Healthcare Premiums

Q Which healthcare premiums are frozen at the 2019 rates?

A Please note the healthcare premiums are established in the 2018-2021 JCBA. The language would not change whether or not the contract extension TA is ratified.

Only the PPO premiums are frozen at the 2019 rates pursuant to JCBA §23.A.1-2 [Flight Attendant Insurance Plan(s)].

For the high deductible PPO premiums, Flight Attendants will pay no more than any other workgroup to participate in the plan pursuant to §23.A.3.

For Health Maintenance Organizations (HMOs), Flight Attendant will pay the greater of either the PPO rate or the difference between the entire cost of the HMO and the Company contribution for the PPO plan.

Pay Increases Under the Contract Extension Extension TA?

Q I saw the news about the tentative agreement with the 1.5% increase in pay. I’m confused about this though. Does this mean 1.5% and that is all we will see until a new contract is signed in 1-2 years? Or is there some other step increase that will be honored?

A You will continue to progress through the step rates on your anniversary date just like always if you are not at top of scale. The only difference is that the entire pay scale would also increase by 1.5% on December 17, 2021, if the TA passes. This is the same type of increase that changed the entire pay scale by 2.5% on December 17, 2020 under the current 2018-2021 JCBA. Eligible Flight Attendants at the top of scale will also continue to move to the level of Longevity Premium on their applicable anniversary date.

If We Vote “No” on this TA…?

Q If we vote “no” on this contract extension TA, does this mean we have to go into new contract negotiations, or can we negotiate a new extension in hopes for a higher pay increase?

A The MEC approached management regarding this extension, so it’s not like management was necessarily interested in negotiating an extension. There is technically nothing preventing management and AFA from negotiating another extension with different terms (such as pay rates) if this TA is not ratified, but we do not see any incentive for management to do so at this time.

Regular negotiations are scheduled to begin in September 2021, so there would be just over three months following the mid-May TA count date for both parties to prepare for those negotiations.

Does a Contract Extension Make Sense Right Now? (2)

_{(Compiled from the 2^nd virtual roadshow transcript and lightly edited.)}

Q Some Flight Attendants think that starting negotiations later this year will position us to take advantage of potential profitability later. Is this a good strategy?

A

Well, I think we’ve heard a lot about “the curve.” Is it a good strategy? It’s an opinion question, so I’m going to answer it with my opinion based on my experience.

It’s not a terrible strategy, but is it the best strategy? I don’t believe so. I think that we would be better served by waiting just one year longer to be on the other side of that curve where it’s not just starting to start go up but where everyone else is starting to rise, too, and other groups have started to bargain. So I would not call it a good strategy.

I think it’s not a completely detrimental strategy, but it wouldn’t be my preferred way to go, which is why I am in favor of this extension. At the same time, no one has a crystal ball, and I don’t want to tell anyone how to vote, so you really have to look at it and just listen to all the information and decide for yourself what you think is the best for you, your family and for all of us collectively.

MEC President Jeff Peterson

Does a Contract Extension Make Sense Right Now?

_{(Compiled from the 2^nd virtual roadshow transcript and lightly edited.)}

Q According to an economist at Morgan Stanley I talked with about a month ago, this pandemic produced what is called an exogenous shock to the economy, which typically produces immediate chaos but a short recession and quick recovery. In this case that is what is happening: The US economy bottomed out last July, corporate profits reached pre-pandemic levels Q1 2021, and corporate revenues are on track to do so by June 2021. Employment always takes longer to recover. The airline industry will lag but will also recover.

Since the contract negotiations will take several years, and I’ve read that the pay part of negotiations happens at the end, we should be well into recovery by the time our pay is negotiated. Without this extension our prior contract already has been extended. Many Flight Attendants don’t believe another extension makes sense. Can the economist comment on this?

A

Yes, the economist can. First off, I don’t know which corporations are operating at pre-pandemic levels of profitability in the first quarter of 2021.Obviously airlines aren’t, and I guess the question really is in terms of the next year following the amendable date without a TA the difference between 1.5% and 0% is kind of what we’re looking at.

So, when I when I say that I mean we are not going to get that money back in a future year by saying we gave it up, (but) we want it back in 2023 or 2024. It’s kind of a lost opportunity in my book. To look at with the contract opening in December of 2021where would we be in a year if we didn’t extend, and I would say we would have gotten zero percent pay increases for sure as opposed to a 1.5 percent pay increase for sure.

So, I agree that the airline industry lags behind the rest of the economy. The economy is forecast to grow very strong coming out of this recession, but I do think it’s really a question of do you want a one and a half percent pay raise or a zero percent pay raise over the next year after the amendable date. That’s really the question on the table because I don’t think there’s any way to negotiate this money back in some future period to make up for what we gave up.

Aviation Economist Dan Akins – FlightPath Economics, LLC

Almost every section of the agreement has an economic impact, and when you’re bargaining, if the company is really in cash preservation mode, then even sections you wouldn’t think like sick leave and vacation–any little work rule improvement that you want there–they’re looking at how is that going to impact on sick leave rates, how it’s going to impact on vacation utilization and so forth. In that context what you find once you get into scheduling and reserve, they’re looking at all of those work rules that you wouldn’t necessarily think as economic items as well. So, in the context where a company is either concerned about cash burn or they’re concerned about rebuilding cash reserves, all of the sections of the contract become a lot more difficult to negotiate, and things really slow down.

In part we know the answer here because we know that negotiations were proceeding at a pace such as (at) American and Southwest. Even though they…already started their negotiations, those negotiations essentially stalled out. Even though they weren’t at (the) economics (yet), just because there wasn’t going to be or there wasn’t any progress being made. When there [were] substantive discussions, the company was coming in and demanding concessions.

So, the other thing I think to take into account is Jeff went over your position in the industry [regarding pay ray rates earlier in the roadshow], and … one of the features of bargaining in this industry is we do something called “leapfrog bargaining.” What that means is we’re able to win increases at one carrier that provides a platform for the next Flight Attendant group to come back and use those increases as an argument about why they need more.

So, for example the Hawaiian Flight Attendants got an increase right before the pandemic. Those negotiations centered on where was everyone else situated, and we had a big fight with [Hawaiian management]. It was really based on what the comparators in the industry, and how does that affect our negotiations. One of the difficulties if you try to speed up your negotiations in front of everybody else is that your comparators haven’t had a chance to get the increases that they normally would have gotten. American you know we would have hoped but for the pandemic that they would have been in a better place right now with their contract. If they had gotten some good increases, that provides a better basis for you to get increases and so forth. United, Spirit and all of that.

You want to be … doing your timing correctly … in order to get the increases … that you really want in these negotiations. We need some of these other work groups to get in there and also be fighting for increases otherwise you’re going to be a little bit ahead of the curve.

This one-and-a-half percent, it’s basically in line when you do an extension. You don’t get a massive increase, but you get something to kind of keep you where you’re at until you can have a more favorable point.

AFA Director of Collective Bargaining Joe Burns

From my experience with negotiating for AFA Alaska, it’s exactly like what Joe has been saying about what Flight Attendant might think is not economic because it’s not specifically having to do with the step rate–so the pay rate–or say the vacation value or something like that. They think that’s not economic, all the other things, but they actually are…. Say open time is an example of something that we may want to likely revisit, and it does have an economic impact because … it does impact staffing, and therefore it costs the company money…. A sensitive topic that we will address at some point is say TFP versus block, and there’s a whole conversation that could be had on that, but … again it’s an economic conversation.

So, if we didn’t delay, (then) we would go to the table [in September], and we would quickly blaze through the non-discrimination (policy), all the stuff that we agree to right away, or the very low-lying things about certain definitions or updating and incorporating LOAs that we’ve already agreed to into the contract.

Once we’re done with that, then it really is like all of it is economic: reserve, scheduling, hours of service, obviously pay, vacation, sick leave. So, it would just make it challenging to have those conversations and probably would not be extremely productive for some period of time, and that’s why we have brought it to you guys for consideration whether this is our best strategic position to enter negotiations [in September or to extend for a year].

MEC President Jeff Peterson

Rising Stock Price (NYSE: ALK)

_{(Compiled from the 2^nd virtual roadshow transcript and lightly edited.)}

Q Our stocks are up way up today (April 12, 2021) at 71. What would you say that has on the influence of how we are doing?

A

I think that it’s an encouraging sign for Alaska in particular. I do think that at least with the last scan–I haven’t been following the other aviation stocks–but I think our stock is probably a little over inflated at the moment based on recovery. It is encouraging, but the recovery is far from certain.

MEC President Jeff Peterson

Yeah, I think … that’s a good point, Jeff. The recovery is far from certain, and if you look at where we are with a 71-ish dollar value stock, it’s the highest it’s been since about 2017 October. But if you look at carriers that are positioned in the box that I talked about earlier, which is no wide body international mostly domestic discretionary traffic, those carriers including Alaska, Southwest, somewhat jetBlue, Spirit, Allegiant (and) Frontier. Those stocks are all kind of in that same bucket. They’re close to all-time highs–at least all-time highs in the last three or four years–and it’s all because those are the places of the industry analysts expect the recovery to be to be happening fastest. It’s a reflection of not what’s actually occurring but relative to other airline stocks.

What’s likely to occur at Alaska and other primarily narrow body domestic focus carriers are looking at…a faster recovery than United, American and Delta, which if you look at their stocks are still about halfway back to where they were this time or a little bit earlier last year. So, I think it’s a reflection of what the market expects to happen in the future not so much what’s happening now.

Aviation Economist Dan Akins – FlightPath Economics, LLC