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» Smilin' Jack   » Specific Airline Discussions   » TWA   » AMR's "Escape Hatch" at MCI Overhaul Base

   
Author Topic: AMR's "Escape Hatch" at MCI Overhaul Base
TWA Fan 1
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Memo details American deal for base at KCI
By Mark Kind
The Business Journal of Kansas City

Jan. 26 — American Airlines has negotiated an escape hatch allowing it to cut its work force at the Kansas City International Airport overhaul base to zero without repaying incentives offered by the city.


Unveiled Jan. 21, the airline's memorandum of understanding with the city reveals details that officials have hinted at since announcing Oct. 22 that American would keep jobs at the base.

In the document, the airline formally commits to use only two service bays of 11 the airline now uses.

The document also allows American to cut its 2,200-employee work force to fewer than 700 without penalty if its airplane fleet declines by 10 percent and remains that small for a period of 90 days.

"If they drop that far, they're probably bankrupt anyway, so we let them get away with that," said City Councilman Bill Skaggs, chairman of the city's Aviation Committee.

The company also gets a pass on repaying incentives in Kansas City if, beginning in 2006, its operating losses during any four-quarter period exceed $750 million and its fleet declines by 5 percent because of adverse conditions in the aviation market.

On Jan. 21, American announced an operating loss of $844 million for 2003. Net loss for the year was $1.2 billion.

"They wanted what I'd call an 'out' on the clawbacks," said Gary Sage, who leads business development and retention for the Economic Development Corp. of Kansas City.

Unless American suffers an economic disaster, a head count of fewer than 700 employees essentially would require the airline to pay the lost salaries back to Kansas City and Missouri, Sage said.

"Once they hit that base level of employment, (the repayments are) almost proportionate to their employment costs," Sage said.
American's rent could increase by as much as $2 million, but if the airline maintains at least 700 employees, it will pay $1 million a year in rent on the city-owned facility. The rent would
increase to $1.25 million during the 18th through 25th years of the lease.

American can immediately begin cutting its 2,200-employee population to fewer than 1,700 workers, according to a summary of the memo, which puts a positive spin on American's "intent."

"Excluding attrition, it is the intent of American to maintain... an equivalent head count of 1,700 through at least Dec. 31, 2005,"
the summary said.

Kansas City and the state each have agreed to put up $1 million a year to repay a $40 million bond dedicated primarily to renovating the overhaul base's "super hangar," which contains two bays large enough to accommodate wide-body jets. No more than $8 million of the bond would go to repairs of the narrow-body hangar.

Although the airline apparently intends to use the base's nine narrow-body repair bays through 2006, it can opt to give them up or continue using them after that with no change in its rent.

Before October, the struggling airline had seemed ready to close the former TWA base in favor of its other two: a high-tech facility in Fort Worth, Texas, and a massive Tulsa base.

The company announced Jan. 15 that some jobs at the Kansas City base could begin disappearing in August as the airline closes its parts warehouse here.

About 90 union employees work in the warehouse, said Gordon Clark, president of Local 530 of the Transport Workers Union.

"I know there's going to be opportunities for those workers in other areas of the base," Clark said.

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Kenneth
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Just wondering,

Does American do very much contract maintenance for smaller airlines? I know that Delta does a decent amount of contract work (or at least they used to - an old classmate of mine is a Delta mech) and TWA used to do a lot many years ago. I remember discussions back in 2000 that TWA didn't seem to be very aggressive about pursuing contract work that would keep the bases busy.

Ken

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gambit3131
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quote:
Originally posted by my_cat:
I remember discussions back in 2000 that TWA didn't seem to be very aggressive about pursuing contract work that would keep the bases busy.

I don't think TWA was able to make much off contract maintenance. Before I started with TWA they had the C17 contract and lost it or let it because they couldn't produce. If I am wrong on the reason, please correct me. I came in on the tail end of that issue and never knew the whole issue behind why TWA lost it.

gambit

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chrispy
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You're not going to like the answer, but the IAM's work rules (not it's people)had a lot to do with TWAs lack luster maint. performance.

The IAM like all unions was screwed by Uncle Carl and grew very angry at the paycuts involved. They tried to protect themselves (a trade-off of sorts) by agreeing to the paycuts in exchange for work rules that were good for retention of the masses but not very efficient. Two people on the catering truck, an IAM employee had to fuel the airplane, etc. etc.

Contract Maint, especially for the Gov't is like finding a pot of gold. Unfortunately, TWA was not able to convert. The writing was on the wall, make the IAM efficient, which would involve layoffs and less dues money and possibly keep the airline afloat, or keep the saggy work rules and the boat sinks into he hands of AMR. Now, I think I can count on two hands how many IAM workers are still on the payroll. Many good workers and good talent, lost - which would have been helpful to AMR which had maint issues.

The rest is history- bad history. Red Tail cleansing continues in MCI.

[ 02-07-2004, 13:31: Message edited by: chrispy ]

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