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88–585 PDF 2003

S. HRG. 108–198

TWA/AMERICAN AIRLINE WORKFORCE

INTEGRATION

HEARING

OF THE

COMMITTEE ON HEALTH, EDUCATION,

LABOR, AND PENSIONS

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

ON

EXAMINING CERTAIN ISSUES RELATIVE TO TWA/AMERICAN AIRLINE

WORKFORCE INTEGRATION

JUNE 12, 2003

Printed for the use of the Committee on Health, Education, Labor, and Pensions

(
COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

JUDD GREGG, New Hampshire, Chairman

BILL FRIST, Tennessee

MICHAEL B. ENZI, Wyoming

LAMAR ALEXANDER, Tennessee

CHRISTOPHER S. BOND, Missouri

MIKE DEWINE, Ohio

PAT ROBERTS, Kansas

JEFF SESSIONS, Alabama

JOHN ENSIGN, Nevada

LINDSEY O. GRAHAM, South Carolina

JOHN W. WARNER, Virginia

EDWARD M. KENNEDY, Massachusetts

CHRISTOPHER J. DODD, Connecticut

TOM HARKIN, Iowa

BARBARA A. MIKULSKI, Maryland

JAMES M. JEFFORDS (I), Vermont

JEFF BINGAMAN, New Mexico

PATTY MURRAY, Washington

JACK REED, Rhode Island

JOHN EDWARDS, North Carolina

HILLARY RODHAM CLINTON, New York

SHARON R. SODERSTROM, Staff Director

J. MICHAEL MYERS, Minority Staff Director and Chief Counsel

(II)
CONTENTS

STATEMENTS

THURSDAY, JUNE 12, 2003

Page

Bond, Hon. Christopher, a U.S. Senator from the State of Missouri .................. 1

Talent, Hon. James M., a U.S. Senator from the State of Missouri .................... 4

Case, Theodore A., Snellville, GA, former Secretary-Treasurer, TWA Master

Executive Council, Airline Pilots Association; Sherry Cooper, Jupiter, FL,

former IAM General Chairperson, TWA Flight Attendants Union and

former member, TWA Board of Directors; Karen Schooling, Independence,

Mo, TWA Flight Attendant ................................................................................. 7

Brundage, Jeff, Fort Worth, TX, Vice President, Employee Relations, American Airlines; and Edwin C. White, Jr., Fort Worth, TX, Allied Pilots

Association ............................................................................................................ 60

ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.:

Theodore A. Case .............................................................................................. 80

Sherry Cooper ................................................................................................... 83

Jeff Brundage .................................................................................................... 86

(III)

(1)

TWA/AMERICAN AIRLINE WORKFORCE

INTEGRATION

THURSDAY, JUNE 12, 2003

U.S. SENATE,

COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS,

Washington, DC.

The committee met, pursuant to notice, at 2 o’clock p.m., in room

SD–430, Dirksen Senate Office Building, Senator Bond presiding.

Present: Senator Bond.

Also Present: Senator Talent.

OPENING STATEMENT OF SENATOR BOND

Senator BOND. [presiding]. Ladies and gentlemen, the Senate

Committee on Health, Education, Labor, and Pensions will come to

order.

This afternoon, we will receive testimony from those people affected by the fallout from the integration of American Airlines and

the former Trans World Airlines. We have been advised that Senator Kennedy has other commitments, and he may or may not

make it, so we are going ahead without him. We do appreciate his

cooperation and the cooperation of the chairman of the committee,

Senator Judd Gregg, who authorized this hearing and permitted

me to serve as the hearing officer today.

I am very pleased to be joined by my colleague, Senator Jim Talent of Missouri. I have extended an invitation personally to other

Senators who have expressed an interest in this matter in the debates and discussions we have had on the Senate floor and elsewhere. This is a very busy day for the Senate, but I am hoping that

some of these people will be able to join us. In any event, this

record will be available for all members of the committee and all

Members of the Senate, and we will ask explicitly both panels if

they would agree to respond to written questions that may be submitted up to a week after this hearing and to be included as part

of the record, and we would ask that those who submit testimony

agree to that provision.

What we are going to hear today is a story of how the once promising combination of two great airlines turned into a disaster for so

many former TWA employees. Over the last 2 years, we have seen

the promises turn into pink slips. Today is our first opportunity to

hear directly from all sides.

First, we intend to get to the bottom of what promises were

made. Second, we need to give former TWA pilots and flight attendants the opportunity to tell their story. Third, we want to hear
2

from American Airlines, their employees and unions, their positions

and their perspectives.

In summary, we want to know why former TWA flight attendants and pilots never received the comparable seniority status at

American Airlines that was promised to them.

These are important and painful questions for many families in

Missouri and across the Nation, and as I indicated earlier, I am

most grateful to the leadership of this committee for their willingness to allow us to hold this hearing.

I am delighted, as I said, to be joined by Senator Talent today.

All of us on this committee and indeed, all of us in the Senate,

certainly understand how tough times are right now for our Nation’s airlines. We understand how cutbacks in personnel as well

as cutbacks in other expenses have been needed in order to keep

the airlines in the air. There is no question that this is a difficult

time, and we sympathize with all in the airline business.

Unfortunately, we have seen in Missouri that when it came time

to cut at American Airlines, the blade fell almost exclusively on the

former TWA workers, including pilots, flight attendants, and to

some extent, baggage handlers and ground crews.

As most of you in this room know, on April 9, 2001, American

Airlines closed an asset acquisition deal ending a 75-year history

of TWA as an independent operation. At that time, I offered my full

support to and was a committed advocate of the acquisition, and

I pledged to the parties that I would do whatever I could to help.

Thus, I was very pleased to hear the testimony of former American Airlines CEO Don Carty before the Senate Commerce, Science,

and Transportation Committee when he stated: ‘‘We look forward

to adding TWA’s 20,000 employees to the American Airlines family.

We are keenly aware of TWA’s illustrious history and know that

were it not for the hard work and great performance of the people

throughout TWA, they would not be the perfect fit for American

that we believe they are. We also recognize what a good corporate

citizen TWA has been in the State of Missouri, and I can assure

you that our company will be as well.’’

Now, in the lead-up to the bankruptcy court approval of American’s acquisition of TWA assets, a number of good faith steps were

taken by TWA. In particular, TWA, at the request of American,

agreed to enter into bankruptcy in order to shed some of its other

obligations. TWA employees, particularly the pilots and flight attendants represented by their respective unions, agreed, again at

the request of American, to waive the Allegheny-Mohawk provisions in their contracts in exchange for written promises and assurances from American Airlines that they would be integrated fairly

into American Airlines’ workforce.

The Allegheny-Mohawk provisions in their contracts guaranteed

TWA pilots and flight attendants the option to have their integration into a purchaser’s workforce decided by an independent neutral third party provided no agreement on integration could be

reached between TWA’s and the purchaser’s unions. According to

the provisions, this independent arbitration would be binding.

These steps were taken with some risk to TWA and its employees, but in the interest of integrating the two airlines quickly and

smoothly, the TWA pilots and flight attendants in good faith placed
3

their trust in assurances made to them by American Airlines, its

management and unions.

It is precisely what was conveyed by those assurances, who made

them, why they were needed, and what there substance was that

is at the heart of the matter before us today. In particular, in a

letter dated March 17, 2001, American Airlines assured the TWA

pilots that it would ‘‘use its reasonable best efforts with its labor

organizations representing the airline pilots craft or class to secure

a fair and equitable process for the integration of seniority.’’ Since then, and in the wake of the airline industry’s slump following the 9/11 attacks, it is crystal clear that those best efforts

were not good enough. The simple fact is that there was no significant integration of the seniority lists. The flight attendants and

most pilots were simply stapled to the bottom of the senior lists,

and when the cuts came, they came from the bottom up.

The result—60 percent of all former TWA pilots were stapled to

the bottom of the seniority list at American Airlines. Of the 40 percent of TWA pilots who were integrated, more than half of these

pilots—about 400 flyers—were actually slated for mandatory retirement before the integration actually took place. And for those few

TWA pilots who did make it, they were given seniority far below

their counterparts of equal experience. For example, the seniormost former TWA captain, hired in 1963, was integrated into the

same bracket as a 1985-hire American captain.

The result is that many former TWA pilots with much more flying experience and cockpit seniority actually have a lower seniority

rank than the first officer sitting in the copilot seat next to the actual pilot. And ultimately, most of these former TWA pilots are

now out of a job, including many of our friends here today.

However, as poorly as the pilots were treated, it has been much

worse for TWA’s flight attendants. As of July 2, 2003, 100 percent

of all former TWA flight attendants will have been furloughed by

American Airlines—nearly 4,200 employees. Let me repeat that— 100 percent furloughed, 4,200 employees. Best efforts, indeed.

Because of this, I and others attempted on numerous occasions

to reinstate the concept of fair and equitable. On October 1, 2001,

I introduced S. 1479, the Airline Workers’ Fairness Act, with four

of my colleagues in the Senate. The following day, my colleague

from Missouri, Congresswoman Jo Ann Emerson, introduced the

same legislation in the House. The House bill had 31 cosponsors.

Late in October, I organized a marathon meeting between the

APA and ALPA—the two unions representing the pilots—here in

Washington. The meeting last for more than 36 hours, but a resolution to the integration issue was not achieved. Some of here in the

room today participated in that meeting.

In December of 2001, I offered the Airline Workers’ Fairness Act

as an amendment to the Department of Defense appropriations bill.

The amendment was adopted in the Senate, but the provisions

were removed in conference with the House.

On January 31, 2002, I sent a letter to the chairman of the National Mediation Board, Frank Dugan, supporting the response

filed with the board by the ALPA—that is the TWA pilots’ union—

in opposition to the determination that American and TWA had

achieved single-carrier status.
4

On February 14, I sent another letter to Chairman Dugan supporting the International Association of Machinists and Aerospace

Workers on behalf of TWA’s flight attendants and the board’s determination of whether TWA and American had achieved singlecarrier status.

Again this year, Senator Talent and I have been exploring legislative options, including a revised version of S. 1479, and we continue our efforts in this area.

It is clear to anyone who has watched this painful process over

the past 2 years that lives have been disrupted and in some cases

destroyed by what has transpired—jobs lost, promises not met,

anger, disillusionment, and despair replacing the feelings of hope

and sense of opportunity that the initial TWA-American announcement had been greeted with.

Nothing we say or hear today can put the genie back into the

bottle. We cannot repair the relationships or restore the trust, but

we can lay out the facts and perhaps learn enough so that no other

family or employee will face this travesty again.

I thank all of you who have agreed to testify today. In some

cases, your testimony may open old wounds that you wish to have

left alone, but if we are to get to the facts, we must hear your personal stories and must have the opportunity to question those who

are involved.

I am disappointed that neither Don Carty nor Bill Comption are

here today. I worked with both men extensively, developing admiration and respect for them. To be honest, I trusted them, as did

their employees. We invited both. They were certainly integral to

the agreements that created the acquisition, but their absence

today does not lesson my interest or ability to get the full facts on

the table.

So again, I want to thank all of you who have agreed to be here.

I give you my assurance that while we hope our questioning will

be thorough and professional, it will be courteous and fair.

With that, I will turn to my colleague from Missouri, Senator

Talent, for his opening comments.

OPENING STATEMENT OF SENATOR TALENT

Senator TALENT. Thank you, Mr. Chairman.

I want to thank you for your work on this issue which goes back

several years. Also, I am grateful to Chairman Gregg and Senator

Kennedy for allowing me to sit in today even though I am not a

member of this committee; but I do have great interest in this

issue, both as a Senator from Missouri and also as somebody who

thinks this situation is quite unjust to a lot of people.

I am not going to go over everything that Senator Bond did in

summarizing the events that brought us to this hearing today. Just

suffice it to say that American acquired TWA in March of 2001. We

all thought that was a good thing. We still want it to be a good

thing for everybody.

At the time, American promised TWA and the TWA employees

that they would be treated fairly as a result of the buyout, and that

promise was one of the conditions of the Federal approval of the

buyout. I do not think any of this is contested. Certainly the expectation was that when the representative employee groups merged,
5

their seniority lists would be dovetailed in the normal fashion, that

the years of service for TWA employees would count in the merged

company and the years of service for former American Airlines employees would count in the merged company.

And, for whatever reason, which is I guess what we are here to

explore today, that did not happen, and nothing even close to it

happened. The former TWA flight attendants were stapled to the

bottom of the merged seniority list, and most of the TWA pilots

were also stapled to the bottom of the merged seniority list.

I do not mean any disrespect to anybody here who was involved

in that, but in all my years in public office and in the years when

I practiced labor law, I have never seen a merger that was a disadvantageous to one of the former employee groups as this one was.

The effect is that employees who have been working for TWA for

decades are placed behind on the seniority list employees who have

only been working for American Airlines a year or two.

I do not think I go on a flight when a flight attendant does not

come up to me and tell me a story like, ‘‘I have been flying for 25

years for TWA, and I am about to be laid off, and there are people

who have been flying for only one or 2 years who are not going to

be laid off.’’

But when you have layoffs and when you have a lot of layoffs,

the situation is not easy for anybody. We all recognize that. I have

spent 18 years in public life, and I try not to get involved in these

kinds of situations except to be an honest broker where I can because I know it is difficult. However there are thousands of people

here who are in a uniquely difficult situation because they have 10

or 15 or 20 years of seniority with a company, and when you get

seniority with a company like that, you believe reasonably—you develop a reasonable expectation—that you have some protection in

the event of layoffs, and you order your life around that. You get

mortgages; your kids go to school; and then, all of a sudden, when

the rug is pulled out from under you, you have a reason to ask

what happened.

Thousands of people who worked for TWA for years and years

and years are in that position, and it is especially bad because

promises were made that would lead a reasonable person to believe

that that was not going to happen, that the opposite of that was

going to happen.

It is just clear to me that for some reason—I do not know why—

the people who were supposed to represent the interests of the

TWA employees in this process—the management, the union, the

NMB, for some reason did not, so they are now facing layoffs, contrary to what I think were very reasonable expectations, and I look

forward to exploring these issues in a fair and impartial way, and

I know Senator Bond feels the same way.

Thank you, Mr. Chairman.

Senator BOND. Thank you very much, Senator Talent.

We have all of your full statements in the record, and we would

ask you to try to summarize your statements in about 5 minutes.

I am reminded that while I promised that questions for the

record would be submitted within a week, the hearing record will

actually be left open for 2 weeks.
6

The first panel includes Mr. Ted Case, who is married and a father of two and a graduate of Georgia State University. He became

a commercial pilot and started flying passenger jets in 1985 joined

TWA as a commercial pilot in 1990. He served as a union representative for TWA pilots in multiple capacities, most recently as

secretary-treasurer of the TWA Master Executive Council, the

TWA branch of ALPA, and was one of the representatives on a

TWA panel that directed and supervised the pilots’ merger committee discussions with American Airlines.

Our next witness is Ms. Sherry Cooper, a 27-year seniority flight

attendant hired by TWA in 1975. During her career, she served as

president of the Independent Federation of Flight Attendants,

president of the local lodge. She was a labor director serving on the

TWA board of directors from 1998 to 2001 and directly participated

in the negotiations leading up to American Airlines’ acquisition of

TWA.

Ms. Karen Schooling, a former TWA flight attendant, was initially hired by Ozark Airlines in 1975. She has 28 years of seniority. She and her sister were both former Ozark flight attendants

and were given full-seniority credit when Ozark was acquired by

TWO. Ms. Schooling is a widow—her husband passed away 31⁄2

years ago—and she has a son with great medical challenges that

I will let her describe.

These three witnesses all have one unfortunate thing in common.

They either will be furloughed on July 1, 2003 or have already

been furloughed.

Before we begin I have a statement from Senator Kennedy.

[The prepared statement of Senator Kennedy follows:]

PREPARED STATEMENT OF SENATOR KENNEDY

I welcome this hearing on the effects on employees of American

Airlines’ purchase of TWA assets in 2001.

The employees of TWA hoped to continue their careers with

American. But 9/11 and the severe downturn in the economy had

an especially serious effect on the airline industry, and many of the

former TWA employees lost their jobs, as have many other workers

in other parts of the economy.

The economy continues to be troubled, and millions of unemployed Americans are paying the price. The unemployment rate is

the highest in 9 years. Despite all the tax cuts that the President

says will produce jobs and growth, the fact is that today nine million Americans are out of work, and one in five of those Americans

has been out of work for more than six months.

The airline industry has been hard-hit. Since 9/11, over 200,000

workers in the airline and related industries have lost their jobs.

American Airlines hopes to stave off bankruptcy, and has recently

insisted on concessions in wages and benefits from its workers. As

part of these concessions, thousands of workers will be laid off.

Over 7,500 American flight attendants and 3,000 pilots will soon

be out of work.

TWA employees were in an especially difficult situation. In early

2001, the airline was in bankruptcy. Liquidation seemed likely, and

the TWA employees would have lost their jobs and many other benefits. In these circumstances, when American Airlines offered to
7

purchase the TWA assets, the TWA employees voluntarily and specifically waived their right to any arbitration of their seniority.

The seniority rule applied by American was negotiated in arm’slength collective bargaining with the Allied Pilots Association and

the Association of Professional Flight Attendants. The National

Mediation Board determined that TWA had become fully integrated into American Airlines as a single carrier, and the TWA employees became subject to the seniority rule that had been negotiated to address the issue.

Unfortunately, some former TWA employees believe that American promised them a different seniority result. Others say that the

TWA and American Airlines unions had a duty to achieve a different result. The employees have raised their claims in federal

court, and next Monday, the federal district court in New York will

hold a hearing on the flight attendants’ request for an injunction

to stop lay-offs based on the current seniority rule. Lawsuits have

also been filed in St. Louis, Chicago, and New Jersey, so the courts

are clearly well underway in considering these fact-intensive

issues.

I’m concerned about Congress rushing in when the courts are already well underway in considering these issues, and when the

controlling agreement was achieved through arm’s-length collective

bargaining. It’s particularly difficult for Congress to step in when

the employees themselves have waived their right to arbitration. In

the past, Senator Bond has proposed legislation to reopen the seniority issue and send it to third-party arbitration. We all wish

that all the TWA employees and all the American employees could

keep their jobs. But Congress should not try to tilt the balance,

when our action would only jeopardize more American Airlines employees’ jobs, and ignore decisions already made by the former

TWA employees.

Senator BOND. With that introduction, I would invite Mr. Case

to begin his testimony.

STATEMENTS OF THEODORE A. CASE, SNELLVILLE, GA,

FORMER SECRETARY-TREASURER, TWA MASTER EXECUTIVE

COUNCIL, AIRLINE PILOTS ASSOCIATION; SHERRY COOPER,

JUPITER, FL, FORMER IAM GENERAL CHAIRPERSON, TWA

FLIGHT ATTENDANTS UNION AND FORMER MEMBER, TWA

BOARD OF DIRECTORS; KAREN SCHOOLING, INDEPENDENCE, MO, TWA FLIGHT ATTENDANT

Mr. CASE. Chairman Bond and members of the committee and

guests, I sincerely appreciate the opportunity to appear before you

today. On behalf of my fellow pilots who were formerly employed

by Trans World Airlines, we welcome the opportunity to testify on

the record about the whole story, the real story behind the most

shamefully flawed seniority integration in United States airline

history.

Many of you are already familiar with some of the facts of this

crisis. To date, thousands of ex-TWA workers, including ground

workers, flight attendants and their families, have suffered as a result of layoffs. The great State of Missouri and the entire St. Louis

region has felt a sharp economic shock and emotional trauma

caused by these massive job cuts.
8

The uniform hat that you see here today symbolizes thousands

of men and women who built TWA over more than 75 years and

who now have seen American Airlines’ promises disappear.

I believe, like so many of my colleagues, that we became pilots

to serve the flying public, safely and responsibly, to the best of our

ability. I am honored to have been selected by my fellow pilots to

speak on their behalf today.

I am a married father of two, a graduate of Georgia State University and have served as a representative of the TWA pilots in

multiple capacities. My interest in flying began as a young boy

watching my father fly as a pilot for Eastern Airlines. I began flying when I was 20 years old and became a commercial pilot in

1983, began flying for TWA in 1990. I loved my job; I respected my

employer; and above all, I believed in my customer service mission

for the past 13 years.

My world, and the lives of all of my former TWA colleagues, dramatically changed in April 2001 when American Airlines acquired

TWA. As part of the acquisition, American offered virtually all

former TWA pilots employment. Quoting from portions of the

Bankruptcy Asset Purchase Agreement: ‘‘Purchaser officers to offer

employment benefits and postretirement benefits to all employees

actually hired by Purchaser at levels substantially no less favorable

than those benefits provided to Purchaser’s similarly-situated employees.’’ TWA employees took that promise to heart. When the transaction was announced, I was a 10-year Boeing 767 international

first officer. My American counterpart was also a 10-year Boeing

767 international first officer. Just last week, I received a furlough

notice, while my similarly-situated American counterpart enjoys

his or her continued employment.

To put this in a personal perspective, a good friend of mine, Sally

Young, a single mother of two and a 14-year veteran and former

TWA captain, will lose her job on July 2. I too will lose my job on

July 2 after 16 years as a career jet airline pilot with over 13 years

of seniority and experience with TWA and American Airlines.

On April 9, 2001, the day before the transaction closed, American

hired Mr. B.D. White. Today, Mr. White, who has 2 years and 2

months of American Airlines experience and seniority, continues to

fly while Ms. Young, myself, and hundreds more former TWA pilots

like us are being furloughed.

Touching on Senator Bond’s earlier comments, in February 2001,

many of you heard Don Carty, former AMR CEO, State before the

U.S. Senate Committee on Commerce, Science, and Transportation

his commitment to ‘‘adding TWA’s 20,000 employees to the American Airlines family,’’ a willing commitment ‘‘to the 20,000 TWA

employees and their families that no one else would make.’’

Obviously, Mr. Carty said what the Senate Committee and the

bankruptcy court needed to hear to approve the deal, with no intention whatsoever of living up to those commitments.

Unknown to us at the time American made those promises to

TWA employees, Congress, and the bankruptcy court, they were

also making promises to their unions. American’s promises to their

unions empowered them to hijack the experience and seniority of

the TWA pilots and employees. It is now clear that American’s
9

promise of employment was a hollow one designed only to quell

Congress’ concerns and clear regulatory hurdles to close the transaction.

American Airlines walked away with billions of dollars’ worth of

TWA assets and market share. Once this was accomplished, and

the deal was no longer news, or under the watchful eye of legislators, American callously discarded the TWA employees.

Although American pilots claim to be ‘‘sharing the pain’’ of the

airline’s troubles, more than 87 percent of the pre-transaction

American pilots will retain their employment while only 23 percent

of the former TWA pilots will remain employed by May 2004, as

this chart indicates.

Members of the committee, we are not here seeking sympathy or

pity. We are here in the name of justice and fairness. We are here

in hopes that Congress can rectify this atrocity and act so this tragedy can never again be repeated in another workplace to the detriment of another working man or woman. We ask only that our

all-important seniority rights be handled fairly and equitably as

promised—no more, no less.

I hope that you and the American people can now clearly see

that our seniority was handled unfairly and inequitably by an airline that can now only be called ‘‘un-American Airlines.’’ I thank you for the opportunity to speak before this committee

today, and I am happy to answer any questions.

Senator BOND. Thank you very much, Mr. Case.

Ms. Cooper?

[The prepared statement of Mr. Case may be found in additional

material.]

Ms. COOPER. Thank you, Senator Bond.

First of all, I am very honored to be here to speak to you since

I know how important this issue is to both you and Senator Talent.

This affects not only the lives and futures of the TWA employees

but the City of St. Louis and the State of Missouri. I thank both

of you for being here today to listen to our comments.

On May 3, 2003, I received my 28th anniversary service announcement; that very same day, I also received my furlough notice

as an American Airlines flight attendant.

Perhaps more than anyone else here today, I served in a unique

position at TWA. Not am I a soon-to-be-furloughed TWA flight attendant, but I also sat on the TWA board of directors.

In January of 2001, I received a telephone call from Mr. Bill

Compton, former president of TWA. He told me there was a ‘‘great

deal’’ for the TWA employees. First of all, he advised me that all

TWA employees would be protected, all retirees would be protected,

that the unionized employees would receive greater job security

and guaranteed jobs. We were told that all TWA employees would

receive greater pay and greater benefits—in summary, that TWA

employees would be better-off through the agreement that he had

reached with American Airlines.

There was only one catch. Even though American and TWA had

struggled very mightily to come up with a straight merger transaction, there was a stumbling block. That stumbling was Carl

Icahn and his Karabu ticket agreement. The only way that American could see fit to do the deal was to take Karabu out for bank-
10

ruptcy. Thus begins the biggest myth of all—that American Airlines saved TWA from bankruptcy. I want to make it perfectly clear

to everyone—at the time of the agreement, TWA was not in bankruptcy.

The asset purchase agreement guaranteed that all unionized employees would be employed by American Airlines. Mr. Carty, then

CEO of American Airlines, promised that TWA employees would

receive the same benefits that the American Airlines employees received. Our union contracts would need to be modified in order to

mirror those of the American employees.

Importantly, American Airlines agreed and insisted that all seniority integration matters be worked out between the unions.

American agreed that there would be a fair and equitable procedure and that it would adopt whatever process came out between

the facilitated talks of the two unions. For the flight attendants,

there simply were no talks.

The merger of a relatively small of senior flight attendants from

TWA would have had very little impact on the overall picture, because most flew out of St. Louis, MO, a non-American Airlines

base. Unlike other carriers who went out of business, the TWA employees were coming to the acquisition with planes, routes, airport

slots, reservation and maintenance facilities, and the prized St.

Louis hub. It was for all intents and purposes our ‘‘dowry.’’ It is well-chronicled that American Airlines and Don Carty touted the TWA purchase as a great acquisition. In his own words, Mr.

Carty stated, and I quote: ‘‘American gains many great assets from

TWA but none as important as its talented team of employees.’’ American Airlines broke its written agreement with TWA flight

attendants by engaging in secret talks with APFA, the American

Airlines union. It negotiated an agreement that stapled to the bottom of the APFA seniority list all TWA flight attendants.

At the same time, APFA had agreed that it would allow those

former TWA flight attendants based in New York and St. Louis

some job protection. They would maintain that job protection as

long as we remained in our two hubs.

By contrast, when TWA purchased Ozark, all former Ozark flight

attendants received full seniority. Even APFA, when American Airlines acquired both Air Cal and Trans-Caribbean, agreed that those

flight attendants would retain credit for their years of service at

those carriers. Ironically, even American Airlines voluntarily provided full credit for seniority to TWA nonunion and management

personnel.

Following the aftermath of September 11, American Airlines decided to shut down the New York TWA operation. It transferred

the former TWA flight attendants to St. Louis and took the former

TWA flights and gave them to more junior American flight attendants. The New York flight attendants had two options—transfer to

St. Louis or be sent to the streets without a paycheck.

Many of our former New York flight attendants did in fact transfer and move to St. Louis. We began operating on the TWA flights

because we would retain our job security at St. Louis as long as

we flew on TWA LLC aircraft. Apparently, we were wrong.

They have now determined that all remaining TWA LLC flight

attendants, ranging from senior of 27 years to 49 years of seniority,
11

will be furloughed effective July 2. Eighteen hundred flight attendants with more than 50,000 years of service to their communities

will be losing their jobs. They will be joining the other 2,400 TWA

flight attendants on the streets. At the same time, American flight

attendants with less than 3 years of seniority will be flying on

TWA LLC aircraft out of St. Louis.

To add insult to injury, for the first time in American Airlines

history, TWA flight attendants will be sent to the streets without

furlough pay. What makes it even worse is that for the first time

in American Airlines history, employees will be losing 60 days of

medical benefits.

For the most part, our group to be furloughed are women, 50 and

over, who are primary caretakers for their children, for their parents, and even for their grandchildren. We are facing an uncertain

future with one thing for certain—we have certain personal and financial ruin. At the same time, American Airlines admitted that it

was funding pensions for more than 45 of its top executives.

It should be clear to everyone in this room that when American

Airlines promised ‘‘two great airlines—one great future,’’ it was a

lie. It undertook a pattern of activity designed to solely eliminate

the former TWA employees that it once called TWA’s greatest

asset.

When American Airlines came to Congress asking for financial

aid after September 11, it received financial assistance based in

large part upon the TWA route structure. When it sought reimbursement for security costs, it received its reimbursement due in

large part based on the TWA operation. At the same time, it has

taken our routes, our jobs, our planes, our St. Louis hub and has

handed us a pink slip.

I am a taxpayer who has paid taxes for more than 35 years. Like

all Americans, I have gone to work on a daily basis and performed

a meaningful job for a fair day’s pay. I expected fair wages. I have

watched my tax dollars be spent to help American Airlines survive

this troubled industry. I have asked for nothing in return but fairness. Both are tragically and horribly missing in the TWA integration. There has been no integration.

It has been reported that there is nothing this committee can do,

and my question is simple: Why not? We travel halfway around the

world to save the rest of the world for freedom. At the same time,

we are witnesses to an incredible injustice in our own back yard.

We are the greatest Nation on Earth. What makes us so great is

that we place our highest value on human life. It realizes that the

valuable citizen is what keeps us strong. We are best-known for

how we treat our most vulnerable citizen, not our most powerful.

On behalf of the 20,000 TWA employees, I want more than your

sympathy. There would be no reason to be here today if American

Airlines had honored its commitment. We are asking Congress to

honor all that is right about America. We are asking you to intercede on our behalf and restore the agreement to a fair and equitable seniority integration.

Thank you.

Senator BOND. Thank you, Ms. Cooper.

[The prepared statement of Ms. Cooper may be found in additional material.]
12

Senator BOND. I will indicate that a vote has started, and we

want to hear Ms. Schooling’s testimony. Senator Talent and I will

have to go and vote, so we will ask that the committee stand in

recess, and we will come back for questions.

Ms. Schooling, we want to give you full time for your statement,

if you could make it 5 minutes, before we go vote.

Ms. Schooling?

Ms. SCHOOLING. First of all, I want to thank you for taking time

to listen to my story. While mine may be an extreme case of the

hardship that the former TWA flight attendants are facing, it nonetheless represents the hardship that all of us will be facing on July

2, 2003.

I began my career in 1975 when I was 19 years old. I am from

Missouri, and the natural choice was to begin flying for Ozark Airlines. When TWA acquired my airline in 1987, I had been flying

for 12 years. Instead of being stapled to the bottom of the seniority

list, I was given my full seniority. It made all the difference in the

world.

My younger sister, Maureen Short, also flew for Ozark and became a TWA flight attendant. With her 25 years of combined seniority, Maureen has already been furloughed to the street in May.

I am a single mother of a son who has a rare condition causing

him to be profoundly disabled, both mentally and physically. My

son is 17 years old; he weights 32 pounds; he is fed through a feeding tube and is in diapers and requires constant care. My husband

died 3 years ago of cancer. Many of you would look at me and tell

me how sorry you are for what has happened to me in my personal

life with my husband and my child, but I see it as a challenge. Perhaps it is because of my upbringing, and perhaps it is because of

growing up in the Midwest in the great State of Missouri, but I do

not question why God has given me this life. I love my child, and

I love my career.

What I do not understand is why both American Airlines and the

union that represents me have chosen to eliminate my career.

When American Airlines announced the TWA acquisition, it promised ‘‘two great airlines—one great career.’’ It has broken its promise to every TWA employee and spun a web of deception that has

broad social as well as safety issues.

I am scheduled to be furloughed on July 2, 2003. I will lose my

health insurance coverage for myself and my son. Instead of providing 90 days of medical coverage, which it did for all other furloughed employees prior to June 2003, it has now determined that

it will only provide 30 days’ worth of coverage. On top of that, both

the company and the union agreed that I would not receive any

severance pay. Every other employee prior to June 2003 received

severance pay to help defray the costs of a job loss.

I am facing total and complete financial devastation. Because I

took leave to care for my son, I will not even receive full unemployment benefits to cover Ryan’s care, let alone household expenses.

For most flight attendants, the maximum we can receive weekly is

$250. I can tolerate financial downturn, and I can tolerate economic hardship. What I cannot tolerate is the fact that American

Airlines has broken its commitment to all former TWA employees
13

when it promised a ‘‘fair and equitable’’ process to determine seniority integration.

I will not sit idle and tolerate the life-threatening hardship that

it will cause my son Ryan.

We are asking for your support to right the wrong. If I have

learned anything from what I have experienced personally, it is

that everyone deserves to be treated fairly and with respect.

Thank you.

Senator BOND. Thank you very much, Ms. Schooling.

We will now declare a recess in the hearing in order for us to

go over and cast our votes. We will be back as quickly as we can,

which will probably take about 10 minutes, and we will resume at

the call of the chair.

We stand in recess.

[Recess.]

Senator BOND. The hearing will come to order, and we thank you

all for your patience and indulgence.

We will go back and forth with 5 minutes of questions and probably go for two rounds, so we can get on to the second panel as well

this afternoon.

Mr. Case, in the written statement that has been presented to

us by Mr. White, he says on the supplemental CC that ‘‘the methodology drew considerably on the thinking and proposals of the

TWA pilots’ own representatives and expressed in approximately

25 negotiation sessions. Their thinking and concerns went into both

the construction of the seniority list itself and also into the conditions and restrictions applied to give added protection to the TWA

pilots. There are only minor differences between the two sides’ positions.’’

You were there, weren’t you?

Mr. CASE. Yes, sir, I was there in the background, coaching or

assisting our merger committee.

Senator BOND. Was that the case?

Mr. CASE. No, sir, absolutely not. If they were minor differences,

I do not think the current employment situation would be what it

is. There were miles between the two parties. There was never an

agreement reached between the two parties. As a matter of fact,

American Airlines’ vice president of employee relations, when

asked, replied that ‘‘This is not a fair deal.’’

Senator BOND. Would that be Mr. Brundage?

Mr. CASE. That would be Mr. Brundage.

Senator BOND. Did the TWA MEC Branch of ALPA ever agree

to any integration plan with American Airlines pilots’ union, APA?

Mr. CASE. No, sir. There were multiple offers and counter-offers

that went back and forth across the table, and as a matter of fact,

through fax machines, city-to-city, and there was never an agreement reached.

Senator BOND. All right. Let me go to Ms. Cooper. Would you

please tell the committee the assurances you received of American

that you would not be stapled to the end of the seniority list?

Ms. COOPER. Well, first of all, it is important to understand that

no union group at TWA gave American Airlines a blank check.

They made written assurances to us in exchange for our board

votes. They promised that there would be a process. They promised
14

that, first of all, they would stay out of the process. They promised

that we would have benefits that mirrored those of American Airlines flight attendants. And they promised that only after the two

unions met and reached an agreement would they adopt whatever

agreement came out of those talks. In our case, there were no

talks.

We repeatedly demanded that American Airlines honor its commitment to us that we be allowed to attend talks. They instead

chose to hold secret talks in which they stapled us. So they in fact

broke the agreement.

Senator BOND. Let me follow up on that. Secret talks—obviously,

they were kept secret—how did you find out about them, and what

information do you have on those talks?

Ms. COOPER. How I found out was that after the fact, there was

an announcement that an agreement had been reached, and 2 days

after that, I confronted Mr. Brundage in person demanding to

know what talks had in fact taken place, when they had met, how

often they had met, what times they had met. And he indicated

that the talks had gone on, and he admitted that despite the letters

that were sent to him demanding our right to attend the meetings,

they ignored those demands and chose to meet in secret. So that

is how I found out, was through a press release.

Senator BOND. Could you by any chance supply a copy of the

press release to the committee?

Ms. COOPER. I certainly can.

Senator BOND. Thank you.

[Document follows:]
15

Senator BOND. What negotiations did you participate in with

your counterpart American flight attendants?

Ms. COOPER. Zero, none, nada. There were no talks.

Senator BOND. Did American Airlines in any way attempt to facilitate any such meetings?

Ms. COOPER. To the best of my knowledge, no. We repeatedly

asked American Airlines to set up the talks, and that is when we

discovered after the fact that talks had taken place without us, and

the only way we found out that there were talks was through the

press release that I stated earlier.

Senator BOND. Thank you.

Very quickly, Ms. Schooling, you were at Ozark, and you were

part of the acquisition by TWA. How was that acquisition handled

with respect to seniority rights?
16

Ms. SCHOOLING. We got our full seniority at TWA.

Senator BOND. So you were given credit for the time you spent

at Ozark.

Ms. SCHOOLING. Every year that we flew, yes.

Senator BOND. I assume you believe that that would be the same

process followed by the acquirer in this instance?

Ms. SCHOOLING. That would be the best scenario. I just think

that being stapled to the bottom is totally unfair and unacceptable.

Senator BOND. Thank you, Ms. Schooling.

I will now turn to Senator Talent for his questions.

Senator TALENT. Thank you, Mr. Chairman.

I want to go a little bit into the whole issue of the status of TWA

at the time that this filing occurred, and I am going to read from

Mr. White’s statement.

‘‘Let us keep in mind the following: In light of the fact that TWA

was teetering on the verge of collapse and dissolution at the time

of the asset purchase’’—is that true? Is that an accurate description

of the situation in our view? I will ask Ms. Cooper and Mr. Case.

Ms. COOPER. That is not correct. In fact, at the time, in December 2000, the unions had reached agreements with various lessors

to restructure the financial debt of TWA. In fact, I was a direct

participant in a search committee that had selected a new president to take over TWA.

We also had an agreement with the unions to roll back certain

of our contracts—we had all hit our target amount. We had hired

someone to take over the company, and we were looking to going

forward. Mr. Compton would have been replaced in this scenario,

and we found out at the end of December that he in fact was engaged in other talks, and it was only after I had seen CNN that

he reported to me as a member of the board of directors that he

had negotiated another deal.

Senator TALENT. And in fact, American described TWA at the

time as a ‘‘valuable asset,’’ an important acquisition. They did not

treat it as a company about to go out of business that they were

going to——

Ms. COOPER. In fact, if I could follow up, I had been given a copy

of a powerpoint presentation that I believe American presented to

its own board of directors, claiming what a great deal it was, how

they had gotten TWA for less than its real value, and that they believed that this was a great transaction for them because they

were, among other things, becoming the world’s largest airline and

were acquiring the all-important St. Louis hub. So they said it was

a good deal, and they said they got it for less than what it was

truly worth.

Senator TALENT. If you have a copy of that, I would like it for

the record—if that is all right, Mr. Chairman.

Senator BOND. We will accept it without objection.

Ms. COOPER. I will send that.

[Document follows:]
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Senator TALENT. Mr. Case, ALPA gave up in the course of this

its Allegheny-Mohawk protections, isn’t that right?

Mr. CASE. I would not directly say they gave up. Basically what

happened was that all the labor-protective positions in our contract

were required to be amended by American Airlines. That was part

of the purchase agreement. And as a matter of fact—and I think

this has escaped a lot of people—TWA was not in bankruptcy.

Bankruptcy was a requirement of the asset purchase.

Senator TALENT. Right. Even if TWA had gone back into bankruptcy, that does not mean it was going to cease to operate. It

could have been restructured and come out, as in fact it did.

Mr. CASE. Absolutely not. TWA had proven to be a very resilient

airline, as a matter of fact, surfacing after two previous bankruptcies, and a lot of that resilience was based on the fact that the

employees were very dedicated to making sure that the airline continued to fly. It was in my opinion in no way, shape, or form going

out of business. And the bankruptcy was simply a design of the

sale.

Senator TALENT. And what I was getting at was that even in the

back of your mind, there was a concern that without the buyout,

TWA might not be able to continue operating indefinitely—and let

us face it—that concern had been with you guys for years and

years; it was not an airline that was in great shape financially.

Nevertheless, you gave up or sacrificed your employee protections,

and I guess what I want to ask is would you have done that if you

had known that this was going to be the result?

Mr. CASE. Absolutely not, and as a matter of fact, through that

resilience, the employees had built an ability to have labor directors on the board of directors with transaction-blocking votes.

There is absolutely no way that the employees at TWA would have

allowed the transaction to go through had we known where we

would be today.

Senator TALENT. Yes, because from your perspective, it could not

have ended up worse than it did.

Mr. CASE. Absolutely not, and as a matter of fact, in exchange

for our cooperation, for our amending our contract, what we exchanged those provisions for was promises from American of fairness and equity. And when their vice president of employee relations does not see this as a fair integration, how did they stand by
57

and continue to sign it? They did not have to sign the integration

agreements with their labor unions; they could have held that as

a caveat to ensure a fair seniority list integration.

Senator TALENT. There are a couple more points I want to bring

up, and then I am done, Mr. Chairman, and I appreciate your indulgence.

Mr. Case, in your longer written statement, you indicated that

American actually, just before the effective date of the combination

of the companies, did not just hire—you mentioned one pilot that

they hired who is going to keep flying when you are not—but actually, they hired more than one, didn’t they? How many did they

hire?

Mr. CASE. Yes. There were hundreds who had been hired, and as

a matter of fact, on the specific date that you are talking about,

there was what they called, paraphrasing, a ‘‘furlough exchange

program.’’ What happened was that some of the American pilots

had been furloughed who had hire dates prior to April 10, 2001.

There were 208 American pilots on furlough status that were all

hired prior to April 10, 2001. With the implementation of Supplement CC, which was the integration imposed upon us, 1,240-plus

TWA pilots received a hire date of April 10, 2001, so American was

obligated to bring those 208 American pilots back and exchange

them for some of staple-ees.

So around the May time frame, after a single carrier was determined, they exchanged 208 American pilots; they brought back Mr.

B.D. White’s group, and in exchange for that, they placed TWA pilots on furlough in their place.

Senator TALENT. Thank you.

One more thing, Ms. Cooper. In your exchange with Senator

Bond, you talked about talks that were never held. I think it is important for the record if you could just set forth who was representing whom. In the case of the flight attendants, who represented

each of the employee groups, and which of the representatives had

talks with American and which did not. Everybody who knows the

background knows that, but I do not know how clear that was for

the record.

Ms. COOPER. The International Association of Machinists and

Aerospace Workers represented the TWA flight attendants, and as

general chair for the flight attendants, I sent notices and requests

to American Airlines to hold the facilitated talks. APFA, the Association of Professional Flight Attendants, represented American

flight attendants. We asked for those talks to commence with the

facilitator. American apparently held talk with APFA; they held no

talks with us. We attempted as a follow-up to hold talks with TWA

LLC because we were still the bargaining representative. American

showed up and refused to discuss it with us and did not allow even

TWA representatives to meet with us over seniority.

Senator TALENT. Did you talk with the APFA people at all?

Ms. COOPER. In talks about seniority—absolutely not. There were

no talks that ever took place on that issue.

Senator TALENT. Thank you.

Thank you, Mr. Chairman.

Senator BOND. Thank you, Senator Talent.
58

Ms. Cooper, we asked Mr. Case a similar question. Is it your belief that the American management could have refused to accept

the so-called integration agreement allegedly between the employees of the two companies?

Ms. COOPER. Absolutely—and you do not have to take my word

for it. Mr. Baker, who was then a senior vice president of American

Airlines, clearly indicated that they had no obligation to reach any

agreement with APFA. In fact, he stated that any agreements that

would be reached would have to come from the unions. In that

powerpoint presentation that I discussed earlier, it even points that

out to the American Airlines board of directors.

What he indicated would happen if there were no agreement between the unions was the natural process of a national mediation

board, and once there would have been a single-carrier determination, there would have been no conflict between the unions, and

APFA would have necessarily owed an obligation to the TWA LLC

flight attendants.

So American by its actions interfered. American by its actions we

believe committed fraud. American by its actions broke its written

agreement with us.

Senator BOND. Ms. Schooling, you are being furloughed July 2.

How soon does your health care coverage expire?

Ms. SCHOOLING. We are covered for 30 days from the time of furlough.

Senator BOND. Do you have any employment lined up?

Ms. SCHOOLING. No. I have not given it much thought at this

point.

Senator BOND. Thank you.

Mr. Case, did American Airlines ever bargain collectively with

you over seniority?

Mr. CASE. No, sir, they did not. As a matter of fact, they specifically said that they had no duty to bargain with us over seniority

and that it was specifically left between the two unions; however,

there were some actions that they took that did not indicate that.

Once again, if it was just simply between the two unions, they did

not have to sign off on something that was not agreed to; they

could have signed off after something was agreed to or ensure that

there was a fair integration.

Senator BOND. Were there some provisions of American’s contracts with its union, APA and APFA, that were modified by agreement between American Airlines and the unions before or during

the asset acquisition of TWA?

Mr. CASE. Yes, sir, as a matter of fact, there were. The APA contract, like many major airline contracts, requires that all flying be

done by the corporation’s pilots. As such, the APA had to amend

their collective bargaining agreement or waive a provision of their

agreement to even allow TWA LLC to operate with TWA LLC pilots.

Senator BOND. So in fact the company did achieve a change in

the labor agreement.

Mr. CASE. Yes, sir. As a matter of fact, they achieved that change

by basically exchanging promises and guarantees with the APA— in other words, it is the ‘‘alter ego airline’’ fear. Most pilot groups

and most flight attendant groups do not want to see management
59

start up an alter ego airline and operate a low-cost or a separate

carrier under the guise of a wholly-owned subsidiary. So they put

protective provisions in the contract to make sure that that does

not happen.

Senator BOND. Mr. Case, why didn’t your national union, ALPA

help you? You were dues-paying members of ALPA, weren’t you?

Mr. CASE. Yes, sir, we were. And as a matter of fact, on the face

of things, they appeared to be helping. Unfortunately, there were

multiple conflicts within the national union that prevented a lot of

their participation and assistance with us.

Senator BOND. Senator Talent, do you have any further questions?

Senator TALENT. One real quick one, Mr. Chairman.

Ms. Schooling, you say that you are getting 30 days of health

care?

Ms. SCHOOLING. Yes.

Senator TALENT. Is that what is typical for American employees,

or is that less?

Ms. SCHOOLING. That went into effect in June 2003 with the

agreement that our union made with the company on the concession package that we only get 30 days. It was 90 days’ paid medical

coverage, and then it went to 30 days.

Senator TALENT. Thank you.

Mr. CASE. Senator, might I add just one point that I left out a

minute ago?

Senator BOND. Yes.

Mr. CASE. Without getting too vulgar, this integration was classified by American’s vice president of employee relations as ‘‘a shit

sandwich.’’ Senator BOND. Well, I was going to ask if there was anything

else we need to add, but I think I will not ask that question.

[Laughter.]

To be serious, you understand that the record will be open so

that additional questions may be asked of each of you for the

record, and we would ask that you respond to those questions in

a full and timely manner.

Do you agree to accommodate that request?

Mr. CASE. Yes.

Ms. COOPER. We will.

Ms. SCHOOLING. Yes.

Senator BOND. Thank you very much. We very much appreciate

your testimony, and we will now hear from the second panel.

Mr. CASE. Thank you.

Ms. SCHOOLING. Thank you.

Ms. COOPER. Thank you.

Senator BOND. Mr. Brundage, is there anything we can get for

you to make that leg more comfortable?

Mr. BRUNDAGE. No, thank you, Senator.

Senator BOND. Having just gone through a similar experience, I

understand that this is not an easy thing for you to do.

The second panel includes Mr. Jeffrey Brundage, vice president

of employee relations, appointed by American Airlines in 2001,

overseeing employee relations matters with all union-represented

employee groups. Previously, he served as managing director of em-
60

ployee relations for flights since December 1999, and for 7 years

prior to joining American, Mr. Brundage worked for the Airline Pilots Association International, most recently as senior collective

bargaining coordinator. He began his aviation career as a pilot for

Pocono Airlines before serving in the same capacity for Atlantic

Coast Airlines. He resides in Cooleyville, TX.

Our second witness on this panel is Captain Edwin C. White, an

airline pilot employed by American Airlines since December 1977,

a captain since 1987, currently a Boeing 777 captain based in Dallas-Fort Worth. Prior to that, he served in the United States Air

Force, the DC. Air National Guard, and the Air Force Reserves. He

is a member of the Allied Pilots Association Collective Bargaining

Representative, currently chairman of the APA Negotiating Committee. In 2001 he was chairman of the APA’s Mergers and Acquisitions Committee; on behalf of the committee, he participated in

extended negotiations.

Gentlemen, we welcome you, and I would like to call on Mr.

Brundage first for his testimony. We will accept your full testimony

for the record, and if you could summarize in 5 minutes or so, we

would appreciate it. Unfortunately, we have gotten notice that

there is going to be another vote coming up before long, so we will

try to get this in as quickly as we can.

Mr. Brundage?

STATEMENTS OF JEFF BRUNDAGE, FORT WORTH, TX, VICE

PRESIDENT, EMPLOYEE RELATIONS, AMERICAN AIRLINES;

AND EDWIN C. WHITE, JR., FORT WORTH, TX, ALLIED PILOTS

ASSOCIATION

Mr. BRUNDAGE. Senator Bond, Senator Talent, thank you very

much for your invitation to speak on behalf of American Airlines.

I am Jeff Brundage, vice president of employee relations. I joined

American Airlines in December 1999 after a career as a pilot and

a union leader. At American, I was actively involved in the labor

integration plan when the company acquired the assets of TWA in

the spring of 2001.

As you know, these are extraordinarily difficult time in the U.S.

airline industry. Since the events of September 11, 2001, the industry has lost more than 100,000 jobs and has suffered perhaps more

than any other industry from the economic downturn, the effects

of war and the threat of terrorism on travel. So we certainly understand and appreciate your concerns and Senator Talent’s concerns

about the jobs lost and the effect on the people and the communities that you both represent.

Today I want to use my time to offer you a little background on

American’s acquisition of TWA’s assets during the early part of

2001 and our efforts to provide jobs to the 20,000 TWA employees

who would have otherwise been facing the liquidation of their company.

It was always our intent to provide jobs to the TWA workers

until their retirement, and we did everything we could to put our

newest employees on par with all other American employees. In

fact, we provided pay and benefits that represent one of the most

generous employee packages in the history of corporate acquisitions.
61

Before TWA filed bankruptcy in January of 2001, it approached

the other major U.S. airlines about entering into some kind of

transaction whereby TWA could have continued to operate. Only

American was willing to make a comprehensive proposal that

saved the jobs of many TWA employees.

Under the asset purchase agreement, American voluntarily

agreed to provide employment to all unionized TWA employees.

The bankruptcy court found American’s offer to be the only qualifying offer and approved the asset purchase agreement. The alternative was liquidation, and the immediate unemployment of 20,000

TWA workers.

Our goal was to successfully integrate the two airlines. We knew

that we would not be successful unless we had the good will of the

TWA employees. From the very beginning, we offered TWA employees compensation and benefits that rewarded them as if they had

worked their entire career at American.

TWA employees were not brought on as new hires and lost no

pay, benefits, accrued vacation time, or sick leave. We gave TWA

employees full credit for their longevity for these purposes.

As of January 2002, we put all TWA employees on American’s

pay scale. Because TWA pay rates had been significantly lower

than those at American, the majority received a substantial pay increase.

It is important to note that this was not a merger. As we began

the asset acquisition process, we had longstanding obligations to

the existing workforce at American of more than 100,000 employees and to the contracts negotiated with their unions.

But the challenge of integrating two workforces goes beyond matters of benefits and pay. It is the right and the responsibility of the

labor unions that represent our employees to negotiate on their

memberships’ behalf on a wide range of other contract provisions,

including seniority and job protection, and they are at issue today.

This, as you can imagine, was a difficult situation for all involved. We had competing unions with competing interests, and ultimately, these matters were resolved as internal union matters.

The company’s role in the process was to use our best efforts to facilitate the seniority integration process, and as one independent

arbitrator ruled, we did just that.

Even though the seniority integrations varied with each work

group—pilots, flight attendants and ground workers—American

met its commitment to provide former TWA employees full credit

for their years of service at TWA for all pay and benefit purposes.

At the time of this asset acquisition, no one foresaw the industry’s impending financial crisis—a financial crisis that regrettably

has led to the furloughing of so many employees throughout the industry, including at American.

The ultimate consequences for the TWA employees were not the

result of the integration plan, but rather an economic downturn

that forced layoffs and cutbacks throughout the industry. The pain

has been spread far and wide.

I appreciate the efforts of this Congress to provide aid to the airline industry and assistance to the tens of thousands of workers

who have lost their jobs. I hope that we can all soon anticipate bet-
62

ter times for the U.S. airline industry and begin to turn our focus

toward recall our fellow workers.

Thank you for your attention, and I would be happy to address

your questions.

Senator BOND. Thank you very much, Mr. Brundage.

Captain White?

[The prepared statement of Mr. Brundage may be found in additional material.]

Mr. WHITE. Thank you all for giving us this opportunity today.

My name is Edwin White. I have been an airline pilot since 1977

at American Airlines and a captain since 1987. During my tenure

at American, I have been a member of the Allied Pilots Association,

the union representing the pilots at American, and have served in

a variety of official positions at the APA. Most pertinent to your

purposes here, I served as chairman of the APA Mergers and Acquisitions Committee, and in that position negotiated the agreement known as Supplement CC that governed the seniority integration of TWA pilots into American after American purchased

most of the TWA assets in a bankruptcy proceeding in 2001. I am

here to address that seniority integration.

It is my understanding that a group of former TWA pilots has

charged that the pilot seniority integration established in Supplement CC is unfair to them. I can tell you, Senators, that I have

heard that same charge from some incumbent American pilots,

namely, that the integration was unfair to the incumbent pilot

group. Complaints of this sort are standard in any major seniority

integration in the airline industry.

I take issue with those charges from both sides of the house.

What we sought to achieve in Supplement CC and what I believe

we did achieve, was an extremely fair expression of the legitimate

and realistic career expectations of both pilot groups. The former

TWA pilots were fully credited with what they brought to the combined carrier—that is, aircraft and sustainable jobs—and so were

the American pilots. That to my mind is the essence of fairness in

a matter like this.

In my written statement to the committee, I have gone into considerable detail on the significant research and thought that went

into Supplement CC and how it was based on virtual mathematical

projections of the career paths of every former TWA pilot and every

American Airlines pilot as of the date American purchased TWA

assets. That methodology drew considerably on the thinking and

proposals of the TWA pilots’ own representatives as expressed in

approximately 25 negotiating sessions.

Their thinking and concerns went into both the construction of

the seniority list itself and also into the conditions and restrictions

applied to give added protection to the TWA pilots.

Although you would hardly know it through the public statements of some of the former TWA pilots, at the end of those negotiations, there were only minor differences between the two sides’

positions. And as the TWA pilots informed us at the time, they

were willing to sign off on the final product of those negotiations

if American were willing to agree to certain conditions that went

beyond our capacity as employee representatives to deliver.
63

Much of the unhappiness with Supplement CC of course derives

from the fact that the entire airline industry has been in a tailspin

since 9/11, resulting in massive furloughs throughout the industry.

I personally find any furlough regrettable. No doubt the former

TWA pilots have suffered significantly due to furloughs. But before

we find something wrongful in that, let us keep in mind the following: In light of the fact that TWA was teetering on the verge of collapse and dissolution at the time of the asset purchase, the career

expectations of the TWA pilots were infused with a much higher

probability of furlough or, even worse, permanent unemployment,

than the American pilots.

Moreover, the APA had succeeded in negotiating furlough protection for American pilots while the former TWA pilots’ representatives were unsuccessful in doing so. As a matter of fundamental

fairness, this aspect of the former TWA pilots’ career expectations

also had to get factored into the integration process.

Finally, although the TWA pilots knowingly and voluntarily gave

up whatever right they may have had to arbitrate integration

issues in order to save their jobs, the TWA pilots did not in any

way give up their absolute right to challenge what they now call

the defects of Supplement CC in the Federal courts.

Indeed, they are exercising that right right now in the Federal

district court of New Jersey. As the courts have always done in this

area, the court will determine what is just and proper in this situation, and it will do so not on the basis of emotion but on the considerable body of law that has been developed in scores of seniority

integration cases. In short, if the former TWA pilots have not been

accorded their due—and I sincerely believe they have—the court

will provide the appropriate remedy.

Finally, their court case is significantly advanced. Motions to determine the claims of the former TWA pilots have been fully

briefed, and the court should render a decision in the near future.

With all due respect, I do not believe that Congress should intrude

into that orderly legal process.

Thank you.

Senator BOND. Gentlemen, unfortunately, we have started another vote, but we will see how quickly we can go with the questioning. Actually, Senator Talent, do you want to go ahead and vote

and come back?

Senator TALENT. I think it would be better.

Senator BOND. All right. Why don’t you go ahead——

Senator TALENT. Oh—if you are going to stay, I will stay.

Senator BOND. All right.

Mr. Brundage, we have had an opportunity to work with you and

have great respect for your confidence and your dedication and intellect. I was looking at page 3 of the summary of your written testimony, and it says: ‘‘The fact is that the unions negotiated and

agreed to an integration plan that attempted to balance competing

interests and preserve jobs.’’

Based on what we have heard, I do not see that there was any

kind of agreement between the two sides on this most important

issue of the seniority plan. Would you care to correct that statement based on what we have heard?
64

Mr. BRUNDAGE. Senator, the comment that I was credited with

at the end of the last testimony was made in a private meeting

with the TWA MEC, where I was attempting to encourage the

MEC—and I was invited into that meeting by myself, with a group

and their advisors, and this was at the conclusion of that 36-hour

stint that you asked us to participate in over at the Mayflower

Hotel. And the point that I was making was that under the agreement that American had with the APA, our only option would have

been to have treated the TWA pilots as new hires. The company

has the right to choose whom we hire, but our union contract dictates how they are placed on the seniority list.

The point I was making to the MEC was that however they

viewed the deal that had been discussed at the Mayflower, it was

clearly better than the alternative that American had available to

it in terms of how we put these people on the list. And they then,

after hours of deliberation and another day, sent a letter by fax to

me at American Airlines and to the APA where they accepted the

APA’s integration agreement as it was discussed at the Mayflower

Hotel, but they also added to that letter a number of conditions

that they wanted to impose upon American, some significantly burdensome economic conditions in terms of how pay would be adjusted and those types of things. So had I signed that letter when

I received it, had it not included those new conditions we had never

discussed, those economically burdensome conditions, and if the

APA had signed that letter—and I cannot attest to whether they

would have or not—as a result of the meetings you commissioned,

we would have had a voluntary agreement between the two parties.

Senator BOND. Excuse me, Mr. Brundage, but when you make an

offer to one party and they come back with a counter-offer, if you

like some terms of the counter-offer and do not like some other

terms and you do not accept it, that is not an agreement. I would

like to see where they agreed to this proposition. The fact that they

say, OK, we will take this if you will do this does not mean that

you can say, Well, okay, they agreed to take this, and we just decided we were not going to consider it——

Mr. BRUNDAGE. Senator, I must have misunderstood your question. I thought your question was whether or not they have agreed

to the APA’s proposal as to how to integrate seniority.

Senator BOND. I asked whether they had come to an agreement

on that proposal. Apparently, their somewhat positive response was

conditioned on other items which you and/or they or somebody

found unacceptable. That is not an agreement.

Mr. BRUNDAGE. I agree, but they were not items that were related to how the seniority would be integrated. They were items related to, for instance, pay.

Senator BOND. Yes, well, there was no agreement. You can—I

apologize. I am not going to get into an argument with you, but

that is not an agreement.

I would like to know from you gentlemen whose idea it was to

eliminate the protections. Here is the Allegheny-Mohawk protection

in the TWA contract.

Mr. BRUNDAGE. It was mine.

Senator BOND. It was yours.

Mr. BRUNDAGE. Yes.
65

Senator BOND. And why did you say you had to have it taken

out?

Mr. BRUNDAGE. Months prior to the acquisition that resulted in

American’s purchase, American had been discussing with TWA opportunities to potentially have a different commercial arrangement.

I was asked at that time to review the TWA contracts and determine as to whether or not there were inconsistencies or frictions

between the two agreements, because as you know, in the airline

industry, that is one of the most difficult issues.

I reported back to the people that I work for that based on the

agreements that we had with our employees at American, we

would have created a friction or a tension which was unresolvable

had we simply accepted the agreement to purchase TWA with

those Allegheny-Mohawk provisions in their agreement.

Senator BOND. But your pilots have Allegheny-Mohawk-type protections, do they not?

Mr. BRUNDAGE. There are protections in the pilot agreement, and

I can refer to Mr. White, who is an expert on this area, but their

protections are in the event that American was purchased, and if

a purchaser conditioned the purchase of American on the removal

of those conditions, it would have been up to the pilots to determine whether or not they were going to stand by those provisions

or modify those provisions. And in the testimony provided by Mr.

Case, that is the exact decision that the TWA pilot group was faced

with. They recognized that we had said to them that there was no

circumstance under which we would make this asset acquisition if

in fact those Allegheny-Mohawk provisions were named because of

the very tension they would have created with our own employees.

They made that decision. They made that decision with full knowledge of the commitments that we made.

Senator BOND. And the commitments that you made that we

have heard discussed here today were these employees, the crown

jewel, the St. Louis hub, and that you were going to see that there

was a fair integration. And did you know at the time that there

was going to be no effort whatsoever at resolving the integration

on something resembling an equal seniority time-and-service basis?

Mr. BRUNDAGE. Richard Bloch, who is a pretty respected arbitrator in the aviation industry, was asked to decide an arbitration

case brought forward by the Airline Pilots Association, and the Airline Pilots Association claimed that American had not lived up to

its commitment to work toward a process that was fair and equitable.

There are thousands of pages, or at least a thousand or more

pages, of testimony in that case where Arbitrator Bloch confirmed

that in his opinion, American did in fact meet the commitments

that it agreed to in the agreement with the Airline Pilots Association, so—— Senator BOND. By providing a facilitator.

Mr. BRUNDAGE. By providing a facilitator, which is exactly what

we signed up for.

Now, sir, the Allegheny-Mohawk provisions and the term ‘‘fair

and equitable’’ is clearly a legal distinction. I mean, it results from

the CAB and the old labor-protective provisions. If in fact we had

intended to provide those Allegheny-Mohawk provisions, why
66

would we have ever conditioned our purchase of the assets at TWA

on the removal of those positions? To me, that is the inconsistency

in the discussion that I personally have a hard time resolving.

We specifically took the provisions that you are addressing and

told the employees of TWA: If you would like us to offer you employment—and remembering this was not a merger; it was an asset

acquisition—if you would like us to offer you employment, you have

to understand that those provisions prevent a tension, a conflict,

with our existing agreements, and we cannot accept them.

So the commitment we made was significantly different than the ‘‘fair and equitable’’ commitment that exists in the Allegheny-Mohawk LPPs. The commitment we made was simply to facilitate a

process, and when that process failed with the pilots, at your request, we entered the fray and participated in the Mayflower meetings.

Senator BOND. And it went nowhere, and that is the problem. It

was not a negotiation. You wound up—let me turn quickly to Senator Talent.

Senator TALENT. Mr. Brundage, as I look at this thing, the question that comes to mind is what happened—I mean, what happened?

Mr. BRUNDAGE. That is a great question.

Senator TALENT. You are in labor relations. I do not pretend to

be an expert on labor relations and transportation, but I know that

in a typical industrial-type setting, this could not happen. Right

now, they are evaluating this in Federal court. How did this happen?

Mr. BRUNDAGE. Well, first, you are correct. This is being evaluated in court as we speak. But our promise was to hire the TWA

employees. And I said earlier—and it may seem to be a fine point,

but it is an important point—this was not a merger. And you may

refer in context to some of the things you have said in the context

of a merger, but this was not, and it was made clear.

We also at the time we employed the TWA——

Senator TALENT. Let me enter for just a second here. When I

have been around here for a couple years, I will remember to push

the button so the microphone works.

Yes, it was a buyout rather than a merger, so one of the themes

of your testimony and Mr. White’s and the company’s position now

is that basically, we were doing TWA a big favor. Nobody else

would take over this crippled airline. There is sort of this underlying note. And yet the truth of the matter is you guys did not do

this out of charity. You thought this was going to be a good deal

for American Airlines. That is correct, isn’t it?

Mr. BRUNDAGE. Absolutely.

Senator TALENT. So let us get that on the record. You would have

violated your duty to your shareholders if you did this just as a

matter of charity for TWA. And TWA did bring a lot to the table

that you do not always get in buyouts—they had planes, they had

maintenance facilities, a lot of expert employees and all that, right?

Mr. BRUNDAGE. Yes.

Senator TALENT. So this was going to be good for both parties— that was the basis of it.

Mr. BRUNDAGE. Absolutely.
67

Senator TALENT. And that was the expectation, that you would

emerge with a stronger airline which, Mr. White, would be better

for everybody’s employees if that happened, or you would not have

made the deal.

Mr. BRUNDAGE. [Nodding.]

Senator TALENT. OK. So, go ahead. I just wanted to get that on

the record.

Mr. BRUNDAGE. The commitment we made was to hire the TWA

employees, and we did that. We also agreed to provide full longevity, which frequently is not done even in merger situations, but for

their service at TWA, we gave them full credit for pay purposes

and the pay scales and steps.

We also agreed to the facilitation of a fair seniority integration

process. We have talked about the legal distinctions of ‘‘fair and equitable.’’ Let me put it in context if I can. We spent a considerable amount

of time in advance of that April transaction out at employee meetings. I personally travelled with the senior executives of the company to every base in the American Airlines system and made a

commitment to 100,000 employees in person that we would not— we would not—attempt to subject them to any seniority process

that they were not agreeable to. We were not going to make this

transaction on the backs of the American employees.

As you well know, prior to my arrival at American, there was a

very difficult occurrence in another acquisition by American, and

we had learned our lessons. We had learned our lessons very clearly, and we were going out of our way to inform our employees that

we understood what their contract said. Now, we also said that we

were willing to accept whatever process they were willing to accept

as well, and in the case of the IAM and the TWU, they used an

arbitrated process.

Senator TALENT. OK. So as I understand what you are saying,

and based on the comment that you made to the MEC—and I am

not going to repeat that, and I do think that that was language

that you used in a private meeting in a labor-management-type situation, and let us face it, it is not like the elders at a church getting together and discussing the future; so we all need to understand that, and we have all heard language worse than that in that

kind of meeting—but basically, what you were saying was, look, we

know this is not very good for you—in fact, this is lousy for you,

this is ‘‘bleep’’ for you—but we are buying you out, and it is what

our current union wants.

That is really what you are telling us, that you were under pressure from the American Airlines unions, and this was all that you

could give the TWA people.

Mr. BRUNDAGE. Actually, I was suggesting that what the TWA

people had gotten in the pilot case was actually better than I had

expected and that there were certain protections there, and in fact

at that meeting, American—one of the reasons American came to

that meeting was to try to bring some additional things to the

table.

Senator TALENT. So you had no choice given what your current

employee workforce felt and had represented to you through their

union leaders.
68

Mr. BRUNDAGE. Who were living by the contracts that we had.

Senator TALENT. OK. You had no choice.

Now, you did not make it worse, did you? You did not intervene

in this process to make it worse for the TWA people?

Mr. BRUNDAGE. The only way we could have made it worse was

by not attempting to help this facilitation process, because our only

alternative then would have been to have offered this employment

as brand, new hires, without anything other than a promise of job,

no seniority, no longevity, no benefits, none of those things.

Senator TALENT. So the point is that however bad it was, that

was what your current unions wanted; you did not make it any

worse?

Mr. BRUNDAGE. We tried to make it better, sir.

Senator TALENT. OK.

Are we going to interrupt now? I have some more.

Senator BOND. Yes. We are going to have to recess this hearing,

and we will get back as quickly as possible.

Thank you.

[Recess.]

Senator BOND. We will resume the hearing and ask Senator Talent to continue the line of questioning he was pursuing.

Senator TALENT. Thank you, Mr. Chairman.

Mr. Brundage, we were just at the point where you had testified

that—I am going to paraphrase—while your evaluation of the

agreement to the MEC was in one sense substantially correct, that

it was a ‘‘bleep’’ deal—it was not a very good deal for them—that

nevertheless, you—‘‘you’’ meaning American Airlines—had tried to

make it better and certainly did not try to make it worse.

Mr. BRUNDAGE. Correct.

Senator TALENT. Since you have tried to make it better in the

past, and you agree it is a uniquely bad deal, would you be willing

to sit down if the union were willing to and talk about making it

better now?

Mr. BRUNDAGE. Sir, we could not have been clearer about the

conditions of this agreement. And we have heard some testimony

today that quite frankly is news to me, that the TWA employees

had a number of options at the time that this transaction closed.

I am a believer that you need to simply State the facts up front;

everybody has got to be clear about what the game field looks like

and what the rules are and move forward.

I believe that American went out of its way to make sure that

our commitment to hire the TWA employees was clear. Our expectations for what would happen was clear. And I think that we need

to be cognizant here of what a decision like the one that you just

suggested could reap in the future for airlines or for other industries who may not be in the best condition and whether there

would ever be a suitor who would consider coming in and taking

that company and trying to integrate that company and hire its

employees, because if you agree to purchase something, and you

make what you are willing to do absolutely clear and, in my opinion, you live up to the agreement that was made at that time——

Senator TALENT. Wait a minute. Hold on a second, because you

were willing to do more. You just said you wanted to make it better, but you could not in light of what your current unions wanted,
69

which is frankly what I suspected from the beginning when I

looked at this. So you wanted to make it better, so why not now?

If the union were willing to do it, why can’t you sit down and readjust this seniority agreement before the next round of layoffs go

into place to make it more equitable in light of what we both know

the typical tradition and practices in labor-management relations

are?

I will let you finish.

Mr. BRUNDAGE. Maybe I have not been as clear as I would like

to be. American made it absolutely clear at the onset that the issue

of how seniority would be integrated would be an issue to be solved

by the unions. Seniority was not within the purview of American,

and we made that clear at the time of the transaction.

We made a commitment to employ people. We made a commitment to facilitate a process. That process was never defined, and

it was intentionally not defined. We agreed to an arbitrated process

in the case of the IAM and the TWU. We hired and paid for a

facilitator for both the flight attendants and for the pilots. We encouraged at every opportunity the American unions to use the facilities of that facilitator. But at the end of the day, the game field

said that seniority would be determined by a decision of the unions.

Senator TALENT. What I contest there, Mr. Brundage, in light of

the statements that Senator Bond has read regarding the public

statements of American Airlines officials as well as private statements or statements that were made to him, I know, and to other

people is your statement that you made it absolutely clear. Don’t

you think that if you had said to the TWA pilots and to Ms. Cooper—with whom you did not even have talks—‘‘Look, you guys

need to understand that all you are going to get is what our current unions are willing to give you. We are basically out of this

game. We are going to hire a facilitator but that is it’’—do you

think that they would have given up Allegheny-Mohawk? Do you

think they would have agreed and supported the buyout as they

did—because I don’t know how they could possibly have ended up

worse.

Mr. BRUNDAGE. Well, as I said in my opening, I was an employee

of ALPA for some time, and I had very high regard for the ALPA

union, and I also had high regard for the IAM. They have been

around this business for a long time, and they are very smart people.

I think it is important to note that those very smart people, who

probably understand Allegheny-Mohawk as well as you or I do——

Senator TALENT. Probably better than I do.

Mr. BRUNDAGE. [continuing]. Fully understood what they were

removing from those agreements to allow that asset acquisition to

take place and to provide for the opportunity to be hired by American. So beyond that, I would be speculating on what they were

thinking, but my respect for those unions would indicate they knew

exactly what they were doing, and there was no surprise.

Senator TALENT. Can I have just one line of questions for Mr.

White, Mr. Chairman, rather than waiting? I know I am over my

5 minutes.

Senator BOND. Go ahead.
70

Senator TALENT. Mr. White, I have a letter dated April 18 from

you to Captain Mike Day, who was chairman of the TWA Merger

Committee, the first sentence of which is: ‘‘Attached is the APA

Mergers and Acquisitions Committee’s reviewed seniority integration proposal.’’ And attached to that is, as part of 1(a), the statement: ‘‘Seniority list merge date shall be on the date on which

American Airlines was declared the successful winner of the auction for the assets of TWA 12 March 2001.’’ I do not know if you are familiar with this letter or if you remember it. And I am holding on by my fingernails to understand what

all this means, but as I understand it, that meant that you had

come to an agreement, at least on a preliminary basis, with the

TWA Mergers Committee that the seniority list integration date

would be 12 March 2001. Is that what that means?

Mr. WHITE. Yes, sir.

Senator TALENT. Now, that is not the merge date that was subsequently adopted by American, is it?

Mr. WHITE. That is correct.

Senator TALENT. And what was the merge date that they subsequently adopted?

Mr. WHITE. I believe it is April 10.

Senator TALENT. Now, as I understand it, one of the significant

aspects of this is that had the merge date been 12 March 2001, so

that the lists would have merged about a month before the final

buyout date, then the furlough protections of the contract would

have attached to the TWA employees. Is that your understanding?

Mr. WHITE. Yes, sir.

Senator TALENT. So because the merge date was moved forward

to April 10, the TWA employees did not get the furlough protections.

Mr. WHITE. A portion of them did not.

Senator TALENT. OK. How did we go from 12 March 2001 in this

letter dated April 18, 2001 to April 10? What happened?

Mr. WHITE. What happened is when American Airlines announced the purchase of the assets of TWA, I had not been doing

union work for a while—I had gotten out of it—and I was asked

to chair the merger committee, and we had a negotiating committee that was relatively new, so we had myself and one other member attached to the negotiating committee, and we were attached

to negotiate with that negotiating committee with American Airlines on the transition agreement, which was the ‘‘exception of

scope’’ clause that you asked about earlier.

The purpose of attaching us to that committee and then having

a couple members of the negotiating committee attached to the

merger committee in our discussions for the TWA pilots was to

make sure that we were keeping everything lined up.

Well, when we reached an agreement with American Airlines on

the transition agreement, and the contractual language started

writing, I did not end up getting involved in the contractual language-writing of that process, and the negotiating committee unbeknownst to me negotiated with American Airlines for furlough protection for the pilots of American Airlines because of the risk that

was associated with buying the assets of TWA, and that furlough

protection was going to go to pilots, absolute protection to the pilots
71

as of April 10 and then a soft furlough protection for pilots hired

after that.

Well, after the facilitation process was over, I had gone on vacation and got a call, and they said that under the auspices of Senator Bond’s office, they wanted to have discussions. So we came in

to Washington, DC., and Jeff Brundage became aware that we had

talked to them about April 10, and he said they had negotiated for

furlough protection and were not successful in achieving furlough

protection for their pilots and that the corporation was going to

stand by that unwillingness to provide any furlough protection for

the TWA pilots.

So I explained that we had a problem in that we had reached an

agreement with the TWA pilots that we would use March 12, and

the negotiating committee was standing on one side, saying, ‘‘We

cannot back the date up,’’ and we had American Airlines on the

other side saying I cannot give all the pilots furlough protection.

So I had gotten myself into a little bit of hot water there.

So we sat down in discussions during that period of time and discussed the three-party situation, and Jeff Brundage offered to provide the furlough protection for the 1,095 pilots—not quite half of

their seniority list that was going to go on the integration—and

that was something that American Airlines was able to what I call

‘‘pot-sweeten’’ or bring to the table that we could not offer.

So that is how that date got changed to April 10.

Senator TALENT. I was getting at that. So it was American Airlines that contacted you and wanted the date changed or wanted

some adjustment in that agreement?

Mr. WHITE. I would not say so much as they contacted us; they

were sitting at the table when we were going over these items, and

when he heard that date, he sat upright and said, ‘‘Wait a minute.

We need to talk about this.’’

Senator TALENT. OK. Now, Mr. Brundage, I understood you to

say that you tried to make it better.

Mr. BRUNDAGE. Yes.

Senator TALENT. This made it worse, didn’t it?

Mr. BRUNDAGE. Sir, the pilots represented by ALPA, while still

at TWA, Incorporated, attempted to negotiate furlough protection

as part of the agreement—as a quid—for the agreement to eliminate the Allegheny-Mohawk provisions of their agreement.

At that time, it was made absolutely clear from American to

TWA that in light of the inherent risks of this commercial transaction, there were no circumstances under which American Airlines

could proceed with the transaction if in fact it included a commitment to provide furlough protection for the employees we did not

yet even have on our property.

Senator BOND. But, Mr. Brundage, you did get in and change the

agreed-upon date of March 12. Here, we have been hearing, Boy,

Mr. Carty told me this is strictly up to the unions. You changed

the date that the unions agreed upon. You accepted an agreement

with the flight attendants that the flight attendants never made.

You took a counter-offer from the TWA pilots and said because part

of the counter-offer was that they would accept it on this condition,

that that was an agreement.
72

It seems to me that you were all over the middle of these negotiations and had a significant say in how they would come out. And

I find it hard to square that actuality with the assurances that

TWA employees got and, frankly, that I got in my conversations

with your top executives—who regrettably cannot be here, so we

cannot talk about their discussions. But that was their understanding, it was my understanding, and clearly, you had a major role in

the terms that the unions discussed—the one thing they agreed on

you changed.

Senator TALENT. I think I will yield back to you, Mr. Chairman.

[Laughter.]

Senator BOND. No—I just had a thought there, Senator.

Senator TALENT. That was my last question, anyway. I may have

a few more. I assume you have a few, obviously.

Senator BOND. I have one or two that I wanted to bring up. Mr.

Brundage, about that time, there was a proposal that United and

American divide up USAIR. Weren’t those discussions going on?

Mr. BRUNDAGE. American was working with United to purchase

a portion of USAIR to potentially satisfy the Justice Department

requirements in that transaction, and yes, that is correct.

Senator BOND. I had heard that American would agree to accept

the Mohawk-Allegheny provisions in the USAIR contract. Is that

accurate?

Mr. BRUNDAGE. No, sir. It is inaccurate. What we said to the

APA pilots was—and again, this was an ALPA/APA issue because

ALPA represented the USAIR pilots—we said to the pilots at APA

that the only way that the transaction could take place—and I may

not have the right aircraft type, but I believe there were a number

of 757s involved here—the only way we would be able to acquire

those 757s was if the pilots came with those airplanes. We went

to the APA and said to the APA the only way the pilots will come

with those airplanes is if they get Allegheny-Mohawk 3 and 13 protection.

So essentially, we gave the APA veto power over whether or not

that portion of the transaction would ever occur based on the exact

same understanding that we used to ask the TWA pilots to expunge that portion of their agreement.

So it was never offered by American. We told the APA: If you

guys think these airplanes are a good deal for American, then you

are going to have to help us in this transaction, and you are going

to have to step up to the plate on this portion. And quite frankly,

we do not believe we ever brought that to conclusion because the

deal fell apart, and I have no idea what their answer would or

would not have been.

Senator BOND. But the American Airlines management did not

get involved in negotiations between unions. You were the ones

who brought up, and you said that you were the ones who required

ALPA and the flight attendants to give up—ALPA to give up its

Mohawk-Allegheny rights.

Mr. BRUNDAGE. What we said was, to be accurate, we told TWA,

Incorporated that we would not conclude, we would not finish, the

asset acquisition process, that we would not purchase the assets or

offer the jobs if these provisions remained in the TWA contracts.

That was a condition to TWA, Inc. It was their job to go and re-
73

solve those issues with their unions. And in fact, at one point, it

appeared that TWA was not going to be successful and actually

began to prepare what is called an 1113 petition in their bankruptcy process to ask a court to not simply change that provision

but to in fact reject the entire agreement.

That was something that, it is correct, it was American’s condition, but it was a condition put on TWA, Incorporated if they wanted this transaction to be concluded.

Senator BOND. But by the same token, you were actively engaged

in modifying—the American management was modifying the

union’s agreements. You had to go back and modify the agreement

with the APA, did you not, to bring the TWA ALPA employees on

board?

Mr. BRUNDAGE. We did not even need to speak to the APA if we

chose to simply hire them as new hires. That is within the company’s purview to do. We went to the APA and said: Look, we think

it makes sense to do more than that and to do it differently, and

there are provisions of your agreement that control that relationship, so we would like to talk to you about modifying that agreement in a way to improve our ability to bring the TWA employees

on the property. And that is the transition agreement that Mr.

White referred to.

Senator BOND. In order to get TWA to accept the offer and not

to pursue an option in bankruptcy, which they had done at least

twice previously, representations were made to them about the fair

and equitable treatment. You represented to them that they had to

give up their Mohawk-Allegheny protection, and at the same time

you were telling the TWA employees who were actually members

of management of TWA and those of us who had an interest in it

that they would be treated fairly and equitably. you really were

laying the groundwork to make sure that they would not have to

be integrated fairly into the system. That is what came out, is it

not?

Mr. BRUNDAGE. Oh, I disagree respectfully, sir. I believe that our

commitment was to hire those employees and to provide them with

credit for longevity for pay purposes and to work to create a facilitated process that was fair and equitable. And as I said earlier,

that was put to the test of an arbitration and to an arbitrator in

the case of the pilots, and the arbitrator clearly ruled that American had met the exact duty that you are describing.

So I guess my opinion of it is maybe less important than Arbitrator Bloch’s opinion of it.

Senator BOND. And what about the promise to fence off St. Louis,

since the management of American made the representation that

the St. Louis hub, the airplanes, the personnel who operated them,

the traffic that they generated there, the reputation that they had

as the crown jewel, and that would be protected? Whatever became

of that promise?

Mr. BRUNDAGE. Senator, if I can transport myself back to the

days that we were in the process of trying to acquire those assets,

I can tell you that in my mind, I saw nothing but an extraordinarily bright future, especially in light of the fact that American

at the time was constrained at Chicago and constrained at Dallas.
74

As you know, the Congress was dealing with an airspace system

that was congested. There was no room at airports. We had all the

problems, and clearly, that was a wonderful opportunity for American.

Fast-forward—two airplanes into the World Trade Center, the

Pentagon, and a field in Pennsylvania; business travel that shrunk

up to almost zero; overcapacity in the system. There is no way that

we could have predicted when we looked at the network of American Airlines in 2001 that we would be sitting here facing the kinds

of trials and tribulations that the airline industry faces today.

I can only talk to my perception and my good fait, and it was

exactly as you described it, and that is exactly what we had intended. And I can only write off what has happened today to a

much larger circumstance than the integration of American and

TWA. As you well know, airline workers across the entire country

have been devastated by this, and there are way too many stories

like the stories we heard here earlier, and the empathy for those

folks is unbelievable—— Senator BOND. What do you say to Ms. Schooling?

Mr. BRUNDAGE. I say to Ms. Schooling that it deeply, deeply

hurts me. I never, never expected when I signed up to be vice

president of employee relations at American Airlines that shortly

after I took that position, I would be in the process of laying off

more than 20,000 people. It is one of the hardest things I have ever

done in my life. But, Senator, if we do not focus on our turnaround

plan, if we do not make a stable economic foundation for American

Airlines, we will not have jeopardized 20,000 jobs across the country, we will have jeopardized 100,000 jobs across the country.

Senator BOND. Well, I think we said at the beginning that nobody in the spring of 2001 had any idea of the tragedy. What we

were concerned about was establishing a policy, a procedure, that

would be fair and equitable in operation should some unforeseen,

even catastrophic, occurrence arrive. But at the time—and I remember this rather well, I think—seniority protection was promised inside the fence. Now, when we were told that the TWA employees will be unable to operate out of St. Louis, that was, as I

understood it, an area where the fence was providing a separate seniority list for the TWA employees who flew in and out of St. Louis

and made that such an important hub. That representation was

made, and this was not an expression, as I understood it, of intent

or desire or ‘‘we would like to’’—this was, as I understood it, a ‘‘we

will, and we are committed to it.’’ Mr. BRUNDAGE. Senator, in the first month after the transaction,

actually, the IAM and ALPA continued to represent the former

TWA employees who are now employees of TWA LLC. At the point

in time that the NMB ruled that for labor relations purposes,

American and LLC were a single carrier, the integrated lists for

the first time became, for lack of a better term, operative, and

those integrated lists did contain provisions to allow the TWA employees to use their seniority for certain purposes at TWA in an exclusive matter—or ‘‘super-seniority,’’ for lack of a better term.

But again, back to the representations we made at the time of

the transaction. The seniority issues would be worked out, and

American would abide by those seniority lists, and the contracts
75

only provide one way to reduce force, and that is in reverse seniority order. That is the only option that we have in terms of reduction in force.

There is no question that the former TWA folks have been severely impacted by these reductions as have all the employees who

were American employees prior to the transaction. All of the American family has been severely impacted, as have all of the other airlines in the industry.

So I too share your concern about the devastation that has been

caused by all of this, but my focus and the company’s focus is to

return the company to profitability, and these folks today who have

been furloughed have recall rights. And obviously, we need to be

very concerned about these folks because they are still our employees, and they will be the employees, if we are successful, that we

call back to work.

Senator BOND. We certainly wish and hope that the airline industry will recover and that they will be hired back, but we are

very much concerned about where they are.

Captain White, I would just ask you this. You have AlleghenyMohawk protections. Should, heaven forbid, something go wrong,

or go even further wrong, with American, and it is put in the position where it must be acquired, what would you do if you were

asked to give up your Allegheny-Mohawk protections?

Mr. WHITE. I would give it up. The short answer—if it is a question of hitting the street or going into negotiations, my belief is—

and I have been a negotiator for quite a while—that arbitration

shows a failure to negotiate in good faith. And I am a believer that

you can negotiate.

I would be happy to take this integration model that we have

here with the career path progression and use that for any integration that I would be subjected to.

Senator BOND. Captain White, I think that is stunning. [Laughter.] I mean, seriously, as far as—at least you all sat in a room for

36 hours with ALPA, but as far as I could tell, nothing happened.

But in terms of the flight attendants—and I know you were not responsible for the flight attendants—they did not even get in the

room, and that really bothers me, and I am sorry, I guess we just

do not understand, but it does not strike me as something that any

representative of employees would be willing to accept, to get into

a situation like this.

Mr. WHITE. But that was the alternative, sir. A reporter asked

me—and I feel kind of foolish, because when we did the seniority

integration—I am a big believer that pilots should talk to pilots

about seniority list integration—and in fact we had some argument

about whether or not lawyers should be in the room, because my

view is that lawyers in the room means litigation. And in the facilitation process that the company brought forth, we sat down, and

we talked to the lawyers, and we decided to do the facilitation process, and the mistake I made was that I agreed that it would be off

the record. So we had 2 weeks’ worth of negotiations, which I

thought were very fruitful and in which talking off the record as

a negotiator is good because it allows you to air ideas without consequences down the road and be quoted, etc, or be locked in.
76

The ALPA people brought in Dr. Tanin, who I found very fascinating to work with, and he has been used before by ALPA and

is a very intelligent man, and he came up with this career path

model. In those 2 weeks, we were able to advance the methodologies which I thought were good, and I thought that the TWA pilots

on that merger committee—Mr. Case, I have never met before and

have never seen him; he said he was involved in the process, but

I have never seen him before—but the committee people that we

worked with were very good in advancing their case about their

concerns about seniority list integration, about working conditions

as a result of that, and we accommodated a lot of those suggestions

in our seniority list integration. The problem is that it was all off

the record.

So I would say in good faith, I can sit here and say that those

negotiations did prove fruitful; they did prove to bring a lot of the

things that the TWA pilots suggested. For example, you were asking Jeff Brundage about minimum size. One of the last things that

we did—and it was after the meetings that you involved us in— is we went back to the company and said, ‘‘Look, it makes sense

to us. The pilots have a legitimate complaint. What happens if we

offer them all the seniority in St. Louis, and St. Louis shrinks to

zero? It made sense to us, brought up by their pilots.’’ So what did I do? I went to the company and said, Give me a

minimum percentage. And the company said, We intend to keep it

there, and I said, Put your money where your mouth is. And that

is how we have the 30 percent rule in there now.

So the short answer is that American Airlines has to keep that

St. Louis hub contractually in relation to Dallas and Chicago, so in

Missouri, you have those protections because I put it in the contract. I did not have to, but it was a suggestion that they did. And

that is the kind of negotiating that I tried to do, and those are the

things that we put in to try to protect the interests of the TWA pilots.

Senator BOND. Well, that part we appreciate, no question about

that, because that is important.

Mr. WHITE. Yes, sir.

Senator BOND. Senator Talent, you have a couple more questions.

Senator TALENT. Yes, briefly.

Mr. White, I am going to ask you the same thing I asked Mr.

Brundage. Would you be willing to sit down and talk with the company about how this might be made more equitable for the former

TWA employees?

Mr. WHITE. No, sir, I would not. I have a duty of fair representation to all pilots, and I would be subject to a lot larger group lawsuit—plus the fact that we feel that the integration that we did is

an equitable solution based on the career path model developments

that we did based on Dr. Tanin’s ideology. So we think that we will

hold up on that.

Senator TALENT. OK. I am going to say that I appreciate this

hearing, and I appreciate you two coming here. I know it has not

been easy.

I am going to tell you what I think happened, and you guys tell

me if you agree with me, and if not, why I am wrong. I think the
77

company’s officials anyway say this as a really good deal. You said

that a little while ago, Mr. Brundage—now, you did not anticipate

September 11, and that certainly upset all of our expectations. I do

not think you saw this as a rescue so much as an opportunity to

really enhance American Airlines’ prospects.

You both said, Well, we did not have to accept the TWA employees—you could have traded them as new hires—and as a matter

of raw economic power, I do not know whether that is true or not,

but I think what is also true is that had you made it clear that

that is how you were going to treat them, as new hires, or in fact

had you made clear that they were going to end up where the

ended up on the seniority list, whatever the economic power you

may have had to do that, you would have had very strong opposition to the buyout on those terms from the Missouri and New York

congressional delegations—of which I was not a part at the time,

so I am sort of free to speculate on it.

So what happened was that promises were made, perhaps vague

promises, but promises were made that would have led a reasonable person to believe that more would be done for these people

than was done. I mean, when you make a statement, ‘‘For its part,

American Airlines agrees to use its reasonable best efforts with its

labor organizations representing the airline pilots and flight engineers crafts or classes to secure a fair and equitable process for the

integration of seniority,’’ and the company then not only does not

do that, does not aggressively do that, but then pushes changes

that makes their protections worse—and I understand what you

said about why you did it, Mr. Brundage, but if I am reading that

language, I am thinking they are really going to make an effort to

do this notwithstanding whatever raw economic power they have,

and then afterward, we find out that the people are being treated

this way. That is my view of it, and if that is wrong, I would sure

like you all to set the record straight—and I am going to let you

do that. I am not going to cut this off.

Mr. WHITE. I will take the first shot at that, sir, if you do not

mind. I was elected chairman of the merger committee toward the

end of January, and we arranged our first meeting with the TWA

pilots somewhere around February 7, 8, or 9, somewhere in that

time frame. We asked for 3 days, and I think we got one.

At that very first meeting, I said very clearly: We will not do

date of hire—will not do it, will not consider it, will not be there.

And I also said very clearly that we will not do Allegheny-Mohawk,

and we will not do arbitration. That was in February, sir, before

they waived their Allegheny-Mohawk provisions.

At the end of February, we had scheduled three different bargaining sessions of 3 days each, most of which were canceled, but

on March 1, we gave them our initial proposal which proposed to

put somewhere in the neighborhood of 700 or 800 pilots on our seniority list.

I was very clearly with them, sir, very clear, and that was before

they waived their Allegheny-Mohawk.

So I would like to say that I was very straightforward and honest

with them up front about where APA was. Now, I think that in discussions with them and the methodology that Dr. Tanin put forward, we changed it because we had looked at other mergers where
78

they had put 767 captains behind 767 captains, and that was our

first proposal. And we ended up putting 767 captains behind our

777 captains. And that was because of Dr. Tanin’s methodology,

and we took a look at that, and we agreed with that. But we were

very straightforward and honest with them up front.

So I understand what you are saying, but they had an opportunity to meet with us several times before they waived it. They

had no doubt in their minds that we were not going to do date of

hire—no doubt. I was as straightforward with them as I am with

you now, sir. That is how I like to deal.

Mr. BRUNDAGE. Senator, I will just refer back to the fact that the

RLA has a dispute resolution process, and it is pretty well-respected and is a prerequisite to even being able to get a matter into

the courts.

The commitment that we made was a written commitment. The

actions that we took were well-documented. I have spent a considerable amount of time testifying in an arbitration process as to the

details of what took place surrounding that commitment to use our

best efforts.

I will not offer my opinion. I will stand by the opinion of an independent neutral arbitrator who listened very carefully to all of the

testimony—all of the testimony, both from the ALPA committee,

from the company, who read the documents, who had access to all

the factual information—and I will be happy to submit to you the

arbitrator’s award on point.

Senator BOND. Mr. Brundage, Ms. Cooper said that you had first

come to an agreement with the American Airlines flight attendants’ organization, announced it before you ever talked with her or any

of the other flight attendants. Is that accurate?

Mr. BRUNDAGE. Sir, we negotiated separately with the TWA LLC

flight attendants because the representation was different. The

TWA flight attendants at the time were represented by the IAM,

and this all occurred prior to the NMB single-carrier ruling.

So as a result, yes, the TWA LLC labor folks were dealing with

the TWA LLC employees represented by the IAM, and the American labor folks, a completely separate group, were working with

the American flight attendants, represented by the APFA.

Now, I do not know that this was a negotiation. I do know, because I have spoken to this about him personally, that Robert

Roach, who is the general vice president of the IAM, actually attended a meeting of the APFA board of directors for the very purpose of discussing seniority integration between IAM and APFA.

I also know that I hired Richard Casher, another respected arbitrator and facilitator, and Mr. Casher was employed for the purpose of attempting to facilitate those discussions between the IAM

and the APFA.

Now, Senator, I was never—— Senator BOND. Was there any discussion between the two?

Mr. BRUNDAGE. I honestly cannot answer that question. I was

never party to a discussion. I do know that Mr. Casher showed a

great degree of frustration in his ability to get the parties together.

I also know that during that period of time, I do not believe that

either of the parties, the IAM or the APFA, ever moved from their

opening position.
79

So if my assumption is correct that neither of them ever moved

from their opening position, I think it is fair to assume there was

probably not much negotiation.

Senator BOND. So it was enough for American Airlines under the

fair and equitable undertaking to pay several hundred bucks,

maybe a grand, to a facilitator and say, ‘‘Good luck, that is it’’?

Mr. BRUNDAGE. Well, I can tell you that my efforts were significantly greater than that, personally, in trying to encourage the

APFA to meet with the IAM representatives.

Senator BOND. What about the ticket agents, passenger agents—

how were they integrated.

Mr. BRUNDAGE. I think, as you know, they were represented by

the IAM at TWA and at American, they were not represented, and

as a result, the certification was extinguished at the point that we

became a single carrier for labor representation purposes, and we

created a ‘‘protected cell,’’ for lack of a better term, at St. Louis for

those employees. There were some American employees, a small

number of American employees, who had the first seniority slots,

but then the balance of the former TWA employees had access to

all of the jobs in St. Louis, both at St. Louis and those who were

not in St. Louis, and the ones not in St. Louis were put on a list

so that they had priority ahead of any American employee to bid

back into St. Louis. There was also Colorado Springs and a reservation office that had that same protected cell. But they were

given the 4-10 hire date, and they were provided, again, full credit

for their longevity at TWA—and I think we have skimmed over

that a couple of times, but that is a pretty significant economic

commitment, and I agree with the Senator, this was not something

that we took lightly, and it was not just purely an economic issue

or an issue to simply get through the process in the Congress.

American clearly recognized that we needed to try to do things

to have a workforce that was going to be behind us, and we were

not going to be successful unless that occurred, so we provided full

credit for that longevity for those employees.

Senator BOND. Mr. Brundage, Captain White, we appreciate the

testimony and the time that you and all the other witnesses have

put in today. As I stated earlier, you understand that the record

will be open so that additional questions may be asked for the

record. A number of our colleagues are following this and may have

questions, and we would expect that you could respond to those

questions in a full and timely manner. Is that agreeable with you,

gentlemen?

Mr. WHITE. Yes, sir.

Mr. BRUNDAGE. Yes.

Senator BOND. Both of you agree.

Again, this is a very important subject, and we obviously have

not come to agreement, but I express my thanks to all the parties

who have participated and presented their views.

If there is no further business to come before this committee, the

committee stands in adjournment.

[Additional material follows.]
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ADDITIONAL MATERIAL

PREPARED STATEMENT OF THEODORE A. CASE

Mr. Chairman, and Members of the Committee: Chairman Bond and Members of

the committee, I sincerely appreciate the opportunity to appear before you today.

On behalf of my fellow pilots who were formerly employed by Trans World Airlines

(TWA), we welcome the opportunity to testify on the record and under oath about

the whole story, the real story behind the most shamefully flawed seniority integration in United States airline history.

Many of you are already familiar with some of the facts of this crisis: to date thousands of ex-TWA workers—including ground workers and flight attendants—and

their families have suffered as a result of layoffs; the great state of Missouri, and

the entire St. Louis region has felt a sharp economic shock and emotional trauma

caused by these massive job cuts. The flying public—already reeling post 9/11—has

been faced with drastic schedule and service reductions due to these cuts.

I believe, like so many of my colleagues, that we became pilots to serve the flying

public—safely and responsibly—to the best of our ability. I am honored to have been

selected by my fellow pilots to speak on their behalf today.

I am a married father of two, a graduate of Georgia State University and have

served as a union representative of the TWA pilots in multiple capacities.

My interest in flying began as a young boy watching my father fly as a pilot for

Eastern Airlines. I began flying when I was 20, I became a commercial pilot in 1983,

and began flying for TWA in 1990. I loved my job; I respected my employer; and

above all, I believed in my customer service mission.

My world—and the lives of all of my former TWA colleagues—dramatically

changed in April 2001. That is when American Airlines acquired TWA. As part of

the acquisition, American offered me and nearly all former TWA pilots’ employment,

promising to: ‘‘provide employment benefits and post-retirement benefits to all employees actually hired by American, at levels substantially no less favorable than

hose benefits provided to American’s similarly situated employees.’’ (From the ‘‘Asset Purchased Agreement’’—Article X—EMPLOYEE MATTERS 10.1 Hiring Obligations. Upon the occurrence of the Closing, Purchaser shall (i) offer all of Sellers’

union employees (all of whom are listed on Schedule 10.1(a)) (other than personnel

who (A) have previously been terminated by Purchaser or an entity controlled by

Purchaser or (B) would not be qualified for employment under Purchaser’s general

hiring policies as in effect at Closing) employment by Purchaser or one or more entities controlled by Purchaser at compensation levels substantially equivalent to those

currently enjoyed by similarly situated employees of Purchaser or such controlled

entity, (ii) offer employment to certain members of TWA’s executive management

and those non-union employees listed on Schedule 10.1 (b) on a case-by-case basis

at Purchaser’s sole discretion and (iii) provide employment benefits and postretirement benefits to all employees actually hired by Purchaser pursuant to (i) and (ii)

above at levels substantially no less favorable than those benefits provided to Purchaser’s similarly situated employees. Any Seller employees to be hired by Purchaser or an entity controlled by Purchaser in accordance with this Section 10.1 will

be hired in accordance with terms and conditions established by Purchaser or such

entity (and, where applicable, in accordance with and pursuant to collective bargaining agreements relating to employees of Purchaser or such controlled entity).

10.2 Union Matters. All offers of employment made by Purchaser in accordance

with Section 10.1(i) above and all benefits to be provided pursuant to Section

10.1(iii) above will be conditioned on acceptance by all such employees of Purchaser’s work rules then in effect and in effect after the Closing Date from time to

time that are generally applicable to similarly situated employees of Purchaser. Purchaser and Sellers agree to encourage their respective unions to negotiate in good

faith to resolve fair and equitable seniority integration. Prior to Closing, TWA shall

amend all existing Collective Bargaining Agreements relating to any present or

former employee of TWA to provide that (i) scope, successorship, and benefits provisions of the Collective Bargaining Agreements are not applicable to or being assumed by Purchaser as part of or as the result of the transactions contemplated by

this Agreement, and (ii) consummation of the transactions contemplated by this Article X will not violate or breach in any manner any provision of any Collective Bargaining Agreement (collectively, the ‘‘CBA Amendments’’). The sale closed and we

all became employees of a newly-fashioned entity—not an airline—but a shell corporation called TWA, LLC, a wholly-owned subsidiary of American.)

Our seniority story is quite atypical, when considering other major airline seniority integrations. In the vast majority of previous major airline mergers pilot seniority integration was based upon a date of hire (DOH) basis or some type of DOH
81

ratio with conditions and restrictions to protect the pre-merger career expectations

of both pilot groups

Despite my more than 13 years of TWA seniority, I was given a new seniority

date with American of April 10, 2001, the day the transaction closed—all of my

years of earned service up to that date were obliterated from my record. I am now

facing a July 2 layoff. Adding insult to injury is the fact that American hired pilots

off the street on April 9, 2001 (one day before the acquisition closed), and these new

hires continue to fly today. Indeed, from the date the acquisition was announced

until the date the sale closed, American hired over 300 new pilots, all of whom were

given more seniority than the vastly more experienced TWA pilots. Today there are

more than 1200 TWA pilots scheduled for furlough or unemployed and on the street.

All of this because of the way our seniority was handled, or mishandled.

Why do we care so much about our seniority? Seniority is the bedrock of employment benefits with any career. Seniority is the American dream for the American

worker. In the airline industry seniority is everything, determining: where you live,

where you fly; what you fly; whether you fly as captain or first officer, pay rates,

and of course, the order in which you lose your job, should a layoff occur.

I wear an American Airlines’ uniform, I am covered under American’s health and

retirement benefit plans, and fly American aircraft on American Airlines flights. Despite those facts, my fellow TWA employees and I have been treated as nothing

more than ‘‘furlough fodder’’ to protect the jobs of the employees hired at American

prior to April, 2001. Why this inconsistency? It was all part of the ruse, the conspiracy between the world’s largest airline and two powerful pilot unions to crush the

ex-TWA employees, and take their jobs. Those two unions were attempting to merge

into one, and the TWA pilots stood in their way. They had no interest in representing or protecting USE pilots.

By all accounts, the cost-cutting, experience—downsizing, seniority—busting

scheme is working. By July 2nd, fewer than 900 of the original 2349 TWA pilots

will remain American Airlines employees. Meanwhile, every single one of the approximate 11,000 pilots who were on American’s payroll as of April 9, 2001, has

kept their jobs. This integration is much more akin to a process of segregation and

discharge, rather than an efficient and seamless combination of employee groups.

No reasonable person could say this integration was fair and equitable. It was a

travesty. Indeed, Jeff Brundage, VP Employee Relations for American, stated in October 2001 to the TWA pilots, that the seniority cram down was a ‘‘s——t sandwich’’ that the TWA pilots had to eat.

And this is only the tip of the iceberg.

Just last week American Airlines released ‘‘The Master Reshuffle Bid’, an announcement of American’s pilot staffing for the next 12 months. Without getting too

technical, this document (which I offer into the record) shows that by May 2004— in less than one year—only 27% or approximately 630 of the original 2,349 TWA

pilots will remain with American. The TWA pilots slated to lose their jobs by then

include large numbers of TWA Captains, with 15 plus years of experience at TWA

and American. These massive staffing reductions mean, that not only will the St.

Louis hub dramatically shrink to a fraction of its present size (not to mention its

size prior to American’s acquisition of TWA), but hundreds more TWA pilots will

lose their jobs.

The fact is that over 1,200 TWA pilots were ‘‘stapled’’ to the bottom of the seniority list. That is, TWA pilots, including TWA Captains hired as early as March, 1989

were stripped of every bit of their seniority, and given a seniority date of April 10,

2001. Captain Mike McFarland, the most senior TWA Captain, was stripped of 21

years of seniority. Captain McFarland was hired in 1964, but he was integrated

with the 1985 hire pilots of American Airlines!

At the same time this is happening to the former TWA pilots, the more junior

American Airlines pilots will invade the shrinking TWA St. Louis domicile, further

displacing the jobs of former TWA pilots and encroaching on what can no longer be

classified as a ‘‘hub’’ in St. Louis.

Although American pilots claim to be ‘‘sharing the pain’’, more than 87% of pretransaction American pilots will retain their employment while only 23% of the

former TWA pilots will remain employed by May 2004.

It is an accepted fact among airline industry experts that one of the most important aspects of airline mergers is the seniority integration of the merged work

forces. This issue has been contentious in many mergers, however in the vast majority of previous combinations, agreements were reached or arbitrations settled the

disagreements.

The TWA-American integration is a textbook example of what happens when the

process spins wildly out of control. I previously outlined the outrageous inequity in

the way seniority was handled. But you also must understand the impact this is
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having on employee morale and cooperation in a business where teamwork means

everything. Just last week an American Airlines pilot (whose name I will withhold

publicly but gladly provide to the committee upon request), apparently incensed over

this very hearing, posted an email threatening to poison the food of former TWA

pilots. I offer a copy of this email to be placed into the record. It is an excellent

example why seniority integrations, to be successful, must be done fairly and equitably.

It is crucial to know that when American started courting TWA, it was insistent

on two preconditions to acquisition: 1) American required that TWA declare bankruptcy; and 2) TWA’s unionized workers amend certain provisions contained in their

collective bargaining agreements. Those provisions, known as Allegheny/Mohawk

LPP’s, would have allowed us to mediate and arbitrate our seniority integration

should the parties not agree to a fair integration.

Allegheny/Mohawk provisions had been around for many years and although the

Civil Aeronautics Board and its requirement to apply LPP’s in seniority integrations

became part of a bygone era with deregulation, airline managements and unions

continue to abide by these ‘‘LPP’s’’ generally writing them into their collective bargaining agreements; until, of course the largest airline combination in history.

While the TWA unions contemplated American’s demands to amend our contracts,

American Airlines directed TWA Inc. to file a motion under §1113 of the bankruptcy

code to strip us of those provisions. This drastic assault was a result of demands

made by American’s own unions. In our case, American’s pilots’ union, the APA, demanded that it alone control the seniority integration for all pilots. American agreed

to give APA unfettered control over the integration and structured their purchase

offer to solidify that control.

In effect American empowered their unions to treat the TWA employees unfairly,

by requiring these amendments to our protective provisions. American and its

unions held a gun to the heads of the TWA employees. Not coincidentally, own

union, ALPA, was engaged in merger talks with the APA at the very time our jobs

were on the line. In exchange for our acquiescence to American’s coercive demands,

the Carty-led American Airlines promised to use its ‘‘reasonable best efforts’’ to help

us work out our integration with the APA. We believed federal law offered some insulation from mistreatment because American’s promise became a substitute for

those exchanged LPP’s. And given those assurances, the TWA pilots attempted to

negotiate with our American Airlines counterparts, unaware of the wholesale

slaughter ahead.

We now know we were duped. American considered its global promise of ‘‘reason- able best efforts’’ to mean simply one thing—writing the check for a ‘‘facilitator’’. The APA dictated the facilitation’s terms and conditions down to the last detail.

Those restrictive conditions stripped the facilitator of all of his authority, and any

meaningful ability to bring the parties to consensus. TWA pilot representatives met

with the APA on multiple occasions, including meetings in the presence of the

facilitator in the summer of 2001, but the discussions went nowhere. This is not surprising because we now know American and APA had already cut their own deal,

which not only protected every American pilot from furlough, but which guaranteed

the American pilots the ability to cannibalize the jobs of the TWA pilots for literally

decades to come! The APA had no reason to negotiate in good faith, or to deal fairly

with the TWA pilots because they rigged every aspect of the game in advance. No

agreement was reached and the discussions failed. During and after this period, we

asked to bargain directly with our employer, American, over our seniority. American

told us that it was not our employer, and that we had to talk to—you guessed it—

the wholly owned subsidiary shell corporation, TWA LLC. At other times American

stated that the seniority discussions were out of their control, and were to be entirely the purview of the employee groups involved. We went to TWA LLC, and were

told that only American could talk about our seniority. Neither company would talk

to us regarding seniority. We believed then, and we believe now that American and

TWA LLC were one and the same; they were ‘‘alter egos’’ of the same company. The

sham has now been exposed: American created this wholly owned subsidiary in part

to avoid its bargaining obligations to us; creating a ‘‘shell game’’ forcing us to dance

around in circles, while enabling their employee groups to cherry pick our seniority,

and our jobs.

There are numerous sidebars and footnotes to this integration atrocity. For example, the imposed integration, known as Supplement CC to APA’s contract, eviscerated our seniority. An important fact tying the seniority deal to the corporate

subterfuge is that Supp. CC was announced on November 8, 2001. The very next

day APA filed with the National Mediation Board to declare TWA LLC and American a single, integrated carrier. APA waited until it had cut its final deal on seniority with American, and then made its move to implement that deal.
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At that same time, American closed every TWA pilot domicile with the exception

of St. Louis. Pilots who previously lived and flew on the East and West Coasts for

decades were forced to displace to St. Louis.

Please remember these key words—fair and equitable—in considering this evolving picture. Seniority has been wiped out. American forced all of the TWA pilots out

of our jobs in the cities where TWA had operations, ordered us to fly exclusively

from St. Louis, and gave our jobs in those cities to the American Airlines pilots.

Once in St. Louis, the TWA pilots were stripped of our international routes, and

many of our higher paying positions. Meanwhile, much less experienced American

pilots continue living in their city of choice and enjoying schedules, captaincies and

our routes overseas, as if no merger ever occurred.

To put this in a personal perspective, a good friend of mine, Sally Young, a single

mother of two and a 14 year-veteran former TWA Captain, will lose her job on July

2. I too, will lose my job on July 2 after 16 years as a career jet airline pilot, with

over 13 years of seniority with TWA and American Airlines. American gave me a

seniority date of April 10, 2001. On April 9, 2001, American hired Mr. B.D. White.

Today Mr. White, who now has 2 years and 2 months of American Airlines experience and seniority, continues to fly while Ms. Young, myself and hundreds more

former TWA pilots like us are being furloughed.

In February 2001 many of you heard Don Carty, former AMR CEO state before

the U.S. Senate Committee on Commerce, Science, and Transportation, his commitment to ‘‘adding TWA’s 20,000 employees to the American Airlines family.’’ A willing commitment ‘‘to the 20,000 TWA employees and their families that no one else

would make.’’

Obviously Mr. Carty said what the Senate Committee and the Bankruptcy Court

needed to hear to approve the deal, with no intention whatsoever of living up to

those commitments.

Members of the committee, we are not here seeking sympathy or pity. We are

here in the name of justice and fairness. We are here in hope that Congress can

rectify this atrocity and act so this tragedy can never again be repeated in another

workplace to the detriment of another working man or woman.

We ask only that our all important seniority rights be handled ‘‘fairly, and equitably,’’ as promised. No more and no less. I hope you and the American people can

now clearly see that our seniority was handled unfairly and inequitably by an airline that can only now be called Un-American Airlines.

Thank you for the opportunity to speak before this committee today. I am happy

to answer any questions.

PREPARED STATEMENT OF SHERRY COOPER

Senator Gregg, thank you for allowing me to testify before the Senate Subcommittee on Health, Education, Labor and Pensions concerning the TWA/American Airlines Workforce Integration. Senator Bond, thank you for chairing the hearing on

this all-too-important issue. To be perfectly candid with you, there was no integration. In fact, what American and the Association of Professional Flight Attendants

have done is to arbitrarily discriminate against former TWA employees and segregate them to the bottom of the seniority list. There has been no integration.

On May 3, 2003, I celebrated a milestone in my flying career. I began my 28th

year as a Flight Attendant. That same day, instead of receiving recognition from

American Airlines, I received a furlough notice. My career in the airline industry

was over.

Perhaps more than anyone else here today, I held a unique position at TWA.

Apart from the fact that I am a TWA line Flight Attendant, I also served on the

TWA Board of Directors from 1998 to 2001 as a Labor Director, representing the

International Association of Machinists and TWA Flight Attendants. I directly participated in the approval of the sale of TWA to American Airlines.

On January 9, 2001, I received a telephone call from Mr. Bill Compton, former

President of TWA to tell me about the ‘‘great deal’’ that was waiting for the TWA

employees. During that conversation, Mr. Compton stated the following: (1) That all

TWA retirees would be protected; (2) That TWA unionized employees would be guaranteed jobs and greater job security; and (3) That TWA employees would receive

greater pay and benefits.

In summary, the TWA employees would be better off through the agreement he

had reached with American Airlines. There was only ‘‘one’’ catch. Even though

American and TWA had struggled mightily to come up with a straight merger

transaction, we would have to file for bankruptcy for one reason—and one reason

only. The reason was Carl Icahn. As many of you may recall, Carl Icahn had been

prior owner of Trans World Airlines. In negotiating his departure in 1994, TWA had
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been required to enter into a series of ticket arrangements under which Mr. Icahn

had been allowed to sell deeply discounted TWA tickets through a corporation he

owned known as ‘‘Karabu.’’ Mr. Compton advised me that the only way that American could see fit to do the deal was to take Karabu ‘‘out’’ through bankruptcy. And

so, the TWA Board of Directors met the following week to hammer out the terms

of the deal with American Airlines. Thus begins the biggest myth of all—that American Airlines saved TWA in bankruptcy.

I want to make this perfectly clear. At the time of the agreement, TWA was NOT

in bankruptcy. As a member of the Board of Directors, we agreed to file for bankruptcy in order to eliminate the Karabu ticket agreement.

Quite honestly, as a Labor Director, I wanted some assurances that TWA employees would receive protection. The Asset Purchase Agreement guaranteed that all

unionized employees would be employed by American Airlines. Because of the well

known problems that had surfaced with the Reno acquisition, American Airlines announced that it would take its time to ensure a smooth and orderly transition. Mr.

Carty, then CEO of American Airlines, promised that the TWA employees would receive the same ‘‘benefits’’ that the American Airlines employees received. Our union

contracts would need to be modified to ‘‘mirror’’ those contracts of the American employees. Because American flight attendants did not have Allegheny-Mohawk Labor

Protective Provisions, our contract would have to be modified to match theirs. Importantly, both American Airlines and TWA management insisted that all seniority

integration issues would necessarily be worked out between the Unions. It was

agreed that the Unions to ultimately work out how the seniority would be integrated. American Airlines agreed to hire an independent facilitator to arrange meetings between the Unions and use it best efforts on behalf of the TWA employees.

It promised that there would be a ‘‘fair and equitable’’ process and that it would

adopt the ‘‘process’’ that came out -of the facilitated talks.

The American Flight Attendants numbered in excess of 22,000 employees. By contrast, TWA Flight Attendants totaled approximately 4,200 individuals. The merger

of a small group of senior Flight Attendants would have relatively little impact on

the overall picture because most flew out of St. Louis, MO—a non American Airlines

base. The balance flew out of New York. Unlike other carriers who went out of business whose employees then sought employment at other airlines, this would be an

orderly transaction because the TWA employees were coming to the acquisition with

planes, routes, airport slots, reservation and maintenance facilities, and the prized

St. Louis hub. It was—for all intents and purposes—our dowry.

It is well chronicled that Don Carty and American Airlines touted the TWA purchase as a great acquisition. In a powerpoint presentation to its own Board of . Directors, American management happily noted that it acquired TWA for far less than

it was worth. In his own words, Mr. Carty stated that ‘‘American gains many great

assets from TWA, but none as important as its talented team of employees.’’ Quite

clearly, the team of employees were highly trained and experienced professionals.

He threw a barbecue for the TWA employees. Little did we realize at the time—

but the TWA employees were the entree at the barbecue.

Instead of holding talks for the two Unions—the Association of Professional Flight

Attendants and the IAM—American Airlines engaged in secret talks with APFA—

it negotiated an agreement with APFA that all TWA Flight Attendants would be

stapled to the bottom of the APFA seniority list. American broke its written agreement with the TWA Flight Attendants. At the same time, APFA had agreed that

it would allow those former TWA Flight Attendants based in New York and in St.

Louis that they would receive some job protection in the form of a fence. In other

words, we would retain our combined TWA and AA seniority as long as we remained in our two (2) hubs. We would be allowed some sort of job protection in

those bases. By contrast, when TWA purchased Ozark, all former Ozark Flight Attendants received full seniority. Even APFA, when American Airlines acquired both

Air Cal and Trans Caribbean, agreed that those Flight Attendants retain credit for

their years of service at those carriers. Ironically, even American Airlines voluntarily provided full credit for seniority to TWA non-union and management personnel.

Following the aftermath of September 11, American Airlines decided to shut down

the New York TWA operation. It transferred the former TWA New York flights to

more junior AA Flight Attendants. American Airlines gave New York Flight Attendants two (2) options: They could be furloughed to the streets without a paycheck

or accept a transfer to the remaining TWA base in St. Louis. Many of our former

New York Flight Attendants elected to transfer to St. Louis. After all, we would retain job security as long as TWA, LLC flights continued to operate out of St. Louis.

We were wrong. American and APFA first violated its own agreement by transferring St. Louis International flights to more junior American Flight Attendants. They
85

have now determined that all remaining TWA, LLC Flight Attendants—all with

more than 27 years of seniority—will be furloughed effective July 2, 2003. Eighteen

hundred (1800) Flight Attendants with seniority totaling more than fifty thousand

(50,000) years of service to the airline industry will lose their jobs. They will be joining 2,400 other TWA Flight Attendants. At the same time, American Flight Attendants with less than three (3) years seniority will be flying on TWA, LLC aircraft

out of St. Louis.

To add insult to injury, both American Airlines and APFA agreed as part of their

recent concessionary agreement that the scheduled July 2 furloughees will hit the

streams with no severance pay. For the first time in the history of American Airlines, Flight Attendants will lose their jobs without any cushion of severance pay.

What makes it even worse is that for the first time in American Airlines history,

employees losing their jobs will lose Company-paid medical benefits. Instead of providing 90 days of medical coverage, American Airlines will only be providing 30 days

of coverage. For the most part, the group about to be furloughed are women—fifty

and over—who are primary caretakers for their parents, children, and grandchildren. They will be facing an uncertain future with one thing for certain—personal and financial ruin. At the same time, American admitted that it was funding

pension plans for 45 of its top executives. It had also approved ‘‘retention’’ bonuses

for its senior executives—however—due to the public outcry, it has abandoned the

retention bonus program. Recently, the American Airlines Board of Directors expelled Don Carty. By anyone’s definition, he left in disgrace due to his failure to

be honest with employees about senior executive pay packages and incentives.

American Airlines has asked you to believe that all that has transpired with TWA

has been above board and in the open. Can you honestly believe a corporation in

light of its most recent shortcomings? I would hope not. American has told you that

the no one anticipated the tragic events of September 11. It is one thing to make

financial decisions to recover from our greatest tragedy. It is quite another to capitalize on that event at the expense of former TWA employees.

Needless to say, we have filed lawsuits against both American and APFA. Among

other grounds, we are suing American Airlines for fraud. The most recent filing—

submitted this week—concerns their concerted effort to eliminate all former TWA

Flight Attendants based in St. Louis.

It should be clear to everyone in this room that when American Airlines promised

‘‘two great airlines—one great future’’—it was a lie. Instead, it undertook a pattern

of activity designed solely to eliminate the former TWA employees that it, once

called TWA’s greatest asset.

When American Airlines came to Congress. asking for economic help following the

aftermath of September 11, you stood up and gave financial assistance to the carrier. The assistance American received was based—in part—on the TWA route

structure. When American Airlines sought reimbursement for security expenses at

airports, the money it will be receiving will be based—in part—on the TWA, LLC

operation. At the same time, American has sought—and received—financial assistance from you—based on what I and my fellow employees ‘‘brought to the table,’’

it has thrown us aside arguing that ‘‘we should be grateful that we have a job.’’ We

have no job. American has taken our jobs—our routes—our planes—our St. Louis

Hub—and has handed us a pink slip.

I am a taxpayer having paid taxes for more than thirty-five (35) years. Like almost all Americans, I have gone to work on a daily basis and performed a meaningful job for my employer. I. have expected a fair wage for a fair day’s worth of work.

I have watched my tax dollars be spent on both social programs and weapons. I

have watched my tax dollars be used to assist troubled corporations and rightfully

help the family farmer. I have asked for nothing in return but that I be: treated

with decency and fairness. Both of those- are tragically—horribly—missing in the

TWA American Airlines workforce integration. It has been reported that there is

nothing that this Committee can do to help right this wrong. My question is simpler

Why not? We travel halfway around the world to fight for freedom At the same

time, we are witness to an incredible injustice in our own backyard only to be told

that it is beyond our control. America is the greatest nation on earth. What makes

it so great is that it has long-championed the rights of individuals. It has placed

its highest value on human life. It realizes that a nation is best known for how it

treats its most vulnerable citizen not its most powerful. A country prospers because

of the everyday citizen—not because of its CEO’s, Union Presidents, or—even—U.S.

Senators. On behalf of the more than 20,000 former TWA employees, I want more

than just your sympathy. I want—and demand—that you honor all that is right

about America. Intercede on our behalf and restore the process to a fair and equitable seniority integration.
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PREPARED STATEMENT OF JEFF BRUNDAGE

Mr. Chairman and Members of the Committee: Thank you for your invitation to

speak on behalf of American Airlines. I am Jeff Brundage, Vice President of Employee Relations. I joined American Airlines in December 1999 after a career as a

pilot and union leader. At American I was actively involved in the labor integration

plan when the company acquired the assets of TWA in the spring of 2001.

As you know, these are extraordinarily difficult times in the U.S. airline industry.

Since the events of September 11, 2001, the industry has lost more than 100,000

jobs and has suffered perhaps more than any other industry from the economic

downturn, the effects of war and the threat of terrorism on travel.

So we certainly understand and appreciate your concern about the jobs lost and

the effect on the people and the communities you represent.

Today, I want to use my time before you to offer a little background on American’s

acquisition of TWA’s assets during the early part of 2001 and our efforts to provide

jobs to 20,000 TWA employees who would have otherwise been facing the liquidation

of their company.

It was always our intent to provide jobs to the TWA workers until their retirement, and we did everything we could to put our newest employees on par with all

other American employees. In fact, we provided pay and benefits.that represent one

of the most generous employee packages in the history of corporate acquisitions.

Before TWA filed bankruptcy in January of 2001, it approached other major U.S.

airlines about entering into some kind of transaction whereby TWA could continue

to operate. Only American was willing to make a comprehensive proposal that saved

the jobs of many TWA employees.

Under the asset purchase agreement, American voluntarily agreed to provide employment to all unionized TWA employees.

The Bankruptcy Court found American’s offer to be the only qualifying offer and

approved the asset purchase agreement. The alternative was liquidation and the immediate unemployment of 20,000 TWA workers.

This is clearly and thoroughly documented in the written testimony of the Allied

Pilots Association. As they point out, every court that has reviewed those transactions has agreed that there simply were no alternatives available to TWA workers.

Our goal was to successfully integrate the two airlines’ workforces and combine

our forces to build the largest, most successful airline in the world.

And we knew that we would not be successful unless we had the goodwill of the

TWA employees. Indeed, from the very beginning, we offered TWA employees compensation and benefits that rewarded them as if they had worked their entire career

at American.

TWA employees were not brought on as new hires, and lost no pay, benefits, accrued vacation time or sick leave. We gave TWA employees full credit for their services for these purposes.

As of January 2002, we put all TWA employees on American’s pay scale. Indeed,

because TWA pay rates had been significantly lower than those at American, the

majority received a substantial pay increase.

TWA employees hired by American also received the same travel privileges, pension benefits and retiree benefits we offer all American employees.

Finally, although we were under no obligation to do so, we agreed to assume $515

million in accrued liability on the books of TWA for retiree medical, providing medical coverage to both existing retirees of TWA as of April 9, 2001, who may otherwise

have had no coverage, and future retirees among the employees who came to American.

It is important to note again that this was not a merger. As we began the asset

acquisition process, we had long-standing obligations to our existing workforce of

more than 100,000 employees, and to the contracts negotiated with their unions.

And as I just outlined, we did everything we could within the terms of those contracts to provide 20,000 TWA employees with the same pay and benefits we offered

our existing employees.

But the challenge of integrating two workforces goes beyond matters of benefit’s

and pay. It is the right and responsibility of the labor unions that represent our

employees to negotiate on their memberships’ behalf on a wide range of other contract provisions, including seniority and job protection that are at issue today.

This, as you can imagine, was a difficult situation for all involved. We had competing unions with competing interests. And ultimately, these matters were resolved

as internal union matters. The company’s role in the process was to use our best

efforts to facilitate the seniority integration process. We did that. In fact, an inde-
87

pendent arbitrator found that we met our best efforts commitment in the pilot integration.

Even though the seniority integrations varied with each work group—pilots, flight

attendants and ground workers—American met its commitment to provide former

TWA employees full credit for their years of service at TWA for all pay and benefit

purposes.

At the time of this asset acquisition, no one foresaw the industry’s impending financial crisis—a financial crisis that regrettably has led to the furloughing of so

many employees throughout the industry, including at American.

Once again, no one could have predicted the events of 9/11, or the devastating financial fallout that followed. But the fact is that the unions negotiated and agreed

to an integration plan that attempted to balance competing interests and preserve

jobs. Therefore, the ultimate consequences for the TWA employees were not the result of the integration plan, but rather an economic downturn that forced layoffs

and cutbacks throughout the industry. The pain has been spread far and deep.

I appreciate the efforts of this Congress to provide aid to the airline industry and

assistance to the tens of thousands of workers who have lost their jobs. I hope that

we can all soon anticipate better times for U.S. airlines and their employees.

Thank you for your kind attention, and I will be happy to address your questions.

Whereupon, at 4:45 p.m., the committee was adjourned.]

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