider those changes in upcoming months. The National Officers and Board together are currently forming a Governance Reform Caucus to address these shortfalls, and we encourage those with great ideas to submit them via Soundoff so we can improve the effectiveness of our organization…so that ultimately we will be able to serve YOU, the membership, in the most optimum, efficient, and effective way.

The grass may look greener on the other side, but the truth is that every organization has challenges. APA has its challenges, but ALPA is no different. Those members of the Board of Directors who voted against pursuing a merger found that the costs of possibly merging with ALPA simply outweigh the benefits in this equation, and we did not believe that becoming part of ALPA would be the panacea that some make it out to be. 

However, if you want to make a difference, we encourage you to get involved as a volunteer with APA and you can help make our organization a better place. We need your help, and if you feel passionately about the things we can do and change to make our organization better, then we encourage you to step up and volunteer.

Thank you for your patience as we continue to wait for the Negotiating Committee’s language and as we continue to work to make this a better place for all pilots.

In Unity,

Joe and Tim

American Airlines reports on a profitable 4Q and full-year 2022

American Airlines Group Inc. today reported its fourth-quarter and full-year 2022 financial results, including:

  • Fourth-quarter and full-year net income of $803 million and $127 million, or $1.14 per diluted share and $0.19 per diluted share, respectively. Excluding net special items1, fourth-quarter and full-year net income of $827 million and $328 million, or $1.17 per diluted share and $0.50 per diluted share, respectively.
  • Record fourth-quarter revenue of $13.2 billion, which represents a 16.6% increase over the same period in 2019, despite flying 6.1% less capacity.
  • Ended the year with $12 billion of total available liquidity, after prepaying a $1.2 billion term loan during the fourth quarter.
  • Company continues to execute on its plan to pay down $15 billion of total debt2 by the end of 2025.

“The American Airlines team has produced outstanding results over the past year,” said American’s CEO Robert Isom. “We committed to running a reliable operation and returning to profitability, and our team is delivering on both. We’re proud to have led the industry in operational performance over the holidays while producing record full-year and fourth-quarter revenues, resulting in a third consecutive quarterly profit and a profit for the full year. As we turn our attention to 2023, we will continue to prioritize reliability, profitability and debt reduction.”

Running a reliable operation

American and its regional partners operated more than 475,000 flights in the fourth quarter, with an average load factor of 83.9%. For the quarter, American ranked first in completion factor among the nine largest U.S. carriers.

The American team delivered an even stronger performance over the holidays, despite challenging conditions in many parts of the country. American outperformed the industry over the December holiday period, ranking first in completion factor. The momentum has continued into 2023 as American has delivered the best on-time arrival performance of the nine largest U.S. carriers so far this year.

Returning to profitability

American produced revenues of $13.2 billion in the fourth quarter, an increase of 16.6% versus the same period in 2019 and the highest fourth-quarter revenue in company history, driven by the continued strength of the demand environment. This record revenue was achieved while flying 6.1% less capacity than the same period in 2019. On both a GAAP basis and excluding the impact of net special items, the company produced an operating margin of 10.5% in the quarter. American also produced record revenues of $49 billion for the full year, resulting in full-year profitability.

Liquidity and balance sheet

In the fourth quarter, American made approximately $539 million in debt and finance lease payments and prepaid a $1.2 billion term loan. The company ended the year with $12 billion of total available liquidity, comprised of cash and short-term investments plus undrawn capacity under revolving and other credit facilities. Total debt2 reduction continues to be a top priority, and the company is more than halfway to its goal of reducing total debt by $15 billion by the end of 2025. As of Dec. 31, 2022, American had reduced its total debt by more than $8 billion from peak levels in the second quarter of 2021.

Guidance and investor update

Based on demand trends and the current fuel price forecast and excluding the impact of special items, the company expects its first-quarter 2023 adjusted earnings per diluted share3 to be approximately breakeven. Based on today’s guidance, American expects its full-year 2023 adjusted earnings per diluted share3 to be between $2.50 and $3.50.

Notes

See the accompanying notes in the financial tables section of this press release for further explanation, including a reconciliation of all GAAP to non-GAAP financial information.

  1. The company recognized $24 million of net special items after the effect of taxes in the fourth quarter, which principally included mark-to-market net unrealized losses associated with certain equity investments.
  2. All references to total debt include debt, finance leases, operating lease liability and pension obligations.
  3. Adjusted earnings per diluted share guidance excludes the impact of net special items. The company is unable to reconcile certain forward-looking projections to GAAP as the nature or amount of net special items cannot be determined at this time.

Top Copyright Photo: American Airlines Boeing 737-823 WL N997NN (msn 33250) LAX (Michael B. Ing). Image: 959831.

American Airlines aircraftb photo gallery (Boeing):