A company explanation of the situation.....
We employ approximately 300 pilots in our North American Operations who are represented by the Office and Professional Employees International Union ("OPEIU") under a collective bargaining agreement. Because this agreement became amendable in May 2003, we began negotiations with union representatives in March 2003. After approximately eight weeks of discussions, an agreement could not be reached on several key areas, most notably compensation levels. Both the union representatives and the Company agreed to seek assistance from the National Mediation Board, or NMB, in appointing an independent mediator to assist with the negotiations. A mediator was assigned by the NMB and sessions have continued to date with some progress being made. In the future, all negotiations will be at the discretion of the NMB mediator. If the mediator and the NMB should determine that no further progress is being made toward resolution, then the NMB can seek a number of alternatives which include:
1. Declare a Release, which would start a 30-day "cooling-off period." Negotiations may continue during the "cooling-off period." If the dispute remains unresolved after the "cooling-off period," then both parties would be released from negotiations and could seek "self help". When "self help" is available the pilots could then engage in a work action that could take a variety of forms including a work stoppage. We have contingency plans in place to respond to these scenarios and believe we will be able to continue operations with limited or no disruption in services. However, no assurances can be given that these plans will be effective. We cannot reasonably estimate the financial impact of a work stoppage, should one occur, on our results of operations; or
2. The NMB can continue negotiations for extended periods of time (in some instances for several years) until one or both of the parties change their demands and reach an agreement.
In March 2004 we petitioned the NMB for a release due to lack of progress in negotiations. The NMB declined this request after input from the Union and instructed the parties that negotiations should continue. The negotiations did continue and some progress was made; however, on August 2, 2004, the Union petitioned the NMB for a Release. The NMB declined this request after input from us and instructed the parties that negotiations will resume the week of November 3, 2004 in Lafayette, Louisiana.
Based on our latest proposals made to the union, base salary expense would increase by approximately 13% annually. Given that the pilot group represents only 33% of our North American workforce, we do not believe that this level of adjustment or the results of our negotiations will place us at a competitive financial or operational disadvantage.