OPTIONS
In deciding what Motions are required, the GC considered the various courses of action available to the Association. The Motions that we conclude are necessary are covered in some detail later in this Newsletter, but first it is appropriate that we should provide you with insight into your GC thinking on each of the options considered.
Do Nothing
It has been suggested by some Members that the best approach for now is to do nothing, allow the dust to settle and then perhaps a path forward may become clearer. Moreover, they suggest that it is appropriate to assume that the funding for the legals will materialize at the required moment and that, in any case, the continued existence of the legal actions will elicit a significantly better offer of settlement from the Company at some stage prior to their conclusion.
Whilst, we fully agree that sitting on our hands and taking stock of the situation was the most sensible initial action, we believe it is clear from ample Member feedback on costs and the recently defined position of the Company, as described in our Newsletter of 25th February, that time is not on our side.
Therefore, we have rejected this strategy in favour of a more proactive approach to gain positive guidance from the Membership.
Re-consider the Offer
Some Members, including some 49ers, consider that the best course of action is to simply vote again on the Offer, as provided for under Rule 17.50. Moreover, we are advised by our industrial consultant that this is a common occurrence in similar situations. Certainly, there is new information available for us all to consider:
• Prior to the vote on the Offer, none of us could accurately judge the level of support for continuing forward with the legal cases. We did not know if 10% or 90% of the Membership would support acceptance. The narrow defeat of the previous motion may indicate a serious shortfall in the required Membership support to continue forward on the legal path with the financial commitment that entails.
• The Company has indicated that the current Offer will not be available beyond 16th May and that they will then make a cash-only Offer through a “payment into court”. We must assume that this means that the opportunity of re-employment, an important component of our original objective for a 49ers resolution, would then be lost.
• As described in the legal advice provided by Instructing Solicitors (still available to you on the web site), a ”payment into court” considerably increases the likely costs to the Association of the actions going forward.
• Following the vote on the Offer, we have been petitioned by some 49ers and Members requesting a re-vote.
Whilst this clearly remains an option worthy of consideration, the GC does have to recognize that the Offer did not achieve the required 2/3rds support. Moreover, it is likely that many of those who voted against acceptance of the Offer would feel that the new information in itself does not warrant a re-consideration. Those Members would feel that the appropriate next step should be to identify the funding to carry forward with the legal actions. We believe that this view must be acknowledged and a feasible plan developed.
However, as previously advised, in conjunction with our Solicitors we have concluded that we do not have the required mandate to simply continue with the funding of the legal actions on the basis of the failure of the vote on the Offer. Additionally, there is clear jeopardy to the Association in this route and therefore we need to know that the commitment is there in order to go forward with the legal actions. We believe it would be better to know the answer to this question whilst there are still other options available to us.
Vote on Legal Funding
The situation is that no positive mandate for funding of the actions has ever been obtained from the Membership. The actions were started in 2001 as a proper legal response to the 49er dismissals and to serve as a pressure point to promote a resolution through negotiation. The financial ramifications of funding the actions to conclusion were less of an issue at the time as it was hoped that we would never reach that point before a resolution through negotiation could be achieved.
To date, we have spent HKD12 million of the Association’s money in support of these actions (allowing for monies returned in costs awards to do with a number of appeal and jurisdictional rulings). We estimate that the Company, as is normally the case, will have spent more.
In going forward with the legal actions, we are advised that to get the actions to a verdict will cost a further HKD13 million. As the legal process is now approaching the point where expenditure beyond our current reserves will be required, ensuring that the proper funding is in place has been a growing concern of your GC for some time. However, for obvious reasons these were concerns that we considered should be kept extremely confidential prior to entering into any negotiations with the Company.
Our concern is to ensure that:
• There are sufficient funds available to bring these actions to a verdict, and
• in a situation where the actions were discontinued due to lack of funds, or where a costs award is made against the 49ers, that sufficient Association funds are available to cover any costs. If this precaution is not taken, individual 49er plaintiffs would be exposed to the near certainty of having to pay the Company costs in the action to that point. These costs could be considerable. If we consider that Company costs are likely to already exceed the HKD 12 million the Association has spent, and with significantly more costs ahead, this would obviously be a disastrous situation for the 49ers.
We believe that these are both strong reasons to ask the question on funding and if Members are not willing to bear the considerable cost of continuing to the point of legal finality, it is better that the 49ers find out sooner rather than later.
Your General Committee has examined a number of options for providing the funding required to carry the legal actions forward, but has concluded that a levy is the most sensible option. Under Rule 6.4 a levy is a payment in addition to normal subscriptions which may be raised for a particular purpose. A levy in instalments would spread the cost, but ensure that the funds are in place prior to the point at which the increased expenditure will be required. The extent of the levies may be mitigated by other means and we have investigated the following:
• Sale of premises. Sale of premises could provide funds of between HKD 3 and 4 million but would expose the Association to relocation and ongoing rental costs in a volatile market. We believe this is a poor option.
• Borrowing. The only collateral the Association could advance is premises. Due to the age of the premises we are advised that the loan amount would not exceed HKD 2.5 million. In borrowing money for this purpose, we would be placing a debt burden on future Members that your Committee, and our auditors, feels is more properly borne by current Members. We believe this is a poor option.
• IFALPA Funding. IFALPA will not agree to fund these actions and have advised us as follows: “The only financial support that IFALPA offers is suspension of subscriptions to Member Associations in financial difficulties and help with representation at conferences, meetings etc. We are a federation of pilot associations and requests for support for any cause would certainly have to come through our Member Associations. We would not support any individual pilot or group of pilots in a legal action as such a precedent would have impossible consequences. “
• Reduce staff costs. VPA conducted a very thorough audit of our staff costs only nine months ago, including benchmarking salaries against the marketplace. The conclusion is that our staff structure and cost base is efficient and appropriate for our needs in the near and medium term.
• Re-direction of subsistence monies from the 49ers to legal funding. This is a decision that properly belongs with the Membership and that option is available to you through motions on this agenda.
• Donations. Donations are a very feasible means of mitigating the amount of any levy required. To that end we have established a HSBC account for the purpose of collecting donations. This account is now open and ready to receive donations. Checks should be made payable to “HKAOA” and marked on the back “49er Legal Fund”. If you wish to make a direct transfer, please contact the AOA Office. Any donations received will be used only for funding 49er legal actions, and only if the decision of the Association is to continue to fund the actions. Should it be the decision of the Association to not continue funding the actions, any donations will be returned in full. Should it be the decision of the Association to continue to fund the actions, the donations will be used to mitigate the subsequent amount of the two levies when they are raised.
OTHER ISSUES
Subscriptions
In response to the feedback we have received, it is clear that we must provide the Membership with an opportunity to determine what it will fund in addition to normal running costs.
Consequently, the Committee has decided that a basic subscription rate should be set to cover only Association running costs with a small buffer which would allow for limited additional expenses. Funding for other issues such as 49er legal and subsistence costs should be raised through special levies that would be voted on by the Membership. In that way the Membership can decide precisely what it is prepared to fund. Therefore, with effect from 1st May the subscription rate will be reduced to 1.5%.
As happened when the subs were reduced from 4% to 3%, this does not require a Membership vote. However, the Membership will be presented with options for maintaining funding at current levels, or even higher, should you choose to do so.
It is important to note that special levies would not be borne by Officers who join the Association for the first time after the levy had been raised, but would form part of the rejoining fee for any former Member seeking to rejoin the Association. In this way we believe we can encourage Officers to join the Association who our experience shows are intimidated by the current high cost of membership that has resulted from events with which they feel little connection.
Subsistence
As you are all aware, 49er subsistence has been an integral element of our support for the 49ers since they were terminated and it is something of which this Association can be extremely proud. I am confident that none of us would want to share either their considerable loss or traumatic experience and I know that the 49ers are universally appreciative of this assistance. Moreover, they have voluntarily ‘tightened their belts’ on several occasions now to enable us to reduce the burden on the Members.
Nevertheless, approximately half of our current 3% subscription rate is used to provide an indefinite commitment to a subsistence program that allows any 49er under age 55 to request assistance of up to HKD 25,000 per month.
Whilst your Committee strongly believes we should continue to financially assist the 49ers, having now provided subsistence for over three and a half years and in light of the ongoing uncertainty of when a resolution will be found, we believe we should seek to define a reasonable time limit on continued subsistence, and the level that Members are prepared to support . On the expiry of this period the Membership would be able to review its commitment.
Therefore the GC will provide an option for you to do this through a levy. As funds raised through levies are directed at their sole purpose, should further ‘belt tightening’ or reduced demand lead to a surplus, it can easily be identified and returned to the Membership.
ACTIONS
After a full consideration of all factors, your Committee has decided upon the following actions:
1. Reduce the subscription rate to 1.5% wef 1st May 2005.
2. Convene an EGM to debate and vote on a series of motions on raising levies to cover most 49er related costs, including continued funding of the legal actions.
3. Only in the event that funding for the legal actions is not mandated by the Membership, reconsider the Company Offer.
EGM MOTIONS
Motion 1 – LEVY TO FUND LEGAL ACTIONS
Be it resolved that the Association will continue to fund the ongoing legal actions relating to the 49er dismissals for those plaintiffs whom it represents, and to that end the following levies will be raised and payable in addition to basic subscriptions:
A levy of up to twelve (12) months subscriptions (at the level of 1.5% of basic salary) to be payable in equal monthly installments commencing on 1st July 2005; plus.
A levy of up to twenty four (24) months subscriptions (at the level of 1.5% of basic salary), to be raised as and when required to cover any additional costs of the actions.
Such levies will be payable by Full Members who are Members of the Association on 1st June 2005 or former Members who subsequently rejoin.
These levies would raise a funding guarantee that would ensure that the actions could be brought to a conclusion without exposing the Association or individual 49ers to the potential of a massive financial liability. If it eventuates that the full amount of the levies are not required after they have been raised, the unused portion will be returned to you, as provided under the Rules.
Motion 2 – LEVY TO MAINTAIN CURRENT 49ER SUBSISTENCE LEVELS
Be it resolved that the Association will continue to provide current levels of subsistence and medical coverage to any 49er requesting such assistance, for a period of up to twelve (12) months, and to that end the following levy, payable in addition to basic subscriptions, will be raised:
A levy of up to twelve (12) months subscriptions (at the level of 1.5% of basic salary), to be payable in equal monthly installments commencing on 1st July 2005.
This levy will be payable by Full Members who are Members of the Association on 1st June 2005 or former Members who subsequently rejoin.
Current subsistence arrangements provide for any 49er below retirement age to request assistance up to the amount of HKD 25,000 per month. When combined with the new basic subscriptions rate of 1.5% this proposed levy would equate to our current subscriptions level of 3% and reflects the fact that 49er subsistence currently accounts for approximately half of our annual expenditure.
The continuance of this subsistence for a further limited period would provide much appreciated stability and reassurance to the 49ers and their families as they deal with the uncertainty of the immediate future. Your Committee urges you to continue supporting this level of subsistence. Should further belt tightening, or reduced demand result in a surplus, this surplus will be returned to you, as provided under the Rules.
Motion 3 – TO CONTINUE 49ER SUBSISTENCE WITHIN RESOURCES
It is important to note that Motion 3 will only become effective in the situation where Motion 2 has failed. However, you will need to submit a vote on this motion and your vote on this motion should assume that Motion 2 has failed.
Be it resolved that the Association will continue to provide subsistence and medical coverage to 49ers within available resources, for a period of up to twelve (12) months. Be it further resolved that this motion will only be effective if Motion 2 fails.
Your Committee has asked that you continue supporting the current levels of subsistence for a limited period through a positive election for Motion 2. However, should you feel unwilling to continue to fund that level of support, your Committee would urge you to at least give your support to the continuation of subsistence payments in some form. In that situation, we would have to manage our available resources through the introduction of significantly more stringent criteria than those that currently exist.
Motion 4 – TO ACCEPT COMPANY OFFER
It is important to note that Motion 4 will only become effective in the situation where Motion 1 has failed. However, you do need to submit a vote on this motion and your vote on this motion should assume that Motion 1 has failed.
Be it resolved that the Membership of the Association accepts the Company Offer of 14th December 2004 on the 49ers. Be it further resolved that this motion will only be effective if Motion 1 fails.
In the situation where Motion 1 fails, the Association will have decided to discontinue support of the legal actions and acceptance of the Offer would seem to be the only sensible alternative remaining for the Association. Therefore, regardless of how you vote on the Legal Funding motion, we believe you should strongly consider voting for acceptance of the Offer on this occasion. This would allow those 49ers who wish to do so to accept the Offer, and those who do not to retain their right to continue with the legal actions on an individual and self funded basis.
SUMMARY
There is no doubt that the realities of our situation have conspired to place us in a difficult position and no path forward exists that will fully satisfy all Members. Moreover, we are faced with difficult choices that will require significant commitment or compromise.
We are certain that the outcome of the vote on the Offer has created the potential for a very real Membership crisis within our Association. Whilst obtaining a resolution to the 49er situation and taking care of their welfare remain very high priorities for your Committee, we are now required to provide the Membership with an opportunity to clearly indicate to what extent they are prepared to continue funding their Association and the needs of the 49er cause. Simply put, Members are the Association’s lifeblood and we are only as effective as the size of our Membership and their commitment allows.
In the circumstances, your Committee and I have striven to provide you with a clear description of the challenges that face us going forward. We believe that the result of the vote on these motions will provide the clearest possible indication as to the direction that is supported by the majority of the Membership. This is the direction that is most likely to further the interests of the 49ers and of your Association.
We ask for respectful and constructive debate, and we urge you to remain informed, during the period leading up to the EGM, which will be held in the middle of April.
Sincerely
President
04 March 2005
Dear Committee
Thank you for your reply to my earlier letter, dated 17th February, which contained the following text:
“…it remains the policy that such budgetary matters are confidential to the GC. However, I can assure you that the answers provided to you at the EGM were correct based on the information recently provided to me by both the Treasurer and the Administrator. Could I further assure you that all members will be provided with all information necessary to make fully informed decisions on any motions relating to cost issues going forward.”
I have read your newsletter dated 4th March 2005, that explains that your priority is to continue the legal funding by introducing Special Levies amounting to HK$48million. That equates to me paying HK$102,360. I’m afraid that you have given absolutely no explanation of the mathematics involved, so I have not been “provided with all information necessary”.
Please answer the following:
1. The current annual income of the HKAOA is approximately HK$24m i.e. approximately HK$2m per month at 3% subs. From Special Levies 1&2 (Motion 1), you will raise HK$12m and HK$24m, respectively. You stated earlier that you needed HK$30m. Why have you increased this to HK$36m?
2. If the court cases are not scheduled to finish until the end of 2006, or longer including separate damages hearings, why not raise Special Levy 1 over 18months or even 2 years i.e. a final levy of perhaps 0.75% coinciding with date of actual payment?
3. You are allowing for CX costs to be broadly equivalent to ours. Assuming that we will spend HK$12m + HK$13m, CX costs will be _HK$25m. Indeed, Special Levy 2 equates to HK$24m. However, costs are awarded at _70%, therefore the probable liability = HK$17.5m. Why raise an extra HK$7.5m?
4. Item (3) assumed that CX will win in all 3 jurisdictions and they “pay into court” in all 3 jurisdictions – otherwise we are not liable for their costs. If CX “pay into court” and lose then they will still be liable for our costs to date (70% x HK$12m = HK$8.5m). As the lawyers are confident in all jurisdictions, the more likely exposure is 17.5 – 8.5 = HK$9m, therefore why budget for HK$25m?
5. The Committee has previously given direction on all Motions yet no direction is given on Motion 1. Does the Committee urge us to vote for or against Motion 1?
6. You state that staff costs have been “benchmarked”. What other pilots’ unions pay a basic salary of >HK$1.3m for a General Secretary and have less than 1000 members?
7. Why do we need a General Secretary and an Assistant General Secretary when membership numbers have fallen by a third? As the industrial climate is more straightforward now, why not just have an Asst GenSec?
8. When did the 49er Objective become “to get the best possible outcome”?
9. Today, the lowest Seniority number is 1760. There are 123 ASL crew including 61 Flight Engineers. The Association has 9 Associate Class A members. Please explain:
The Association currently has 925 Members. There are 1912 pilots in Cathay Pacific.
10. You appear to have reduced subs because of adverse membership input indicating they will leave. Which gives more income:
a. 875 members paying 1.5% or
b. 825 members paying 3%?
11. Please confirm that that an EGM is required to have a Rule change? When are you going to change the levels in Rule 6.3?
Yours sincerely
This from another forum:
Is that true the general secretary gets paid 1.3million a year? That\'s more than a B scale captain. Does IFALPA pay that sort of money? Sounds way over the top. Now that we give in to whatever cx wants why do we need a general secretary?
If they\'re serious about saving money then there\'s a straight $1.3million saving.
10th March 2005
APRIL EGM
Gentlemen
I write to you all regarding the upcoming EGM scheduled for April in which a number of motions regarding financial assistance to the 49ers are intended to be tabled. Naturally this is a matter of the utmost importance, not only for the 49ers but for the Membership as a whole.
There exists a concern that there are a number of recent developments of which you may not be aware and, therefore, that may not have been taken into account during your deliberations prior to deciding upon the current course of action. Some of these are summarised below.
1. Australian Court Case
At a directions hearing held at the end of February last, the judge set a court date of 6th March 2006 for the case to be heard and set aside 4 weeks for the hearing. This hearing will rule on all matters, both substantive and jurisidictional. In addition, she also set a very detailed timetable of procedural steps to be completed between now and the hearing itself. Now that a specific timetable for this case is available, this facilitates the construction of a more accurate cash flow and business plan regarding possible funding requirements
2. UK Court Case
The case in the Appeal Court is to be heard on either Monday 14th March or Tuesday 15th March 2005 in the Royal Courts of Justice, The Strand, London. This will determine once and for all the issues of jurisdiction. The only possible further avenue of appeal available to either party is the highest court in the land, the House of Lords. In any event, the hearing in the Appeal Court will make case law and set precedent. This is a very significant development on its own. In addition, however, it also has a direct bearing on possible future funding requirements depending on the outcome. Therefore, the view can be held that it would be premature to make irrevocable decisions on funding matters until the result of this hearing is known.
3. Supplementary Funding
Very recently, an independent sponsor has come forward and offered substantial funding for the purpose of assisting with financing the legal actions should this be required. Negotiations on this offer are at an advanced stage and should be completed within the next 3 to 4 weeks. Given that the GC is presently considering a financial plan for the way forward, this is obviously a significant development which should be taken into account.
4. Membership
A significant number of Members, have approached the 49ers and given undertakings to the effect that, should the Association decide to cease funding assistance, they will leave the Association and pay the equivalent of their membership dues directly to the 49ers in order that financial assistance may continue. In addition, it is understood that plans are already in hand to set up an alternative union in such a situation. This is a very serious matter and has significant ramifications for the future viability of the Association itself given that its Membership and finances are already depleted.
Might I suggest that an evaluation of these and other matters be completed by a sub-committee and its report be circulated to the Membership for consideration prior to any irrevocable motions being put to the vote. Might I also suggest that the sub-committee consist of 6-persons: two General Committee Members, two 49ers and two other Full Members; one each “other Full Member” to be chosen by the General Committee and the 49ers respectively, although each may be neither a General Committee Member nor a 49er.
It is strongly recommend that until the General Committee has had the opportunity to properly evaluate these matters, it would be entirely inappropriate for the Membership to be asked to decide on the need for special levies.
Yours sincerely