-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WTIdLqwDugvScXV/yph8uHXvi8scMYDnSC/eMU9sbucVLjucd/EZJiXDECF6QXEe Z9ooJHEjGH9+6IrbC+J85A== 0001068800-99-000133.txt : 19990413 0001068800-99-000133.hdr.sgml : 19990413 ACCESSION NUMBER: 0001068800-99-000133 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 DATE AS OF CHANGE: 19990412 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANS WORLD AIRLINES INC /NEW/ CENTRAL INDEX KEY: 0000278327 STANDARD INDUSTRIAL CLASSIFICATION: 4512 IRS NUMBER: 431145889 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-07815 FILM NUMBER: 99583929 BUSINESS ADDRESS: STREET 1: ONE CITY CENTRE STREET 2: 515 N SIXTH ST CITY: ST LOUIS STATE: MO ZIP: 63101 BUSINESS PHONE: 3145893000 MAIL ADDRESS: STREET 1: ONE CITY CENTRE STREET 2: 515 N 6TH ST CITY: ST LOUIS STATE: MO ZIP: 63101 10-K 1 TWA FORM 10-K ========================================================================= ========================================================================= SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ________________ FORM 10-K /x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-7815 TRANS WORLD AIRLINES, INC. (Exact name of registrant as specified in its charter.) DELAWARE 43-1145889 (State or other jurisdiction of (I.R.S. Employer incorporation or organization.) Identification Number.) ONE CITY CENTRE 515 NORTH 6TH STREET ST. LOUIS, MISSOURI 63101 (Address of principal executive offices, including zip code.) (314) 589-3000 (Registrant's telephone number, including area code.) Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED - - ------------------------------------------- ----------------------------------------- Common Stock, par value $.01 per share American Stock Exchange Warrants (expiring August 23, 2002) American Stock Exchange 11 1/2% Senior Secured Notes due 2004 American Stock Exchange 11 3/8% Senior Notes due 2006 American Stock Exchange 11 3/8% Senior Secured Notes due 2003 American Stock Exchange 10 1/4% Senior Secured Notes due 2003 American Stock Exchange Series A Participating Cumulative Preferred Stock Purchase Rights American Stock Exchange
_____________ Securities registered pursuant to Section 12(g) of the Act: (Title of Class) 8% Cumulative Convertible Exchangeable Preferred Stock, par value $.01 per share 9 1/4% Cumulative Convertible Exchangeable Preferred Stock, par value $.01 per share 8% Secured Notes due 2001 Warrants (expiring April 1, 2002) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months; and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes /X/ No / / The aggregate market value of voting stock held by non- affiliates of the registrant as of February 28, 1999, $356,540,268. As of February 28, 1999, 58,252,305 shares of the registrant's Common Stock, par value $0.01 per share, were outstanding. DOCUMENTS INCORPORATED BY REFERENCE: Definitive Proxy Statement for the Annual Meeting of Stockholders on May 25, 1999 - Part III ========================================================================= ========================================================================= PART I ITEM 1. BUSINESS Trans World Airlines Inc. ("TWA" or the "Company") is a Delaware corporation organized in 1978 and is the successor to the business of its predecessor corporation, Transcontinental & Western Air, Inc., originally formed in 1934. The Company's principal executive offices are located at One City Centre, 515 N. Sixth Street, St. Louis, Missouri 63101 and its telephone number is (314) 589-3000. TWA is the eighth largest U.S. air carrier (based on revenue passenger miles ("RPMs") for the full-year 1998), whose primary business is transporting passengers, cargo and mail. During 1998, the Company carried approximately 23.9 million passengers and flew approximately 24.4 billion RPMs. As of December 31, 1998, TWA provided regularly scheduled jet service to 93 cities in the United States, Mexico, Europe, the Middle East, Canada and the Caribbean. As of December 31, 1998, the Company operated a fleet of 185 jet aircraft. RECENT DEVELOPMENTS On March 16, 1999, TWA announced that effective at the Annual Meeting of Shareholders on May 25, 1999, William F. Compton, currently president and chief operating officer, will become chief executive officer, retaining the title of president. Gerald L. Gitner, currently chairman of the board of directors and chief executive officer, will continue as chairman of the board and will assume the additional role of chairman of the board's executive committee and will focus on leading TWA's strategic planning initiatives, including alliance development, aircraft acquisition and financings. On March 23, 1999, TWA elected Michael J. Palumbo, formerly Senior Vice President and Chief Financial Officer, as Executive Vice President and Chief Financial Officer. NORTH AMERICAN ROUTE STRUCTURE TWA's North American operations have a hub-and-spoke structure, with a primarily domestic hub in St. Louis at Lambert International Airport ("St. Louis") and a domestic-international gateway at New York's John F. Kennedy International Airport ("JFK"). The North American system serves 36 states, Puerto Rico, Mexico, Canada and the Caribbean. The JFK and St. Louis systems are designed to allow TWA to support both its North American and transatlantic connecting flights. During 1998, TWA's North American passenger revenues accounted for approximately 88.5% of its total passenger revenues versus approximately 85.9% during 1997. TWA is the predominant carrier at St. Louis, with approximately 357 scheduled daily departures as of December 31, 1998 serving 78 cities. In 1998, TWA had approximately a 76% share of airline passenger enplanements in St. Louis, excluding commuter flights, while the next largest competitor enplaned approximately 13%. 1 TWA serves 27 domestic and international cities from JFK, with approximately 40 daily departures. JFK is both the Company's and the industry's largest international gateway from North America. The Company offers non-stop flights from JFK to seven cities in Europe and the Middle East as well as 18 destinations in the U.S. and the Caribbean. TWA coordinates operation of its commuter feed into St. Louis and JFK with Trans States Airlines, Inc. ("Trans States"). Trans States, an independently owned regional commuter carrier, currently operates approximately 155 daily flights into St. Louis and 56 flights into JFK. Trans States' operations are coordinated to feed TWA's North American and international flights. Management believes that these commuter operations are an important source of traffic into the Company's domestic and international route networks. INTERNATIONAL ROUTE STRUCTURE TWA's international operations consist of both nonstop and through service from JFK and St. Louis to destinations in Europe and the Middle East. TWA's international operations are concentrated at JFK, where TWA's system is primarily designed to provide domestic traffic feed for its transatlantic service. International cities served include: Barcelona, Cairo, Lisbon, Madrid, Milan, Riyadh, Rome and Tel Aviv from JFK; Paris from JFK and St. Louis; and London-Gatwick from St. Louis. In 1997, as part of its plans to improve the operating and financial performance of its international operations, the Company discontinued service on certain European routes, including JFK to Frankfurt, JFK to Athens and Boston to Paris, as well as non-stop feed service to JFK from several domestic cities. In 1998, TWA's international passenger revenues accounted for approximately 11.5% of total revenues versus approximately 14.1% in 1997. TWA continues to explore opportunities for entering into marketing and code-share alliances with foreign carriers. Such alliances allow TWA to provide its passengers with extended service to foreign destinations not served directly by TWA, while feeding TWA's North American operations from these foreign destinations. TWA and Royal Jordanian Airline have a code-share agreement that calls for the joint coding of TWA domestic flights between certain U.S. cities and JFK and of Royal Jordanian Airline's direct flights between JFK and Amsterdam and cities in the Middle East and Persian Gulf area. TWA also has a code-share agreement with Royal Air Maroc, Morocco's flag carrier, pursuant to which Royal Air Maroc sells seats with its code on TWA flights between JFK and certain U.S. cities and TWA sells seats with its code on Royal Air Maroc flights between JFK and Casablanca and certain other African cities. TWA and Air Ukraine signed a code-share agreement in 1997. TWA will place its code on Air Ukraine flights between Paris and Kiev, Ukraine. Air Ukraine will place its code on TWA flights between JFK and Paris. This service has been temporarily deferred pending the resolution of minor technological problems and is expected to commence in mid-1999. 2 BUSINESS STRATEGY TWA operates in a highly competitive, capital-intensive industry in which small fluctuations in revenue per available seat mile ("RASM") and cost per available seat mile ("CASM") can significantly affect TWA's financial results. Its long-term viability depends, therefore, on its ability to generate revenues, control costs and attract new capital. Consequently, TWA seeks to improve operational reliability and productivity, schedule integrity and overall product quality in order to accomplish these goals. To that end, TWA has implemented and continues to focus its efforts on the following key initiatives: * modernizing its fleet; * reducing costs and improving productivity; * implementing revenue-enhancing marketing initiatives to attract higher-yield travelers; * implementing employee-related initiatives to reinforce TWA's focus on operational performance; and * optimizing TWA's route structure. Since late 1996 when TWA began implementing these initiatives, it has achieved several important milestones toward its goals, including: * reducing the average age of its fleet from 19.0 years at year-end 1996 to 16.2 years as of December 31, 1998; * upgrading and implementing new services targeted at specific segments of TWA's customer base; * increasing operational reliability through improved on-time performance; and * increasing the use and efficiency of St. Louis and JFK. The key elements of TWA's overall ongoing business strategy are outlined below. Fleet Upgrade and Simplification TWA's fleet modernization plans seek to realize operating and maintenance cost savings and increased productivity by replacing a number of older, less efficient aircraft with more modern, technologically advanced, twin-engine, two-pilot aircraft. These changes are also intended to simplify TWA's fleet structure in order to decrease overall crew training and aircraft maintenance costs (although resulting in increased short-term transition crew training costs). Additional efficiencies should be realized through increased standardization of aircraft parts, supplies and cabin equipment that must be inventoried throughout TWA's system. Despite the higher capital costs associated with owning or leasing new and later model aircraft, TWA believes that corresponding reductions in operating costs will offset any increased costs in the long term. Management believes this initiative will further improve TWA's operating performance while allowing TWA to achieve Stage 3 compliance with the Airport Noise and Capacity Act of 1990 (the "Noise Act") by the year 2000. 3 Retirements. In the first quarter of 1997, as part of its efforts ----------- to improve near-term operational reliability, TWA announced plans to accelerate retirement of the 14 B-747s and the 11 L-1011s remaining in its fleet as of December 31, 1996. All of the L-1011s were retired in 1997 and the B-747s were retired in February 1998. During 1998, TWA retired six of its older B-727s, which it replaced with MD-80s. TWA intends to retire additional B-727s and DC-9s in 1999 in order to comply with Stage 3 requirements of the Noise Act. Acquisitions. Since 1996, TWA has entered into agreements with ------------ the manufacturer to acquire a total of 27 B-757 aircraft. As of December 31, 1998, TWA had taken delivery of 16 B-757 aircraft. Eleven additional B-757 aircraft are scheduled for delivery in 1999 and 2000. TWA took delivery of two B-767-300ER aircraft in early 1998. One B-767-300ER aircraft is scheduled for delivery in 1999. TWA also took delivery of nine late-model used MD-82s in 1997 and early 1998. Since 1996, TWA has entered into agreements with the manufacturer to acquire a total of 39 new MD-83s. As of December 31, 1998, TWA had taken delivery of 13 MD-83 aircraft. TWA expects to take delivery of the remaining 26 MD-83 aircraft in 1999. TWA expects these fleet replacements will offer improved range and payload characteristics in state-of-the-art, environmentally friendly new aircraft that should allow for the schedule frequency required by the business traveler. Management believes these aircraft are appropriately sized to the routes served and, by reducing TWA's reliance on lower-yield feed traffic to fill capacity, have resulted in higher load factors and improved yields. Further, TWA expects these newer, twin-engine, two-pilot aircraft to provide efficiencies in fuel, flight crew and maintenance expenses while reducing long-term pilot training costs. TWA announced in December 1998 that it had signed letters of intent to acquire an additional 125 new aircraft: 50 Boeing 717-200 aircraft for delivery beginning in 2000, 50 Airbus A318 aircraft for delivery beginning in 2003 and 25 Airbus "A320 Family" aircraft for delivery beginning in 2005. In addition to these 125 firm orders, TWA has taken options on an additional 50 Boeing 717s and an additional 75 "A320 Family" aircraft. The letters of intent include financing for all the firm order aircraft. The terms of the purchase orders and related financing are subject to further negotiation and the signing of definitive agreements. These new aircraft would primarily replace B-727, DC-9 and older MD-80 aircraft currently in TWA's fleet. As a result of this fleet restructuring, TWA's mix of narrow-body aircraft and wide-body aircraft shifted from approximately 80%/20% at year-end 1996 to approximately 91%/9% at December 31, 1998, and the average number of seats per aircraft declined from 161 to 137 over the same period. The average age of TWA's fleet decreased from 19.0 years at year-end 1996 to 16.2 years at December 31, 1998. Based on scheduled deliveries through 1999, TWA expects the mix of narrow-body to wide-body aircraft to equal approximately 92%/8% at December 31, 1999. The average number of seats per aircraft is expected to equal approximately 145.3 over the same period. Finally, the average age of the fleet is expected to decrease to approximately 11.3 4 years by year-end 1999. Because of capital constraints, among other reasons, however, there can be no assurance that fleet retirements and new deliveries will occur as expected. Cost and Efficiency Initiatives Investment in Technology. Management believes significant ------------------------ opportunities exist for TWA to increase revenues and reduce costs by investing in available technology that provides TWA and its employees with the tools and knowledge necessary to operate its business more effectively and to improve customer service. Late in 1995, TWA purchased and began installing a sophisticated state-of-the-art yield management system with the objective of maximizing passenger revenue through effective control of the proportion of discount ticket sales. TWA believes it has achieved most of the system's potential but that further improvements are possible as operating skills improve. Additional expansion of the system beyond the current segment-based structure to an origin-and-destination-based structure offers further potential in 1999 and beyond. In early 1996, TWA introduced an Internet web site, and in the third quarter of 1997, TWA allowed customers to book flights and purchase tickets via its web site. In the second quarter of 1996, TWA initiated electronic ticketing and today it represents 47% of all tickets sold. TWA expects that distribution cost will be reduced as travelers use on- line booking vehicles to book flights and purchase electronic tickets. In addition, TWA is implementing a number of programs to reduce computer reservation systems booking fees, both internally and from travel agents. These booking fees are separate transaction fees that are paid in addition to any travel agent commission. Effective Cost Controls. TWA's fleet restructuring has allowed ----------------------- for the reduction of expenses associated with fuel consumption and flight crew staffing. The transition from older fleet types like the B-747, L-1011 and B-727 to new MD-83s and B-757s has increased flight crew training costs in the near term, but these costs have begun to moderate as a result of fewer fleet types and the elimination of the flight engineer position in the cockpit (third cockpit crew member). Aircraft maintenance costs have stabilized as TWA replaces older aircraft with new aircraft and are expected to decline significantly over time as the new aircraft become a larger proportion of the existing fleet. The higher lease costs of the new aircraft have been the major factor in TWA's increasing operating costs per available seat mile. Improved employee productivity and below-market labor rates, however, have enabled TWA to retain a cost structure near the industry average. Management believes that it is essential to retain a low cost structure while the airline transitions to the new fleet. At the same time it recognizes the need to improve wage structures 5 to remain competitive within industry labor markets. Therefore, the focus in contract negotiations with labor groups has been to provide increased wage scale rates in exchange for productivity improvements and facility consolidation. The transition to new, more efficient aircraft will help allow TWA to offset the higher aircraft lease costs while maintaining a cost structure competitive with the industry. Marketing Initiatives TWA is focusing on improving the quality of its air travel product and the appeal of the TWA brand. TWA believes that its increased focus on quality, certain new marketing initiatives and the steps taken to restore operational reliability and schedule integrity in 1997 and 1998 will allow TWA to attract a greater percentage of higher-yield passengers. Ongoing initiatives include the following: Facility Improvements. TWA has recently upgraded a series of --------------------- facilities, including a newly opened Ambassadors Club in St. Louis, a renovated club at LaGuardia, a completely refurbished club in its JFK terminal and improved new check-in counters and backwalls. TWA is installing a new electronic passenger and baggage processing system in St. Louis. Business Travelers. Based on customer research, TWA has targeted ------------------ business travelers and is therefore tailoring its marketing and advertising efforts to emphasize TWA's positioning as a full-service, high-value airline providing branded service products to popular business destinations throughout the United States. TWA believes that its convenient flight schedules and connections, as well as its centrally located hub at St. Louis, are important in providing service that is attractive to these travelers. In March 1995, TWA introduced Trans World One, a premium business class service in its international and certain trans-continental non-stop markets. This product has recently been enhanced and relaunched with advertising and promotional support. Trans World One is available in B-767 aircraft and in selected B-757 aircraft. Overall service is being improved, including check-in, on-board comfort, food service and priority baggage return. TWA increased first class cabin seating in its narrow-body domestic aircraft beginning in 1997 and is planning a series of airport and in-flight enhancements. This domestic service was launched in early 1998 as Trans World First. In March 1998, TWA launched TWQ, a specially designed service for short-haul business markets. Leisure Travelers. Within the leisure travel market, TWA has ----------------- positioned itself as a high-quality, competitive-fare carrier, and management believes that TWA's cost structure and attractive route system are a competitive advantage to it in this market. TWA's Getaway Program, the original airline tour program, provides packaged tours to the leisure traveler. TWA has relaunched this program with advertising support in 1999. Frequent Fliers. TWA has implemented several new initiatives to --------------- improve its frequent flier program. A platinum level was introduced in the third quarter of 1997 to offer TWA's most 6 attractive travel benefits for its highest mileage customers. Platinum level travelers and travelers purchasing first class or full fare coach tickets are given mileage bonuses equal to the base dollar amount paid for their tickets, in addition to other existing bonuses. TWA rebranded its frequent flier program named "Aviators" effective May 1, 1998. TWA also joined the American Express Membership Rewards Program, allowing members the opportunity to earn additional miles for amounts charged on the American Express credit card. Employee Initiatives TWA has implemented programs through which it has sought to institutionalize throughout all levels of its organization the importance of running an airline with operational reliability and schedule integrity. These programs provide certain operating and procedural guidelines for enhancing performance and improving overall product quality. In addition, in 1996, TWA introduced Flight Plan 97, which paid eligible employees a $65 bonus for each month that TWA finished in the top five in all three performance categories tracked by the Department of Transportation (the "DOT") (on-time performance, customer complaints and baggage handling) and a total of $100 if TWA also ranked first in at least one of these categories. Based on TWA's performance in September 1997, eligible employees earned a bonus under this program, a $100 payment for ranking first in on-time performance, fourth in customer complaints and fifth in baggage handling. This program was enhanced as Flight Plan 98 and provided that in any quarter where TWA placed first in one of the DOT-tracked performance categories for the entire quarter (and assuming that no bonus was paid to employees during that quarter) the eligible employees would receive a $100 bonus. Eligible employees received a $100 bonus for first place in on-time performance for the fourth quarter 1998. As Flight Plan 99, the program currently provides that $100 will be paid to eligible employees if TWA achieves an on-time average of 85% or better and a completion factor of 99% or better for the months of April through October, and an 80% or better on-time average with 98% completion factor for the months of November through March. Employees earned a bonus under the program in February 1999. 7 Optimization of Route Structure TWA has been optimizing its route structure by redeploying assets to markets in which it believes it has a competitive advantage and limiting its commitments in other markets. TWA believes one of its greatest opportunities for improved operating results will continue to come from focusing resources on its hub at St. Louis in order to leverage its strong market position. TWA already dominates operations at St. Louis; in 1998, approximately 76% of airline passengers boarding from St. Louis, excluding commuter traffic, boarded TWA flights. In addition, TWA enjoys certain advantages in the Midwest due to its established route system, strong brand identity and concentrated presence in that market. Because St. Louis is located in the center of the country, it is well-suited to function as an omni-directional hub for both north-south and east-west transcontinental traffic. Therefore, TWA believes it is better positioned to offer more schedule frequencies and connecting opportunities to many travelers in its key Midwestern markets than competing airlines. To capitalize on these advantages, TWA has consistently increased its number of daily departures at St. Louis, from 229 in 1993 to approximately 357 as of December 31, 1998. Since 1995, TWA has added service from its St. Louis hub to a number of cities including Reno, Nevada; Knoxville, Tennessee; Shreveport, Louisiana; Steamboat Springs, Colorado; Anchorage, Alaska; Montego Bay, Jamaica; Toronto, Canada; Mexico City and the Mexican resort cities of Cancun, Puerto Vallarta and Ixtapa/Zihuatenejo. TWA's strategy has been to maximize utilization of the JFK facility by building a gateway there as well as operating flights designed for domestic service. As a result, TWA has increased service from JFK to the Caribbean, Florida and to certain other domestic cities to increase utilization of TWA's JFK facility, particularly during off-peak time periods, and to provide feed traffic for its international operations. In addition, TWA restructured its operations at JFK during 1997 by eliminating certain unprofitable international destinations (such as Frankfurt and Athens), as well as certain low-yield domestic feed service into JFK. TWA has consolidated its JFK operations into a single terminal in order to reduce operating costs, increase facility utilization and improve passenger service. In addition to enhancing yields and load factors, the substitution of B-757s and B-767s for B- 747s and L-1011s on international routes also has increased operating efficiencies and on-time performance at JFK, since these smaller aircraft are better suited to the physical limitations of TWA's terminal. As a result of these changes, TWA's international scheduled capacity (as measured by available seat miles) decreased by 20.2% during 1998 from 1997, and represented 16.4% of total scheduled capacity in 1998 as compared to 19.5% in 1997. TWA believes that this decrease in international operations also will help deseasonalize TWA's business. TRAVEL AGENCIES Travel Agent Commissions Consistent with most other airlines, TWA sells its tickets directly and through travel agents. During 1998, approximately 76% of all ticket sales on TWA were sold by travel agents. 8 Until October 2, 1997, TWA paid a 10% commission on domestic tickets sold by independent travel agents without the cap of $50 and $25 per domestic round-trip and one-way tickets, respectively, which most other major airlines imposed in 1995, and paid an 11% commission on international tickets. On October 2, 1997, TWA reduced its commission on domestic and international tickets to 8% and 10%, respectively, without the cap imposed by most of the major airlines. On May 11, 1998, TWA began paying a maximum travel agent commission of $50 per round-trip and $25 for one-way tickets for domestic travel, as does most of the Industry, and 8% for international travel with no commission cap. In addition, Internet vendors receive a 5% commission with a maximum payment of $10. TWA pays a 9% commission for tickets issued outside the United States. Carriers (including TWA) may also pay additional commissions to travel agents as incentive for increased volume or other business directed to the carrier. Automation of Travel Bookings More than 90% of all travel agencies in the United States obtain their airline travel information through access to global distribution systems (also referred to as computerized reservation systems). These systems are used by travel agents to make travel reservations including airline, hotel, train, car and other bookings and allow travel agents to issue airline tickets and boarding passes. One such system is Worldspan, which is owned by a partnership in which affiliates of TWA, Delta Air Lines and Northwest Airlines have interests of approximately 26%, 40% and 34%, respectively. Management believes that its participation in Worldspan has given it direct access to an efficient distribution system. Worldspan continues to expand its offering and coverage, further benefiting TWA. TWA will continue to increase the methods and efficiency of distributing its product through a variety of channels and systems, including increasing use of electronic ticketing and direct booking through the Internet. FREQUENT FLYER PROGRAM: "AVIATORS" TWA initiated its frequent flyer program in May 1981. Frequent flier programs like TWA's Aviators have been adopted by most major air carriers and are considered the number one marketing tool for developing brand loyalty among travelers and accumulating demographic data pertaining to business fliers. TWA accounts for its frequent flyer program under the incremental cost method, whereby travel awards are valued at the incremental cost of carrying one additional passenger. These costs are accrued when Aviators participants accumulate sufficient miles to be entitled to claim award certificates. Incremental costs include passenger food, beverages and supplies, fuel and liability insurance expenses incurred on a per passenger basis. No profit or overhead margin is included in the accrual for incremental costs. TWA does not record a liability for airline, hotel or car rental award certificates that are to be honored by other parties because there is no cost to TWA for these awards. 9 At December 31, 1998, participants in TWA's frequent flyer program had accumulated mileage credits for approximately 1,107,768 free awards, compared with accumulated mileage credits for approximately 938,319 free awards at December 31, 1997. TWA's customers redeemed free awards representing approximately 5.4% and 4.5% of TWA's revenue passenger miles in 1998 and 1997, respectively. Because TWA expects that some award certificates will never be redeemed, the calculations of the accrued liability for incremental costs at December 1998 and 1997 were based on approximately 68.6% and 63.0%, respectively, of the accumulated credits. The accrued liability at December 31, 1998 was approximately $16.0 million compared to approximately $19.6 million at December 31, 1997. Mileage for Aviators participants who have accumulated less than the minimum number of mileage credits necessary to claim a free award is excluded from the calculation of the accrual. AIRCRAFT FUEL TWA uses more than 20 different suppliers to fulfill its worldwide aircraft fuel requirements. TWA has contracts with some of these suppliers, the terms of which vary as to price, payment terms, quantities and duration. TWA also makes incremental purchases of fuel based on price and availability. To assure adequate supplies of jet fuel and to provide a measure of control over price, from time to time, TWA trades fuel, ships fuel, hedges against significant increases in jet fuel prices and maintains fuel storage facilities to support key locations. Commencing in September 1998, TWA has entered into future jet fuel fixed price swaps with respect to a minor portion of its fuel requirements during 1999 to provide a hedging mechanism against significant increases in jet fuel prices. Petroleum product prices, including jet fuel, are primarily driven by crude oil costs. The market's alternate uses of crude oil to produce petroleum products other than jet fuel (e.g., heating oil and gasoline) as well as the adequacy of refining capacity and other supply constraints affect the price and availability of jet fuel. Changes in the price or availability of fuel could materially affect the financial results of TWA. During 1996, aircraft fuel prices increased significantly; however, these prices declined moderately during 1997 and significantly in 1998. The following table details TWA's fuel consumption and costs for the three years ended December 31, 1998, 1997 and 1996: 10
YEAR ENDED DECEMBER 31, ------------------------------------------ 1998 1997 1996 ------------------------------------------ Gallons consumed (in millions) 675.8 730.3 838.9 Total cost (in millions) $344.6 $480.9 $585.2 Average cost per gallon 51 cents 66 cents 70 cents Percentage of operating expenses 10.4% 14.3% 15.6% _______________ Excludes into-plane fees.
11 COMPETITION General Since the passage of the Airline Deregulation Act of 1978, the airline industry has been characterized by intense competition, resulting in consolidation of existing carriers, the formation of international and domestic alliances and the advent of numerous low-cost, low-fare new entrants. While DOT authority is required before any person may operate as an air carrier within or to and from the United States, the Airline Deregulation Act of 1978 and the International Air Transportation Competition Act of 1979 substantially decreased previous governmental restrictions in this area. TWA's services are subject to varying degrees of competition, depending in part on whether these services are operated over domestic or international routes. Airlines offer discount fares, a wide range of schedules, frequent flier mileage programs and ground and in-flight services as competitive tools to attract passengers and increase market share. Intense price competition has accelerated the efforts of airline managements to reduce costs and improve productivity in order to withstand greater levels of discounting. A number of airlines have filed for bankruptcy and/or ceased operations as a result of this competition. Many of the major U.S. carriers have announced plans for alliances with other major U.S. carriers, which could further intensify the competitive environment. Domestic In the case of domestic operations, any person who is found to be fit, willing and able may operate as an air carrier between any two points in the United States. Existing airlines are able to enter new routes or suspend existing routes within the United States without seeking regulatory approval. Because of the relative ease with which U.S. carriers can enter new domestic markets, TWA's domestic services are subject to increases or decreases in competition from other air carriers. In addition, the airline industry faces substantial price competition as U.S. airlines are free to determine domestic pricing policies without government regulation. Several carriers have introduced or announced plans to introduce low-cost, short-haul jet service, which may result in increased competition to TWA. Changes in intensity of competition in the deregulated domestic environment cannot be predicted. The rapid growth of regional jet airline affiliates represents a significant competitive challenge for TWA due to its reliance on through- hub passenger traffic. A small regional jet can now offer direct service in markets that previously were served only by through-hub service. TWA's current IAM contracts limit TWA from directly competing with regional jets in these markets. International The level of competition in international markets is normally governed by the terms of bilateral agreements between the United States and the foreign countries involved. Many of the bilateral agreements permit an unlimited number of carriers to operate between the United States and the foreign country. Competition in some international markets is limited to a specified number of carriers and flights on a given route by the terms of the air transport agreements between the United States and the foreign country. See "Regulatory Matters." While the DOT retains authority over international fares, which are also subject to the jurisdiction of the governments of the foreign countries being served, TWA generally has substantial discretion with respect to its international pricing policies. 12 EMPLOYEES As of December 31, 1998, TWA had 21,261 full-time employees (based upon full-time equivalents, which include part-time employees). 1992 Labor Agreements In its 1992 labor agreements, TWA agreed to pay to employees represented by the International Association of Machinists and Aerospace Workers (the "IAM") a cash bonus for the amount by which overtime incurred by the IAM from September 1992 through August 1995 was reduced below specified thresholds. This amount was to be offset by the amount by which medical savings during the period for the same employees did not meet certain specified levels. TWA and the IAM agreed in 1998 that the net overtime bonus owed to the IAM is $25.5 million, which amount TWA previously provided for and reflected as a liability in its financial statements. The obligation is payable in three equal annual installments, and TWA made the first payment on October 15, 1998. TWA had entered into agreements subsequent to the 1992 labor agreements that provide for an adjustment to existing salary rates of certain labor- represented employees based on the amount of the cash bonus for overtime to the employees represented by the IAM as described in this paragraph. These adjustments equated to a 4.814% increase that management made effective for all employee groups on September 1, 1998, except for pilots whose contract provided for separate increases also effective September 1, 1998 and the officers of TWA who did not receive the increase. Management intends that the 4.814% salary adjustments will be part of any percentage increase that would be incorporated in contract amendments currently being negotiated. 1994 Labor Agreements TWA entered into three-year labor agreements with the Air Line Pilots Association ("ALPA"), the IAM and the Independent Federation of Flight Attendants ("IFFA") in 1994, which amended the then existing labor agreements with each such union. Among other things, these amendments (1) eliminated certain raises scheduled to take effect in 1994 and 1995, thereby continuing certain wage and benefit concessions granted to TWA in its 1992 labor agreements, (2) modified existing work rules and benefit packages, and (3) eliminated contractual "snapback" provisions that would have automatically restored wages to pre-concessionary levels for purposes of future contract negotiations. The terms of the 1994 IFFA contract remain in effect, although the flight attendants are now represented by the IAM. In addition, TWA implemented in 1994 and 1995 a number of similar savings initiatives with respect to domestic non-union and management employees, primarily through reducing headcount, altering benefit packages, and eliminating certain planned restorations of previous wage concessions. In exchange for the substantial cost savings realizable by TWA as a result of the 1994 labor agreements, TWA agreed to certain concessions described below. Wage Increases. As part of the 1994 labor agreements, TWA agreed -------------- with its unionized employees to a series of semi-annual 1% wage increases commencing in May 1995 and 13 continuing through August 31, 1997. The last such wage increase equaled 3% in the case of employees represented by ALPA and IFFA, and the IAM employees received a 1% wage increase and a 2% contribution to its retirement plan on August 31, 1997. Issuance of Equity Securities. On the effective date of the 1995 ----------------------------- reorganization, TWA issued 6,425,118 shares of three separate series of employee preferred stock ("Employee Preferred Stock") to trusts established for its unionized employees. Except for certain rights with respect to the election of directors and the fact of being held in a trust, the Employee Preferred Stock has rights substantially identical to TWA's common stock. TWA also issued an aggregate of 1,026,694 shares of common stock to a trust established for the benefit of certain of TWA's other employees. The value of shares issued to TWA's non-union employees was intended to reflect the estimated value to TWA of the concessions granted by these employees. Future Grants. In recognition of the fact that the percentage of ------------- TWA's stock owned by TWA's employees was substantially reduced in the 1995 reorganization, TWA adopted the Employee Stock Incentive Plan ("ESIP") as part of the 1995 reorganization. The ESIP requires TWA, from 1997 through 2002, to make grants of additional shares of common stock and Employee Preferred Stock to certain trusts established for the benefit of its union and non-union employees if certain conditions are met. The ESIP requires TWA to make a grant on July 15 of each year if the average market closing price of the common stock for 30 consecutive trading days has exceeded a target price for such year set forth in the ESIP. Each grant is cumulative: if the applicable target price is not met in the initial grant year, the applicable grant is carried forward and may be granted in future years (up to July 15, 2002) in which the average market closing price of the common stock exceeds the target price before July 15 of that year. The ESIP provides for an increase to these grants to protect against the dilutive effect of certain stock issuances by TWA. In addition, a stock purchase trustee of a special purpose trust to be established has the right under the ESIP through July 15, 2002 to purchase additional shares of Employee Preferred Stock in amounts up to a total of 2% of the combined total number of outstanding shares of common stock and Employee Preferred Stock, at a discount of 20% from the then current market price. If all of the target prices are met or exceeded within the time periods specified and if the entire discount stock purchase option is exercised, the various employee stock trusts will receive a total of 10% of TWA's outstanding common stock, with the exact amount issued dependent upon the number of shares outstanding as of the date of each grant and option exercise. The ESIP separately provides that following the distribution by TWA of additional shares of Employee Preferred Stock or common stock in respect of the 1995 reorganization, TWA would issue an additional number of shares of Employee Preferred Stock and common stock to permit employees to retain the same level of ownership initially granted to them based on a formula. Union representatives and TWA agreed to a one-time distribution in 1997 pursuant to this provision of the ESIP of a total of 525,856 shares of Employee Preferred Stock and common stock. As part of that agreement, TWA also issued an additional 405,750 shares of Employee Preferred Stock and common stock to the employee trusts. TWA received a credit for this issuance of shares against its July 15, 1998 grant under the ESIP. 14 The first two ESIP target prices were realized on February 17, 1998 and March 4, 1998, respectively, and as a result, TWA issued an additional 2,377,084 shares (net of the credit of 405,750 shares discussed in the preceding paragraph) of Employee Preferred Stock on July 15, 1998 to satisfy the 1997 and 1998 ESIP grant amounts. TWA recorded non-cash charges of $26.5 million and $1.0 million in the first and third quarters of 1998, respectively, in connection with this issuance. If the ESIP's remaining target prices of $13.31, $14.64, $16.11 and $17.72 are realized for the years 1999 to 2002, respectively, the minimum aggregate non-cash charge for the years 1999 to 2002 will be approximately $103.4 million based upon these target prices and the number of shares of common stock and Employee Preferred Stock outstanding at December 31, 1998. The non-cash charge for any year, however, could be substantially higher if the then market price of TWA's common stock exceeds certain target prices. Governance. In addition to certain amendments required to effect ---------- the recapitalization of TWA, on the effective date of the 1995 reorganization, TWA further amended its certificate of incorporation and by-laws to include provisions that allow certain corporate actions requiring board approval, including mergers, consolidations and sale of all or substantially all the assets of TWA, to be blocked by a vote of six (four union-elected directors and two other directors) of TWA's 15 directors, who together constitute a "blocking coalition." Actions subject to disapproval by the blocking coalition include: * any sale, transfer or disposition, in a single or series of transactions, of at least 20% of TWA's assets, except for transactions in the ordinary course of business, including aircraft transactions as part of a fleet management plan; * any merger of TWA into or with, or consolidation of TWA with, any other entity; * any business combination within the meaning of Section 203 of the Delaware General Corporation Law; * any dissolution or liquidation of TWA; * any filing of a petition for bankruptcy, reorganization or receivership under any state or federal bankruptcy, reorganization or insolvency law; * any repurchase, retirement or redemption of TWA's capital stock or other securities prior to their scheduled maturity or expiration, except for redemptions out of the proceeds of any substantially concurrent offering of comparable or junior securities and mandatory redemptions of any redeemable preferred stock of TWA; * any acquisition of assets, not related to TWA's current business as an air carrier, in a single transaction or a series of related transactions exceeding $50 million adjusted annually by the consumer price index; or * any sale of TWA's capital stock or securities convertible into capital stock of TWA to any person if (1)at the time of issuance or (2)assuming conversion of all outstanding securities of TWA convertible into capital stock, such person or entity would beneficially own at least 20% of the capital stock of TWA. At all times before September 1, 2000, the Company must obtain the approval of at least two-thirds of the issued and outstanding Voting Stock of the Company, voting as a single class and not as separate classes, for the holders of such Voting Stock to approve certain actions, unless such matters have been approved by a vote of at least 80% of the Board of Directors then in office. Actions requiring such approval are the following: * any merger of the Company into or with, or consolidation of the Company with, any other entity; * any business combination within the meaning of Section 203 of the Delaware General Corporation Law; * any dissolution or liquidation of the Company; or * any repurchase, retirement or redemption of the Company's capital stock or other equity securities prior to their scheduled maturity or expiration, except for redemptions out of the proceeds of any substantially concurrent offering of comparable or junior securities, and mandatory redemptions of any redeemable preferred stock of the Company. 15 1998 ALPA Agreement The 1994 labor agreements became amendable after August 31, 1997 and negotiations on a new collective bargaining agreement with ALPA commenced in June 1997. TWA reached agreement with ALPA that became effective on September 1, 1998. As part of the new contract with ALPA, TWA agreed to pay increases over the next four years that will result in wages for TWA's pilots improving by 2002 to 90% of the industry average as determined by wage rates in contracts in effect as of August 1998. The contract also provides for significant work rule improvements for pilots in certain areas while also granting TWA flexibility and improvements necessary to enhance its competitive position. TWA also may issue shares to employees under the terms of its new contract with ALPA. The new ALPA contract requires TWA to distribute either one million shares of TWA's common stock or $11 million in cash to ALPA members, in four equal quarterly payments commencing in 1999. TWA has the option to make each quarterly payment in shares or in cash. Other Labor Agreements TWA reached agreement with the International Brotherhood of Teamsters on a new collective bargaining agreement in August 1998. The contract calls for substantial increases in pay and benefits over the life of the contract improving by 2002 to 90% of the industry average as determined by wage rates in contracts in effect as of August 1998. TWA also reached agreement with the Transport Workers Union on a new collective bargaining agreement in March 1999. Among other benefits, the contract provides for increases in wages improving by 2003 to 93% of the industry average as determined by wage rates in contracts in effect as of March 1999. Ongoing Negotiations TWA is currently engaged in negotiations with its flight attendants and ground employees, which constitute approximately 73% of TWA's employees as of December 31, 1998, on new collective bargaining agreements, as the existing agreements became amendable as of August 31, 1997. TWA and the IAM commenced negotiations on new collective bargaining agreements for the ground employees in February 1997 and for the flight attendants in July 1997. Under the Railway Labor Act, workers whose contracts have become amendable are required to continue to work under the "status quo" (i.e., under the terms of employment existing before the amendable date) until they exhaust the Railway Labor Act's procedures. Under the Railway Labor Act, TWA and the IAM must continue face-to-face bargaining until an agreement is reached or until at least one of the parties petition the National Mediation Board (NMB) to appoint a mediator. If the mediator concludes that negotiations are deadlocked, the mediator must attempt to induce the parties to agree to arbitrate the dispute. If either party refuses to arbitrate, then the mediator must notify the parties that the mediator's efforts have failed and, after a thirty day cooling off period if agreement has not been reached, the parties may strike or take other direct action. At the request of the IAM, the NMB appointed a mediator on August 6, 1997 with respect to ground employees represented by the IAM. On March 27, 1998, at the request of the IAM, the NMB appointed a mediator with respect to the flight attendants 16 represented by the IAM. Negotiations are continuing under the oversight of the NMB. TWA expects new agreements with these employees will likely result in additional increases in wage rates. TWA believes it is essential that its labor costs remain favorable in comparison to its largest competitors. TWA will seek to continue to improve employee productivity as an offset to any wage increases. REGULATORY MATTERS Slot Restrictions TWA's ability to increase its level of operations at certain domestic cities currently served is affected by the number of slots available for take-offs and landings. At JFK, LaGuardia, Chicago O'Hare and Ronald Reagan Washington National airports, which have been designated "high density airports" by the Federal Aviation Administration (the "FAA"), there are restrictions on the number of aircraft that may land and take-off during peak hours. In the future, these take-off and landing time slot restrictions and other restrictions on the use of various airports and their facilities may result in further curtailment of services by, and increased operating costs for, individual airlines, including TWA, particularly in light of the increase in the number of airlines operating at these airports. In 1986, the FAA implemented a final rule relating to allocated slots at the high density airports. This rule, as since amended, contains provisions requiring the relinquishment of slots for nonuse and permits carriers, under certain circumstances, to sell, lease or trade their slots to other carriers. TWA does not anticipate losing any slots as a result of these new rules; however, the higher use rates required by these rules do increase the risk that TWA might lose slots in the future because of nonuse and decrease TWA's ability to adjust its flight schedules at the high density airports. Legislation is currently pending before Congress which would eliminate the slots at JFK, LaGuardia and O'Hare airports at a date in the future. TWA's slots at these airports are currently encumbered and are used as collateral for certain of TWA's debt securities. If such legislation is enacted with an effective date prior to the maturity of such debt, TWA could be required to substitute collateral to replace the affected slots. TWA has stated its opposition to this legislation and, at this time, TWA cannot predict whether the proposals will be implemented or its effect on TWA. Most transatlantic points served by TWA also are slot-controlled. Control Over International Routes TWA's international authority is granted by the DOT for indefinite or fixed-term periods, depending on the route. TWA is authorized to provide transatlantic service from major cities in the United States to points in Europe, North Africa, the Middle East and Asia. Some of these authorized routes are not currently served by TWA. Many of the European markets served by TWA are "limited entry" markets in which, as a result of agreements between the United States and foreign governments, TWA has traditionally competed with a limited number of other carriers. During the past several years, however, the U.S. government has encouraged competition in international markets and entered into bilateral agreements with various foreign governments that provide for expanded exchanges of routes and traffic rights, reduction of governmental controls over fares and avoidance of limits on capacity and charter services. Competition in international markets has increased dramatically over the past several years as major U.S. carriers have initiated and/or continued to expand their international operations. Foreign flag carriers have continued to expand service and the DOT has indicated its support for further expansion of opportunities of foreign carriers to serve new points in the United States. 17 No assurance can be given that TWA will continue to have the advantage of all the "limited entry" markets in which it currently operates, that additional carriers will not be permitted to operate in one or more of these markets or that TWA in general will not face substantial unexpected competition. Competition in the international market is further complicated by the fact that pricing levels on some transatlantic routes are influenced by subsidies that certain foreign carriers receive from their governments and by the presence of smaller, low-cost carriers. The operations of TWA's international system will require continued approval by the U.S. government as well as permission or authorization from the governments of the respective countries served and compliance with the laws and regulations of those countries. These authorizations, permits and rights vary considerably in their terms, particularly as to the imposition of restrictive conditions on U.S. airlines. Other Transportation Regulations Additional laws and regulations have been proposed from time to time that could significantly increase the cost of airline operations by, for instance, imposing additional requirements or restrictions on operations and therefore increasing operating expenses. For example, several airports have recently sought to increase substantially the rates charged to airlines, and federal legislation, DOT resolutions and judicial decisions have restricted the ability of airlines to contest these increases. The DOT has the authority to regulate competitive practices, advertising and other consumer protection matters such as on-time performance, smoking policies, denied boarding, baggage liability and computerized reservation systems provided to travel agents. With respect to foreign air transportation, the DOT may approve agreements between air carriers and grant antitrust immunity to those agreements. The DOT must also approve the transfer between U.S. carriers of international route certificates. The U.S. Department of Justice has the authority to approve mergers and interlocking relationships between air carriers. Noise Abatement The Noise Act provides for a reduction in aircraft noise levels by commercial aircraft. Under the Noise Act, air carriers were permitted to elect to comply with the transitional requirements of the Noise Act at December 31, 1994, either by (1)phasing out, or retrofitting with noise abatement equipment, certain older aircraft known as Stage 2 aircraft, or (2)phasing in quieter aircraft, known as Stage 3 aircraft. Air carriers who elected to comply by phasing out or retrofitting Stage 2 aircraft were required to phase out or retrofit at least 25% of a specified 1990 base level of these aircraft by December 31, 1994 and at least 50% by December 31, 1996. TWA elected to comply with the transition requirements of the Noise Act by adopting the Stage 2 aircraft phase-out/retrofit option, which required that 50% of its base level (December 1990) Stage 2 fleet be phased-out/retrofitted by December 31, 1996. To comply with the 1996 requirement, TWA retrofitted, by means of engine hushkits, 30 of its DC-9 aircraft at an aggregate cost of approximately $55.5 million, most of which was financed by lessors with repayments being facilitated through increased rental rates or lease term extensions. TWA has complied with the transition requirements for December 31, 1998 by having 75% of its fleet meet 18 Stage 3 requirements through the grounding of older Stage 2 aircraft in combination with the acquisition of Stage 3 aircraft. By December 31, 1999, 100% of the fleet must meet Stage 3 requirements. TWA's ability to comply with the federal requirements within the time specified, or with more restrictive local noise restrictions, by acquiring newer aircraft and by phasing out or retrofitting older aircraft that are not in compliance with the Stage 3 standards, will depend upon its ongoing financial condition, its ability to renegotiate existing leases for these aircraft and its ability to obtain financing to acquire the requisite number of Stage 3 aircraft or retrofit kits. TWA is considering "hushkitting" additional aircraft as well as other alternatives to assure compliance with Stage 3 noise requirements, and has already acquired a number of Stage 3 aircraft while phasing out several Stage 2 aircraft. However, there can be no assurance that TWA will be able to satisfy all applicable noise level requirements. Numerous airports have imposed restrictions such as curfews, airplane noise levels, mandatory flight paths and runway restrictions, which limit the ability of TWA and other carriers to increase services at these airports. Other jurisdictions are considering similar measures. While TWA has historically had the flexibility to schedule around these restrictions, there can be no assurance that TWA will continue to be able to work around these restrictions. The FAA and air carriers, including TWA, have stated their opposition to such proposals. At this time, TWA cannot predict what additional restrictions will be implemented or, if so, the timing or effect on TWA of any such implementation. The effect on TWA would depend on the extent to which TWA's aircraft then being used in the affected airports meet the Stage 3 or more stringent local requirements as well as the timing of TWA's flights. Labor The Railway Labor Act governs the labor relations of employers and employees engaged in the airline industry. Comprehensive provisions are set forth in the Railway Labor Act establishing the right of airline employees to organize and bargain collectively along craft or class lines and imposing a duty on air carriers and their employees to exert every reasonable effort to make and maintain collective bargaining agreements. (See "Employees") The Railway Labor Act contains detailed procedures that must be exhausted before a lawful work stoppage can occur. Pursuant to the Railway Labor Act, TWA has collective bargaining agreements with four domestic unions that together represent approximately 85% of TWA's employees. Aging Aircraft Maintenance The FAA issued several Airworthiness Directives ("ADs") in 1990 mandating changes to maintenance programs for older aircraft to ensure that the oldest portion of the nation's fleet remains airworthy. The FAA required that these older aircraft undergo extensive structural modifications before the later of the accumulation of a designated number of flight cycles or 1994 deadlines established by the various ADs. Most of TWA's aircraft are currently affected by these aging aircraft ADs. TWA monitors its fleet of aircraft to ensure safety levels that meet or exceed those mandated by the FAA. 19 Safety TWA is subject to FAA jurisdiction with respect to aircraft maintenance and operations, including equipment, dispatch, communications, training, flight personnel and other matters affecting air safety. The FAA has the authority to issue new or additional regulations. To ensure compliance with its regulations, the FAA requires TWA to obtain operating, airworthiness and other certificates that are subject to suspensions or revocation for cause. In addition, a combination of FAA and Occupational Safety and Health Administrative regulations on both federal and state levels apply to all of TWA's ground-based operations. Passenger Facilities Charges During 1990, Congress enacted legislation to permit airport authorities, with prior approval from the FAA, to impose passenger facility charges as a means of funding local airport projects. These charges, which are intended to be collected by the airlines from their passengers and remitted to the airports, are limited to $3.00 per enplanement and to $12.00 per round trip, although Congress is currently considering allowing airports to raise the passenger facility charges. As a result of competitive pressure, TWA and other airlines have been limited in their ability to pass on the cost of the passenger facility charges to passengers through fare increases. Environmental TWA is subject to regulation under major environmental laws administered by state and federal agencies, including the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response Compensation and Liability Act of 1980 and the Resource Conservation and Recovery Act ("RCRA"). In some locations there are also county and sanitary sewer district agencies that regulate TWA. TWA believes that it is in substantial compliance with applicable environmental regulations. See, however, "Item 3. Legal Proceedings." Foreign Ownership of Shares The Federal Aviation Act of 1958 generally prohibits non-U.S. citizens from owning more than 25% of the voting interest in U.S. air carriers, including TWA. INSURANCE TWA maintains commercial airline insurance with a major group of independent insurers that regularly participate in world aviation insurance markets. TWA's policies include coverage for losses resulting from the physical destruction of or damage to TWA's owned and leased aircraft, as well as losses arising from bodily injury, property damage and personal injury to third parties for which TWA becomes legally obligated to pay. TWA maintains aircraft third party and airline general third party liability insurance with a combined single limit of $1.25 billion per occurrence. Management believes that TWA's commercial airline insurance policies are generally consistent with those of other U.S.-domiciled scheduled passenger air carriers operating similar aircraft over similar routes. 20 CORPORATE REORGANIZATIONS During the early 1990s, the U.S. airline industry, including TWA, experienced unprecedented losses, which were largely attributable to, among other things, the Persian Gulf War (which caused a substantial increase in fuel costs and reduction in travel demand due to concerns over terrorism), recessions in the United States and Europe and significant industry-wide fare discounting resulting from another U.S. airline's attempt to introduce a new pricing structure into the domestic airline business. In addition, TWA owed significant amounts as a result of the leveraged acquisition in 1986 of a controlling interest in TWA by Carl Icahn. The substantial losses sustained by TWA during this period, coupled with TWA's excessive debt obligations, made it necessary for TWA to restructure its debt obligations and equity, lower its labor costs and severely reduce its capital outlays. On November 3, 1993, TWA emerged from the protection of Chapter 11 of the United States Bankruptcy Code pursuant to a bankruptcy case filed on January 31, 1992. Notwithstanding the reduction in levels of debt and obligations achieved through the 1993 reorganization, TWA emerged from the 1993 reorganization in a highly leveraged position and, despite progress in increasing revenues and reducing costs, continued to experience significant operating losses. On August 23, 1995, TWA emerged from the protection of a second Chapter 11 proceeding pursuant to a bankruptcy case filed on June 30, 1995. In connection with the 1995 reorganization, TWA: * exchanged certain of its then outstanding debt securities for a combination of newly issued preferred stock, common stock, warrants and rights to purchase common stock and debt securities, * converted its then outstanding preferred stock to shares of common stock, warrants and rights to purchase common stock, * obtained certain short-term lease payment and conditional sale indebtedness deferrals amounting to approximately $91 million and other modifications to certain aircraft leases, * obtained an extension of the term of the approximately $190 million principal amount of the loans from the entities associated with Mr. Icahn, TWA's former Chairman, * effected a reverse stock split of its then outstanding common stock and exchanged these shares for common stock, * raised approximately $52 million through an equity rights offering, * distributed certain warrants to its then current equity holders and certain creditors, and * implemented certain amendments to its certificate of incorporation relating to the recapitalization and various corporate governance matters. In connection with and as a precondition to the 1995 reorganization, in August and September of 1994, TWA entered into the 1994 labor agreements, amending existing collective bargaining agreements, with the IAM, ALPA and IFFA, the three labor unions who then 21 represented approximately 84% of TWA's employees. The 1994 labor agreements provided for an extension of certain previously agreed wage concessions, modifications to work rules and the deletion of certain provisions of the then existing labor agreements, including elimination of so-called "snapbacks," i.e., the automatic restoration of wage reductions granted in these agreements at the end of their term to levels that prevailed before the concessionary agreement. During 1994 and 1995, TWA also implemented a number of similar cost saving initiatives with respect to domestic non-union and management employees, primarily through reducing head count, altering benefit packages, and continuing wage reductions that had been scheduled to expire. (See "Employees") ITEM 2. PROPERTIES FLIGHT EQUIPMENT As of December 31, 1998, TWA operated a fleet of 185 aircraft, of which 15 were owned by TWA and 170 were leased. The aircraft in TWA's active operating fleet as of December 31, 1998 are listed below:
SEATS IN AVERAGE AGE STANDARD OF AIRCRAFT TWA TYPE OWNED LEASED TOTAL (IN YEARS) CONFIGURATION - - ---------------- --------- ------ --------- ----------- ------------- DC-9-10 2 3 5 32.2 77 DC-9-30/40 - 38 38 28.9 100 DC-9-50 - 12 12 21.9 115 MD-80/82 - 40 40 14.1 140 MD-83 - 25 35 6.4 142 727-200 4 19 23 21.5 145 757 - 16 16 1.7 180 767-200 9 3 12 15.5 192 767-300 - 4 4 4.0 233 ----------------------------------------------- Total 15 170 185 16.2 =============================================== ____________ Excludes the following aircraft that are not in the active fleet: four B-727-100s, eight B-727-200s, six 747-100s, one 747-200, seven L-1011s, one DC-9-10 and one DC-9-30. TWA has pledged a substantial portion of its owned aircraft to secure its debt. For information concerning compliance of the above-referenced aircraft with the Noise Act, see "Regulatory Matters -- Noise Abatement."
For a discussion of TWA's fleet restructuring plans, see "Business Strategy -- Fleet Upgrade and Simplification." 22 REAL PROPERTY TWA uses or has rights to use airport and terminal facilities located in or near the cities it serves under lease agreements or other arrangements with the governmental authorities exercising control over these facilities. At St. Louis, TWA has preferential use rights to 57 gates and 40 ticket counter positions, and ramp, baggage and other supporting ground facility space. At JFK, although TWA leases Terminals 5 and 6, for a total of 29 gates, 96 ticket counter positions and ramp, baggage and other supporting ground facility space, TWA operates out of one passenger terminal facility (Terminal 5). TWA leases both Terminal 5 and Terminal 6 as a holdover tenant pursuant to expired agreements of a lease with the Port Authority of New York and New Jersey. These holdover tenancies are with the consent of the Port Authority pursuant to a Term Sheet dated August 12, 1993, which extended TWA's right to occupy Terminals 5 and 6 so long as TWA paid the rent set forth in the Term Sheet, made certain specified financed improvements to Terminals 5 and 6 and was otherwise in compliance with the expired leases. TWA's tenancy is currently on a month-to-month basis and no lease has been signed. TWA has currently subleased approximately half of the gates in Terminal 6 to other carriers. TWA's overhaul base is located on approximately 250 acres of leased property at the Kansas City International Airport, Kansas City, Missouri. The overhaul base is the principal base where TWA performs major maintenance and repair services for its aircraft fleet. The overhaul base is owned by the city of Kansas City, Missouri and leased to TWA along with other facilities until May 31, 2000. For a description of certain environmental corrective actions that TWA anticipates will be required at the overhaul base, see "Item 3. Legal Proceedings." TWA leases office space and other facilities in a number of locations in the United States and abroad. In December 1993, pursuant to a sale/leaseback transaction with the city of St. Louis, TWA leased a two-story ground operations building near the St. Louis airport and an adjacent 165,000 square foot, five-story flight training facility. The lease of these properties is covered under a month-to-month agreement that renews automatically so long as TWA is not in default, until its expiration on December 31, 2005. The lease is subject to early termination in the event of certain events of default, including non-payment of rents, cessation of service, failure to maintain corporate headquarters within the city or County of St. Louis or failure to maintain a reservations office within the city of St. Louis. TWA's St. Louis area reservation facility and customer relations department is located in approximately 48,000 square feet in the city of St. Louis, Missouri. In June 1996, TWA opened a new reservation facility in Norfolk, Virginia, comprised of approximately 40,000 square feet and having 455 work stations. The facility is leased for a 25 year term. TWA's corporate headquarters are located at One City Centre, 515 N. Sixth Street, St. Louis, Missouri, where TWA has subleased approximately 56,700 square feet through February 28, 2000. 23 ITEM 3. LEGAL PROCEEDINGS Icahn Litigation On June 14, 1995, TWA signed the Extension and Consent Agreement with Karabu Corp. ("Karabu"), a company controlled by Carl Icahn, to extend the term of certain financing provided by Karabu (the "Icahn Loans"). In consideration of, among other things, the extension of the Icahn Loans, TWA and Karabu entered into a 99-month ticket agreement, which permitted Karabu to purchase two categories of discounted tickets: (1)"domestic consolidator tickets," which are subject to a cap of $610 million, based on the full retail price of the tickets ($120 million in the first 15 months and $70 million per year for the next seven consecutive years through the term of the ticket agreement), and (2)"system tickets," which are not subject to any cap throughout the term of the ticket agreement. Tickets sold by TWA to Karabu pursuant to the ticket agreement are priced at levels intended to approximate current competitive discount fares available in the airline industry. TWA believes that applicable provisions of the ticket agreement do not allow Karabu to market or sell system tickets through travel agents or directly to the general public. Karabu, however, has been marketing system tickets through travel agents and directly to the general public. TWA has demanded that Karabu cease doing so, and Karabu has stated that it disagrees with TWA's interpretation concerning sales through travel agents or directly to the general public. In December 1995, TWA filed a lawsuit against Karabu, Mr. Icahn, and certain affiliated companies seeking damages and to enjoin further violations of the ticket agreement. Mr. Icahn countered by threatening to file his own lawsuit and to declare a default on the loans from entities related to Mr. Icahn, which financing was then secured by certain receivables and flight equipment. Mr. Icahn's position was based upon a variety of claims related to his interpretations of the security agreement, as well as, with respect to certain alleged violations of the ticket agreement by TWA. The parties negotiated a series of standstill agreements pursuant to which TWA's original lawsuit was withdrawn, while TWA and Mr. Icahn endeavored to negotiate a settlement of their differences and respective claims. On March 20, 1996, TWA filed a petition in the Circuit Court for St. Louis County, Missouri, commencing a lawsuit against Mr. Icahn, Karabu and certain other entities affiliated with Mr. Icahn. The TWA petition alleged that the defendants are violating the ticket agreement and otherwise tortiously interfering with TWA's business expectancy and contractual relationships, by among other things, marketing and selling tickets purchased under the ticket agreement to the general public. The TWA petition sought a declaratory judgment finding that the defendants have violated the ticket agreement, and also sought liquidated, compensatory and punitive damages, in addition to TWA's costs and attorney's fees. On May 7, 1998 the court denied the TWA petition and dismissed the defendants' counterclaims. The court concluded that the defendants could sell discount tickets under the ticket agreement to any person who actually uses the ticket, including non-business travelers, and that the defendants had not breached the ticket agreement. No damages were assessed in respect to either plaintiff's or defendants' petitions. The court's ruling could have an adverse effect on revenue, which could be significant but the impact of which will depend on a number of factors, including yield, load factors and whether any resulting incremental sales by the defendants will be to passengers that would not otherwise have flown on TWA. The defendants moved to amend or modify the court's 24 ruling to include a declaratory judgment that the defendants are permitted to sell tickets to any person for any purpose, which could include use by the purchaser's family members or friends. TWA opposed the motion and requested that the court clarify the ruling to limit its scope consistent with the reasoning set forth in the decision, specifically so that the person purchasing the ticket must use the ticket (with certain enumerated exceptions) and may not purchase a ticket for any other person. The court denied both motions on June 25, 1998. TWA has appealed the denial of its motion for clarification and the court's original ruling. Although TWA intends to press its claims vigorously, it is possible that Karabu's interpretation of the ticket agreement regarding system discount ticket sales by the defendants through travel agents or directly to the general public could be determined, either by a court or otherwise, to be correct. In such event, unless TWA took appropriate action to mitigate the effect of these sales, TWA could suffer loss of revenue and reduced overall passenger yields on a continuing basis during the term of the ticket agreement. Other Actions On July 17, 1996, TWA Flight 800 crashed shortly after departure from JFK en route to Paris, France. There were no survivors among the 230 passengers and crew members aboard the Boeing 747 aircraft. While TWA is currently a defendant in a number of lawsuits relating to the crash, TWA maintains substantial insurance coverage and management believes that TWA's insurance coverage is more than sufficient to cover the claims arising from the crash. In addition, TWA has entered into agreements that limit the amount of TWA's exposure to such claims and that significantly reduce the amounts charged or reserved under applicable insurance policies as a result of the crash of Flight 800. Based on the insurance coverage maintained by TWA and those agreements, TWA believes that the resolution of these claims will have no material impact on the financial condition of TWA or its results of operations. TWA is unable to identify or predict the extent of any adverse effect on its revenues, yields or results of operations which has resulted or may result from the public perception of the crash or from any future findings by the National Transportation Safety Board. On May 31, 1988, the U.S. Environmental Protection Agency ("EPA") filed an administrative complaint seeking civil penalties as well as other relief requiring TWA to take remedial procedures at TWA's overhaul base in Kansas City, Missouri, alleging violations resulting from TWA's past hazardous waste disposal and related environmental practices. Simultaneously, TWA became a party to a consent agreement and a consent order with the EPA pursuant to which TWA paid a civil penalty of $100,000 and agreed to implement a schedule of remedial and corrective actions and to perform environmental audits at TWA's major maintenance facilities. This consent agreement and consent order were terminated on July 24, 1998. In September 1989, TWA and the EPA signed an administrative order of consent, which required TWA to conduct extensive investigations at or near the overhaul base and to recommend remedial action alternatives. The two major requirements of the administrative order of consent, the RCRA Facility Investigation Report and the Corrective Measures Study, were approved by EPA and the Missouri Department of Natural Resources ("MDNR") in October of 1995 and August of 1997, respectively. On August 7, 1998, MDNR and EPA issued a RCRA Part B post-closure permit ("Permit") for post-closure care of regulated units and Corrective Measures Implementation ("CMI") activities at the maintenance base. This Permit continues activities initiated under the consent agreements. TWA presently 25 estimates the cost of the post-closure care and CMI activities to be approximately $4.7 million, a majority of which represents costs associated with long-term groundwater monitoring and maintenance of remedial systems. Although TWA believes adequate reserves have been provided for all known environmental contingencies, it is possible that additional reserves might be required in the future that could have a material adverse effect on the results of operations or financial condition of TWA. However, TWA believes that the ultimate resolution of known environmental contingencies should not have a material adverse effect on the financial position or results of operations based on TWA's knowledge of similar environmental sites. In connection with certain wage scale adjustments afforded to TWA's non-contract employees, employees previously represented by IFFA asserted and won an arbitration ruling with respect to the comparability of wage concessions made in 1994 that, if fully sustained, would require TWA to provide additional compensation to these employees. The Eighth Circuit Court of Appeals upheld a district court ruling that affirmed the arbitrator's award. TWA has filed a motion before the District Court for the Eastern District of Missouri seeking referral of the matter to the System Board of Adjustment for determination on TWA's claim that, to the extent it was unsuccessful on the merits, actions taken by TWA following issuance of the arbitrator's award and in accordance with the arbitrator's opinion have substantially, if not totally, mitigated potential damages. Accordingly, the Company has not recorded any liability for this litigation. The IAM (now collective bargaining agent for employees formerly represented by IFFA) has filed a motion requesting the district court to hold TWA in contempt of court and to order TWA to implement the arbitration award. TWA believes that pending the district court's ruling on TWA's motion to remand, TWA is not required to implement the arbitration award and the IAM's motion is without merit. The amount, if any, due under the award is incapable of being determined pending the district court's ruling on TWA's motion and, if remanded, the decision of the System Board of Adjustment. TWA is also defending a number of other actions that have either arisen in the ordinary course of business or are insured or the cumulative effect of which management of TWA does not believe may reasonably be expected to be materially adverse. ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS No meeting of security holders was held during the fourth quarter of 1998. 26 PART II ITEM 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS GENERAL The common stock is listed for trading on the American Stock Exchange. The following table sets forth the range of high and low prices for shares of the common stock (as reported in The Wall Street Journal) for the periods indicated:
PERIOD HIGH LOW - - ------ ---- --- 1997 First Quarter $8.437 $5.1875 Second Quarter 10.8125 5.875 Third Quarter 8.75 6.00 Fourth Quarter 12.3125 6.50 1998 First Quarter 15.125 9.25 Second Quarter 12.5 8.125 Third Quarter 11.1875 5.5625 Fourth Quarter 6.625 3.6875 1999 First Quarter (through March 16, 1999) 7.75 4.0625
Since 1978, the Company has not paid any cash dividends on any of its common stock. The Company currently plans to retain all earnings to finance its business and to reduce its leverage rather than paying cash dividends on the common stock. Payments of any cash dividends in the future will depend on the financial condition, results of operations and capital requirements of TWA, as well as other factors deemed relevant by its Board of Directors, including applicable restrictions in various agreements relating to indebtedness. As of February 28, 1999, there were (i) 58,252,305 shares of the Company's common stock outstanding and 24,786 holders of record of the common stock, and (ii) 5,946,355 shares of Employee Preferred Stock issued and outstanding and nine holders of record of the Employee Preferred Stock. 27 SALES OF UNREGISTERED SECURITIES In April 1998, the Company issued in a private placement $31.8 million principal amount of Mandatory Conversion Equity Notes due 1999 (the "April Equity Notes") to the owners of three used B-767-231 ETOPS aircraft and six associated engines (the "April Aircraft") and to Lazard Freres & Co. ("Lazard") as partial consideration for the purchase of the April Aircraft. Lazard acted as placement agent for the transaction, which was exempt from the registration requirements of the Securities Act of 1933, as amended (the "Act") pursuant to Section 4(2) of the Act. The April Equity Notes were convertible into shares of common stock of the Company. On July 6, 1998, a registration statement on Form S-3 (Reg. No. 333-56991) with respect to offers and sales of shares of the restricted common stock to be issued upon conversion of the April Equity Notes became effective. On July 7, 1998, the April Equity Notes were converted into 3,290,901 shares of restricted common stock at a price of 95% of the average of the closing price of the common stock on the American Stock Exchange for the 20 consecutive trading days prior to conversion, which price equaled $9.663. In June 1998, the Company issued in a private placement $13.0 million principal amount of the 10 1/4% Mandatory Conversion Equity Notes due 1999 (the "10 1/4% Equity Notes") to the owners of one used B- 767-231 ETOPS aircraft and two associated engines (collectively, the "June Aircraft") as partial consideration for the purchase of the June Aircraft. The transaction was exempt from the registration requirements of the Act pursuant to Section 4(2) of the Act. The 10 1/4% Equity Notes were convertible into shares of common stock of the Company. On July 10, 1998, a registration statement on Form S-3 (Reg. No. 333-58481) with respect to offers and sales of shares of the restricted common stock to be issued upon conversion of the 10 1/4% Equity Notes became effective. On July 13, 1998 the 10 1/4% Equity Notes were converted into 1,225,719 shares of restricted common stock at the closing price of the common stock on the American Stock Exchange on the day prior to conversion, which price equaled $10.6875, plus interest of $7.6875 per $1,000 face amount of the 10 1/4% Equity Notes. 28 ITEM 6. SELECTED FINANCIAL DATA The selected financial data presented below relate to periods in the years ended December 31, 1998, 1997 and 1996, the four months ended December 31, 1995, the eight months ended August 31, 1995 and the year ended December 31, 1994. This data should be read in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements. The consolidated financial data for the above periods was derived from the audited consolidated financial statements of the Company. Certain amounts have been reclassified to conform with presentations adopted in 1998. TWA underwent Chapter 11 reorganization in 1995. As a result of the 1995 reorganization, TWA has applied fresh start reporting in accordance with the American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code," which resulted in a new reporting entity for accounting purposes. TWA also adjusted its assets and liabilities to reflect fair values on the effective date of the 1995 reorganization, which for accounting purposes occurred September 1, 1995. Because of the application of fresh start reporting, TWA's consolidated financial statements for periods after the 1995 reorganization are not comparable in all respects to the financial statements for periods before the reorganization. The vertical black lines in the following tables separate these periods. TWA has not presented earnings per share of the predecessor company, as it believes these amounts are not meaningful.
REORGANIZED COMPANY PREDECESSOR COMPANY --------------------------------------------------------- ---------------------------- YEAR YEAR YEAR FOUR MONTHS EIGHT MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, AUGUST 31, DECEMBER 31, 1998 1997 1996 1995 1995 1994 ------------ ------------ ------------ ------------ ------------ ------------ (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF OPERATIONS DATA: Operating revenues $3,259,147 $3,327,952 $3,554,407 $1,098,474 $2,218,355 $3,407,702 Operating income (loss) (65,159) (29,260) (198,527) 10,446 14,642 (279,494) Loss before income taxes and extraordinary items (107,169) (89,335) (274,577) (32,268) (338,309) (432,869) Provision (credit) for income taxes 243 527 450 1,370 (96) 960 Loss before extraordinary items (107,412) (89,862) (275,027) (33,638) (338,213) (433,829) Extraordinary items, net of income taxes (13,069) (20,973) (9,788) 3,500 140,898 (2,005) Net loss (120,481) (110,835) (284,815) (30,138) (197,315) (435,834) Ratio of earnings to combined fixed charges and preferred stock dividends - - - - - - Per share amounts: Loss before extraordinary items $(2.14) $(1.98) $(6.60) $(1.15) Net loss (2.35) (2.37) (7.27) (1.05)
29
PREDECESSOR REORGANIZED COMPANY COMPANY ------------------------------------------------------- ----------- DECEMBER 31, ---------------------------------------------------------------------------- 1998 1997 1996 1995 1994 ---------- ---------- ---------- ---------- ----------- (DOLLARS IN THOUSANDS) SELECTED BALANCE SHEET DATA: Cash and cash equivalents $ 252,408 $ 237,765 $ 181,586 $ 304,340 $ 138,531 Current assets 605,414 632,957 625,745 737,301 603,806 Net working capital (deficiency) (397,425) (303,988) (336,416) (81,913) (1,238,216) Flight equipment, net 514,298 626,382 472,495 455,434 508,625 Total property and equipment, net 620,030 741,765 614,207 600,066 693,045 Intangible assets, net 1,055,544 1,118,864 1,184,786 1,275,995 921,659 Total assets 2,554,623 2,773,848 2,681,939 2,868,211 2,512,435 Current maturities of long-term debt and capital leases 149,403 88,460 134,948 110,401 1,149,739 Long-term debt, less current maturities 572,372 736,540 608,485 764,031 - Long-term obligations under capital leases, less current maturities 163,046 182,922 220,790 259,630 339,895 Shareholders' equity (deficiency) 185,322 268,284 238,105 302,855 (417,476) _______ Includes special charges of $42.6 million in 1998, $85.9 million in 1996, $1.7 million in the eight months ended August 31, 1995 and $138.8 million in 1994. For a discussion of these and other non-recurring items, see Note 14 to the consolidated financial statements. The eight months ended August 31, 1995 include charges of $242.2 million related to reorganization items. The extraordinary items in 1998, 1997 and 1996 are the result of the early extinguishment of certain debt. The extraordinary item in the four months ended December 31, 1995 was the result of the settlement of a debt of a subsidiary, while the extraordinary item in the eight months ended August 31, 1995 represents the gain on the discharge of indebtedness pursuant to the consummation of the 1995 reorganization. The extraordinary item in 1994 represents the charge for a prepayment premium related to the sale and leaseback of four MD-80 aircraft. For purposes of determining the ratio of earnings to combined fixed charges and preferred stock dividends; "earnings" consist of earnings before income taxes, extraordinary items and fixed charges (excluding capitalized interest); "fixed charges" consist of interest (including capitalized interest) on all debt and that portion of rental expense management believes to be representative of interest and "preferred stock dividends" consist of preferred stock dividend requirements divided by the after-tax effective rate. Earnings were not sufficient to cover combined fixed charges and preferred stock dividends as follows (in millions): for the years ended December 31, 1998, 1997 and 1996, and for the four months ended December 31, 1995, $152.7, $120.5, $340.1 and $40.1, respectively. No effect has been given to stock options, warrants, convertible preferred stock or potential issuances of additional employee preferred stock, as the impact would have been anti-dilutive; accordingly, basic and diluted per share amounts are the same for all periods presented. Long-term debt in 1994 was reclassified to current maturities as a result of certain alleged defaults and payment defaults. No dividends were paid on TWA's outstanding common stock during the periods presented above.
30 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements made below relating to plans, conditions, objectives, and economic performance go beyond historical information and may provide an indication of future financial condition or results of operations. To that extent, they are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and each is subject to risks, uncertainties and assumptions that could cause actual results to differ from those in the forward-looking statements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. In any event, these forward-looking statements speak only as of their dates, and the Company undertakes no obligation to update or revise any of them whether as a result of new information, future events or otherwise. GENERAL TWA operates in an intensely competitive environment. The Company competes with one or more major airlines on most of its routes (including all routes between major cities). The airline industry has consolidated as a result of mergers and liquidations and more recently through alliances, and further consolidation may occur in the future. This consolidation has, among other things, enabled certain of the Company's major competitors to expand their international operations and increase their domestic market presence, thereby strengthening their overall operations, by transporting passengers connecting with or otherwise traveling on the alliance carriers. Such alliances could further intensify the competitive environment. The rapid growth of regional jet airline affiliates represents a significant competitive challenge for TWA due to its reliance on through-hub passenger traffic. A small regional jet can now offer direct service in markets that previously were served only by through- hub service. TWA's current IAM contracts limit TWA from directly competing with regional jets in these markets. These issues represent a competitive challenge for the Company, which has higher operating costs than many regional carriers and fewer financial resources than many of its major competitors. Small fluctuations in RASM and CASM can significantly affect TWA's financial results. The Company has experienced significant operating losses on an annual basis since the early 1990s, except in 1995 when the Company's combined operating profit was $25.1 million. TWA expects the airline industry will remain extremely competitive for the foreseeable future. The Company continues to focus on implementing several strategic initiatives to improve operational reliability and schedule integrity and overall product quality in order to attract higher-yield passengers and enhance overall productivity. Key initiatives currently in progress include: * modernizing its fleet; * focusing on improved productivity; * implementing a series of revenue-enhancing marketing initiatives to attract higher-yield business travelers; * implementing a number of employee-related initiatives to reinforce the Company's focus on operational performance; and * optimizing TWA's route structure. 31 TWA faces a number of uncertainties that may adversely affect its future results of operations, including: * insufficient levels of air passenger traffic resulting from, among other things, war, threat of war, terrorism or changes in the economy; * governmental limitations on the ability of TWA to service certain airports and/or foreign markets; * regulatory requirements necessitating additional capital or operating expenditures; * pricing and scheduling initiatives by competitors; * the availability and cost of capital; * increases in fuel and other operating costs; * the outcome of certain ongoing labor negotiations; and * the adverse effects on yield of the continued implementation of a discount ticket program between TWA and Karabu Corporation, a company controlled by Carl Icahn, on the terms currently applied by Karabu. (TWA believes these terms are inconsistent with, and in violation of, the ticket agreement governing this program.) (See "Part I, Item 3. Legal Proceedings.") TWA is unable to predict the potential affect of any of these uncertainties upon its future results of operations. Labor Costs Wage rates for most of TWA's employees have increased recently as a result of several events. A new collective bargaining agreement between TWA and its pilots became effective September 1, 1998. As part of the new contract, TWA agreed to pay increases over the next four years that will result in wages for TWA's pilots improving by 2002 to 90% of the industry average as determined by wage rates in contracts in effect as of August 1998. The contract also provides for significant work rule improvements for pilots in certain areas while also granting TWA flexibility and improvements necessary to enhance its competitive position. Under the contract, TWA also will distribute either one million shares of TWA's common stock or $11 million in cash to its pilots, in four equal quarterly payments commencing in 1999. TWA has the option to make each quarterly payment in shares or in cash. Pursuant to the labor agreements TWA entered into in 1992, TWA agreed to pay to employees represented by the IAM a cash bonus for the amount by which overtime incurred from September 1992 through August 1995 was reduced below specified thresholds. This amount was to be offset by the failure of medical savings to meet certain specified levels during the period for the same employees. TWA and the IAM have agreed that the net overtime bonus owed to the IAM is $25.5 million, which amount TWA previously provided and reflected as a liability in its financial statements. The obligation is payable in three equal annual installments, and TWA made the first payment on October 15, 1998. TWA also entered into agreements subsequent to the 1992 labor agreements that provide for an adjustment to existing salary rates of certain labor-represented employees based on the amount of the cash bonus for overtime to the employees represented by the IAM as described in the previous paragraph. These adjustments equated to a 4.814% increase which management made effective for all employee groups on September 1, 1998, except for pilots whose contract provided for separate increases also effective September 1, 1998, and the officers of TWA who did not receive the increase. Management intends that the 4.814% salary adjustments will be part of any percentage increase that would be incorporated in contract amendments currently being negotiated. 32 There are certain issues relating to agreements with employees, the resolution of which could result in significant non-cash charges to future operating results of TWA. Shares granted or purchased at a discount under the ESIP will generally result in a charge equal to the fair market value of shares granted and the discount for shares purchased at the time these shares are earned or purchased. As a result of the first two target prices being realized on February 17, 1998, and March 4, 1998, respectively, the Company issued an additional 2,377,084 shares on July 15, 1998, to satisfy the 1997 and 1998 ESIP grant amounts. In connection with such issuance, TWA recorded an aggregate non-cash charge in the first quarter of 1998 in the amount of $26.5 million. An aggregate non-cash charge of $1.0 million was recorded in the third quarter of 1998 to reflect the actual number of shares issued on July 15, 1998. If the ESIP's remaining target prices for TWA common stock are realized, the minimum aggregate non-cash charge for the years 1999 to 2002 will be approximately $103.4 million based upon these target prices and the number of shares of common stock and Employee Preferred Stock outstanding at December 31, 1998. The non-cash charge for any year, however, could be substantially higher if the then market price of the TWA common stock exceeds certain target prices. In connection with certain wage scale adjustments afforded to non- contract employees, employees previously represented by IFFA have asserted and won an arbitration ruling with respect to the comparability of wage concessions made in 1994 that, if sustained, would require TWA to provide additional compensation to these employees. The Eighth Circuit Court of Appeals upheld a district court ruling that affirmed the arbitrator's award. TWA has filed a motion before the District Court for the Eastern District of Missouri seeking referral of the matter to the System Board of Adjustment for determination on TWA's claim that, to the extent it was unsuccessful on the merits, actions taken by TWA following issuance of the arbitrator's award and in accordance with the arbitrator's opinion have substantially, if not totally, mitigated potential damages. Accordingly, the Company has not recorded any liability for this litigation. The IAM (now collective bargaining agent for employees formerly represented by IFFA) has filed a motion requesting the district court to hold TWA in contempt of court and to order TWA to implement the arbitration award. TWA believes that pending the district court's ruling on TWA's motion to remand, TWA is not required to implement the arbitration award and the IAM's motion is without merit. The amount, if any, due under the award is incapable of being determined pending the district court's ruling on TWA's motion and, if remanded, the decision of the System Board of Adjustment. TWA is currently engaged in negotiations with its flight attendants and ground employees on new collective bargaining agreements and expects that the new agreements with these employees will likely result in additional increases in wage rates. TWA believes it is essential that its labor costs remain favorable in comparison to its largest competitors. The Company will seek to continue to improve employee productivity as an offset to any wage increases and will continue to explore other ways to control and/or reduce operating expenses. There can be no assurance that the Company will be successful in obtaining such productivity improvements or unit cost reductions. In the opinion of management, the Company's financial resources are not as great as those of most of its competitors, and therefore, a substantial increase in its labor costs as a result of any new labor agreements or any cessation or disruption of operations due to any strike or work action could be particularly damaging to the Company. Seasonality Due to the greater demand for air travel during the summer months, airline industry revenues for the third quarter of the year are generally significantly greater than revenues in the first and fourth quarters of the year and moderately greater than revenues in the second quarter of the year. In the last two years, TWA has attempted to reduce the seasonal nature of its business through an acceleration of its fleet renewal program, a decrease in international operations, and the restructuring of its JFK operations, with the result that the difference between TWA's seasonal average daily peak and trough capacities relating to available seat miles ("ASMs") has dropped from 20.8% in 1996 and 16.9% in 1997 to 3.9% in 1998. TWA anticipates that the seasonal variability of its financial performance 33 will be reduced (but not eliminated) as a result of these changes; however, there can be no assurance that this deseasonalization will occur. 34 TWA's passenger traffic data, for scheduled passengers only, are shown in the table below for the indicated periods:
1998 1997 1996 ------- ------- ------- NORTH AMERICA Passenger revenues ($ millions) $ 2,562 $ 2,512 $ 2,515 Revenue passenger miles (millions) 20,132 19,737 19,513 Available seat miles (millions) 28,796 29,341 30,201 Passenger load factor 69.9% 67.3% 64.6% Passenger yield (cents) 12.72 cents 12.73 cents 12.89 cents Passenger revenue per available seat mile (cents) 8.90 cents 8.56 cents 8.33 cents INTERNATIONAL Passenger revenues ($ millions) $ 333 $ 412 $ 563 Revenue passenger miles (millions) 4,290 5,363 7,598 Available seat miles (millions) 5,657 7,093 10,393 Passenger load factor 75.8% 75.6% 73.1% Passenger yield (cents) 7.77 cents 7.68 cents 7.41 cents Passenger revenue per available seat mile (cents) 5.89 cents 5.81 cents 5.42 cents TOTAL SYSTEM Passenger revenues ($millions) $ 2,895 $ 2,924 $ 3,078 Revenue passenger miles (millions) 24,422 25,100 27,111 Available seat miles (millions) 34,453 36,434 40,594 Passenger load factor 70.9% 68.9% 66.8% Passenger yield (cents) 11.85 cents 11.65 cents 11.35 cents Passenger revenue per available seat mile (cents) 8.40 cents 8.03 cents 7.58 cents Operating cost per available seat mile (cents) 9.23 cents 8.98 cents 8.76 cents Average daily utilization per aircraft (hours) 9.77 9.38 9.63 Aircraft in fleet being operated at end of year 185 185 192 Excludes subsidiary companies. The number of scheduled miles flown by revenue passengers. The number of seats available for passengers multiplied by the number of scheduled miles those seats are flown. Revenue passenger miles divided by available seat miles. Passenger revenue per revenue passenger mile. Passenger revenue divided by scheduled available seat miles. Operating expenses, excluding special charges, earned stock compensation, other nonrecurring charges and subsidiaries, divided by total available seat miles. The average block hours flown per day in revenue service per aircraft.
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE FISCAL YEAR ENDED DECEMBER 31, 1997 Total operating revenues of $3,259.1 million for 1998 were $68.9 million or 2.1% less than the total operating revenues of $3,328.0 million for the year ended December 31, 1997. The decrease was primarily reflected in TWA passenger revenues, which were $28.8 million less than in 1997; domestic passenger revenue increased year over year by $49.7 million, however, international passenger revenue decreased by $78.5 million resulting from the reduction of certain unprofitable international operations and the planned reduction in capacity as the Company replaced older L-1011 and B-747 aircraft with new B-757 and B-767 aircraft on many routes. Revenue from freight and mail also decreased $24.3 million as a result of the reduction in capacity. Additionally, revenues from contract work decreased $8.6 million primarily due to an overall reduction in third party maintenance as the Company focused its resources on maintenance of its own aircraft. 35 As a result of the Company's planned retirement of older widebody aircraft and elimination of unprofitable services, capacity and traffic decreased in 1998 as compared to 1997. System-wide capacity, measured in available seat miles flown in scheduled service, decreased by 5.4% in 1998 as compared to 1997 (reflecting a 1.9% decrease in domestic available seat miles and a 20.2% decrease in international available seat miles). This capacity change reflects the continued planned "leveling" of TWA's seasonal schedules and the reduction in international operations. Passenger traffic volume, as measured by total revenue passenger miles in scheduled service, decreased 2.7% in 1998 over 1997. Passenger load factor for 1998 was 70.9% compared to 68.9% in 1997. TWA's yield per revenue passenger mile increased to 11.85 cents in 1998 from 11.65 cents in 1997. Overall, revenues generated as a result of moderate year over year increases in load factor and yield from 1997 to 1998, while reflecting TWA's emphasis on improving system yield, were not sufficient to offset the decline in capacity. Operating expenses decreased to $3,324.3 million (including $42.6 million in special charges) in 1998, $32.9 million (1.0%) less than the total operating expenses of $3,357.2 million for the year ended December 31, 1997, representing a net change in the following expense groups: * Salaries, wages and benefits of $1,198.9 million for 1998 were $25.2 million (2.1%) less than 1997, primarily due to a decrease in the average number of employees, offset by increases in wage rates. The average number of employees declined 6.1% to 21,981 in 1998 as compared to 23,413 in 1997. A reduction of the number of employees occurred in several areas, particularly those impacted by the reduction in flying or maintenance of older narrow and widebody aircraft. * Earned stock compensation charges of $27.5 million for 1998 versus $4.2 million for 1997 represent the non-cash compensation charge recorded to reflect the expense associated with the distribution of shares of stock on behalf of employees as part of the 1995 reorganization. The 1998 charge is related to incentive shares issued in July 1998 under the ESIP as a result of the achievement of certain common stock target prices in February and March 1998. The 1997 charge is related to the allocation of shares to the pilots' employee benefit plan (the "ESOP"), which became fully allocated in 1997. * Aircraft fuel and oil expense of $344.6 million for 1998 was $136.3 million (28.3%) less than expenses of $480.9 million for 1997. Approximately $100.9 million of the decrease was due to a reduction in the average cost of fuel from 65.9 cents per gallon in 1997 to 51.0 cents per gallon in 1998. The remaining $35.4 million decrease was due to the reduction in gallons consumed (675.8 million gallons in 1998 compared to 730.3 million gallons in 1997) resulting from the replacement of B-747, L-1011 and B-727 aircraft with more fuel efficient B-757, B-767 and MD-80 aircraft and the elimination of certain unprofitable international routes. * Passenger sales commission expense of $197.9 million for 1998 was $44.2 million (18.3%) less than the expense of $242.1 million in 1997 primarily due to: (1) a 23.9% decrease in average domestic commission rates due to a reduction in domestic base commission rates in October 1997 and a commission cap implemented in May 1998; (2) a 7.8% decrease in domestic commissionable tickets sold during 1998 versus 1997, resulting in part from an increase in electronic ticketing; and (3) a decrease in commissions on international passenger revenues, which declined 19.1% as the Company continued to restructure its international operations. * Aircraft maintenance material and repairs expense of $129.7 million for 1998 represented a decrease of $8.7 million (6.3%) from $138.4 million for 1997. The decrease was primarily the result of higher levels of maintenance on narrow-body aircraft during 1997, reduced material usage on wide-body aircraft and engines in 1998 due to the retirement of the B-747 and L-1011 fleets, a reduction in unprofitable contract maintenance work performed on both government and commercial aircraft and engines, and the effect of adding new lower maintenance B-757, B-767 and MD-80 aircraft to the fleet. 36 * Depreciation and amortization expense increased $2.6 million (1.7%) in 1998 to $153.0 million compared to $150.4 million in 1997. Depreciation of aircraft increased $7.7 million primarily as a result of the purchase of five B-767 aircraft previously leased by TWA under operating leases from the end of 1997 through the first six months of 1998, which was partially offset by reduced depreciation, amortization and obsolescence provided for the B-747 and L-1011 fleets, which were retired. * Operating lease rentals of $458.3 million for 1998 were $87.5 million (23.6%) more than the rentals of $370.8 million for 1997. Aircraft lease rentals increased $68.3 million versus 1997 reflecting additional new B-757 and MD-80 aircraft leases in 1998 which replaced older L-1011 and B-747 wide-body aircraft and B-727 aircraft retired from the fleet. The remainder of the increase ($19.2 million) related to a non-recurring charge of $9.0 million for certain retroactive facilities rentals in addition to increased space rentals at other airports. * Passenger food and beverage expense of $89.0 million during 1998 represented an increase of $5.8 million (7.0%) from $83.2 million during 1997. The increase was related to a significant increase of 35.8% in first class enplaned passengers and associated improved menu offerings primarily in TWA's domestic First Class ("Trans World First") and international business ("Trans World One") services partially offset by a slight decline in coach enplaned passengers of 2.7% and selective menu changes to mitigate the overall cost impact. Overall, 1998 scheduled boardings were 2.3% higher than 1997 boardings. During the fourth quarter of 1998, special charges of $42.6 million were recorded in connection with the elimination of excess overhead items and the Company's ongoing fleet renewal program. These charges included $25.0 million related to the planned retirement of B-727 and non-hushkitted DC-9 fleets and $17.6 million for the ongoing restructuring of international operations and the closure of the Los Angeles reservations office, both of which include significant employee severance costs. See Note 14 to the consolidated financial statements for a further discussion of these special charges. All other operating expenses increased $19.6 million (3.0%) to $682.7 million in 1998 from $663.1 million during the year ended December 31, 1997. Expenses increased in several categories including computerized reservation system fees ($11.0 million), Worldspan transaction fees ($5.6 million), advertising and publicity primarily associated with the launch of new TWA services including "Trans World First", "TWQ" and the "Aviators" frequent flier program ($5.9 million), legal fees and expenses ($7.3 million) and uncollectible accounts ($3.2 million). Offsetting decreases occurred as a result of lower insurance premiums and uninsured losses ($9.8 million) and expenses related to TWA's subsidiary, Getaway Vacations, ($5.9 million). Other charges (credits) were a net charge of $42.0 million for 1998, compared to $60.1 million for 1997. Interest expense increased $2.9 million in 1998 over 1997 as a result of the addition of new debt during 1998 and the latter part of 1997. Interest and investment income increased by $10.4 million in 1998 primarily as a result of higher levels of invested funds. Dispositions of assets resulted in net gains of $20.1 million in 1998, compared to $16.0 million in 1997. The net gains in 1998 primarily included the sale of certain retired, wide-body aircraft, engines and other surplus equipment while the net gains in 1997 related to the sale of three gates at Newark International Airport and spare flight equipment. Other charges and credits-net improved by $6.4 million to a net credit of $29.8 million for 1998 from a net credit of $23.4 million for 1997. In May 1998, the U.S. Supreme Court refused to hear an appeal of a decision reversing a 1991 judgment against TWA in an action brought by Travellers. Accordingly, a cash undertaking previously posted by TWA of $13.7 million was 37 returned to TWA in June 1998 and recorded as a credit in the second quarter. After deduction of $3.3 million for reimbursement of certain administrative costs previously incurred by TWA, $10.4 million received pursuant to this proceeding was applied in July 1998 to reduce the promissory notes issued to the Pension Benefit Guaranty Corporation ("PBGC Notes") pursuant to a pre-existing agreement. Partially offsetting this favorable change was a decrease in TWA's equity in the earnings of Worldspan ($2.2 million) and an increase in provisions for losses resulting from claims and litigation judgments against TWA ($1.2 million). The provision for income taxes in 1998 and 1997 related primarily to foreign taxes. In future periods, the amortization of reorganization value in excess of amounts allocable to identifiable assets and certain other non-deductible items will likely result in the Company's effective tax rate for financial reporting purposes exceeding statutory rates, notwithstanding the Company's substantial net operating loss carryforwards. See Note 5 to the Consolidated Financial Statements. As a result of the above, the operating loss of $65.2 million for 1998 was $35.9 million greater than the operating loss of $29.3 million for 1997 and the net loss of $120.5 million for 1998 was $9.7 million greater than the net loss of $110.8 million for 1997. The operating and net losses for 1998 included special charges for nonrecurring items of $42.6 million as further described in Note 14 to the Consolidated Financial Statements. The 1998 net loss also included $13.1 million in extraordinary charges related to the early extinguishment of debt while the 1997 net loss included $21.0 million of such charges. RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE FISCAL YEAR ENDED DECEMBER31,1996 Total operating revenues of $3,328.0 million for 1997 were $226.4 million or 6.4% less than the total operating revenues of $3,554.4 million for the year ended December 31, 1996. The decrease was primarily reflected in TWA passenger revenues, which were $153.9 million less than in 1996, resulting from the elimination of certain unprofitable international destinations and the planned reduction in capacity as the Company replaced older L-1011 and B-747 aircraft with new B-757, B-767 and MD-80 aircraft on many routes. Additionally, revenues from contract work decreased $41.8 million primarily due to the termination of an unprofitable aircraft maintenance contract with the U. S. government and overall reduction in other third party maintenance as the Company focused its resources on maintenance of its own aircraft. Revenue from freight and mail also decreased $26.3 million as a result of the reduction in capacity. As a result of the Company's planned retirement of older widebody aircraft and elimination of unprofitable services, capacity and traffic decreased in 1997 as compared to 1996. System-wide capacity, measured in ASMs, decreased by 10.2% in 1997 as compared to 1996 (reflecting a 2.8% decrease in domestic ASMs and a 31.5% decrease in international ASMs). Passenger traffic volume, as measured by total RPMs in scheduled service, decreased 7.4% in 1997 over 1996. Passenger load factor for 1997 was 68.8% compared to 66.8% in 1996. TWA's yield per passenger mile increased from 11.35 cents in 1996 to 11.65 cents in 1997. Reflecting the Company's efforts to improve productivity and reduce operating costs, operating expenses declined to $3,357.2 million in 1997, $395.7 million (10.5%) lower than the total operating expenses of $3,752.9 million for the year ended December 31, 1996, representing a net change in the following expense groups: * Salaries, wages and benefits of $1,224.1 million for 1997 were $30.2 million (2.4%) less than 1996, primarily due to a decrease in the average number of employees. The average number of employees declined 3.5% to 23,413 in 1997 as compared to 24,254 in 1996. A reduction of the number of employees occurred in several areas, particularly those impacted by the reduction in flying or maintenance of older narrow and widebody aircraft. 38 * Earned stock compensation charges of $4.2 million for 1997 and $9.1 million for 1996 represent primarily the non-cash compensation charge recorded to reflect the expense associated with the distribution of shares of stock on behalf of employees as part of the 1995 reorganization. For a further discussion of future charges related to non-cash compensation, see Note 8 to the Consolidated Financial Statements. * Aircraft fuel and oil expense of $480.9 million for 1997 was $104.3 million (17.8%) less than expenses of $585.2 million for the year ended December 31, 1996. The decrease in expenses was primarily due to decreases in the price of fuel ($28.2 million) and in gallons consumed ($76.1 million). * Passenger sales commission expense of $242.1 million for 1997 was $26.0 million (9.7%) less than the expense of $268.1 million in 1996 primarily related to the $153.9 million decrease in TWA passenger revenues. Other factors contributing to the decrease were a reduction in commission rates in October 1997 and a decrease in the percentage of commissionable sales resulting in decreases in commission expense of $7.1 million and $3.2 million, respectively. * Aircraft maintenance materials and repairs expense of $138.4 million in 1997 represented a decrease of $69.8 million (33.5%) from $208.2 million for 1996. The decrease was primarily the result of higher levels of scheduled maintenance in 1996, including heavy maintenance, a 3.0% decrease in flying hours in 1997 versus 1996, addition of new aircraft and retirement of old aircraft from TWA's fleet, and a decrease in contract repair work performed by the Company for other air carriers and third parties. The average age of TWA's operating fleet decreased from 19.0 years at December 31, 1996 to 16.9 years at December 31, 1997. * Depreciation and amortization expense decreased $11.4 million from $161.8 million in 1996 to $150.4 million in 1997 primarily represented by decreases in the provision for obsolescence ($7.0 million), depreciation of aircraft ($3.0 million) and amortization of intangible assets ($1.2 million). The decrease in obsolescence was significantly related to the retirement of L-1011 and B-747 aircraft fleets and its replacement with newer aircraft fleets. The decrease in aircraft depreciation was related to B-727-200, B-747 and L-1011 fleets becoming fully depreciated partially offset by increased depreciation on B-757, B-767 and DC9-30 fleets related to new aircraft acquisitions and aircraft modifications on the DC9-30 aircraft associated with noise compliance and aging aircraft. The decrease in amortization of intangible assets was related to the 1996 write-off of the carrying value of TWA's New York to Athens route authority as a result of TWA's decision to discontinue unprofitable service to Athens and the sale of three gates at Newark International Airport in early 1997. * Operating lease rentals of $370.8 million for 1997 were $67.8 million (22.4%) more than the total rentals of $303.0 million for 1996. The increase was primarily due to an increase in the average number of aircraft under operating leases from 123 in 1996 to 137 in 1997 and higher lease rates attributed to the introduction of newer aircraft into the fleet. * Passenger food and beverage expense of $83.2 million in 1997 represented a decrease of $26.9 million (24.4%) from $110.1 million for the twelve months of 1996. The decrease was primarily due to a 29.7% reduction in the number of passengers boarded on international flights resulting from the 31.5% reduction in international scheduled ASMs together with savings derived from changes and improved efficiencies in food and beverage service. 39 During the fourth quarter of 1996, special charges of $85.9 million were recorded in connection with the Company's decision to modify its international route structure and related aircraft fleet plan. The charges included a write-off of the carrying value of TWA's New York-Athens route authority ($26.7 million) and international employee severance liabilities ($5.5 million) related to the termination of service to Athens and Frankfurt. The 1996 special charges also included a reduction in carrying value of TWA's owned L-1011 and B-747 fleets ($32.2 million) and the related inventories ($21.5 million). These charges were based upon management's estimate of the amounts to be realized upon the disposition of these assets when removed from service. Actual amounts could materially differ from such estimates. See Note 14 to the Consolidated Financial Statements for a further discussion of these special charges. All other operating expenses decreased $104.1 million (13.6%) to $663.1 million in 1997 from $767.2 million during the year ended December 31, 1996. Decreases were noted in the cost of services sold ($19.3 million), cost of services purchased ($23.0 million), advertising and publicity ($17.8 million), navigation charges ($9.4 million), landing fees ($6.4 million), subsidiary expenses ($7.4 million), uncollectible accounts ($5.6 million), taxes-other than income ($5.4 million) and numerous other miscellaneous categories. These decreases were primarily related to TWA's planned reductions in capacity (10.2% reduction in system scheduled ASMs) and maintenance performed for third parties. Other charges (credits) were a net charge of $60.1 million for 1997 as compared to $76.1 million for 1996. Interest expense decreased $12.8 million in 1997 over 1996 as a result of the reduction of debt arising from the 1995 restructuring and additional reductions of debt during 1997 and 1996. Interest income decreased by $8.8 million in 1997 primarily as a result of lower levels of invested funds. Dispositions of assets resulted in a net gain of $16.0 million in 1997, compared to a net loss of $1.1 million in 1996. The net gain in 1997 included $7.4 million from the sale of three gates at Newark International Airport and $8.6 million from the sale of aircraft, engines and other property. Other charges and credits-net were unfavorable by $5.2 million in 1997 compared to 1996, primarily due to a $1.2 million decline in foreign currency translation adjustments, a $1.7 million decrease in vendor discounts and a $2.5 million credit in 1996 to reflect a litigation settlement. The provision for income taxes in 1997 and 1996 related primarily to foreign taxes. In future periods, the amortization of reorganization value in excess of amounts allocable to identifiable assets and certain other non-deductible items will likely result in the Company's effective tax rate for financial reporting purposes exceeding statutory rates, notwithstanding the Company's substantial net operating loss carryforwards. See Note 5 to the Consolidated Financial Statements. As a result of the above, the operating loss of $29.3 million for 1997 was $169.2 million less than the operating loss of $198.5 million for 1996. The net loss of $110.8 million for 1997 was $174.0 million less than the net loss of $284.8 million for 1996. The operating and net losses for 1996 included special charges for nonrecurring items of $85.9 million as further described in Note 14 to the Consolidated Financial Statements. The 1996 net loss also included $9.8 million in extraordinary charges related to the early extinguishment of debt while the 1997 net loss included $21.0 million of such charges. 40 LIQUIDITY AND CAPITAL RESOURCES The following is a discussion of the impact of significant factors affecting TWA's liquidity position and capital resources. These comments should be read in conjunction with, and are qualified in their entirety by, the Consolidated Financial Statements and Notes thereto. Liquidity The Company's consolidated cash and cash equivalents balance at December 31, 1998 was $252.4 million, a $14.6 million increase from the December 31, 1997 balance of $237.8 million. The net increase in cash and cash equivalents during 1998 was due, in large part, to cash provided by financing activities of $131.9 million in 1998 versus $112.2 million in 1997. Sources of cash generated by financing activities included proceeds from the sale of notes of $144.9 million and $261.9 million from the sale and leaseback of certain aircraft and engines in 1998 versus proceeds of $277.7 million from notes and warrants issued, $17.6 million from the sale and leaseback of certain aircraft and $82.2 million from the sale of preferred stock in 1997. These proceeds were partially offset by the repayment of long-term debt and capital lease obligations of $254.0 million in 1998 versus $257.8 million in 1997. The unfavorable change in cash used by operating activities reflects an increase in the net loss from 1997 to 1998 of $9.7 million. Additionally, net discounted sales from tickets sold under the 99 month Karabu ticket program agreement between the Company and Karabu have been excluded from cash flows from operating activities as the related amounts were applied to reduce certain loans to the Company provided by Karabu (the "Icahn Loans") and the PBGC Notes. During 1998, $148.3 million of these proceeds was applied to reduce the PBGC Notes. In 1997, the proceeds applied to reduce the Icahn loans were $53.8 million in addition to $70.3 million applied to reduce the PBGC Notes. On December 30, 1997, TWA repaid the outstanding balance of the Icahn Loans out of the proceeds of a receivables securitization offering by the Company. In December 1998, the PBGC Note were paid in full primarily with the proceeds from ticket sales. Accordingly, proceeds from the sales of tickets under the Karabu ticket agreement are now paid directly to TWA. Accounts payable and accrued expenses also generated a use of cash in 1998 of $28.8 million primarily due to the timing of payments of certain obligations compared to providing cash in 1997 of $42.5 million. Cash used by investing activities was $34.6 million in 1998 compared to $56.3 million in 1997. Components of this net change include an increase in capital expenditures (including aircraft pre- delivery payments) to $92.6 million in 1998 versus $74.0 million in 1997. However, gross proceeds from assets sold during 1998 were $35.9 million primarily from the sale of retired, wide-body aircraft, engines and other surplus equipment while 1997 proceeds of $22.7 million represented $10.0 million for three gates at Newark International Airport and approximately $12.7 million primarily from the sale of spare flight equipment, aircraft and engines. Additionally, approximately $17.0 million was provided in 1998 primarily due to the release of cash from previously restricted deposits and the release of cash collateral supporting certain letters of credit. Cash provided by financing activities and cash used in investing activities exclude a total of $102.5 million principal amount of notes issued by TWA in 1998 as consideration for the purchase of aircraft. In July 1998, $44.8 million principal amount of these notes were converted into TWA common stock. 41 Capital Resources TWA generally must satisfy all of its working capital expenditure requirements from cash provided by operating activities, from external capital sources or from the sale of assets. However, TWA has pledged a substantial portion of its assets to secure various issues of outstanding debt. TWA's financing agreements generally require TWA to apply the sale proceeds from the sale of any pledged assets to repay the corresponding debt. If TWA is unable to obtain additional capital, the Company may not be able to make certain capital expenditures or to continue to implement certain other aspects of its strategic plan, and TWA may therefore be unable to achieve the full benefits expected from the plan. Commitments TWA entered into an agreement in February 1996 with Boeing for the purchase of ten B-757-231 aircraft and related engines, spare parts and equipment for an aggregate purchase price of approximately $500 million. As of December 31, 1998, TWA had taken delivery of six aircraft and had four on firm order. Five of the six aircraft already delivered were originally manufacturer-financed and one was leased. In separate transactions in June, July and October 1998, these five manufacturer- financed aircraft were sold to, and leased back from, an aircraft lessor. The four remaining aircraft are scheduled to be delivered in 1999 and 2000. The first of these aircraft was delivered in March 1999 and was immediately sold to, and leased back under an operating lease from an aircraft lessor. TWA has obtained commitments for debt financing for approximately 80% of the cost of acquiring two of the remaining three aircraft and commitments for 100% lease financing of the cost of acquiring the remaining aircraft. In September 1998, TWA entered into an agreement with Boeing to acquire four additional B-757-231 aircraft to be delivered during 1999. TWA has obtained commitments for debt financing for approximately 80% of the cost of acquiring these aircraft. These commitments are subject to, among other things, material adverse change clauses that make the availability of this debt and lease financing dependent upon the financial condition of TWA at the time of delivery. The Company has entered into an agreement for the operating lease for one additional B-767-300ER and three additional B-757-200 aircraft. These aircraft are scheduled to be delivered in 1999, excluding one B-757-200 that is scheduled for delivery in January 2000. The Company has granted to a major financial institution the option to purchase and leaseback to TWA, under substantially the same terms and conditions as another B-757 aircraft previously leased to TWA in 1998, four of the eight B-757-231 aircraft to be delivered by Boeing during 1999. In 1989, TWA entered into agreements with AVSA, S.A.R.L. ("Airbus") and Rolls-Royce plc relating to the purchase of ten A330-300 twin-engine wide-body aircraft and related engines, spare parts and equipment for an aggregate purchase price of approximately $1.0 billion. The agreements, as amended, require the delivery of the aircraft in 2001 and 2002 and provide for the purchase of up to ten additional aircraft. TWA has not yet made arrangements for the permanent financing of the purchases subject to the agreements. In the event of cancellation, predelivery payments of approximately $18 million may be subject to forfeiture. In 1996, TWA entered into an agreement to acquire from Boeing 15 new MD-83s, to be financed by long-term leases. As of December 31, 1998, TWA had taken delivery of 13 of the MD-83 aircraft and expects to take delivery of two additional planes in 1999. In April 1998, TWA entered into an agreement with Boeing to acquire 24 additional new MD-83 aircraft, with deliveries in 1999. The Company has obtained commitments for long-term debt and lease financing for these aircraft. 42 In December 1998, TWA announced that it had signed letters of intent to acquire an additional 125 new aircraft: 50 Boeing 717-200 aircraft for delivery beginning in 2000, 50 Airbus A318 aircraft for delivery beginning in 2003 and 25 Airbus "A320 Family" aircraft for delivery beginning in 2005. In addition to these 125 firm orders, TWA has taken options on an additional 50 Boeing 717s and an additional 75 "A320 Family" aircraft. The letter of intent includes financing for all of the firm order aircraft. The terms of the purchase orders and the related financing are subject to further negotiation and the signing of definitive agreements. These new aircraft would primarily replace B- 727, DC-9 and older MD-80 aircraft currently in TWA's fleet. TWA elected to comply with the transition requirements of the Noise Act by adopting the Stage 2 aircraft phase-out/retrofit option, which requires that 50% of its base level (December 1990) Stage 2 fleet be phased-out/retrofitted by December 31, 1996. To comply with the 1996 requirement, the Company has retrofitted, by means of engine hush-kits, 30 of its DC-9 aircraft at an aggregate cost of approximately $55.5 million, most of which was financed by lessors with repayments being facilitated through increased rental rates or lease term extensions. TWA complied with the transition requirements for December 31, 1998, by having 75% of its fleet meet Stage 3 requirements through the grounding of older Stage 2 aircraft in combination with the acquisition of Stage 3 aircraft. By December 31, 1999, 100% of the fleet must meet Stage 3 requirements. In February 1999, TWA signed letters of intent with an aircraft lessor to sell and leaseback six Boeing 767-200 aircraft which would subsequently be returned to the lessor and replaced with three Boeing 767-300 aircraft from the same aircraft lessor. In connection with this transaction, the Company has made an offer to purchase for cash up to $28.8 million total principal amount of its outstanding 11 3/8% Senior Secured Notes due April 15, 2003 and any and all of its outstanding 10 1/4% Senior Secured Notes due June 15, 2003 (collectively, the "Notes"). The offer to purchase is subject to the consummation of the sale by TWA of the collateral that currently secures the Notes. The Company had noncancellable operating leases in effect at December 31, 1998 (see Note 4 to the consolidated financial statements). Certain Other Capital Requirements TWA generally does not commit to expenditures for facilities and equipment, other than aircraft, before purchase and, therefore, no such significant commitments exist at the present time. TWA's ability to finance these expenditures will depend in part on TWA's financial condition at the time of the proposed expenditure. Year 2000 TWA utilizes software and related computer technologies essential to its operations that use two digits rather than four to specify the year, which will result in a date recognition problem in the year 2000 and thereafter unless modified. TWA has completed an assessment to determine the changes needed to make its computer systems, internal operating systems and equipment year 2000 compliant and is executing a plan to implement these changes. The Company currently expects that it will complete the necessary changes and testing for its mission critical systems in the third quarter of 1999. TWA estimates that the total cost to complete the remediation of its information technology systems is approximately $19.3 million, which is approximately 20% of the Company's total information technology budget for the project duration period. As of December 31, 1998, the Company estimates that approximately 45% of the cost to complete the remediation of its computer systems had been incurred. As of December 31, 1998, approximately 60% of the systems had been remediated. TWA has substantially completed assessments and begun remediation for the non-information technology related systems. The Company currently estimates the remediation costs related to infrastructure and facilities enhancements necessary to prepare its systems for the year 2000 will range from $2 million to $4 million, which it plans to fund through operating cash flows. The costs of the Company's year 2000 project and the date on which it will be completed are based on management's best estimates and include assumptions regarding modification plans of third parties. However, there can be no assurance that these estimates will be achieved and actual results could differ materially from those anticipated. TWA has also reviewed software that was purchased from outside vendors and has evaluated its reliance on other third parties (e.g. the FAA, the DOT, airport authorities, data providers and suppliers) to 43 determine and minimize the extent to which its operations may be dependent on these third parties to remediate the year 2000 issues in their systems. Outside vendors and other third parties have either provided TWA with year 2000 compliant versions of their products or informed TWA that all mission critical systems from such parties are in the process of being remediated. To help insure compliance, TWA is continuing to set up and perform independent testing with these systems. Although the Company currently has day-to-day operational contingency plans, management is in the process of reviewing and modifying these plans for each mission critical system for possible year 2000-specific operational requirements. TWA's emphasis in this process is on passenger safety, and then on business continuity. Further, TWA has been actively participating in the industry reviews led by the Air Transport Association and the International Air Transport Association. TWA's business, operating results and financial condition could be materially adversely affected by the failure of its systems or those of other parties to operate properly beyond 1999. Fuel Hedging In September 1998, TWA entered into future jet fuel fixed price swaps with respect to a minor portion of its fuel requirements during 1999 to provide a hedging mechanism against significant increases in jet fuel prices. See Note 19 to the consolidated financial statements for further discussion of fuel hedging activities. Reorganization During the period from 1992 through 1995, TWA underwent two separate Chapter 11 bankruptcy reorganizations, the first in 1992-93, and the second in 1995. In connection with the 1995 reorganization, TWA applied fresh start reporting in accordance with generally accepted accounting principles, which resulted in the creation of a new reporting entity for accounting purposes and TWA's assets and liabilities being adjusted to reflect fair values on the effective date of the 1995 reorganization. As a result of the application of fresh start reporting, substantial values were assigned to routes, gates and slots ($458.4 million) and reorganization value in excess of amounts allocable to identifiable assets ($839.1 million). TWA has evaluated its future cash flows and notwithstanding the operating losses experienced since the 1995 reorganization, expects that the carrying value of the intangibles at December 31, 1998, will be recovered. However, the achievement of these improved future operating results and cash flows are subject to considerable uncertainties. In future periods, TWA will evaluate these intangibles for recoverability based upon estimated future cash flows. If TWA does not achieve these expectations, it may be required to charge future operations for impairment of these assets, and these charges could be material. Availability of NOLs TWA estimates that it had, for federal income tax purposes, net operating loss carryforwards ("NOLs") amounting to approximately $975 million at December 31, 1998. Such NOLs expire in 2008 through 2018 if not utilized before then to offset taxable income. Section 382 of the Internal Revenue Code of 1986, as amended, and regulations issued thereunder impose limitations on the ability of corporations to use NOLs if the corporation experiences a more than 50% change in ownership during certain periods. Changes in ownership in future periods could substantially restrict the Company's ability to utilize its tax net operating loss carryforwards. The Company believes that no such ownership change has occurred subsequent to the 1995 reorganization. There can be no assurance, however, that such an ownership change will not occur in the future. In addition, the NOLs are subject to examination by the Internal Revenue Service ("IRS") and, thus, are subject to adjustment or disallowance resulting from any such IRS examination. For financial 44 reporting purposes, the tax benefits related to the utilization of the tax net operating loss carryforwards generated prior to the 1995 reorganization of approximately $491 million will, to the extent realized in future periods, have no impact on the Company's operating results, but instead be applied to reduce reorganization value in excess of amounts allocable to identifiable assets. Sale of Equant Shares TWA is a long-term member of the Societe Internationale de Telecommunications Aeronautiques ("SITA"), a worldwide provider of communication services to the aviation industry. In February 1999, SITA divested a portion of its shares in Equant N.V., a telecommunication network company, through a secondary offering. As a member of SITA, TWA indirectly participated in the sale of its holdings in Equant, resulting in a reported gain and receipt of cash of approximately $21.3 million. Additionally, Worldspan, an affiliate, also participated in the divestiture of Equant, resulting in the additional recognition of gain by TWA of approximately $2.6 million as an equity participant in the earnings of Worldspan. The above transactions will be included in TWA's financial results for the first quarter of 1999. New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities". This statement establishes accounting and reporting standards for derivative instruments and all hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities at their fair values. Accounting for changes in the fair value of a derivative depends on its designation and effectiveness. For derivatives that qualify as effective hedges, the change in fair value will have no impact on earnings until the hedged item affects earnings. For derivatives that are not designated as hedging instruments, or for the ineffective portion of a hedging instrument, the change in fair value will affect current period earnings. The Company will adopt Statement No. 133 during its first quarter of fiscal 2000 and does not presently believe that it will have a significant effect on its results of operations or cash flows. 45 ITEM 7A. MARKET RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS The risk inherent in the Company's market risk sensitive instruments and positions is the potential loss arising from adverse changes in those factors. TWA is susceptible to certain risks related to changes in the cost of jet fuel, changes in interest rates and foreign currency exchange rate fluctuations. The Company does not purchase or hold any derivative financial instruments for trading purposes. Aircraft Fuel Airline operators are inherently dependent upon energy to operate and, therefore, are impacted by changes in jet fuel prices. Jet fuel and oil consumed in 1998 represented approximately 10.4% of TWA's operating expenses. TWA endeavors to acquire jet fuel at the lowest prevailing prices possible. TWA's earnings are affected by changes in the price and availability of aircraft fuel. The Company hedges its exposure to jet fuel price market risk only on a limited basis. The fair value of outstanding derivative commodity instruments (primarily commodity swap agreements) related to the Company's jet fuel price market risk both during 1998 and at December 31, 1998 was immaterial. For further discussion, see Note 19 to the consolidated financial statements. A one cent change in the average cost of jet fuel would impact TWA's aircraft fuel expense by approximately $6.8 million, based upon consumption in 1998. Interest Rates Airline operators are also inherently capital intensive, as the vast majority of assets are aircraft, which are long lived. TWA's exposure to market risk associated with changes in interest rates relates primarily to its debt obligations. The Company does not have significant exposure to changes in cash flows resulting from changes in interest rates as substantially all its long-term debt carries fixed rates of interest. The nature of fixed rate obligations does expose the Company to the risk of changes in the fair value of these instruments. As disclosed in Note 3 to the consolidated financial statements, the Company has outstanding debt of $683.9 million, net of unamortized discounts and including current maturities at December 31, 1998. The contractual maturities of long term debt and the associated average interest rates are as follows:
Contractual Amounts Weighted Average Maturity Date in Thousands Interest Rate - - ------------- ------------ ---------------- 1999 $111,538 9.13% 2000 17,367 10.22% 2001 141,355 9.58% 2002 70,024 11.51% 2003 67,761 10.92% Thereafter 290,000 11.44%
46 Foreign Currency Exchange Rates Airline operators who fly internationally are exposed to the effect of foreign exchange rate fluctuations on the U.S. dollar value of foreign currency-denominated operating revenues and expenses. While international operations generated 12.8% of TWA's operating revenues in 1998, a substantial portion of these related ticket sales are denominated in U.S. dollars. Additionally, no single foreign currency is a material portion of that amount. The Company does not have significant exposure to fluctuations in these currency rates because of the short-term nature of maturities of receivables and payables related to these operations. The Company has not undertaken additional actions to cover this currency risk and does not engage in any other currency risk management activity. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Index to Financial Statements, which appears on page F-1 hereof. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None 47 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item regarding the identification of the Company's directors and executive officers is incorporated by reference to information contained under the caption "Directors and Executive Officers" of the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on May 25, 1999. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated by reference to information contained under the caption "Executive Compensation" of the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on May 25, 1999. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is incorporated by reference to information contained under the caption "Security Ownership of Certain Beneficial Owners and Management" of the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on May 25, 1999. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated by reference to information contained under the caption "Security Ownership of Certain Beneficial Owners and Management" of the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on May 25, 1999. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K Financial Statements and Schedules. See Index to Financial Statements and Schedules, which appears on page F-1 hereof. Reports on Form 8-K. No reports on Form 8-K were filed during the fourth quarter of 1998. Exhibits. The exhibits listed on the Exhibit Index following the signature page hereof are filed herewith in response to this Item. 48 TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS
PAGE NO. -------- FINANCIAL STATEMENTS: Independent Auditors' Report F-2 Statements of Consolidated Operations for the Years Ended December 31, 1998, 1997 and 1996 F-3 Consolidated Balance Sheets, December 31, 1998 and 1997 F-4 Statements of Consolidated Cash Flows for the Years Ended December 31, 1998, 1997 and 1996 F-6 Consolidated Statements of Shareholders' Equity (Deficiency) for the Years Ended December 31, 1998, 1997 and 1996 F-8 Notes to Consolidated Financial Statements F-9 SCHEDULE: II Valuation and Qualifying Accounts S-1
SCHEDULES OMITTED Schedules not filed herewith are omitted because of the absence of conditions under which they are required or because the information called for is shown in the financial statements or notes thereto. F-1 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Trans World Airlines, Inc.: We have audited the accompanying consolidated balance sheets of Trans World Airlines, Inc. and subsidiaries as of December 31, 1998 and 1997, and the related statements of consolidated operations, cash flows and shareholders' equity (deficiency) for each of the years in the three-year period ended December 31, 1998. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule for each of the years in the three-year period ended December 31, 1998. These consolidated financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Trans World Airlines, Inc. and subsidiaries as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1998, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG LLP Kansas City, Missouri February 19, 1999 F-2 TRANS WORLD AIRLINES, INC AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED OPERATIONS For the Years Ended December 31, 1998, 1997 and 1996 (Amounts in Thousands Except Per Share Amounts)
Years Ended December 31, ---------------------------------------------- 1998 1997 1996 ---------- ---------- ---------- Operating revenues: Passenger $2,895,199 $2,924,042 $3,077,905 Freight and mail 102,424 126,730 153,076 All other 261,524 277,180 323,426 ---------- ---------- ---------- Total 3,259,147 3,327,952 3,554,407 ---------- ---------- ---------- Operating expenses: Salaries, wages and benefits 1,198,876 1,224,116 1,254,341 Earned stock compensation (Note 8) 27,544 4,199 9,056 Aircraft fuel and oil 344,603 480,853 585,163 Passenger sales commissions 197,927 242,135 268,131 Aircraft maintenance materials and repairs 129,663 138,353 208,183 Depreciation and amortization 152,997 150,381 161,822 Operating lease rentals 458,338 370,827 302,990 Passenger food and beverages 89,035 83,241 110,092 Special charges (Note 14) 42,632 - 85,915 All other 682,691 663,107 767,241 ---------- ---------- ---------- Total 3,324,306 3,357,212 3,752,934 ---------- ---------- ---------- Operating loss (65,159) (29,260) (198,527) ---------- ---------- ---------- Other charges (credits): Interest expense 116,918 114,066 126,822 Interest and investment income (24,975) (14,560) (23,288) Disposition of assets, gains and losses-net (Note 15) (20,087) (16,004) 1,135 Other charges and credits - net (Note 16) (29,846) (23,427) (28,619) ---------- ---------- ---------- Total 42,010 60,075 76,050 ---------- ---------- ---------- Loss before income taxes and extraordinary items (107,169) (89,335) (274,577) Provision for income taxes (Note 5) 243 527 450 ---------- ---------- ---------- Loss before extraordinary items (107,412) (89,862) (275,027) Extraordinary items, net of income taxes (Note 13) (13,069) (20,973) (9,788) ---------- ---------- ---------- Net loss (120,481) (110,835) (284,815) Preferred stock dividend requirements 23,454 16,119 36,649 ---------- ---------- ---------- Loss applicable to common shares $ (143,935) $ (126,954) $ (321,464) ---------- ---------- ---------- Basic earnings per share amounts: Loss before extraordinary items and special dividend requirement $ (2.14) $ (1.98) $ (6.60) Extraordinary items and special dividend requirement (.21) (.39) (.67) ---------- ---------- ---------- Net loss $ (2.35) $ (2.37) $ (7.27) ========== ========== ========== See notes to consolidated financial statements
F-3 TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 1998 and 1997 (Amounts in Thousands) ASSETS
1998 1997 ---------- ---------- Current assets: Cash and cash equivalents $ 252,408 $ 237,765 Receivables, less allowance for doubtful accounts, $14,459 in 1998 and $9,334 in 1997 (Note 3) 170,492 176,333 Spare parts, materials and supplies, less allowance for obsolescence, $20,554 in 1998 and $19,176 in 1997 (Note 3) 99,909 96,108 Prepaid expenses and other 82,605 122,751 ---------- ---------- Total 605,414 632,957 ---------- ---------- Property (Notes 3, 4 and 11): Property owned: Flight equipment 414,645 569,063 Prepayments on flight equipment 69,875 15,431 Land, buildings and improvements 68,812 62,854 Other property and equipment 72,108 64,131 ---------- ---------- Total property owned 625,440 711,479 Less accumulated depreciation 136,336 114,921 ---------- ---------- Property owned-net 489,104 596,558 ---------- ---------- Property held under capital leases: Flight equipment 176,094 166,358 Land, buildings and improvements 49,431 49,443 Other property and equipment 9,093 7,704 ---------- ---------- Total property held under capital leases 234,618 223,505 Less accumulated amortization 103,692 78,298 ---------- ---------- Property held under capital leases-net 130,926 145,207 ---------- ---------- Total property-net 620,030 741,765 ---------- ---------- Investments and other assets: Investments in affiliated companies (Note 2) 124,429 117,293 Investments, receivables and other (Note 4) 149,206 162,969 Routes, gates and slots-net 356,324 377,691 Reorganization value in excess of amounts allocable to identifiable assets-net 699,220 741,173 ---------- ---------- Total 1,329,179 1,399,126 ---------- ---------- $2,554,623 $2,773,848 ========== ========== See notes to consolidated financial statements
F-4 TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 1998 and 1997 (Amounts in Thousands Except Per Share Amounts) LIABILITIES AND SHAREHOLDERS' EQUITY
1998 1997 ---------- ---------- Current liabilities: Current maturities of long-term debt (Note 3) $ 111,538 $ 51,392 Current obligations under capital leases (Note 4) 37,865 37,068 Advance ticket sales 211,340 223,197 Accounts payable, principally trade 229,368 250,551 Accounts payable to affiliated companies (Note 2) 7,167 6,261 Accrued expenses: Employee compensation and vacations earned 159,064 119,572 Contributions to retirement and pension trusts (Note 6) 12,616 13,469 Interest on debt and capital leases 33,156 32,018 Taxes 11,447 14,146 Other accrued expenses 189,278 189,271 ---------- ---------- Total accrued expenses 405,561 368,476 ---------- ---------- Total 1,002,839 936,945 ---------- ---------- Long-term liabilities and deferred credits: Long-term debt, less current maturities (Note 3) 572,372 736,540 Obligations under capital leases, less current obligations (Note 4) 163,046 182,922 Postretirement benefits other than pensions (Note 6) 496,848 485,787 Noncurrent pension liabilities (Note 6) 24,634 30,011 Other noncurrent liabilities and deferred credits 109,562 133,359 ---------- ---------- Total 1,366,462 1,568,619 ---------- ---------- Commitments and Contingent Liabilities (Notes 1, 3, 4, 6, 7, 8, 10, 11, 12 & 14) Shareholders' equity: 8% cumulative convertible exchangeable preferred stock, $50 liquidation preference; 3,869 shares issued and outstanding 39 39 9 1/4% cumulative convertible exchangeable preferred stock, $50 liquidation preference; 1,725 shares issued and outstanding 17 17 Employee preferred stock, $0.01 liquidation preference; special voting rights; shares issued and outstanding: 1998-6,347; 1997-6,472 63 65 Common stock, $0.01 par value; shares issued and outstanding: 1998-57,768; 1997-51,393 578 514 Additional paid-in capital 730,894 693,437 Accumulated deficit (546,269) (425,788) ---------- ---------- Total 185,322 268,284 ---------- ---------- $2,554,623 $2,773,848 ========== ========== See notes to consolidated financial statements
F-5 TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS For the Years Ended December 31, 1998, 1997 and 1996 (Amounts in Thousands)
Years Ended December 31, --------------------------------------- 1998 1997 1996 --------- --------- --------- Cash flows from operating activities: Net loss $(120,481) $(110,835) $(284,815) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Employee earned stock compensation 27,544 4,199 9,056 Depreciation and amortization 152,997 150,381 161,822 Amortization of discount and expenses on debt 12,220 14,461 14,744 Amortization of deferred (gains)/losses on sale and leaseback of certain aircraft and engines (10,132) (1,612) (60) Extraordinary loss on extinguishment of debt 13,069 20,973 9,788 Interest paid in common stock - 4,125 11,332 Equity in undistributed earnings of affiliates not consolidated (7,198) (9,404) (10,017) Revenue from Icahn ticket program (131,822) (115,991) (71,534) Net (gains) losses on disposition of assets (20,087) (16,004) 1,135 Non-cash special charges 42,632 - 85,915 Change in operating assets and liabilities: Decrease (increase) in: Receivables 1,586 65,336 3,927 Inventories (5,605) 13,496 (4,897) Prepaid expenses and other current assets 20,054 (9,227) (28,288) Other assets (9,985) (10,910) 111 Increase (decrease) in: Accounts payable and accrued expenses (28,845) 42,480 83,840 Advance ticket sales (3,943) (41,301) 19,698 Other noncurrent liabilities and deferred credits (14,645) 71 (7,445) --------- --------- --------- Net cash provided (used) (82,641) 238 (5,688) --------- --------- --------- Cash flows from investing activities: Proceeds from sales of property 35,894 22,749 3,234 Capital expenditures, including aircraft pre-delivery deposits (92,634) (74,025) (121,547) Return of pre-delivery deposits related to leased aircraft 4,749 5,565 - Net decrease (increase) in investments, receivables and other 17,399 (10,553) 10,941 --------- --------- --------- Net cash used (34,592) (56,264) (107,372) --------- --------- --------- Cash flows from financing activities: Proceeds from long-term debt issued 144,938 270,608 2,750 Proceeds from warrants issued - 7,076 - Proceeds from sale and leaseback of certain aircraft and engines 261,946 17,600 13,800 Repayments on long-term debt and capital lease obligations (254,010) (257,838) (117,203) Refund due to retirement of 1967 bonds - 5,318 - Net proceeds from sale of preferred stock - 82,231 186,163 Net proceeds from exercise of equity rights, warrants and options 2,743 2,686 1,034 Redemption of 12% Preferred Stock - - (81,749) Cash dividends paid on preferred stock (23,741) (15,476) (14,489) --------- --------- --------- Net cash provided (used) 131,876 112,205 (9,694) --------- --------- --------- Net increase (decrease) in cash and cash equivalents 14,643 56,179 (122,754) Cash and cash equivalents at beginning of period 237,765 181,586 304,340 --------- --------- --------- Cash and cash equivalents at end of period $ 252,408 $ 237,765 $ 181,586 ========= ========= ========= See notes to consolidated financial statements
F-6 TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS For the Years Ended December 31, 1998, 1997 and 1996 (Amounts in Thousands) SUPPLEMENTAL CASH FLOW INFORMATION
Years Ended December 31, -------------------------------------- 1998 1997 1996 -------- -------- -------- Cash paid during the period for: Interest $101,002 $ 96,865 $102,311 ======== ======== ======== Income taxes $ 21 $ 14 $ 159 ======== ======== ======== Information about noncash operating, investing and financing activities: Promissory notes issued to finance aircraft acquisitions $103,069 $177,469 $ 10,565 ======== ======== ======== Promissory notes issued to finance aircraft predelivery payments $ 36,970 $ 6,237 $ 19,862 ======== ======== ======== Aircraft held for sale reclassified from property to investments, receivables and other $ 18,931 $ - $ - ======== ======== ======== Property acquired and obligations recorded under new capital lease transactions $ 17,208 $ 1,138 $ 4,266 ======== ======== ======== Common stock issued in lieu of cash dividends on mandatorily redeemable 12% preferred stock $ - $ - $ 3,255 ======== ======== ======== Exchange of long-term debt for common stock: Debt canceled including accrued interest, net of unamortized discount $ 44,900 $ 48,835 $ 41,021 Common stock issued, at fair value 44,900 56,028 49,182 -------- -------- -------- Extraordinary loss $ - $ 7,193 $ 8,161 ======== ======== ========
ACCOUNTING POLICY For purposes of the Statements of Consolidated Cash Flows, TWA considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. See notes to consolidated financial statements F-7 TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY) For the Years Ended December 31, 1998, 1997 and 1996 (Amounts in Thousands)
8% 9 1/4% Employee Additional Preferred Preferred Preferred Common Paid-In Accumulated Stock Stock Stock Stock Capital Deficit Total --------- --------- --------- ------ ---------- ----------- --------- Balance, December 31, 1995 $ - $ - $ 53 $351 $332,589 $ (30,138) $ 302,855 Warrants exercised - - - 4 68 - 72 Options exercised - - - 2 1,248 - 1,250 Earned stock compensation - - - - 6,875 - 6,875 Allocation of employee preferred stock to ALPA ESOP - - 6 - (6) - - Conversion of employee preferred stock to common stock - - (2) 2 - - - Net proceeds from issuance of 8% preferred stock 39 - - - 186,124 - 186,163 Dividends on 8% preferred stock paid in cash - - - - (11,349) - (11,349) Dividends on mandatorily redeemable 12% preferred stock paid in common stock - - - 3 (3) - - Dividends on mandatorily redeemable 12% preferred stock paid in cash - - - - (3,140) - (3,140) Amortization of the excess of redemption value over carrying value of mandatorily redeemable 12% preferred stock - - - - (328) - (328) Excess of cash paid for early redemption of mandatorily redeemable 12% preferred stock over carrying value - - - - (19,992) - (19,992) Common stock issued in exchange for 12% notes - - - 45 49,137 - 49,182 Interest on 12% Notes paid in common stock - - - 11 11,321 - 11,332 Net loss for 1996 - - - - - (284,815) (284,815) --- --- ---- ---- -------- --------- --------- Balance, December 31, 1996 39 - 57 418 552,544 (314,953) 238,105 Options exercised - - - 6 3,098 - 3,104 Earned stock compensation - - - - 2,941 - 2,941 Allocation of employee preferred stock to ALPA ESOP - - 6 - (6) - - Conversion of employee preferred stock to common stock - - (6) 6 - - - Common stock issued in exchange for 12% Reset Notes - - - 77 55,951 - 56,028 Net proceeds from issuance of 9 1/4% preferred stock - 17 - - 82,214 - 82,231 Dividends on 8% preferred stock paid in cash - - - - (15,476) - (15,476) Interest on 12% Reset Notes paid in common stock - - - 6 4,119 - 4,125 Issuance of warrants with 12% Senior Secured Notes Due 2002 - - - - 7,076 - 7,076 Issuance of employee fill-up shares - - 8 1 976 - 985 Net loss for 1997 - - - - - (110,835) (110,835) --- --- ---- ---- -------- --------- --------- Balance, December 31, 1997 39 17 65 514 693,437 (425,788) 268,284 Options exercised - - - 6 2,930 - 2,936 Earned stock compensation - - 8 3 13,412 - 13,423 Conversion of employee preferred stock to common stock - - (10) 10 - - - Dividends on 8% preferred stock paid in cash - - - - (15,475) - (15,475) Dividends on 9 1/4% preferred stock paid in cash - - - - (8,266) - (8,266) Debt for equity exchange - - - 45 44,855 - 44,900 Exercise of $14.40 warrants - - - - 1 - 1 Net loss for 1998 - - - - - (120,481) (120,481) --- --- ---- ---- -------- --------- --------- Balance, December 31, 1998 $39 $17 $ 63 $578 $730,894 $(546,269) $ 185,322 === === ==== ==== ======== ========= ========= See notes to consolidated financial statements
F-8 TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Accounting policies and methods of their application that significantly affect the determination of financial position, cash flows, and results of operations are as follows: (a) Description of Business: Trans World Airlines, Inc. ("TWA" or the "Company") is the eighth largest U.S. carrier (based on revenue passenger miles for 1998), whose primary business is transporting passengers, cargo and mail. TWA's principal domestic routes have a hub-and spoke structure, with a primarily domestic hub in St. Louis at Lambert International Airport ("St. Louis") and a domestic-international gateway at New York's John F. Kennedy International Airport ("JFK"). TWA's domestic routes also provide connections with its international service to and from U.S. cities and certain major cities in Europe and the Middle East (see Note 17). The airline industry is an intensely competitive environment and the factors affecting competition are subject to rapid change. The Company competes with one or more major airlines on most of its routes (including all routes between major cities). Several carriers have introduced or have announced plans to introduce low-cost, short-haul service, which may result in increased competition to the Company. Additionally, certain of the Company's major competitors have established or announced plans to establish alliances with one or more foreign or domestic carriers to expand their international operations and increase the domestic market presence. Such alliances could further intensify the competitive environment. The rapid growth of regional jet airline affiliates represents a significant competitive challenge for TWA due to its reliance on through-hub passenger traffic. A small regional jet can now offer direct service in markets that previously were served only by through-hub service. TWA's current IAM contracts limit TWA from directly competing in these markets with regional jets. Historically, the airline industry has experienced substantial volatility in profitability as a result of, among other factors, general economic conditions, competitive pricing initiatives, the overall level of capacity operated in the industry and fuel prices. These issues represent a competitive challenge for the Company, which has higher operating costs than many regional carriers and fewer financial resources than many of its major competitors. TWA expects the airline industry will remain extremely competitive for the foreseeable future. (b) Fresh Start Reporting: Financial accounting during a Chapter 11 proceeding is prescribed in "Statement of Position 90-7 of the American Institute of Certified Public Accountants", titled "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"), which TWA adopted effective June 30, 1995. The emergence from the 1995 Chapter 11 proceeding on August 23, 1995, resulted in the creation of a new reporting entity without any accumulated deficit and with the Company's assets and liabilities restated to their estimated fair values. Because of the application of fresh start reporting, the financial statements for periods after reorganization are not comparable in all respects to the financial statements for periods prior to the 1995 reorganization. (c) Consolidation: The consolidated financial statements include the accounts of TWA and its subsidiaries. All significant inter-company transactions have been eliminated. The results of Worldspan, L.P. ("Worldspan"), a 26.315% owned affiliate, are recorded under the equity method and are included in F-9 the Statements of Consolidated Operations in Other Charges (Credits) (see Note 2). (d) Property and Depreciation: Owned property and equipment are depreciated to residual values over their estimated useful service lives on the straight-line method. Property held under capital leases is amortized on the straight-line method over its estimated useful life, limited generally by the lease period. Estimated remaining useful service lives and residual values are reviewed periodically for reasonableness and any necessary change is effected at the beginning of the accounting period in which the revision is adopted. In connection with the application of fresh start reporting, no significant changes in the estimated useful lives of assets have been made. Estimated useful service lives in effect for the purpose of computing the provision for depreciation, were: Flight equipment (aircraft and engines, including related spares) -- 16 to 30 years, varying by aircraft fleet type Buildings -- 20 to 50 years Other equipment -- 3 to 20 years Leasehold improvements-estimated useful life limited by the lease period Maintenance and repairs, including periodic aircraft overhauls, are expensed in the year incurred; major renewals and betterments of equipment and facilities are capitalized and depreciated over the remaining life of the asset. (e) Intangible Assets: Route authorities are amortized on a straight line basis over 30 years, gates over the term of the related leases, and slots over 20 years. Routes, gates and slots consist of the following amounts at December 31 (in thousands):
1998 1997 -------- -------- Routes $248,100 $248,100 Gates 83,649 83,649 Slots 95,800 95,800 -------- -------- 427,549 427,549 Accumulated Amortization 71,225 49,858 -------- -------- $356,324 $377,691 ======== ========
The reorganization value in excess of amounts allocable to identifiable assets is being amortized over a twenty year period on the straight-line method. Accumulated amortization at December 31, 1998 and 1997 was $139,844,000 and $97,891,000, respectively. When facts and circumstances suggest that intangible and other long-term assets may be impaired, the Company evaluates their recoverability based upon estimated undiscounted future cash flows over the remaining estimated useful lives. The amount of impairment, if any, is measured based on projected discounted future operating cash flows. (f) Foreign Exchange: Foreign currency and amounts receivable and payable in foreign currencies are translated into U.S. dollars at current exchange rates on the date of the financial statements. Revenue and expense transactions are translated at average rates of exchange in a manner that produces approximately the same dollar amounts that would have resulted had the underlying transactions been translated into dollars on the dates they occurred. Exchange gains and losses are included in net income for the period in which the exchange rate changes. F-10 (g) Inventories: Inventories, valued at standard cost, which approximates actual average unit cost, consist primarily of expendable spare parts used for the maintenance and repair of flight equipment, plus aircraft fuel and other operating supplies. A provision for obsolescence of spare parts is accrued at annual rates which will provide an allowance such that the unused inventory, at the retirement date of the related aircraft fleet, is reflected at the lower of cost or estimated net realizable value. (h) Passenger Revenue Recognition: Passenger ticket sales are recognized as revenue when the transportation service is rendered. At the time of sale a current liability for advance ticket sales is established and subsequently is eliminated either through carriage of the passenger by TWA, through billing from another carrier that renders the service, or by refund to the passenger. Under TWA's frequent flier program named "Aviators", frequent travelers may accumulate certain defined unit mileage credits which entitle them to a choice of various awards, including certain free air transportation on TWA at a future date. When the free travel award level is achieved by a frequent traveler, a liability is accrued and TWA's operating expense is charged for the estimated incremental cost which will be incurred by TWA upon the future redemption of the free travel awarded. Pursuant to the 1995 reorganization, TWA issued 600,000 ticket vouchers, each having a face value of $50, which may be used for a discount of up to 50% off the cost of a ticket for transportation on TWA. Concurrently, TWA entered into an agreement, as amended, to purchase for cash from a third party any ticket vouchers acquired by the stand-by purchaser. The ticket vouchers were initially recorded as a liability at their estimated fair value, approximately $26.2 million. The liability will be relieved in future periods as vouchers are redeemed for cash or will be reflected as revenue when the transportation is provided for tickets purchased with vouchers. Approximately 127,000 and 131,000 vouchers were outstanding at December 31, 1998 and 1997, respectively. (i) Interest Capitalized: Interest cost associated with funds expended for the acquisition of qualifying assets is capitalized. Interest capitalized was $7.1 million in 1998, $4.8 million in 1997 and $5.5 million in 1996. (j) Income Taxes: TWA accounts for income taxes based on Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". This statement requires the use of the liability method to record the deferred income tax consequences of differences between the financial reporting and income tax bases of assets and liabilities. (k) Postretirement Benefits Other than Pensions: TWA accounts for postretirement benefits other than pensions based on SFAS No. 106 which requires that the expected cost of providing such benefits be accrued over the years that the employee renders service, in a manner similar to the accounting for pension benefits. (l) Deferred Credits-Aircraft Operating Leases: The present value of the excess of contractual rents due under aircraft operating leases over the fair rentals for such aircraft was recorded as deferred credits as part of the application of fresh start reporting. The deferred credits will be increased through the accrual of interest expense and reduced through a reduction in operating lease rentals over the terms of the respective aircraft leases. At December 31, 1998 and 1997, the unamortized balances of the deferred credits were $14.3 million and $23.2 million, respectively. F-11 (m) Environmental Contingencies: TWA is subject to numerous environmental laws and regulations and is subject to liabilities and compliance costs arising from its past and current handling, processing, recycling, storing and disposing of hazardous substances and hazardous wastes. It is TWA's policy to accrue environmental remediation costs when it is probable that a liability has been incurred and an amount can be reasonably estimated. As potential environmental liabilities are identified and assessments and remediation proceed, these accruals are reviewed periodically and adjusted, if necessary, as additional information becomes available. The accruals for these liabilities can significantly change due to factors such as the availability of additional information on the nature or extent of the contamination, methods and costs of required remediation and other actions by governmental agencies. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. (n) Mandatorily Redeemable 12% Preferred Stock: The Mandatorily Redeemable 12% Preferred Stock issued in connection with the 1995 reorganization was initially recorded at its estimated fair value. Until its redemption in April 1996, the carrying amount was being increased by amortization of the difference between the redemption value and the carrying amount, using the interest method. Such amounts were recorded as additional preferred stock dividend requirements. A special dividend requirement of approximately $20.0 million was recorded in 1996 to reflect the excess of the early redemption price over the carrying value of the Mandatorily Redeemable 12% Preferred Stock. (o) Earnings (Loss) Per Share: Basic earnings per share ("EPS") excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. In computing the loss applicable to common shares for 1998, 1997 and 1996, the net loss has been increased by dividend requirements on the 9 1/4% Cumulative Convertible Exchangeable Preferred Stock from the date of issuance in December 1997, the Mandatorily Redeemable 12% Preferred Stock (including amortization of the difference between the carrying amount and the redemption value and the special dividend requirement related to the early redemption in 1996) and on the 8% Cumulative Convertible Exchangeable Preferred Stock from the date of issuance in March 1996. In computing the related net loss per share, the loss applicable to common shares has been divided by the aggregate average number of outstanding shares of common stock (54.6 million in 1998, 47.1 million in 1997 and 38.5 million in 1996) and Employee Preferred Stock (6.7 million in 1998, 6.4 million in 1997 and 5.7 million in 1996) which, with the exception of certain special voting rights, is the functional equivalent of common stock. Diluted EPS has not been presented as the impact of stock options, warrants, conversion of preferred stock or potential issuances of additional Employee Preferred Stock would have been anti-dilutive. For a description of securities which represent potential common shares and which could materially dilute basic EPS in the future, see Notes 7, 8, and 9. (p) Concentration of Credit Risk: TWA does not believe it is subject to any significant concentration of credit risk. At December 31, 1998, most of the Company's receivables were related to tickets sold to individual passengers through the use of major credit cards (39%) or to tickets sold by other airlines (15%) and used by passengers on TWA. These receivables are short-term, generally being settled shortly after sale. Bad debt losses, which have been minimal in the past, have been considered in establishing allowances for doubtful accounts. F-12 (q) Use of Estimates: Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. (r) Stock-Based Compensation: TWA applies Accounting Principles Board ("APB") Opinion No. 25 and related interpretations in accounting for its plans. This opinion allows for stock-based employee compensation to be recognized based on the intrinsic value. (s) Presentation: Certain prior period amounts have been reclassified to conform with current year presentation. (t) New Accounting Standards: During 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income", SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", and SFAS No. 132, "Employers' Disclosure about Pensions and Other Postretirement Benefits". SFAS No. 130 provides for the reporting and presentation of comprehensive income and its components. SFAS No. 131 establishes standards for defining operating segments and reporting certain information about such segments. SFAS No. 132 revised disclosure requirements relative to pension and other postretirement benefits. Since these statements only impact how financial information is disclosed in interim and annual periods, the adoption of these standards in 1998 did not impact the Company's financial condition or results of operations. The Company has no components requiring disclosure in a Statement of Comprehensive Income, and therefore this statement has not been presented. (u) New Accounting Pronouncements: In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities". This statement establishes accounting and reporting standards for derivative instruments and all hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities at their fair values. Accounting for changes in the fair value of a derivative depends on its designation and effectiveness. For derivatives that qualify as effective hedges, the change in fair value will have no impact on earnings until the hedged item affects earnings. For derivatives that are not designated as hedging instruments, or for the ineffective portion of a hedging instrument, the change in fair value will affect current period earnings. The Company will adopt Statement No. 133 during its first quarter of fiscal 2000 and does not presently believe that it will have a significant effect on its results of operations or cash flows. 2. INVESTMENTS: TWA, through a wholly-owned subsidiary, has a 26.315% partnership interest in Worldspan (24.999% interest prior to October 2, 1998), a joint venture among TWA, Delta Airlines, Inc. and Northwest Airlines, Inc. Worldspan owns, markets and operates a global computer airline passenger reservation system on behalf of subscriber travel agents and contracting airlines who pay booking fees to Worldspan for such reservation service. The partnership provides passenger reservations services, communication facilities and other computer services which are purchased by TWA on a recurring basis. The aggregate cost of services purchased from the partnership was $52.2 million in 1998, $48.9 million in 1997 and $54.6 million in 1996. TWA accounts for its investment in the partnership on the equity basis. TWA's share of the combined net earnings of the partnership was approximately $9.1 million for the year ended December 31,1998, $11.3 million for the year ended December 31, 1997 and $11.9 million for the year ended December 31, 1996, which is included in Other Charges (Credits) in TWA's Statements of Consolidated Operations. The excess of TWA's carrying value for its investment in Worldspan over its share of the underlying net assets of Worldspan is being F-13 amortized over a period of 20 years. At December 31, 1998 and 1997, the unamortized balance of this excess amounted to approximately $28.2 million and $30.1 million, respectively. 3. DEBT: A substantial portion of TWA's assets are subject to liens and security interests relating to long-term debt and other agreements. Long-term debt (net of unamortized discounts) outstanding at each balance sheet date was as follows (amounts in thousands):
DECEMBER 31, ----------------------- 1998 1997 -------- -------- 9.80% Airline Receivable Asset Backed Notes, Series 1997-1(a) $100,000 $100,000 12% Senior Secured Notes due 2002(b) 44,427 43,255 11 1/2% Senior Secured Notes due 2004(c) 138,522 138,360 11 3/8% Senior Notes due 2006(d) 150,000 - 8% IAM Backpay Notes(e) 14,936 13,354 PBGC Notes(f) - 141,243 10 1/4% Senior Secured Notes due 2003(g) 14,500 - 11 3/8% Senior Secured Notes due 2003(h) 43,200 - Various Secured Notes, 4.0% to 12.4%, due 1998-2001(i) 5,378 43,799 Installment Purchase Agreements, 7.75% to 10.44%, due 1999-2003(j) 103,961 267,198 Predelivery Financing Agreements(k) 35,387 3,166 IRS Deferral Note(l) 2,375 6,333 WORLDSPAN Note(m) 31,224 31,224 -------- -------- Total long-term debt 683,910 787,932 Less current maturities 111,538 51,392 -------- -------- Long-term debt, less current maturities $572,372 $736,540 ======== ========
(a) In December 1997, TWA agreed to sell certain receivables on an ongoing basis to Constellation Finance LLC ("Constellation"), a special purpose limited liability company wholly owned by TWA, and TWA agreed to service the related receivables. Concurrently, the 9.80% Airline Receivable Asset Backed Notes, Series 1997-1 were issued in December 1997 by Constellation in the principal amount of $100.0 million. Interest on the 1997-1 Notes is payable monthly on the 15th day of each month at the rate of 9.80% per annum. No principal payments are due under the 1997-1 Notes until January 2001, except under certain circumstances. The terms of the 1997-1 Notes provide for the maintenance of certain minimum levels of receivables as defined, or in the event of a deficiency, the deposit of funds with the trustee in the amount of such deficiency. At December 31, 1997, $9.7 million was held by the trustee and is included in the accompanying balance sheet as prepaid expenses and other current assets. This amount was returned to the Company by January 9, 1998 at which time the deficiency was eliminated. (b) The 12% Senior Secured Notes due 2002 were issued in March 1997 in the principal amount of $50.0 million. The notes are reflected net of the unamortized discount of $5.6 million at December 31, 1998 and $6.7 million at December 31, 1997, to reflect an effective interest rate of approximately 17.5%. Interest is payable semi-annually on April 1 and October 1. The notes are not redeemable prior to their maturity on April 1, 2002. The notes are secured by (i) TWA's beneficial interest in certain take-off and landing slots at three high-density, capacity-controlled airports, (ii) certain ground equipment at F-14 certain domestic airports and (iii) all stock of (a) a subsidiary holding the leasehold interest in a hangar at Los Angeles International Airport and (b) three subsidiaries holding leasehold interests in gates and related support space at certain domestic airports. (c) The 11 1/2% Senior Secured Notes due 2004 were issued in December 1997 in the principal amount of $140.0 million. The notes are reflected net of the unamortized discount of $1.5 million at December 31, 1998 and $1.6 million at December 31, 1997, to reflect an effective interest rate of approximately 11.7%. Interest is payable semi-annually in arrears on each June 15 and December 15, commencing June 15, 1998. The Company purchased $23.1 million of U.S. Government Obligations with a portion of the net proceeds from the sale of the notes which was deposited in an escrow account to fund interest payments through June 15, 1999. The notes are secured by a lien on (i) a pool of aircraft spare parts, (ii) TWA's beneficial interest in 30 take-off and landing slots at Ronald Reagan Washington National Airport and (iii) securities pledged to provide for the first three scheduled interest payments. (d) In March 1998, the Company completed a Rule 144A/Regulation S offering of $150.0 million principal amount of 11 3/8% Senior Notes due 2006 (the "11 3/8% Notes") resulting in net proceeds to TWA of approximately $144.9 million (net of discounts, commissions and estimated expenses). The notes represent senior unsecured obligations of the Company. The indenture contains certain covenants which, among other things, may limit (i) the incurrence of additional indebtedness or issuance of additional preferred stock, (ii) the payment of dividends on or retirement of capital stock, (iii) certain investments, (iv) certain transactions with affiliates, (v) the sale of assets and (vi) certain other transactions by or through restricted subsidiaries. The Notes pay interest semi-annually in arrears on March 1 and September 1 at a rate of 11 3/8% per annum. (e) The 8% IAM Backpay Notes have a stated principal amount of $22.0 million at December 31, 1998 and 1997. The notes are reflected net of the unamortized discount of $7.1 million and $8.7 million at December 31, 1998 and 1997, respectively, which reflects an effective interest rate of approximately 24.4%. The notes mature in 2001 and pay interest semi-annually. The notes are secured by a subordinate lien on TWA's interest in Worldspan, a lien on the stock of TWA-Hangar 12 Holding Company, Inc., a wholly-owned subsidiary which leases certain ground equipment located at Hangar 12 at JFK from the Port Authority of New York and New Jersey and which subleases Hangar 12 to the Company, and liens on one JT8D engine and one JT9D engine. During December 1996, ownership of the notes was transferred from the Indenture Trustee to current and former IAM union members who participated in the 1992 labor agreement. (f) The PBGC Notes had a stated unpaid principal balance of $158.7 million at December 31, 1997. The notes were reflected net of unamortized discounts of $17.4 million at December 31, 1997 which reflected an effective interest rate of approximately 13.0%. Interest on the PBGC Notes was payable semi-annually at an average stated rate of 8.73% per annum. Principal payments were due in semi-annual installments beginning in 1999 through 2007; however, prepayments occurred from the election of Karabu to apply the purchase price for tickets purchased under the Ticket Agreement to a reduction of the PBGC Notes (see Note 12). Such prepayments resulted in extraordinary charges related to the early extinguishment of debt. The Notes were non-recourse notes secured by first liens on TWA's international routes and TWA's leasehold interest in the Kansas City maintenance facility and certain fixtures and equipment. The Notes were retired in December 1998 and the liens were released. (g) In June 1998, the Company consummated a private placement of $14.5 million aggregate principal amount of 10 1/4% Senior Secured Notes due 2003 (the "10 1/4% Secured Notes") and $13.0 million principal amount of 10 1/4% Mandatory Conversion Equity Notes due 1999 (the "10 1/4% Equity Notes"). The Company did not receive any cash proceeds from these transactions, but rather delivered the 10 1/4% Secured Notes and the 10 1/4% Equity Notes in payment for one B-767-231 ETOPS airframe and two associated engines, which had an aggregate purchase price of $27.5 million and was previously leased to the Company. On July 13, 1998, the 10 1/4% Equity Notes were converted into F-15 1,225,719 shares of common stock. Upon termination of the operating lease, the Company received $1.5 million relating to a security deposit previously held by the lessor. The 10 1/4% Secured Notes pay interest semi-annually in arrears on June 15 and December 15 at a rate of 10 1/4% per annum. The notes are subject to mandatory redemption by way of sinking fund payments made in cash beginning in June 2001 and continuing until June 2002. (h) In April 1998, the Company consummated a private placement of $43.2 million aggregate principal amount of 11 3/8% Senior Secured Notes due 2003 (the "11 3/8% Secured Notes") and $31.8 million principal amount of Mandatory Conversion Equity Notes due 1999 (the "April Equity Notes"). The Company did not receive any cash proceeds from these transactions, but rather delivered the 11 3/8% Secured Notes and the April Equity Notes in payment for three B-767-231 ETOPS airframes and six associated engines, which had an aggregate purchase price of $75.0 million and were previously leased to the Company. On July 7, 1998, the April Equity Notes were converted into 3,290,901 shares of Common Stock. Upon termination of the operating leases for the aircraft, the Company received approximately $6.0 million relating to security and maintenance deposits previously held by the lessor. The 11 3/8% Secured Notes pay interest semi-annually in arrears on April 15 and October 15 at a rate of 11 3/8% per annum. The notes are subject to mandatory redemption by way of sinking fund payments made in cash beginning in October 2000 and continuing until October 2002. (i) Various Secured Notes represent borrowings to finance the purchase or lease of certain flight equipment and other property. (j) Installment Purchase Agreements represent borrowings to finance the purchase of four Boeing 767-231 and one Boeing 767-205 aircraft. The borrowings mature in monthly installments through 2003, and require interest at rates ranging from 7.75% to 10.44% per annum. At December 31, 1997, the Installment Purchase Agreements also included borrowings to finance the purchase of four Boeing 757-231 aircraft. Such aircraft were subsequently sold and leased back to TWA in June and July 1998. (k) The Predelivery Financing Agreements represent borrowings from the engine manufacturer to finance prepayments on the purchase of eight Boeing 757 aircraft and twenty-four MD-83 aircraft. The borrowings mature upon delivery of the aircraft beginning in March 1999 and continuing through December 1999. Interest is payable quarterly at a rate of LIBOR plus 3.5%. (l) The IRS Deferral Note represents unpaid amounts due under the terms of a settlement reached in 1993 for taxes and interest owed to the IRS. The note requires payment of interest quarterly at a rate of 7% per annum and matures in 1999. (m) The Worldspan Note represents amounts owed to Worldspan, a 26.315% owned affiliate of TWA, for prior services and advances. The note pays interest at maturity at a rate of prime plus 1% per annum and matures in 1999. The note is secured by a pledge of TWA's partnership interest in Worldspan. TWA is currently in negotiations with the other partners of Worldspan to extend the maturity date of the Note although no assurance can be given that such an extension will be granted. F-16 (n) At December 31, 1998, aggregate principal payments due for long-term debt for the succeeding five years were as follows:
(AMOUNTS IN YEAR THOUSANDS) ---- ----------- 1999 $111,538 2000 17,367 2001 141,355 2002 70,024 2003 67,761
Certain of the Company's long-term debt agreements contain various covenants which limit, among other things, the incurrence of additional indebtedness, the payment of dividends on capital stock, certain investments, transactions with affiliates, incurrence of liens and sale and leaseback transactions, and sale of assets. The Company was in compliance with these covenants as of December 31, 1998. 4. LEASES AND RELATED GUARANTEES: Fifteen (15) of the aircraft in the Company's fleet at December 31, 1998 were leased under capital leases. The remaining lease periods for these aircraft range from 2.7 to 8.6 years. The Company has options and/or rights of first refusal to purchase or re-lease most of such aircraft at market terms upon termination of the lease. The Company has guaranteed repayment of certain of the debt issued by the owner/lessor to finance some of the aircraft under capital lease to the Company; however, the scheduled rental payments will exceed the principal and interest payments required of the owner/lessor. Aggregate annual rentals in 1999 will be approximately $36.8 million for the 15 aircraft held under capital leases. One hundred sixty-four (164) of the aircraft in TWA's fleet at December 31, 1998 were leased under operating leases. Other than two leases on a month-to-month basis, the remaining lease periods range from one month to 18 years. Upon expiration of the current leases, TWA has the option to re-lease most of such aircraft for specific terms and/or rentals with some of the renewal options being subject to fair market rental rates. Buildings and facilities leased under capital and operating leases are primarily for airport terminals and air transportation support facilities. Leases of equipment, other than flight equipment, include some of the equipment at airports and maintenance facilities, flight simulators, computers and other properties. Pursuant to an agreement between the City of St. Louis and TWA in November 1993 (the "Asset Purchase Agreement"), the City of St. Louis waived a $5.3 million pre-petition claim and provided TWA with two installments of $24.7 million and $40 million pursuant to sale/leaseback transactions involving certain of TWA's assets located at Lambert-St. Louis Airport and other property and assets located in St. Louis including gates, terminal support facilities at the airport, hangar/St. Louis Ground Operations Center complex, Flight Training Center and equipment and tenant improvements at these various St. Louis facilities. Under the Asset Purchase Agreement, TWA leased back the properties involved under a month-to-month agreement subject to automatic renewal so long as TWA is not in default thereunder, such agreement having a term otherwise expiring December 31, 2005. Such term is subject to early termination in the event of certain events of default, including non-payment of rents, cessation of service, or failure to relocate and maintain its corporate headquarters within the City or County of St. Louis, or relocate and maintain a reservations office within the City of St. Louis. Under the Asset Purchase Agreement, TWA has the right to use 57 gates and terminal support facilities at Lambert-St. Louis Airport. The City has certain F-17 rights of redesignation of TWA's gates in the event TWA's flight activity at St. Louis is reduced below a threshold level of 190 daily flight departures during any given monthly period. The related leases are classified as capital leases for financial reporting purposes. The Company's acquisition of 11 new aircraft during 1982 and 1983, one Lockheed L-1011 and ten Boeing 767s, created certain tax benefits that were not of immediate value in the Company's federal income tax returns and, therefore, such tax benefits were sold to outside parties under so-called "Safe Harbor Leases" as permitted by IRS regulations. Pursuant to the sales agreements, the Company is required to indemnify the several purchasers if the tax benefits cannot be used because of circumstances within the control of the Company. As of December 31, 1998, the Company's contingent indemnification obligations in connection with the tax benefit transfers were collateralized by bank letters of credit aggregating $6.6 million. The Company has pledged $2.6 million in cash collateral to secure its obligation with respect to four of the tax benefit transfers and has pledged flight equipment having a net book value of $22.4 million to secure its obligation with respect to two of the tax benefit transfers. At December 31, 1998, future minimum lease payments for capital leases and future minimum lease payments, net of sublease rentals of immaterial amounts, for long-term leases, were as follows (amounts in thousands):
MINIMUM LEASE PAYMENTS ---------------------- CAPITAL OPERATING LEASES LEASES -------- ---------- YEAR ---- 1999 $ 54,056 $ 441,944 2000 50,555 404,346 2001 45,370 373,769 2002 31,107 345,869 2003 23,309 337,808 Subsequent 60,406 1,805,051 -------- ---------- Total 264,803 $3,708,787 Less imputed interest 63,892 ========== -------- Present value of capital leases 200,911 Less current portion 37,865 -------- Obligations under capital leases, less current portion $163,046 ========
F-18 5. INCOME TAXES: Income tax liabilities at December 31, 1998 and 1997, included in other noncurrent liabilities, consist of the following (amounts in millions):
1998 1997 ----- ----- Current taxes $ - $ - Deferred taxes: Federal 10.7 10.7 Other income and franchise taxes .3 .3 ----- ----- Total income tax liability $11.0 $11.0 ===== =====
Significant components of the Company's deferred tax assets and liabilities as of December 31, 1998 and 1997 are as follows (amounts in millions):
1998 1997 ------- ------- Deferred tax assets: Postretirement benefits, other than pensions $ 208.6 $ 199.8 Pension obligations - 51.0 Employee compensation and other benefits 38.9 40.0 Capital leases, net 49.0 58.8 Net operating loss carryforwards 385.0 337.7 Property and spare parts, net 48.9 45.0 Other, net 74.9 77.9 ------- ------- Total deferred tax assets 805.3 810.2 ------- ------- Deferred tax liabilities: Routes, gates, and slots, net (141.1) (149.2) Investment in affiliate (49.1) (46.1) ------- ------- Total deferred tax liabilities (190.2) (195.3) ------- ------- Net deferred tax asset before valuation allowance 615.1 614.9 Deferred tax asset valuation allowance (626.1) (625.9) ------- ------- Net deferred tax liability $ (11.0) $ (11.0) ======= =======
The valuation allowance arises primarily from the amortization of intangibles, representing taxable temporary differences, the reversal of which extends beyond the period in which deductible temporary differences are expected to reverse. A summary of the provision for income taxes is as follows (amounts in thousands):
YEARS ENDED DECEMBER 31, ---------------------------------- 1998 1997 1996 ---- ---- ---- Current, primarily foreign $243 $527 $450 Deferred - - - ---- ---- ---- Total provision for income taxes, net $243 $527 $450 ==== ==== ====
F-19 Income tax expense for the periods presented below differs from the amounts which would result from applying the federal statutory tax rate to pretax income, as follows (amounts in thousands):
YEARS ENDED DECEMBER 31, --------------------------------- 1998 1997 1996 -------- -------- -------- Income tax benefit at United States statutory rates $(37,509) $(31,268) $(93,652) Amortization of reorganization value in excess of amounts allocable to identifiable assets 14,684 14,684 14,683 Meals and entertainment disallowance 3,524 4,124 4,257 Foreign and state taxes 243 527 450 Net operating loss not benefited and other items 19,301 12,460 74,712 -------- -------- -------- Income tax expense $ 243 $ 527 $ 450 ======== ======== ========
In May 1993, TWA and the Internal Revenue Service reached an agreement (the "IRS Settlement") to settle both: (i) the IRS's proof of claim in the 1993 reorganization in the amount of approximately $1.4 billion covering prepetition employment and income taxes of TWA, and (ii) the audit of TWA's federal income tax returns through 1992. Pursuant to the IRS Settlement, TWA paid $6 million to the IRS through the application of funds owed to TWA by certain governmental agencies and issued a note in the amount of $19 million payable in quarterly installments over a six year period (see Note 3). As a result of the IRS Settlement, TWA increased its tax basis in certain of its assets and will be allowed no benefit of any federal net operating loss or credit carryforward from 1992 or any prior year. Federal income tax losses incurred by TWA subsequent to 1992 may not be carried back to pre-1993 years. The Company estimates that it has tax net operating loss carryforwards ("NOLs") amounting to approximately $975 million at December 31, 1998 expiring in 2008 through 2018 if not utilized before then to offset taxable income. Section 382 of the Internal Revenue Code of 1986, as amended, and regulations issued thereunder, imposed limitations on the ability of corporations to use NOLs if the corporation experiences a more than 50% change in ownership during certain periods. Changes in ownership in future periods could substantially restrict the Company's ability to utilize its tax net operating loss carryforwards. In addition, the tax net operating loss carryforwards are subject to examination by the IRS and thus are subject to adjustment or disallowance resulting from any such IRS examination. For financial reporting purposes, the tax benefits related to the utilization of the tax net operating loss carryforwards generated prior to the 1995 reorganization of approximately $491 million will, to the extent realized in future periods, have no impact on the Company's operating results, but instead be applied to reduce reorganization value in excess of amounts allocable to identifiable assets. F-20 6. PENSION AND OTHER POSTRETIREMENT BENEFITS: Substantially all of TWA's employees are covered by noncontributory defined benefit retirement plans that were frozen on January 1, 1993. While many of TWA's employees continue participation in these plans, they have not accrued any additional benefits since the date the plans were frozen. Employees hired after the freeze are not entitled to participate in these defined benefit retirement plans. TWA's policy has been to fund the defined benefit plans in amounts necessary for compliance with the funding standards established by the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The retirement plans for Pilots, Flight Attendants and Dispatchers provide benefits determined from career average earnings, with Pilots having minimum benefits after ten years of service. Employees (other than Passenger Service Employees) represented by the IAM earn retirement plan benefits of stated amounts for each year of service. The Retirement Plan for U.S. Noncontract Employees (including Passenger Service Employees) provides pension benefits that are based on the employee's compensation during the last five years prior to retirement, with compensation subsequent to 1988 frozen at the 1988 pay level. Foreign plans provide benefits that meet or exceed local requirements. Normal retirement is age 60 for Pilots and Flight Attendants, and age 65 for nonflight personnel. The age at which employees can receive supplemental benefits for early retirement varies by labor group, but ranges from age 45 to age 64. As noted above, in January 1993, TWA's defined benefit plans covering domestic employees (the "Pension Plans") were frozen and Pichin Corporation, a Delaware corporation formed by the Icahn Entities, assumed sponsorship of the Pension Plans and is now responsible for management and control of the Pension Plans. Pursuant to an agreement (the "Comprehensive Settlement Agreement") among the Company, the Icahn Entities, the Pension Benefit Guarantee Corporation (the "PBGC") and unions representing TWA employees, TWA retains only specified obligations and liabilities in respect of the Pension Plans, which include (i) payment obligations under the PBGC Notes which were retired in December 1998, and (ii) the obligation to continue to act as the benefits administrator responsible for, among other things, determining and administering the payment of Pension Plan benefits (see Note 3). Pichin Corporation is obligated to make the required minimum funding payments to each of the Pension Plans, subject to reduction for any payments made under the PBGC Notes. The PBGC may not terminate the Pension Plans, except under section 4042(a)(2) of ERISA or at the request of Pichin Corporation, so long as the Icahn Entities and Pichin Corporation have complied with all terms of the Comprehensive Settlement Agreement relating to the PBGC. Upon the occurrence of certain significant events (as defined) including, but not limited to, a sale of substantially all of TWA's assets, a merger involving TWA or a liquidation under Chapter 7 under the Bankruptcy Code, and at the request of Pichin Corporation, the Pension Plans will be terminated. After such a termination, the liability of Pichin Corporation and all members of its controlled group will be limited to an obligation to make annual payments of $30 million to the PBGC for a period of eight years. Mr. Icahn has advised TWA that Pichin Corporation is entitled to terminate the Pension Plans in a non-standard termination at any time after January 1, 1995. In addition to providing retirement benefits, TWA provides certain health care and life insurance benefits for retired employees, their spouses and qualified dependents. Substantially all employees may become eligible for these benefits if they reach specific retirement age criteria while still actively employed by TWA. SFAS No. 106 requires that the expected cost of providing postretirement benefits other than pensions be accrued over the years that the employee renders service, in a manner similar to the accounting for pension benefits. F-21 The following provides a reconciliation of benefit obligations, plan assets and funded status of the plan, excluding defined benefit plans covering domestic employees (amounts in thousands):
Other International Pension Postretirement Benefits Benefits ------------------------- ------------------------ 1998 1997 1998 1997 -------- -------- --------- --------- Change in benefit obligation: Benefit obligation at beginning of year $ 63,302 $ 62,426 $ 533,375 $ 535,631 Service cost-benefits earned during the period 810 875 10,713 10,650 Interest cost 4,386 4,652 37,163 39,262 Gain from settlement (2,771) - - - Actuarial (gain)/loss 2,776 (3,236) 40,220 (17,863) Benefits paid (1,294) (1,415) (35,709) (34,305) -------- -------- --------- --------- Benefit obligation at end of year 67,209 63,302 585,762 533,375 -------- -------- --------- --------- Change in plan assets: Fair value of plan assets at beginning of year 54,366 50,703 - - Actual return on plan assets 4,879 4,592 - - Benefits paid (794) (929) - - -------- -------- --------- --------- Fair value of plan assets at end of year 58,451 54,366 - - -------- -------- --------- --------- Funded status (8,758) (8,936) (585,762) (533,375) Unrecognized net actuarial (gain)/loss (15,876) (21,075) 52,103 11,882 Unrecognized prior service cost - - 2,733 3,038 -------- -------- --------- --------- Accrued benefit cost included in Consolidated Balance Sheets $(24,634) $(30,011) $(530,926) $(518,455) ======== ======== ========= ========= International Pension Other Postretirement Benefits Benefits ---------------------------------- ---------------------------------- 1998 1997 1996 1998 1997 1996 ---- ---- ---- ---- ---- ---- Weighted-average assumptions: Discount rate 7.00% 7.25% 7.50% 7.00% 7.25% 7.50% Actual return on plan assets 9.00% 9.00% 9.00% - - - Rate of increase in future compensation levels 3.50% 3.50% 3.50% 4.00% 4.00% 4.00%
Plan assets are invested in cash equivalents, international stocks, fixed income securities and real estate. United Kingdom law requires the reduction of retirement plan assets when such assets exceed 105% of plan liabilities. In 1996, assets in TWA's United Kingdom Pension Plan exceeded liabilities by approximately $20 million. This surplus was eliminated by terminating the existing UK Pension Plan and establishing a new pension plan for UK employees. The surplus assets were split between TWA and the participants of the UK Plan, with plan participants receiving their share in enhanced pension benefits, and TWA receiving, in December 1996, a reversion from the original plan of $9.7 million. F-22 The projected benefit obligation and accumulated benefit obligation for the pension plan with accumulated benefit obligations in excess of plan assets were $11.0 million and $6.6 million, respectively, as of December 31, 1998 and $11.1 million and $6.6 million, respectively, as of December 31, 1997. The fair value of plan assets for the pension plan was zero as of December 31, 1998 and 1997. During 1998, the Company recognized a settlement gain of approximately $2.7 million related to the foreign defined benefit retirement plan. The assumed health care cost trend rate used in measuring the postretirement benefit obligation was 6.0% in 1998, declining by 1% per year to an ultimate rate of 5%. If the assumed health care cost trend rate was increased by 1 percentage point, the postretirement benefit obligation at December 31, 1998 would be increased by approximately $40.1 million and 1998 periodic postretirement benefit cost would increase approximately $4.4 million. If the assumed health care cost trend rate was decreased by 1 percentage point, the postretirement benefit obligation at December 31, 1998 would be decreased by approximately $35.8 million and 1998 periodic postretirement benefit cost would decrease approximately $3.9 million. Net periodic pension costs for TWA's foreign defined benefit retirement plans and other postretirement benefit costs include the following components (amounts in thousands):
International Pension Other Postretirement Benefits Benefits ----------------------------- ----------------------------- 1998 1997 1996 1998 1997 1996 ------- ------- ----- ------- ------- ------- Components of net periodic benefit cost: Service cost-benefits earned during the period $ 806 $ 875 $ 577 $10,713 $10,650 $ 9,922 Interest cost 4,562 4,652 992 37,163 39,262 35,444 Expected return on plan assets (4,878) (4,592) (505) - - - Amortization of prior service cost (861) (289) (355) 305 305 - ------- ------- ----- ------- ------- ------- Net periodic benefit cost $ (371) $ 646 $ 709 $48,181 $50,217 $45,366 ======= ======= ===== ======= ======= =======
TWA has several defined contribution plans covering most of its employees. Total pension expense for these plans was $55.8 million, $55.7 million and $58.0 million for the years ended December 31, 1998, December 31, 1997 and December 31, 1996, respectively. Such defined contribution plans include: (a) trust plans established pursuant to collective bargaining agreements with certain employee groups providing for defined Company contributions generally determined as a percentage, ranging from 2% to 11%, of pay; and (b) retirement savings plan for Noncontract Employees to which the Company contributes amounts equal to 25% of voluntary employee after-tax contributions up to a maximum of 10% of the employee's pay. Pursuant to the 1992 labor agreements, Company contributions were suspended for certain defined contribution plans for the period September 1, 1992 through August 31, 1995. Such suspension was extended through August 31, 1997. In connection with the Comprehensive Settlement Agreement, TWA agreed to make contributions to defined contribution plans aggregating 2% of eligible wages for 1993 through 1995, and 3.3% thereafter. The Company made the 1994 contribution payment on June 20, 1995. Commencing on July 1, 1995, TWA is required to make such contributions on a monthly basis. F-23 7. CAPITAL STOCK: The Company has the authority to issue 287.5 million shares of capital stock, consisting of 150 million shares of common stock and 137.5 million additional shares of preferred stock. On the effective date of the 1995 reorganization, TWA issued approximately 17.2 million shares of common stock, 6.4 million shares of Employee Preferred Stock (including approximately 1.7 million shares which are attributable to ALPA represented employees, see Note 8), Equity Rights for the purchase of approximately 13.2 million shares of common stock, warrants for the purchase of approximately 1.7 million shares of common stock exercisable over a seven year period at $14.40 per share (the "Seven Year Warrants"), warrants for the purchase of up to 1.15 million shares of common stock (for nominal consideration), and $109.0 million aggregate liquidation value of Mandatorily Redeemable 12% Preferred Stock (the "12% Preferred Stock"). In addition, each of the 12.5 million shares of the then existing preferred stock were converted into, and holders received, 0.1024 shares of common stock, 0.0512 Equity Rights and 0.1180 Seven Year Warrants. Holders of then existing common stock, other than shares held by trusts for employees, received 0.0213 shares of common stock, 0.0107 Equity Rights and 0.0246 Seven Year Warrants. In October 1995, TWA received approximately $55.3 million in gross proceeds from the exercise of 13,206,247 Equity Rights and issued 13,206,247 shares of common stock. The Company paid a fee of approximately $3.4 million in September 1995 to certain standby purchasers of shares covered by the Equity Rights. TWA subsequently issued 2.07 million additional shares of common stock to previous holders of TWA's 10% Senior Secured Notes based upon the trading prices of securities distributed pursuant to the 1995 reorganization. The Employee Preferred Stock is the functional equivalent of common stock except for an exclusive right to elect a certain number of directors to the Board of Directors and its liquidation preference of $0.01 per share. Employee Preferred Stock does not have redemption rights. Each share will automatically convert into one share of common stock upon the withdrawal of such share from the employee stock trust in which such share is held. There were 1,742,831 and 1,742,920 Seven Year Warrants outstanding at December 31, 1998 and 1997, respectively. All warrants to purchase shares of common stock for nominal consideration had been exercised at December 31, 1998. In March 1997, the Company issued 50,000 Redeemable Warrants in conjunction with the sale of $50.0 million 12% Senior Secured Notes Due 2002. The Warrants are exercisable commencing on the first anniversary of the date of original issuance through their expiration on April 1, 2002 and entitles the holders thereof to purchase 126.26 shares of common stock per Warrant at an exercise price of approximately $7.92 per share. In December 1997, the Company completed an offering, pursuant to Rule 144A of the Securities Act of 1933, of 1,725,000 shares of its 9 1/4% Cumulative Convertible Exchangeable Preferred Stock, with a liquidation preference of $50 per share. Each share of the 9 1/4% Preferred Stock may be converted at any time at the option of the holder, unless previously redeemed or exchanged, into shares of the Company's common stock at a conversion price of $7.90 per share (equivalent to a conversion rate of approximately 6.329 shares of common stock for each share of 9 1/4% Preferred Stock), subject to adjustment. F-24 The 9 1/4% Preferred Stock may not be redeemed prior to December 15, 2000. On or after December 15, 2000, the 9 1/4% Preferred Stock may be redeemed in whole or in part, at the option of the Company, at specified redemption prices. The 9 1/4% Preferred Stock may be exchanged, in whole but not in part, at the option of the Company, for the Company's 9 1/4% Convertible Subordinated Debentures due 2007 on any dividend payment date beginning on December 15, 1999 at the rate of $50 principal amount of Debentures for each share of 9 1/4% Preferred Stock outstanding at the time of exchange; provided that all accrued and unpaid dividends on the 9 1/4% Preferred Stock to the date of exchange have been paid or set aside for payment and certain other conditions are met. The Company filed a registration statement with the Securities and Exchange Commission to register resales of 9 1/4% Preferred Stock, the Debentures and the underlying shares of common stock issuable upon conversion thereof. In addition, the Company must use its reasonable best efforts to cause a registration statement to be effective until the earlier of (i) the sale of all securities covered by the registration, or (ii) two years after the date of original issuance. In March 1996, the Company completed an offering, pursuant to Rule 144A of the Securities Act, of 3,869,000 shares of its 8% Preferred Stock, with a liquidation preference of $50 per share. Each share of the 8% Preferred Stock may be converted at any time, at the option of the holder, unless previously redeemed or exchanged, into shares of common stock at a conversion price of $20.269 per share (equivalent to a conversion rate of approximately 2.467 shares of common stock for each share of 8% Preferred Stock), subject to adjustment. Pursuant to the registration rights agreement between the Company and the initial purchasers of the 8% Preferred Stock, the Company filed a registration statement to register resales of the 8% Preferred Stock, the Debentures (as defined below) and the underlying shares of common stock issuable upon conversion thereof. The 8% Preferred Stock may not be redeemed prior to March 15, 1999. On or after March 15, 1999, the 8% Preferred Stock may be redeemed, in whole or in part, at the option of the Company, at specified redemption prices. The 8% Preferred Stock may be exchanged at the option of the Company, in whole but not in part, for the Company's 8% Convertible Subordinated Debentures Due 2006 (the "Debentures") on any dividend payment date beginning March 15, 1998 at the rate of $50 principal amount of Debentures for each share of 8% Preferred Stock outstanding at the time of exchange; provided that all accrued and unpaid dividends on the 8% Preferred Stock to the date of exchange, whether or not earned or declared, have been paid or set aside for payment and certain other conditions are met. In December 1995, the Company adopted a Shareholders Rights Plan. Each holder of common stock or Employee Preferred Stock received a dividend of one right for each share, entitling the holder to buy one one-hundredth of a share of a new series of preferred stock at a purchase price of $47.50 and, thereafter, all common stock and Employee Preferred Stock issued by the Company has had an equivalent number of rights attendant to it. The rights may become exercisable only under certain conditions whereby certain persons (as defined) become the owner of or commence a tender offer for certain specified percentages of TWA's voting stock and may be redeemed by TWA at $0.01 per right prior to such time. In the event the rights become exercisable, holders would be entitled to receive, without payment of a purchase price, additional shares of common stock or be entitled to purchase common stock having a market value of twice the purchase price. F-25 8. EARNED STOCK COMPENSATION: On the effective date of the 1995 reorganization, TWA issued approximately 6.4 million shares of Employee Preferred Stock to trusts established for its unionized employees, including approximately 1.7 million shares attributable to ALPA represented employees (the "ALPA shares"). Except for certain rights with respect to the election of directors and the fact that such shares are held in trusts, the Employee Preferred Stock has rights substantially identical to TWA's common stock. TWA also issued an aggregate of approximately 1.0 million shares of common stock to a trust established for the benefit of certain of TWA's other employees. The ALPA shares were distributed by its trustee to an employee benefit plan (the "ESOP") in one-third increments annually beginning August 1995. In 1997 and 1996, operating results included charges of approximately $3.9 million and $6.9 million, respectively, representing the value of ALPA shares allocated and ALPA shares earned, but unallocated, for such periods, based upon the market price of TWA's common stock. There was no effect on operating results in 1998. In recognition of the fact that the percentage of TWA's stock owned by TWA's employees was substantially reduced in the 1995 reorganization, TWA adopted the Employee Stock Incentive Plan ("ESIP") as part of the 1995 reorganization. The ESIP requires TWA, from 1997 through 2002, to make grants of additional shares of common stock and Employee Preferred Stock to certain trusts established for the benefit of its union and non-union employees if certain conditions are met. The ESIP requires TWA to make a grant on July 15 of each year if the average market closing price of the common stock for 30 consecutive trading days has exceeded a target price for such year set forth in the ESIP. The target price applicable to the additional shares to be issued in each year is $11.00 in 1997, $12.10 in 1998, $13.31 in 1999, $14.64 in 2000, $16.11 in 2001 and $17.72 in 2002. Each grant is cumulative and if the applicable target price is not met in the initial grant year, the applicable grant is carried forward and may be granted in future years (up to July 15, 2002) in which the average market closing price of the common stock exceeds the target price before July 15 of that year. The first two ESIP target prices of $11.00 and $12.10 were realized on February 17, 1998 and March 4, 1998, respectively, and as a result, TWA issued an additional 2,377,084 shares (net of the credit of 405,750 shares discussed in the following paragraph) of Employee Preferred Stock on July 15, 1998 to satisfy the 1997 and 1998 ESIP grant amounts. TWA recorded non-cash charges of $26.5 million and $1.0 million in the first and third quarters of 1998, respectively, in connection with this issuance. The ESIP provides for an increase in future grants to protect against the dilutive effect of certain stock issuances by TWA. Based on issuances of common stock through December 31, 1998, additional common stock and Employee Preferred Stock will be subject to grant in an amount sufficient to increase employee ownership by 1.84% in 1999, 1.34% in 2000, 1.34% in 2001 and 1.34% in 2002 based on the combined total number of outstanding shares of common stock and Employee Preferred Stock as of the applicable July 15 grant date. If the ESIP's remaining target prices of $13.31, $14.64, $16.13 and $17.72 are realized for the years 1999 to 2002, respectively, the minimum aggregate non-cash charge for the years 1999 to 2002 would be approximately $103.4 million based upon these target prices and the number of shares of common stock and Employee Preferred Stock outstanding at December 31, 1998. The non-cash charge for any year, however, could be substantially higher if the then market price of TWA's common stock exceeds certain target prices. In addition, a stock purchase trustee of a special purpose trust to be established has the right under the ESIP through July 15, 2002 to purchase additional shares of Employee Preferred Stock on behalf of employees in amounts up to a total of 2% of the combined total number of outstanding shares of common stock and Employee Preferred Stock, at a discount of 20% from the then current market price. The ESIP separately provides that following the distribution by TWA of additional shares of Employee Preferred Stock or common stock after the effective date of the 1995 reorganization in respect of the 1995 reorganization, TWA would issue an additional number of shares of Employee Preferred Stock and common stock to permit employees to retain the same level of ownership initially granted to them based on a formula. Union representatives and TWA agreed to a one-time distribution in 1997 pursuant to this provision of the ESIP of a total of 525,856 shares of Employee Preferred Stock and common stock. As part of that agreement, since additional ESIP shares were not issued to the employees in July 1997, TWA issued an additional 405,750 shares of Employee Preferred Stock and common stock to the employee trusts. TWA received a credit for this issuance of shares against its July 15, 1998 grant under the ESIP. F-26 9. STOCK OPTION PLANS: The Company's 1994 Key Employee Stock Incentive Plan (the "KESIP"), as amended, provides for the award of incentive and nonqualified stock options for up to 14% of the common stock and Employee Preferred Stock outstanding as of the start of each fiscal year (approximately 8.6 million shares at January 1, 1999). Generally, options granted under the KESIP have a five year life after the final vesting period and vest at the rate of 34% upon the first anniversary of the award date, 33% upon the second and 33% upon the third anniversary of the award date. Unvested shares are subject to forfeiture under certain circumstances. A summary of the Company's outstanding stock options as of December 31, 1998, 1997 and 1996, and changes during the years ended on those dates is presented below:
1998 1997 1996 ------------------------- -------------------------- ------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE --------- -------- --------- -------- --------- -------- Outstanding at the beginning of year 3,342,180 $ 6.39 2,026,384 $5.61 2,228,000 $ 4.68 Granted 547,850 10.79 2,027,155 6.80 453,000 11.65 Exercised (566,196) 4.79 (565,545) 4.66 (191,316) 4.64 Forfeited (293,565) 8.56 (145,814) 7.88 (463,300) 7.43 --------- --------- --------- Outstanding at end of year 3,030,269 7.28 3,342,180 6.39 2,026,384 5.61 ========= ========= ========= Option exercisable at year-end 1,696,704 1,812,020 1,302,700 Weighted average fair value of options granted during the year $4.92 $3.32 $6.79
The per share weighted average fair value of options granted during 1998, 1997, and 1996 were estimated using the Black Scholes option pricing model assuming risk-free interest rates of 5.09%, 5.97% and 6.6% in 1998, 1997 and 1996, respectively, an expected volatility factor of 62.59% in 1998, 67.14% in 1997 and 85.00% in 1996 and an expected life of three years. F-27 The following table summarizes information about fixed stock options at December 31, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE --------------------------------------------------------- ------------------------------------ RANGE NUMBER WEIGHTED-AVERAGE NUMBER OF OUTSTANDING REMAINING WEIGHTED-AVERAGE EXERCISABLE WEIGHTED-AVERAGE EXERCISE PRICES AT 12/31/98 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/98 EXERCISE PRICE - - --------------- ----------- ------------------- ---------------- ----------- ---------------- $ 4.56 to 5.84 1,303,089 2.51 years $ 5.37 1,111,089 $ 5.34 6.22 to 7.78 1,009,400 4.06 years 7.30 459,505 7.28 7.79 to 10.13 207,900 4.72 years 8.47 56,660 8.48 10.16 to 12.38 434,600 4.74 years 11.19 51,150 10.47 12.63 to 18.37 75,280 4.68 years 14.06 18,300 15.65 --------- --------- $ 4.56 to 18.37 3,030,269 1,696,704 ========= =========
As permitted under SFAS No. 123 "Accounting for Stock-Based Compensation", the Company applies APB Opinion No. 25 and related interpretations in accounting for its plans. However, pro forma disclosures as if the Company adopted the fair value based method of measurement for stock-based compensation plans under SFAS No. 123 in 1998, 1997 and 1996 are presented below. Had compensation cost for the Company's grants for stock-based compensation plans been determined using the fair value method under SFAS No. 123, the Company's pro forma net loss, and net loss per common share for 1998, 1997 and 1996 would approximate the amounts below (amounts in thousands except per share data):
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 ---------------------------- ---------------------------- ------------------------- AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED PRO FORMA ----------- --------- ----------- --------- ----------- --------- Net loss $(120,481) $(124,648) $(110,835) $(114,942) $(284,815) $(285,716) Net loss per common share $ (2.35) $ (2.42) $ (2.37) $ (2.45) $ (7.27) $ (7.30)
The pro forma amounts do not give any effect to options granted prior to January 1, 1995. Operating results include charges of $2.2 million for the year ended December 31, 1996 to reflect the excess of the market price of TWA's common stock on the date of grant over the exercise price, during the vesting period including $1.8 million with respect to the accelerated vesting of certain awards in connection with the severance of certain officers. There were no such charges in 1997 or 1998. 10. CONTINGENCIES: On July 17, 1996, TWA Flight 800 crashed shortly after departure from JFK en route to Paris, France. There were no survivors among the 230 passengers and crew members aboard the Boeing 747 aircraft. While TWA is currently a defendant in a number of lawsuits relating to the crash, TWA maintains substantial insurance coverage and management believes that TWA's insurance coverage is more than sufficient to cover the claims arising from the crash. In addition, TWA has entered into agreements that limit the amount of TWA's exposure to such claims and that significantly reduce the amounts charged or reserved under applicable insurance policies as a result of the crash of Flight 800. Based on the insurance coverage maintained by TWA and those agreements, TWA believes that the resolution of these claims will have no material impact on the financial condition of TWA or its results of operations. F-28 On October 22, 1991, a judgment in the amount of $12,336,127 was entered against TWA in an action in the United States District Court for the Southern District of New York by Travellers International A.G. and its parent company, Windsor, Inc. In order to obtain a stay of judgment pending appeal, TWA posted a cash undertaking of $13,693,101. In connection with the 1993 reorganization, TWA sought to have the matter ultimately determined by the Bankruptcy Court and claimed that the cash undertaking constituted a preference payment. In February 1994, the Bankruptcy Court determined the matter in a manner favorable to TWA. Following appeals, the Bankruptcy Court's decision was affirmed on January 20, 1998. The cash undertaking previously posted by TWA was returned to TWA in June 1998 and is reflected in other income in 1998. After deduction of $3.3 million for reimbursement of certain administrative costs previously incurred by TWA, $10.4 million received pursuant to this proceeding was applied in July 1998 to reduce the Pension Benefit Guaranty Notes ("PBGC Notes"). TWA is subject to numerous environmental laws and regulations administered by various state and federal agencies. Although the Company believes adequate reserves have been provided for all known environmental contingencies, it is possible that additional reserves might be required in the future which could have a material effect on the results of operations or financial condition of the Company. However, the Company believes that the ultimate resolution of known environmental contingencies should not have a material adverse effect on its financial position or results of operations based on the Company's knowledge of similar environmental sites. Since May 1991, TWA's employees in Israel have claimed that the Company should be required to collateralize its contingent payment of termination indemnities. This matter deals only with collateralization of a contingent payment obligation. The employees have asserted that the amount necessary to collateralize the contingent payment of termination indemnities could be as much as $25 million. The Company denies any obligation to collateralize and asserts that any obligation to collateralize any termination indemnity is not a current obligation. In connection with certain wage scale adjustments afforded to non- contract employees, employees previously represented by IFFA have asserted and won an arbitration ruling with respect to the comparability of wage concessions made in 1994 that, if sustained, would require TWA to provide additional compensation to these employees. The Eighth Circuit Court of Appeals upheld a district court ruling that affirmed the arbitrator's award. TWA has filed a motion before the District Court for the Eastern District of Missouri seeking referral of the matter to the System Board of Adjustment for determination on TWA's claim that, to the extent it was unsuccessful on the merits, actions taken by TWA following issuance of the arbitrator's award and in accordance with the arbitrator's opinion have substantially, if not totally, mitigated potential damages. Accordingly, the Company has not recorded any liability for this litigation. The IAM (now collective bargaining agent for employees formerly represented by IFFA) has filed a motion requesting the district court to hold TWA in contempt of court and to order TWA to implement the arbitration award. TWA believes that pending the district court's ruling on TWA's motion to remand, TWA is not required to implement the arbitration award and the IAM's motion is without merit. The amount, if any, due under the award is incapable of being determined pending the district court's ruling on TWA's motion and, if remanded, the decision of the System Board of Adjustment. The Company is also defending a number of other actions which have arisen in the ordinary course of business, and are insured or the likely outcome of which the management of the Company does not believe may reasonably be expected to be materially adverse to the Company's financial condition or results of operations. 11. AIRCRAFT COMMITMENTS: TWA entered into an agreement in February 1996 with Boeing for the purchase of ten B-757-231 aircraft and related engines, spare parts and equipment for an aggregate purchase price of approximately $500 million. As of December 31, 1998, TWA had taken delivery of six aircraft and had four on firm order. Five of the six aircraft already delivered were originally manufacturer-financed and one was leased. In separate F-29 transactions in June, July and October 1998, these five manufacturer- financed aircraft were sold to, and leased back from, an aircraft lessor. The four remaining aircraft are scheduled to be delivered in 1999 and 2000. The first of these aircraft was delivered in March 1999 and was immediately sold to, and leased back under an operating lease from an aircraft lessor. TWA has obtained commitments for debt financing for approximately 80% of the cost of acquiring two of the remaining three aircraft and commitments for 100% lease financing of the cost of acquiring the remaining aircraft. In September 1998, TWA entered into an agreement with Boeing to acquire four additional B-757-231 aircraft to be delivered during 1999. TWA has obtained commitments for debt financing for approximately 80% of the cost of acquiring these aircraft. These commitments are subject to, among other things, material adverse change clauses that make the availability of this debt and lease financing dependent upon the financial condition of TWA at the time of delivery. The Company has entered into an agreement for the operating lease for one additional B-767-300ER and three additional B-757-200 aircraft. These aircraft are scheduled to be delivered in 1999, excluding one B-757-200 that is scheduled for delivery in January 2000. The Company has granted to a major financial institution the option to purchase and leaseback to TWA, under substantially the same terms and conditions as another B-757 aircraft previously leased to TWA in 1998, four of the eight B-757-231 aircraft to be delivered by Boeing during 1999. In 1989, TWA entered into agreements with AVSA, S.A.R.L. ("Airbus") and Rolls-Royce plc relating to the purchase of ten A330-300 twin-engine wide-body aircraft and related engines, spare parts and equipment for an aggregate purchase price of approximately $1.0 billion. The agreements, as amended, require the delivery of the aircraft in 2001 and 2002 and provide for the purchase of up to ten additional aircraft. TWA has not yet made arrangements for the permanent financing of the purchases subject to the agreements. In the event of cancellation, predelivery payments of approximately $18 million may be subject to forfeiture. In 1996, TWA entered into an agreement to acquire from Boeing 15 new MD-83s, to be financed by long-term leases. As of December 31, 1998, TWA had taken delivery of 13 of the MD-83 aircraft and expects to take delivery of two additional planes in 1999. In April 1998, TWA entered into an agreement with Boeing to acquire 24 additional new MD-83 aircraft, with deliveries in 1999. The Company has obtained commitments for long-term debt and lease financing for these aircraft. In December 1998, TWA announced that it had signed letters of intent to acquire an additional 125 new aircraft: 50 Boeing 717-200 aircraft for delivery beginning in 2000, 50 Airbus A318 aircraft for delivery beginning in 2003 and 25 Airbus "A320 Family" aircraft for delivery beginning in 2005. In addition to these 125 firm orders, TWA has taken options on an additional 50 Boeing 717s and an additional 75 "A320 Family" aircraft. The letter of intent includes financing for all of the firm order aircraft. The terms of the purchase orders and the related financing are subject to further negotiation and the signing of definitive agreements. These new aircraft would primarily replace B-727, DC-9 and older MD-80 aircraft currently in TWA's fleet. TWA elected to comply with the transition requirements of the Airport Noise and Capacity Act of 1990 (the "Noise Act") by adopting the Stage 2 aircraft phase-out/retrofit option, which requires that 50% of its base level (December 1990) Stage 2 fleet be phased-out/retrofitted by December 31, 1996. To comply with the 1996 requirement, the Company has retrofitted, by means of engine hush-kits, 30 of its DC-9 aircraft at an aggregate cost of approximately $55.5 million, most of which was financed by lessors with repayments being facilitated through increased rental rates or lease term extensions. TWA complied with the transition requirements for December 31, 1998, by having 75% of its fleet meet Stage 3 requirements through the grounding of older Stage 2 aircraft in combination with the acquisition of Stage 3 aircraft. By December 31, 1999, 100% of the fleet must meet Stage 3 requirements. In February 1999, TWA signed letters of intent with an aircraft lessor to sell and leaseback six Boeing 767-200 aircraft which would subsequently be returned to the lessor and replaced with three Boeing 767-300 aircraft from the same aircraft lessor. In connection with this transaction, the Company has made an offer to purchase for cash up to $28.8 million total principal amount of its outstanding 11 3/8% Senior Secured Notes due April 15, 2003 and any and all of its outstanding 10 1/4% Senior Secured Notes due June 15, 2003 (collectively, the "Notes"). The offer to purchase is subject to the consummation of the sale by TWA of the collateral that currently secures the Notes. F-30 12. FINANCIAL CONDITION AND LIQUIDITY: TWA emerged from a bankruptcy proceeding in August 1995. In connection with the 1995 reorganization, TWA applied fresh start reporting in accordance with generally accepted accounting principles, which resulted in the creation of a new reporting entity for accounting purposes and TWA's assets and liabilities being adjusted to reflect fair values on the effective date of the 1995 reorganization. Since 1995, TWA has sustained significant net losses, although these losses have generally decreased each year, excluding special charges. The Company's long-term viability, as well as its ability to meet its existing debt and other obligations and future capital needs and commitments, depends on its ability to achieve and maintain profitable operations. Consequently, TWA seeks to improve operational reliability and productivity, schedule integrity and overall product quality in order to accomplish this goal. To that end, TWA has implemented and continues to focus its efforts on the following key initiatives: * modernizing its fleet; * focusing on improved productivity; * implementing a series of revenue-enhancing marketing initiatives to attract higher-yield business travelers; * implementing a number of employee-related initiatives to reinforce TWA's focus on operational performance; and * optimizing TWA's route structure. Although TWA began implementing operational changes in late 1996 that are intended to improve TWA's financial results, TWA has incurred and will incur additional expenses as a result of these changes, including aircraft rental expenses, and these changes may not make TWA's future operations profitable. TWA's ability to continue to improve its financial position and to meet its financial obligations depends upon a number of uncertainties that may adversely impact its future results of operations, including: * insufficient levels of air passenger traffic resulting from, among other things, war, threat of war, terrorism or changes in the economy; * governmental limitations on the ability of TWA to service certain airports and/or foreign markets; * regulatory requirements necessitating additional capital expenditures; * pricing and scheduling initiatives by competitors; * the availability and cost of capital; * increases in fuel and other operating costs; * the outcome of certain ongoing labor negotiations; and * the adverse effects on yield of the continued implementation of a discount ticket program (the "Ticket Agreement") between TWA and Karabu Corporation, a company controlled by Carl Icahn ("Karabu"), on terms currently applied by Karabu. (TWA believes these terms are inconsistent with, and in violation of, the Ticket Agreement governing this program.) For the full year ended December 31, 1998, the Company's financial results reflected operating revenues of $3,259.1 million (a decrease of $68.9 million from operating revenues of $3,328.0 million for the full year 1997), an operating loss of $65.2 million which included special charges of $42.6 million and earned stock compensation charges of $27.5 million (a decrease of $35.9 million over the full year 1997 operating loss of $29.3 million which included earned stock compensation charges of $4.2 million), and a net loss of $120.5 million including a non-cash extraordinary loss of $13.1 million related to the early F-31 extinguishment of debt and special charges of $42.6 million (a decrease of $9.7 million over a net loss of $110.8 million in 1997 which included a non-cash extraordinary charge of $21.0 million related to the early extinguishment of debt). Overall, revenues generated as a result of moderate year over year increases in load factor and yield for 1998, while reflecting the Company's emphasis to improve system yield, were not sufficient to offset the decline in capacity. System capacity was down significantly year over year, due in part to the planned replacement of older L-1011 and B-747 aircraft with new B-757, B-767 and MD-80 aircraft on many routes. This capacity change reflects the continued planned "leveling" of TWA's seasonal schedules and the elimination of certain unprofitable international destinations. The Company recognizes the need to establish a better balance between yield enhancement and total revenue generation and continues to implement measures to achieve this goal. TWA's first quarter operating results have historically been considerably less favorable than other quarters and typically reflect substantial operating and net losses. Notwithstanding actions taken to date and planned by management to improve the Company's future operating results and performance, TWA anticipates reporting operating and net losses in the first quarter 1999. The Company's consolidated cash and cash equivalents balance at December 31, 1998 was $252.4 million, a $14.6 million increase from the December 31, 1997 balance of $237.8 million. The net increase in cash and cash equivalents during 1998 was due, in large part, to cash provided by proceeds from the sale of notes and from the sale and leaseback of certain aircraft and engines in 1998. These proceeds were used for the repayment of long-term debt and capital lease obligations and for working capital and other general corporate purposes. The 1994 labor agreements became amendable after August 31, 1997 and negotiations on a new collective bargaining agreement with ALPA commenced in June 1997. TWA reached agreement with ALPA that became effective on September 1, 1998. As part of the new contract, TWA agreed to pay increases over the next four years that will result in wages for TWA's pilots improving by 2002 to 90% of the industry average as determined by wage rates in contracts in effect as of August 1998. The contract also provides for significant work rule improvements for pilots while also granting TWA flexibility and improvements necessary to enhance its competitive position. TWA also may issue shares to employees under the terms of its new contract with ALPA. The new ALPA contract requires TWA to distribute either one million shares of TWA's common stock or $11 million in cash to ALPA members, in four equal quarterly payments commencing in 1999. TWA has the option to make each quarterly payment in shares or in cash. TWA is currently engaged in negotiations with its flight attendants and ground employees on new collective bargaining agreements and expects that the new agreements with these employees will likely result in additional increases in wage rates. TWA believes it is essential to improve employee productivity as an offset to any wage increases and will continue to explore other ways to control and/or reduce operating expenses. It is also essential that its labor costs remain favorable in comparison to its largest competitors. As the Company's financial resources are not as great as those of most of its competitors, any substantial increase in its labor costs as a result of any new labor agreements or any cessation or disruption of operations due to any strike or work action could be particularly damaging to the Company. The outcome of these labor negotiations and the terms of any contracts cannot be predicted at this time. On June 14, 1995, TWA entered into a 99-month Ticket Agreement with Karabu, which permitted Karabu to purchase two categories of discounted tickets: (1) "domestic consolidator tickets," which are subject to a cap of $610 million, based on the full retail price of tickets ($120 million in the first fifteen months and $70 million per year for seven consecutive years through the term of the agreement), and (2) "system tickets," which are not subject to any cap throughout the term of the agreement. Tickets sold by the Company to Karabu pursuant to the Ticket Agreement are priced at levels intended to approximate current competitive discount fares available in the airline industry. TWA believes the applicable provisions of the Ticket Agreement do not allow Karabu to market or sell system tickets through travel agents or directly to the public. Karabu, however, has been marketing system tickets through travel agents and directly to the F-32 general public. TWA has demanded that Karabu cease doing so, and Karabu has stated that it disagrees with TWA's interpretation concerning sales through travel agents or directly to the general public. In December 1995, TWA filed a lawsuit against Karabu, Mr. Icahn, and certain affiliated companies seeking damages and to enjoin further violations of the Ticket Agreement. Mr. Icahn countered by threatening to file his own lawsuit and to declare a default on the loans from entities related to Mr. Icahn, which financing was then secured by certain receivables and flight equipment and have since been fully repaid. Mr. Icahn's position was based upon a variety of claims related to his interpretations of the security agreement as well as with respect to certain alleged violations of the Ticket Agreement by TWA. The parties negotiated a series of standstill agreements pursuant to which TWA's original lawsuit was withdrawn while TWA and Mr. Icahn endeavored to negotiate a settlement of their differences and respective claims. On March 20, 1996, TWA filed a petition in Circuit Court for St. Louis County, Missouri, commencing a lawsuit against Mr. Icahn, Karabu, and certain other entities affiliated with Mr. Icahn. The TWA petition alleged that the defendants are violating the Ticket Agreement and otherwise tortiously interfering with TWA's business expectancy and contractual relationships. The TWA petition sought a declaratory judgment finding that the defendants have violated the Ticket Agreement, and also sought liquidated, compensatory and punitive damages, in addition to TWA's costs and attorney's fees. On May 7, 1998, the court denied the TWA petition and dismissed the defendants' counterclaims. The court concluded that the defendants could sell discount tickets under the Ticket Agreement to any person who actually uses the ticket, including non-business travelers, and that the defendants had not breached the Ticket Agreement. No damages were assessed in respect to either plaintiff's or defendants' petitions. The defendants have moved to amend or modify the court's ruling to include a declaratory judgement that the defendants are permitted to sell tickets to any person for any purpose, which could include use by the purchaser's family members or friends. TWA has opposed this motion and has requested that the court clarify the ruling to limit its scope consistent with the reasoning set forth in the decision, specifically so that the person purchasing the ticket must use the ticket (with certain enumerated exceptions) and may not purchase a ticket for any other person. The court denied both motions on June 25, 1998. TWA has appealed denial of its motion for clarification and the court's original ruling. Although TWA intends to press its claims vigorously, it is possible that Karabu's interpretation of the Ticket Agreement regarding system discount ticket sales by the defendants through travel agents or directly to the general public could be determined, either by a court or otherwise, to be correct. In such event, unless TWA took appropriate action to mitigate the effect of these sales, TWA could suffer loss of revenue and reduced overall passenger yields on a continuing basis during the term of the Ticket Agreement. Ticket sales under the Ticket Agreement, which commenced in September 1995, were $274.4 million in 1998, $236.1 million in 1997, $139.7 million in 1996 and $16.0 million in 1995 at full published fares. The aggregate net sales, after applicable discounts under the Ticket Agreement, were $136.1 million in 1998, $129.9 million in 1997, $76.9 million in 1996 and $8.8 million in 1995. Of these amounts, $124.6 million, $116.0 million, $71.5 million and $4.4 million are included as passenger revenues for 1998, 1997, 1996 and the four months ended December 31, 1995, respectively, as the related transportation had been provided. Substantially all ticket sales under the Ticket Agreement to date have been "System Tickets". Net discounted sales from tickets sold under the Ticket Agreement with Karabu have been excluded from cash flows from operating activities because the related amounts were applied to reduce certain loans to TWA provided by entities controlled by Carl Icahn ("Icahn Loans") and certain promissory notes payable by TWA to the PBGC. The purchase price of tickets purchased by Karabu under the Ticket Agreement were required to either, at Karabu's option and with certain restrictions, be retained by Karabu and the amount so retained be credited as prepayments against outstanding balances of Icahn Loans, or be paid over to the F-33 settlement trust established for TWA's account as prepayments on the PBGC promissory notes. On December 30, 1997, TWA repaid the outstanding balance of the Icahn Loans out of the proceeds of a receivables securitization offering by the Company. In December 1998, the PBGC promissory notes were paid in full with the proceeds from ticket sales. Accordingly, proceeds from the sales of tickets under the Karabu Ticket Agreement are now paid directly to TWA. TWA has assigned substantial value to routes, gates and slots ($458.4 million) and reorganization value in excess of amounts allocable to identifiable assets ($839.1 million). The amortization of these assets, while not requiring the use of cash, will significantly affect future operating results. The Company has evaluated its future cash flows and notwithstanding the operating loss experienced since the 1995 reorganization, expects that the carrying value of the intangibles at December 31, 1998 will be recovered. However, the achievement of these improved future operating results and cash flows are subject to considerable uncertainties. In future periods, TWA will evaluate these intangibles for recoverability based upon estimated future cash flows. If TWA does not achieve these expectations, it may be required to charge future operations for impairment of these assets, and these charges could be material. TWA generally must satisfy all of its capital expenditure requirements from cash provided by operating activities, from external capital sources or from the sale of assets. However, TWA has pledged a substantial portion of its assets to secure various issues of its outstanding debt. TWA's financing agreements generally require TWA to apply the proceeds from the sale of any pledged assets to repay the corresponding debt. If TWA is unable to obtain additional capital, TWA may not be able to make certain capital expenditures or to continue to implement certain other aspects of its strategic plan, and TWA may therefore be unable to achieve the full benefits expected from the plan. 13. EXTRAORDINARY ITEMS: The Company recorded extraordinary charges of approximately $13.1 million in 1998, $9.9 million in 1997 and $1.6 million in 1996 due to the early extinguishment of a portion of the PBGC Notes as a result of Karabu applying approximately $148.3 million in 1998, $70.3 million in 1997 and $6.4 million in 1996 in ticket proceeds as prepayments on the PBGC Notes. In 1997 and 1996, the Company consummated a series of privately negotiated exchanges with a significant holder of the 12% Senior Secured Reset Notes which resulted in the return to the Company of approximately $51.8 million, in 1997, and $45.3 million, in 1996, in 12% Senior Secured Reset Notes and approximately $1.4 million, in 1997, and $1.5 million, in 1996, in accrued interest thereon in exchange for the issuance of approximately 7.7 million, in 1997, and 4.5 million, in 1996, in shares of the Company's common stock. As a result of the exchange of the 12% Senior Secured Reset Notes, the Company recorded an extraordinary non-cash charge of $7.2 million in 1997 and $8.2 million in 1996 representing the difference between the fair value of the common stock issued (based upon the trading price of the Company's common stock on the dates of exchanges) and the carrying value of the 12% Senior Secured Reset Notes retired. During December 1997, the Company prepaid the remaining 12% Senior Secured Reset Notes, incurring an extraordinary non-cash charge of $3.9 million relative to the write off of the unamortized discount on the Notes. 14. SPECIAL CHARGES AND OTHER NONRECURRING ITEMS: The 1998 operating loss includes approximately $42.6 million in special charges associated with the Company's ongoing fleet renewal program and elimination of excess overhead items. F-34 As part of TWA's continuing strategy to update its existing aircraft fleet with newer, more modern equipment, management has made the decision to set down and return a number of older aircraft currently under lease agreements. In order to comply with the lease return conditions contained in the respective lease agreements, these aircraft are expected to require additional costs at lease termination. Accordingly, the Company recorded a charge of $25.0 million which represents management's best estimate of these costs. These costs are expected to be paid by the Company over the next 18 months. As part of TWA's ongoing restructuring of its international operations and the closure of the Los Angeles reservations office, the Company recorded a special charge of approximately $17.6 million primarily related to employee severance liabilities. These severance costs are expected to be paid to the respective employees over the next 12 months. The 1996 operating loss included an aggregate of approximately $85.9 million in special charges and nonrecurring items, primarily as follows: (1) approximately $26.7 million to reflect the write-off of the carrying value of TWA's New York-Athens route authority over which TWA elected to discontinue service, (2) approximately $53.7 million to reflect the reduction in carrying value of TWA's owned L-1011 and B-747 aircraft and related spare parts which were retired from service in 1997 and early 1998, and (3) approximately $5.5 million for employee severance liabilities related to the termination of service to Athens and Frankfurt. The write-down of owned aircraft and related spare parts in 1996 was based upon management's estimates of the net proceeds to be received upon the disposition of these assets. At December 31, 1998, the remaining accrual aggregated approximately $3.0 million which principally related to the retirement of B-747 aircraft. 15. DISPOSITION OF ASSETS: Disposition of assets resulted in net gains of $20.1 million and $16.0 million in 1998 and 1997, respectively, and in a net loss of $1.1 million in 1996. In 1998, TWA recorded gains of $20.1 million in connection with the sale of spare flight equipment, aircraft, engines and other miscellaneous property. F-35 In 1997, TWA recorded gains of $7.4 million in connection with the sale of three gates at Newark International Airport and $8.6 million in connection with the sale of spare flight equipment, aircraft, engines and other miscellaneous property. In 1996, TWA recorded a gain of approximately $8.0 million in connection with the hull insurance settlement for the aircraft destroyed in the Flight 800 incident. The gain was offset by a loss of $8.3 million on the sale of expendable aircraft parts and losses of $0.8 million on other miscellaneous dispositions. 16. OTHER CHARGES AND CREDITS-NET:
YEARS ENDED DECEMBER 31, ------------------------------------------------ 1998 1997 1996 -------- -------- -------- (AMOUNTS IN THOUSANDS) Provisions for losses resulting from claims and litigation judgments against TWA $ 1,329 $ 143 $ 235 Foreign currency transaction (gains) losses-net 200 578 (642) Finance charge income earned on receivables carried by TWA (7,666) (8,112) (8,030) Credits related to settlement of various contract disputes, litigation and other matters (13,693) (289) (2,500) Credits related to vendor discounts applied net of late payment fees (2,692) (4,810) (7,074) Equity in earnings of TWA's investment in Worldspan (Note 2) (9,100) (11,305) (11,919) Miscellaneous other nonoperating charges (credits)-net 1,776 368 1,311 -------- -------- -------- Total Other Charges and Credits-net $(29,846) $(23,427) $(28,619) ======== ======== ========
17. SEGMENT REPORTING: TWA has adopted SFAS 131, Disclosures about Segments of an Enterprise and Related Information, which establishes standards for reporting information about operating segments in annual financial statements. The standard defines an operating segment as a component of an enterprise for which discrete financial information is available and is regularly evaluated by the chief operating decision maker. TWA believes that it operates within only one such segment under the standard, that of air transportation. However, that segment is analyzed and reported in two primary geographic areas, Domestic and International (the Atlantic division as reported to the Department of Transportation). Information related to revenues generated from operations within those geographic areas is presented below.
Years Ended December 31, ------------------------------------------------ 1998 1997 1996 -------- -------- -------- Operating Revenues (in millions): Domestic $2,841.5 $2,809.7 $2,835.2 International 417.6 518.3 719.2 -------- -------- -------- Total $3,259.1 $3,328.0 $3,554.4 ======== ======== ========
TWA identifies revenues to each division based on dollars generated by specific flight segment and the division in which each flight segment operates. A major portion of the Company's long-lived assets consists of its flight equipment (aircraft) which are not assigned to a specific geographic area, but rather are flown across geographic boundaries. F-36 18. DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS: SFAS No. 107, "Disclosures About Fair Value of Financial Instruments" requires disclosures with regards to fair values of all financial instruments, whether recognized or not recognized in the balance sheet, subject to certain exceptions. Solely for purposes of complying with this accounting standard, the Company has estimated the fair value of certain of its financial instruments, as further described below. Because no market exists for a significant portion of TWA's financial instruments, fair value estimates provided below are based on judgments regarding current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. The discussion of financial instruments below conforms with the presentation in the Consolidated Balance Sheets and relates to the amounts at December 31, 1998 and 1997. (a) Cash, cash equivalents and receivables: The carrying amounts of these assets are estimated to approximate fair value due to the generally short maturities of these instruments. (b) Other investments and receivables: The carrying amounts of these assets are estimated to approximate fair value due to the generally short maturities of the underlying instruments which are, however, classified as long-term assets because TWA's ability to access these amounts is generally restricted by contractual provisions. (c) Accounts payable and other accrued liabilities: The carrying amounts of these liabilities are estimated to approximate fair value due to the generally short maturities of these instruments. (d) Debt: On December 31, 1998, TWA's publicly traded debt had a carrying value of $288.5 million and a market value of $192.8 million, while at December 31, 1997, the Company had no publicly traded debt. The Company believes the fair value of the remaining debt, which had an aggregate carrying value of approximately $395.4 million and $787.9 million at December 31, 1998 and 1997, respectively, was approximately $393.5 million and $800.4 million on those dates. In connection with credit card sales, the Company has agreed to maintain specified levels of deposits or a letter of credit. At December 31, 1998, a letter of credit of $20.0 million had been issued for the Company's benefit to provide the required level of deposits. 19. FUEL PRICE RISK MANAGEMENT TWA enters into fuel swap contracts to protect against significant increases in jet fuel prices. Under the agreements, the Company receives or makes payments based on the difference between a fixed price and a variable price for certain fuel commodities. The changes in market value of such agreements have a high correlation to the price changes of the fuel being hedged. Gains and losses on fuel swap agreements are recognized as a component of fuel expense when the underlying fuel being hedged is used. Gains and losses on fuel swap agreements would be recognized immediately were the changes in market value of the agreements to cease to have a high correlation to the price changes of the fuel being hedged. At December 31, 1998, TWA had agreements with broker-dealers to exchange payments on approximately 26 million gallons of fuel products, which represents a minor portion of the Company's fuel requirements in the first six months of 1999. The fair value of the Company's fuel swap agreements at December 31, 1998, representing the amount the Company would pay to terminate the agreements, totaled $1.8 million. F-37 20. SUPPLEMENTAL FINANCIAL INFORMATION (UNAUDITED): Selected consolidated financial data (unaudited) for each quarter within 1998 and 1997 are as follows:
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) YEAR ENDED DECEMBER 31, 1998 Operating revenues $765,389 $883,536 $863,158 $747,064 ======== ======== ======== ======== Operating income (loss) $(68,707) $ 45,548 $ 23,694 $(65,694) ======== ======== ======== ======== Disposition of assets, gains (losses) - net $ 6,997 $ 11,810 $ 2,100 $ (820) ======== ======== ======== ======== Income (loss) before extraordinary items $(54,140) $ 24,750 $ (923) $(77,099) ======== ======== ======== ======== Extraordinary items $ (1,380) $ (5,256) $ (4,390) $ (2,043) ======== ======== ======== ======== Net income (loss) $(55,520) $ 19,494 $ (5,313) $(79,142) ======== ======== ======== ======== Per share amounts: Basic: Earnings (loss) before extraordinary items $ (1.04) $ .33 $ (.11) $ (1.27) ======== ======== ======== ======== Extraordinary items $ (.02) $ (.09) $ (.07) $ (.03) ======== ======== ======== ======== Net income (loss) $ (1.06) $ .24 $ (.18) $ (1.30) ======== ======== ======== ======== Diluted: Net income (loss) $ (1.06) $ .21 $ (.18) $ (1.30) ======== ======== ======== ======== YEAR ENDED DECEMBER 31, 1997 Operating revenues $762,306 $844,442 $908,381 $812,823 ======== ======== ======== ======== Operating income (loss) $(99,486) $ 5,932 $ 63,757 $ 537 ======== ======== ======== ======== Disposition of assets, gains (losses) - net $ 9,350 $ 3,030 $ 2,828 $ 796 ======== ======== ======== ======== Income (loss) before extraordinary items $(70,032) $(11,995) $ 13,276 $(21,111) ======== ======== ======== ======== Extraordinary items $ (1,532) $ (2,405) $ (6,985) $(10,051) ======== ======== ======== ======== Net income (loss) $(71,564) $(14,400) $ 6,291 $(31,162) ======== ======== ======== ======== Per share amounts: Basic: Earnings (loss) before extraordinary items $ (1.51) $ (.31) $ .17 $ (.44) ======== ======== ======== ======== Extraordinary items $ (.03) $ (.05) $ (.13) $ (.18) ======== ======== ======== ======== Net income (loss) $ (1.54) $ (.36) $ .04 $ (.62) ======== ======== ======== ======== Diluted: Net income (loss) $ (1.54) $ (.36) $ .04 $ (.62) ======== ======== ======== ========
The results for each period include all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods. The consolidated financial results on an interim basis are not necessarily indicative of future financial results on either an interim or annual basis. TWA's air transportation business is highly seasonal with the second and third quarters of the calendar year historically producing substantially better operating results than the first and fourth quarters. The results for the fourth quarter of 1998 include special charges of $42.6 million (see Note 14). Additionally, such results include a favorable accrual adjustment to salaries, wages and benefits of approximately $8.0 million as a result of changes in estimates. F-38 SCHEDULE II TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (AMOUNTS IN THOUSANDS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - - ------------------------------------------- ------------ ---------- ---------- ---------- ADDITIONS BALANCE AT CHARGED TO BALANCE AT BEGINNING OF COSTS & END OF DESCRIPTION PERIOD EXPENSES DEDUCTIONS PERIOD - - ------------------------------------------- ------------ ---------- ---------- ---------- YEAR ENDED DECEMBER 31, 1998 Reserves deducted from assets to which they apply: Allowance for doubtful accounts $ 9,334 $ 5,711 $ 586 $14,459 ======= ======= ======= ======= Allowance for obsolescence $19,176 $ 1,804 $ 426 $20,554 ======= ======= ======= ======= YEAR ENDED DECEMBER 31, 1997 Reserves deducted from assets to which they apply: Allowance for doubtful accounts $12,939 $ 2,457 $ 6,062 $ 9,334 ======= ======= ======= ======= Allowance for obsolescence $29,463 $ 1,635 $11,922 $19,176 ======= ======= ======= ======= YEAR ENDED DECEMBER 31, 1996 Reserves deducted from assets to which they apply: Allowance for doubtful accounts $13,517 $ 8,037 $ 8,615 $12,939 ======= ======= ======= ======= Allowance for obsolescence $ 2,201 $28,889 $ 1,627 $29,463 ======= ======= ======= ======= - - --------------- Accounts written off, less recoveries.
S-1 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. March 31, 1999 TRANS WORLD AIRLINES, INC. By: /s/ Gerald L. Gitner -------------------- Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Gerald L. Gitner Director, Chairman of the Board and March 31, 1999 - - ---------------------------- Chief Executive Officer (Principal Gerald L. Gitner Executive Officer /s/ Michael J. Palumbo Executive Vice President and Chief March 31, 1999 - - ---------------------------- Financial Officer (Principal Financial Michael J. Palumbo Officer and Principal Accounting Officer) /s/ John W. Bachmann Director March 31, 1999 - - ---------------------------- John W. Bachmann /s/ William F. Compton Director March 31, 1999 - - ---------------------------- William F. Compton /s/ Eugene P. Conese Director March 31, 1999 - - ---------------------------- Eugene P. Conese Director March 31, 1999 - - ---------------------------- Sherry L. Cooper /s/ Edgar M. House Director March 31, 1999 - - ---------------------------- Edgar M. House /s/ Thomas H. Jacobsen Director March 31, 1999 - - ---------------------------- Thomas H. Jacobsen D-1 /s/ Myron Kaplan Director March 31, 1999 - - ---------------------------- Myron Kaplan /s/ David M. Kennedy Director March 31, 1999 - - ---------------------------- David M. Kennedy /s/ Merrill A. McPeak Director March 31, 1999 - - ---------------------------- Merrill A. McPeak /s/ Thomas F. Meagher Director March 31, 1999 - - ---------------------------- Thomas F. Meagher /s/ Brent S. Miller Director March 31, 1999 - - ---------------------------- Brent S. Miller Director March 31, 1999 - - ---------------------------- William O'Driscoll /s/ G. Joseph Reddington Director March 31, 1999 - - ---------------------------- G. Joseph Reddington /s/ Blanche M. Touhill Director March 31, 1999 - - ---------------------------- Blanch M. Touhill By: /s/ Kathleen A. Soled ----------------------- Attorney-in-fact
D-2 EXHIBIT INDEX 2.1 Joint Plan of Reorganization, dated May 12, 1995 (Appendix B to the Registrant's Registration Statement on Form S-4, Registration Number 33-84944, as amended) 2.2 Modifications to Joint Plan of Reorganization, dated July 14, 1995 and Supplemental Modifications to Joint Plan of Reorganization dated August 2, 1995 (Exhibit 2.5 to 6/95 10-Q) 2.3 Findings of Fact, Conclusions of Law and Order Confirming Modified Joint Plan of Reorganization, dated August 4, 1995, with Exhibits A-B attached (Exhibit 2.6 to 6/95 10-Q) 2.4 Final Decree, dated December 28, 1995, related to the 1995 reorganization (Exhibit 2.7 to 12/31/95 Form 10-K) 3(i) Third Amended and Restated Certificate of Incorporation of the Registrant (Exhibit 3(i) to the Registrant's Registration Statement on Form S-4, Registration Number 333-26645) 3(ii) Amended and Restated By-Laws of Trans World Airlines, Inc., effective December 8, 1998 4.1 Voting Trust Agreement, dated November 3, 1993, between TWA and LaSalle National Trust, N.A. as trustee (Exhibit 4.3 to 9/93 10-Q) 4.2 IAM Trans World Employees' Stock Ownership Plan and related Trust Agreement, dated August 31, 1993, between TWA, the IAM Plan Trustee Committee and the IAM Trustee (Exhibit to 9/93 10-Q) 4.3 IFFA Trans World Employees' Stock Ownership Plan and related Trust Agreement, dated August 31, 1993, between TWA, the IFFA Plan Trustee Committee and the IFFA Trustee (Exhibit 4.5 to 9/93 10-Q) 4.4 Trans World Airlines, Inc. Employee Stock Ownership Plan, dated August 31, 1993, First Amendment thereto, dated October 31, 1993, and related Trust Agreement, dated August 31, 1993, between TWA and the ESOP Trustee (Exhibit 4.6 to 9/93 10-Q) 4.5 ALPA Stock Trust, dated August 31, 1993, between TWA and the ALPA Trustee (Exhibit 4.7 to 9/93 10-Q) 4.6 Stockholders Agreement, dated November 3, 1993, among TWA, LaSalle National Trust, N.A., as Voting Trustee and the ALPA Trustee, IAM Trustee, IFFA Trustee and Other Employee Trustee (each as defined therein), as amended by the Addendum to Stockholders dated November 3, 1993 (Exhibit 4.8 to 9/93 10-Q) 4.7 Registration Rights Agreement, dated November 3, 1993, between TWA and the Initial Significant Holders (Exhibit 4.9 to 9/93 10-Q) E-1 4.8 Indenture between TWA and Harris Trust and Savings Bank, dated November 3, 1993 relating to TWA's 8% Senior Secured Notes Due 2000 (Exhibit 4.11 to 9/93 10-Q) 4.9 Indenture between TWA and American National Bank and Trust Company of Chicago, N.A., dated November 3, 1993 relating to TWA's 8% Secured Notes Due 2001 (Exhibit 4.12 to 9/93 10-Q) 4.10 The TWA Air Line Pilots 1995 Employee Stock Ownership Plan, effective as of January 1, 1995 (Exhibit 4.12 to 9/95 10-Q) 4.11 TWA Air Line Pilots Supplemental Stock Plan, effective September 1, 1994 (Exhibit 4.13 to 9/95 10-Q) 4.12 TWA Air Line Pilots Supplemental Stock Plan Trust, effective August 23, 1995 (Exhibit 4.14 to 9/95 10-Q) 4.13 TWA Air Line Pilots Supplemental Stock Plan Custodial Agreement, effective August 23, 1995 (Exhibit 4.15 to 9/95 10-Q) 4.14 Form of Indenture relating to TWA's 8% Convertible Subordinated Debentures Due 2006 (Exhibit 4.16 to Registrant's Registration Statement on Form S-3, No. 333-04977) 4.15 Indenture dated as of March 31, 1997 between TWA and First Security Bank, National Association relating to TWA's 12% Senior Secured Notes due 2002 (Exhibit 4.15 to Registrant's Registration Statement on Form S-4, No. 333-26645) 4.16 Form of 12% Senior Secured Note due 2002 (contained in Indenture filed as Exhibit 4.15) 4.17 Registration Rights Agreement dated as of March 31, 1997 between the Company and the Initial Purchaser relating to the 12% Senior Secured Notes due 2002 and the warrants to purchase 126.26 shares of TWA Common Stock (Exhibit 4.17 to Registrant's Registration Statement on Form S-4, No. 333-26645) 4.18 Warrant Agreement dated as of March 31, 1997 between the Company and American Stock Transfer & Trust Company, as Warrant Agent, relating to warrants to purchase 126.26 shares of TWA Common Stock (Exhibit 4.18 to Registrant's Registration Statement on Form S-4, No. 333-26645) 4.19 Form of Indenture relating to TWA's 9-1/4% Convertible Subordinated Debentures due 2007 (Exhibit 4.19 to Registrant's Registration Statement on Form S-3, No. 333-44689) 4.20 Registration Rights Agreement dated as of December 2, 1997 between the Company and the Initial Purchasers (Exhibit 4.20 to Registrant's Registration Statement on Form S-3, No. 333-44689) E-2 4.21 Indenture dated as of December 9, 1997 by and between TWA and First Security Bank, National Association, as Trustee, relating to TWA's 11-1/2% Senior Secured Notes due 2004 (Exhibit 4.21 to Registrant's Registration Statement on Form S-4, No. 333-44661) 4.22 Form of 11-1/2% Senior Secured Note due 2004 (contained in Indenture filed as Exhibit 4.21) 4.23 Registration Rights Agreement dated as of December 9, 1997 among the Company and Lazard Freres & Co. LLC and PaineWebber Incorporated, as initial purchasers, relating to TWA's 11-1/2% Senior Secured Notes due 2004 (Exhibit 4.23 to Registrant's Registration Statement on Form S-4, No. 333-44661) 4.24 Sale and Service Agreement dated as of December 30, 1997 between TWA and Constellation Finance LLC, as purchaser, relating to TWA's receivables (Exhibit 4.24 to Registrant's Registration Statement on Form S-4, No. 333-44661) 4.25 Registration Rights Agreement dated as of March 3, 1998 between the Company and the Initial Purchaser (Exhibit 4.25 to Registrant's Registration Statement on Form S-4, No. 333-59405) 4.26 Indenture dated as of March 3, 1998 by and between TWA and First Security Bank, National Association, as Trustee, relating to TWA's 11-3/8% Senior Notes due 2006 (Exhibit 4.26 to Registrant's Registration Statement on Form S-4, No. 333-59405) 4.27 Aircraft Sale and Note Purchase Agreement dated as of April 9, 1998 among TWA, First Security Bank, National Association, as Owner Trustee and Seven Sixty Seven Leasing, Inc. (Exhibit No. 4.27 to Registrant's Registration Statement on Form S-4, No. 333-59405) 4.28 Indenture dated as of April 21, 1998 by and between TWA and First Security Bank, National Association, as Trustee, relating to TWA's 11-3/8% Senior Secured Notes due 2003 (Exhibit No. 4.28 to Registrant's Registration Statement on Form S-4, No. 333-59405) 4.29 Form of 11-3/8% Senior Secured Notes due 2003 (contained as Exhibit 1 to Rule 144A/Regulation S Appendix to Indenture in Exhibit 4.28) 4.30 Registration Rights Agreement dated as of April 21, 1998 between the Company, Lazard Freres & Co. LLC and First Security Bank, National Association relating to the 11-3/8% Senior Secured Notes due 2003 (Exhibit 4.31 to Registrant's Registration Statement on Form S-3, No. 333-56991) 4.31 Registration Rights Agreement dated as of April 21, 1998 between the Company, Lazard Freres & Co. LLC and First Security Bank, National Association relating to the Mandatory Conversion Equity Notes due 1999 (Exhibit 4.32 to Registrant's Registration Statement on Form S-3, No. 333-56991) E-3 4.32 Indenture dated as of June 16, 1998 by and between TWA and First Security Bank, National Association, as Trustee, relating to TWA's 10-1/4% Senior Secured Notes due 2003 4.33 Form of 10-1/4% Senior Secured Notes due 2003 (contained as Exhibit 1 to Rule 144A/Regulation S Appendix to Indenture in Exhibit 4.34) 4.34 Registration Rights Agreement dated as of June 16, 1998 between the Company, Lazard Freres & Co. LLC and First Security Bank, National Association relating to the 10-1/4% Senior Secured Notes due 2003 4.35 Registration Rights Agreement dated as of June 16, 1998 between the Company, Lazard Freres & Co. LLC and First Security Bank, National Association relating to the 10-1/4% Mandatory Conversion Equity Notes due 1999 10.1.1 Asset Purchase Agreement, dated as of November 4, 1993, between TWA and St. Louis (Exhibit 10.2 to 9/93 10-Q) 10.1.2 Equipment Operating Lease Agreement, dated November 4, 1993, between TWA and St. Louis (Exhibit 10.2 to 9/93 10-Q) 10.1.3 Cargo Use Amendment, dated November 4, 1993 between TWA and St. Louis (Exhibit F to the Asset Purchase Agreement) (Exhibit 10.2 to 9/93 10-Q) 10.1.4 Use Amendment 1993, dated November 4, 1993, between TWA and St. Louis (Exhibit E to the Asset Purchase Agreement) (Exhibit 10.2 to 9/93 10-Q) 10.2.1 Amendment Number One to the Note Purchase and Security Agreement, dated October 26, 1993, between TWA and Rolls- Royce (Exhibit 10.3 to 9/93 10-Q) 10.2.2 Amendment Number One to the Equipment Purchase Contract, dated October 26, 1993, between TWA and Rolls-Royce (Exhibit 10.3 to 9/93 10-Q) 10.3 Amendment Number Two to the AVSA Agreement dated June 1, 1989 between TWA and AVSA, dated August 25, 1993 (Exhibit 10.4 to 9/93 10-Q) 10.4.1 First Amendment to Aircraft Installment Sale Agreement, dated November 1, 1993, among TWA, the Vendors, and ITOCHU with respect to aircraft N605TW (Exhibit 10.5 to 9/93 10-Q) 10.4.2 First Amendment to Aircraft Installment Sale Agreement, dated November 1, 1993, among TWA, the Vendors, and ITOCHU with respect to aircraft N603TW (Exhibit 10.5 to 9/93 10-Q) 10.4.3 First Amendment to Security Agreement and Chattel Mortgage, dated November 1, 1993, among TWA, the Vendors, and ITOCHU, as to ITOCHU Amendment No. 1 (Exhibit 10.5 to 9/93 10-Q) E-4 10.4.4 First Amendment to Security Agreement and Chattel Mortgage, dated November 1, 1993, among TWA, the Vendors, and ITOCHU, as to ITOCHU Amendment No. 2 (Exhibit 10.5 to 9/93 10-Q) 10.5.1 Deferral Agreement and First Amendment to Aircraft Installment Sale Agreement No. 1, dated November 1, 1993, among TWA, the Vendors, and ORIX with respect to aircraft N601TW (Exhibit 10.6 to 9/93 10-Q) 10.5.2 Deferral Agreement and First Amendment to Aircraft Installment Sale Agreement, dated November 1, 1993, among TWA, the Vendors, and ORIX with respect to aircraft N603TW (Exhibit 10.6 to 9/93 10-Q) 10.5.3 First Amendment to Security Agreement and Chattel Mortgage, dated November 1, 1993, among TWA, the Vendors, and ORIX, as to ORIX Amendment No. 1 (Exhibit 10.6 to 9/93 10-Q) 10.5.4 First Amendment to Security Agreement and Chattel Mortgage, dated November 1, 1993, among TWA, the Vendors, and ORIX, as to ORIX Amendment No. 2 (Exhibit 10.6 to 9/93 10-Q) 10.6.1 Purchase Agreement, dated October 5, 1993, between TWA and Pacific AirCorp 747, Inc. with respect to aircraft N93107 and N93108 (Exhibit 10.7 to 9/93 10-Q) 10.6.2 Lease Agreement 107, dated October 5, 1993, between Pacific AirCorp 747, Inc. and TWA with respect to aircraft N93107 (Exhibit 10.7 to 9/93 10-Q) 10.6.3 Lease Agreement 108, dated October 5, 1993, between Pacific AirCorp 747, Inc. and TWA with respect to aircraft N93108 (Exhibit 10.7 to 9/93 10-Q) 10.7 Comprehensive Settlement Agreement, dated January 5, 1993 (Exhibit 10(iv)(1) to 12/31/92 10-K) 10.8 Omnibus Amendment and Supplement to Agreements between TWA and Karabu Corp. dated as of March 28, 1994 (Exhibit 10.9.1 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.9 Form of Indemnification Agreement between TWA and individual members of the TWA Board of Directors relating to indemnification of director (Exhibit 10.16 to 6/94 10-Q) 10.10.1 Purchase Agreement, dated as of December 15, 1993 between TWA and Pacific AirCorp DC9, Inc. with respect to aircraft N927L and N928L (Exhibit 10.20.1 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.10.2 Lease Agreement 927, dated as of December 15, 1993, between Pacific AirCorp DC9, Inc. and TWA with respect to aircraft N927L (Exhibit 10.20.2 to Registrant's Registration Statement on Form S-4, No. 33-84944) E-5 10.10.3 Lease Agreement 928, dated as of December 15, 1993, between Pacific AirCorp DC9, Inc. and TWA with respect to aircraft N928L (Exhibit 10.20.3 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.11.1 Aircraft Purchase Agreement between TWA and Mitsui & Co. (U.S.A.), Inc. dated March 31, 1994, with respect to aircraft N950U (Exhibit 10.21.1 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.11.2 Aircraft Purchase Agreement between TWA and Mitsui & Co. (U.S.A.), Inc., dated March 31, 1994, with respect to aircraft N953U (Exhibit 10.21.2 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.11.3 Lease Agreement, dated as of March 31, 1994 between Mitsui & Co. (U.S.A.), Inc. and TWA with respect to aircraft N950U and N953U (Exhibit 10.21.3 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.11.4 Aircraft Purchase Agreement between TWA and McDonnell Douglas Finance Corporation, dated March31, 1994, with respect to aircraft N951U (Exhibit 10.21.4 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.11.5 Aircraft Purchase Agreement between TWA and McDonnell Douglas Finance Corporation, dated March 31, 1994, with respect to aircraft N952U (Exhibit 10.21.5 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.11.6 Lease Agreement, dated as of March 31, 1994 between McDonnell Douglas Finance Corporation and TWA with respect to aircraft N951U and N952U (Exhibit 10.21.6 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.12.1 Aircraft Purchase Agreement, dated March 31, 1994, between McDonnell Douglas Finance Corporation and TWA with respect to aircraft N306TW (formerly N534AW) (Exhibit 10.22.1 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.12.2 Purchase Money Chattel Mortgage, dated as of March 31, 1994, by TWA, as Mortgagor, and McDonnell Douglas Finance Corporation, as Mortgagee, with respect to N306TW (formerly N534AW) (Exhibit 10.22.2 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.12.3 Chattel Mortgage, dated as of March 31, 1994 by TWA as Mortgagor, in favor of McDonnell Douglas Finance Corporation, as Mortgagee, with respect to aircraft N306TW (formerly N534AW) (Exhibit 10.22.3 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.13 Commuter Air Service Agreement dated July 22, 1992, between TWA and Trans World Express, Inc. (Exhibit 10.23 to Registrant's Registration Statement on Form S-4, No. 33-84944) E-6 10.14 Commuter Air Service Agreement dated October 27, 1993, between TWA and Alpha Air (Exhibit 10.24 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.15 Air Service Agreement dated October 1, 1994, between TWA and Trans States Airlines, Inc. (Exhibit 10.25 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.16 Consulting Agreement between TWA and Fieldstone, Private Capital Group, L.P. dated July 11, 1994 (Exhibit 10.26 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.17 Consulting Agreement dated July 15, 1994, between TWA and Simat, Helliesen & Eichner, Inc. (Exhibit 10.27 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.18.1 Agreement for Purchase and Sale dated as of August 29, 1994, between TWA and Browsh & Associates, Inc. (Exhibit 10.28.1 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.18.2 Agreement for Purchase and Sale dated as of August 29, 1994, between TWA and Travel Marketing Holding Corporation (Exhibit 10.28.2 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.19.1 Addendum to Stock Purchase Agreement (identified in 10.29.2) dated October 31, 1994 (Exhibit 10.29.3 to 9/94 10-Q) 10.19.2 Addendum to Stock Purchase Agreement (identified in 10.29.2) dated November 2, 1994 (Exhibit 10.29.4 to 9/94 10-Q) 10.20.1 Form of Agreement dated as of August 31, 1994, between TWA and the Air Line Pilots Association, International (Exhibit 10.31.1 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.20.2 Form of Agreement dated as of September 1, 1994, between TWA and the International Association of Machinists and Aerospace Workers (Exhibit 10.31.2 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.20.3 Form of Agreement dated as of September 1, 1994, between TWA and the Independent Federation of Flight Attendants (Exhibit 10.31.3 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.20.4 Form of Agreement dated as of September 1, 1994, between TWA and the Transport Workers Union of America (Exhibit 10.31.4 to 9/94 10-Q) 10.21.1 Trust Agreement dated as of August 24, 1994 between and among TWA, the International Association of Machinists and Aerospace Workers, the Independent Federation of Flight Attendants, the Air Line Pilots Association, International, United States Trust Company of New York (Exhibit 10.32.1 to Registrant's Registration Statement on Form S-4, No. 33-84944) E-7 10.21.2 Stock Pledge and Intercreditor Agreement dated as of August 24, 1994 among TWA, TWA Stock Holding Company, Inc. and United States Trust Company of New York (Exhibit 10.32.2 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.22.1 Key Employee Stock Incentive Plan (Exhibit 10.33.1 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.22.2 Form of Option Agreements for options issued pursuant to the 1994 Key Employee Stock Incentive Plan (Exhibit 10.33.2 to Registrant's Registration Statement on Form S-4, No. 33-84944) 10.23 Extension, Refinancing and Consent Agreement between TWA, Karabu Corp, Pichin Corp, and Carl C. Icahn and the "Icahn Entities" dated as of June 14, 1995 (Exhibit 10.37 to 9/95 10-Q) 10.23.1 Karabu Ticket Program Agreement between TWA and Karabu Corp. dated as of June 14, 1995 (Exhibit 10.37.1 to 12/95 10-K) 10.24 Trans World Airlines, Inc. Stock Purchase Warrant to Purchase Shares of Common Stock, dated August 23, 1995 (Exhibit 10.38 to 9/95 10-Q) 10.25 Stand-By Purchase Agreement dated as of August 8, 1995 between Trans World Airlines, Inc., M.D. Sass Re/Enterprise Partners L.P., a Delaware limited partnership and M.D. Sass Re/Enterprise International Ltd. a British Virgin Islands Company (Exhibit 10.39 to 9/95 10-Q) 10.26 Voucher Purchase Agreement dated as of October 18, 1995 between TWA and M.D. Sass Re/Enterprise Partners L.P., a Delaware limited partnership and M.D. Sass Re/Enterprise International Ltd. a British Virgin Islands Company (Exhibit 10.40 to 9/95 10-Q) 10.27 Equity Rights Put Agreement dated as of September 15, 1995 between TWA and Elliott Associates L.P., a Delaware limited partnership (Exhibit 10.41 to 9/95 10-Q) 10.28 Equity Rights Put Agreement dated as of September 15, 1995 between TWA and Westgate International L.P., a Cayman Islands limited partnership (Exhibit 10.42 to 9/95 10-Q) 10.29 Equity Rights Put Agreement dated as of September 15, 1995 between TWA and United Equities (Commodities) Company, a New York general partnership (Exhibit 10.43 to 9/95 10-Q) 10.30 Equity Rights Put Agreement dated as of September 15, 1995 between TWA and Grace Brothers, Ltd., an Illinois limited partnership (Exhibit 10.44 to 9/95 10-Q) 10.31 Equity Rights Put Agreement dated as of September 15, 1995 between TWA and First Capital Alliance, L.P., an Illinois limited partnership (Exhibit 10.45 to 9/95 10-Q) E-8 10.32 Equity Rights Put Agreement dated as of September 15, 1995 between TWA and Romulus Holdings Corp. a Delaware Corporation (Exhibit 10.46 to 9/95 10-Q) 10.33 Purchase Agreement, dated February 9, 1996 between The Boeing Company and TWA relating to Boeing Model 757-231 Aircraft (Purchase Agreement Number 1910) (Exhibit 10.48 to 12/31/95 Form 10-K/A) 10.34 Employee Stock Incentive Program dated as of August 23, 1995 by TWA (Exhibit 10.49 to 12/31/95 Form 10-K) 10.35 Trans World Airlines, Inc. 1995 Outside Directors' Stock Ownership and Stock Option Plan (Exhibit 10.51 to Registrant's Registration Statement on Form S-3, No. 333-04977) 10.36 Agreement dated as of October 1, 1996 between the Company and Michael J. Palumbo (Exhibit 10.34 to 12/31/96 Form 10-K) 10.37 Consulting Agreement between the Company and David M. Kennedy dated as of June 6, 1997 (Exhibit 10.1 to 6/97 Form 10-Q) 10.38 Agreement between the Company and Gerald L. Gitner dated as of February 12, 1997 (Exhibit 10.1 to 9/97 Form 10-Q) 10.39.1 Pledge and Security Agreement dated as of December 9, 1997 from the Company to First Security Bank, National Association, as Collateral Agent, in connection with the 11-1/2% Senior Secured Notes due 2004 (Exhibit 10.46.1 to Registrant's Registration Statement on Form S-4, No. 333-44661) 10.39.2 Acquired Slot Trust Agreement Declaration of Trust dated as of December 9, 1997 between the Company and First Security Bank, National Association, as Slot Trustee, in connection with the 11-1/2% Senior Secured Notes due 2004 (Exhibit 10.46.2 to Registrant's Registration Statement on Form S-4, No. 333-44661) 10.39.3 Master Sub-License Agreement dated as of December 9, 1997 between the Company and First Security Bank, National Association, in connection with the 11-1/2% Senior Secured Notes due 2004 (Exhibit 10.46.3 to Registrant's Registration Statement on Form S-4, No. 333-44661) 10.39.4 Collateral Pledge and Security Agreement dated as of December 9, 1997 between the Company and First Security Bank, National Association, as Trustee, in connection with the 11-1/2% Senior Secured Notes due 2004 (Exhibit 10.46.4 to Registrant's Registration Statement on Form S-4, No. 333-44661) 10.40.1 Exchange Agreement dated as of June 10, 1996 between TWA and Elliott Associates, L.P. as amended (Exhibit 10.1 to 9/20/96 Form 8-K) 10.40.2 Exchange Agreement dated as of June 10, 1996 between TWA and Westgate International, L.P., as amended (Exhibit 10.2 to 9/20/96 Form 8-K) E-9 10.41.1 Form of Letter Agreement between TWA and executive officers (continuing employment) (Exhibit 10.1 to 3/97 Form 10-Q) 10.41.2 Form of Letter Agreement between TWA and executive officers (new hire) (Exhibit 10.2 to 3/97 Form 10-Q) 10.42 Change in Control Agreement for executive officers (Exhibit 10.49 to 12/31/98 10-K) 10.43 Termination Agreement between TWA and Roden A. Brandt dated February 12, 1998 (Exhibit 10.1 to 3/98 Form 10-Q) 10.44 Agreement between TWA and the Air Line Pilots Association, International effective September 1, 1998 10.45 Agreement between TWA and Flight Dispatch Officers and Assistant Flight Dispatch Officers effective March 1, 1999 10.46 Agreement between TWA and the International Brotherhood of Teamsters effective October 26, 1998 10.47 Purchase Agreement between McDonnell Douglas Corporation and TWA for 24 MD-83 aircraft dated April 13, 1998 11 Statement of Computation of Per Share Earnings 12 Statement of Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends 21 Subsidiaries of the Registrant 23.1 Consent of KPMG LLP 24 Powers of Attorney 27 Financial Data Schedule [FN] - - -------- Incorporated by reference E-10 EX-3.(II) 2 AMENDED AND RESTATED BY-LAWS Exhibit 3(ii) AMENDED AND RESTATED BY-LAWS OF TRANS WORLD AIRLINES, INC. ARTICLE I - OFFICES Section 1.1. Registered Office in Delaware: Registered Agent The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, and the name of its registered agent at such address is The Corporation Trust Company. Said registered office and said registered agent may be changed as provided by the General Corporation Law (as now or hereafter in effect) of the State of Delaware ("GCL"). Section 1.2. Other Offices The Corporation may have other offices in or outside the State of Delaware. ARTICLE II - STOCKHOLDERS Section 2.1. Place of Meetings Meetings of stockholders shall be held in such place in the United States as the Board of Directors may determine, at the address in said city or in such other place determined by the Directors. The Board of Directors may postpone and reschedule any previously scheduled annual or special meeting of the stockholders. Section 2.2. Annual Meetings An annual meeting of stockholders shall be held for the election of Directors and the transaction of such other business as may properly come before such meeting on the third Tuesday in April in each year (or, if that day shall be a legal holiday in the place in which the meeting is to be held, then on the next following day not such a legal holiday) at twelve o'clock noon at the place where the meeting is to be held, or at such other date and time as the Board of Directors may determine. Section 2.3 Special Meetings (a) Generally Special meetings of the stockholders may be called only by (i) the Chairman of the Board, (ii) the Secretary within ten (10) calendar days after receipt of the written request of a majority of the total number of Directors that the Corporation would have if there were no vacancies, provided, however, that the total number of Directors shall be determined without inclusion of Directors to be named by holders of the Corporation's existing twelve percent (12%) Preferred Stock (the "Preferred Stock") issued and distributed pursuant to the amended plan of reorganization confirmed by the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") in the bankruptcy case captioned In re Trans World Airlines, Inc. (Case No. 92-115) ("Plan of -------------------------------- Reorganization") until such persons have been elected in accordance with these By-Laws (the "Whole Board"), and (iii) as provided in Section 2.3(b) hereof. Any such request by a majority of the Whole Board must be sent to the Chairman of the Board and the Secretary and must state the purpose or purposes of the proposed meeting. Special meetings of holders of the outstanding Preferred Stock, if any, may be called in the manner and for the purposes provided in the Certificate of Designation, Preferences and Rights of the Preferred Stock (the "Preferred Stock Designation"). (b) Request of Stockholders Upon the receipt by the Corporation of a written request executed by the holders of not less than thirty-five percent (35%) of the outstanding Voting Stock (as hereinafter defined) (a "Meeting Request"), the Board of Directors will (i) call a special meeting of the stockholders for the purposes specified in the Meeting Request and (ii) fix a record date for the determination of stockholders entitled to notice of and to vote at such meeting, which record date will not be later than sixty (60) calendar days after the date of receipt by the Corporation of the Meeting Request; provided, however, that no separate special meeting of stockholders requested pursuant to a Meeting Request will be required to be convened if (A) the Board of Directors calls an annual or special meeting of stockholders to be held not later than ninety (90) calendar days after receipt of such Meeting Request and (B) the purposes of such annual or special meeting include (among any other matters properly brought before the meeting) the purposes specified in such Meeting Request. Notwithstanding any provision of the Company's Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation") or these By-Laws to the contrary, this Section 2.3(b) may not be amended or repealed by the Board of Directors, and no provision inconsistent therewith may be adopted by the Board of Directors, without the affirmative vote of the holders of at least a majority of the Voting Stock, voting together as a single class, present or represented by proxy and entitled to vote at any annual or special meeting of stockholders at which such vote is to be taken. The term "Voting Stock" means stock of the Corporation of any class or series entitled to vote generally in the election of Directors and shall not include any class or series of preferred stock of the Corporation unless the certificate of designations, preferences and rights for such class or series of preferred stock shall specifically state that such class or series shall be deemed "Voting Stock" for purposes of the Certificate of Incorporation. 2 (c) Date and Time of Special Meeting Special meetings shall be held at such date and time as shall be determined by the Board of Directors. (d) Application of By-Laws Provisions of the By-Laws relating to meetings of stockholders (other than provisions thereof relating to meetings of all stockholders) shall apply to special meetings of the holders of the Corporation's preferred stock and special meetings of the holders of Common Stock. Section 2.4. Fixing Date for Determination of Stockholders of Record The Board of Directors may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, by fixing, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any such action. If in any case the Board of Directors does not fix such a record date, the record date for such meeting or action shall be the date determined pursuant to the GCL. Section 2.5. Notice of Meeting Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour, and, in the case of a special meeting, the purpose or purposes for which the meeting is called and, if the list of stockholders required by Section 2.6 hereof is not to be at such place at least ten (10) days prior to the meeting, the place where said list will be. Except as otherwise provided by the GCL, the written notice of any meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at his or her address as it appears on the records of the Corporation. An affidavit of the Secretary or an Assistant Secretary or of the Transfer Agents of the Corporation that the notice has been given shall be made and filed with the records of the meeting. Section 2.6. List of Stockholders Entitled to Vote The Secretary shall make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number and class of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be 3 held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 2.7. Chairman and Secretary at Meetings At each meeting of stockholders the Chairman of the Board, or in his or her absence the person designated in writing by the Chairman of the Board, or, if no person is so designated, then a person designated by a majority of the Whole Board, shall preside as chairman of the meeting. The Secretary, or in his or her absence a person designated by the chairman of the meeting, shall act as secretary of the meeting. Section 2.8. Quorum At any meeting of stockholders the holders of record of the Corporation who are entitled to cast a majority of the votes that can be cast by stockholders at such meeting (and, with respect to any matter as to which any stockholders are entitled to vote separately as a class, the holders of record of a majority of the shares of each such class) present in person or represented by proxy and entitled to vote at such meeting, shall constitute a quorum for the transaction of business at such meeting, except that when the GCL or the Certificate of Incorporation requires a larger number for the taking of action on any matter such larger number shall constitute a quorum. In the absence of a quorum (or a quorum of any such class) at a meeting, the chairman of the meeting or the stockholders present in person or represented by proxy and entitled to vote at such meeting, though less than a quorum, may adjourn the meeting from time to time until a quorum (or a quorum of such class) is present; provided, however, that the chairman of the meeting may, in his or her discretion, rule that a motion for such an adjournment is out of order until all business for which a quorum is present has been transacted. At any such adjourned meeting at which a quorum (or a quorum of a class) is present, any business may be transacted that might have been transacted at the original meeting if a quorum (or a quorum of such class) had then been present Section 2.9 Voting Except as otherwise provided by the GCL, by the Certificate of Incorporation or by the certificate of designations, preferences and rights for any class or series of the Corporation's preferred stock, each stockholder will be entitled at every meeting of the stockholders to one vote for each share of stock having voting power standing in the name of such stockholder on the books of the Corporation on the record date for the meeting and such votes may be cast either in person or by written proxy. Every proxy must be duly executed and filed with the Secretary. A stockholder may revoke any proxy that is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary. The vote upon any question brought before a meeting of the stockholders may be by voice vote, unless otherwise required by the Certificate of Incorporation or these By-Laws or unless the chairman of the meeting or the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or by proxy at such meeting otherwise determine. Every vote taken by written ballot will be counted by the inspectors of election. When a quorum is present at any meeting, the affirmative vote of the holders of a majority of the stock 4 present in person or represented by proxy at the meeting and entitled to vote on the subject matter which has actually been voted will be the act of the stockholders, except as otherwise provided in these By-Laws, the Certificate of Incorporation or the certificate of designations, preferences and rights for any class or series of the Corporation's preferred stock. Section 2.10. Order of Business (a) Presiding Officer The chairman of the meeting will call meetings of the stockholders to order and will act as presiding officer thereof. Unless otherwise determined by the Board of Directors prior to the meeting, the chairman of the meeting of the stockholders will also determine the order of business and have the authority in his or her sole discretion to regulate the conduct of any such meeting, including without limitation by imposing restrictions on the persons (other than stockholders of the Corporation or their duly appointed proxies) who may attend any such stockholders' meeting, by ascertaining whether any stockholder or his or her proxy may be excluded from any meeting of the stockholders based upon any determination by the chairman of the meeting, in his or her sole discretion, that any such person has unduly disrupted or is likely to disrupt the proceedings thereat, and by determining the circumstances in which any person may make a statement or ask questions at any meeting of the stockholders. (b) Business Conducted At an annual meeting of the stockholders, only such business will be conducted or considered as is properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors in accordance with Section 2.5 hereof, (ii) otherwise properly brought before the meeting by the chairman of the meeting or by or at the direction of a majority of the Whole Board, or (iii) otherwise properly requested to be brought before the meeting by a stockholder of the Corporation in accordance with Section 2.10(c) hereof. (c) Stockholder's Notice For business to be properly requested by a stockholder to be brought before an annual meeting, the stockholder must (i) be a stockholder of the Corporation of record at the time of the giving of the notice for such annual meeting provided for in these By-Laws, (ii) be entitled to vote at such meeting, and (iii) have given timely notice thereof in writing to the Secretary. To be timely a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than forty-five (45) calendar days before the date on which the Corporation first mailed its proxy materials for the prior year's annual meeting of stockholders. If the date of the annual meeting changes by more than thirty (30) days from the prior year, then the notice must have been received a reasonable time before the Corporation mails its proxy materials, but in any event, not less than twenty-five (25) calendar days prior to such mailing. A stockholder's notice to the Secretary must be set forth as to each matter the stockholder proposes to bring before the annual meeting (A) a description in reasonable detail of 5 the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (B) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business and the beneficial owner, if any, on whose behalf the proposal is made, (C) the class and number of shares of the Corporation that are owned beneficially and of record by the stockholder proposing such business and by the beneficial owner, if any, on whose behalf the proposal is made, and (D) any material interest of such stockholder proposing such business and the beneficial owner, if any, on whose behalf the proposal is made in such business. Notwithstanding the foregoing provisions of this Section 2.10(c), a stockholder must also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 2.10(c). Nothing in this Section 2.10(c) will be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended. (d) Special Meeting of Stockholders At a special meeting of stockholders, only such business may be conducted or considered as is properly brought before the meeting. To be properly brought before a special meeting, business must be (i) specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the chairman of the meeting or a majority of the Whole Board in accordance with Section 2.5 hereof or (ii) otherwise properly brought before the meeting by the chairman of the meeting or by or at the direction of a majority of the Whole Board. (e) Determination of Business Properly Brought The determination of whether any business sought to be brought before any annual or special meeting of the stockholders is properly brought before such meeting in accordance with this Section 2.10 will be made by the chairman of such meeting. If the chairman of the meeting determines that any business is not properly brought before such meeting, he or she will so declare to the meeting and any such business will not be conducted or considered. Section 2.11. Adjourned Meetings A meeting of stockholders may be adjourned to another time or place as provided herein. Whenever a meeting is adjourned, the determination of stockholders of record shall apply to any adjournment to the meeting unless the Board of Directors fixes a new record for the adjourned meeting, in which event the new record date shall determine the stockholders of record for the adjourned meeting. Notice of the adjourned meeting need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting. At any such adjourned meeting at which a quorum (or a quorum of a class) is present, any business may be transacted that might have been transacted at the original meeting if a quorum (or a quorum of such class) had then been presented. 6 Section 2.12 Inspectors of Election The chairman of the meeting shall appoint as many inspectors of election as may be required to conduct the vote cast by ballot on any matter coming before the meeting. ARTICLE III - DIRECTORS Section 3.1 Board of Directors (a) Powers The business of the Corporation shall be managed by a Board of Directors, except as may be otherwise provided by the GCL. (b) Number The number of Directors that shall constitute the Whole Board of Directors shall be fifteen (15). Such number shall be automatically increased by two whenever the holders of Preferred Stock become entitled, pursuant to the Preferred Stock Designation, to elect two (2) Directors and such persons have been elected in accordance with the By-Laws and the number of Directors shall be automatically reduced by two (2) whenever the right of the holders of Preferred Stock to elect such two (2) Directors shall cease. Except upon the affirmative vote of the holders of at least a majority of the Preferred Stock, voting as a single class, no resolution or amendment may change the number of Directors to be elected by the holders of Preferred Stock as above stated. (c) Classes The Board of Directors shall be divided into Class I, Class II and Class III, with five (5) Directors in each class, as provided in the Certificate of Incorporation. (d) Qualification Directors need not be stockholders. (e) Term of Office Subject to the provisions of Article Ninth of the Certificate of Incorporation, each Director shall hold office from the day he or she is elected or chosen until the next annual meeting of all stockholders and until his or her successor is elected and qualified or until his or her earlier resignation, death or removal or, in the case of Directors elected only by the holders of Preferred Stock, until their term of office ends pursuant to the provisions of the Preferred Stock Designation. 7 Section 3.2 Vacancies Subject to the rights, if any, of any class or series of the Corporation's preferred stock specified in the certificate of designations, preferences and rights relating to such class or series to elect additional Directors, including without limitation, under the circumstances specified in the Preferred Stock Designation and Section 3.5 hereof, newly created directorships resulting from any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal, or other cause will be filled solely by the affirmative vote of sixty percent (60%) of the remaining Directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining Director provided, however, any such vacancies arising during the first or second term of a Class I, Class II or Class III Director will be filled by a nominee of the remaining Directors who were nominated by the same Original Nominating Entity as the vacating Director in accordance with the procedures set out in Article Ninth, Section 2 of the Certificate of Incorporation. Any Director elected in accordance with the preceding sentence will hold office for the remainder of the full term of the class of Directors in which the new directorship was created or the vacancy occurred and until such Director's successor is elected and qualified. No decrease in the number of Directors constituting the Board of Directors will shorten the term of an incumbent Director. Section 3.3 Resignation Any Director may resign at any time by giving written notice of such resignation to the Board of Directors, the Chairman, the President or the Secretary. Any such resignation shall take effect at the time specified therein or, if no time be specified, upon receipt thereof by the Board of Directors or one of the above named Officers and, unless specified therein, the acceptance of such resignation shall not be necessary to make it effective. When one or more Directors shall resign from the Board of Directors, a majority of the Directors then in office, including those who have tendered resignations with respect to which effectiveness has not occurred, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective and each Director so chosen shall hold office for the term specified in Section 3.1(e) hereof. Notwithstanding the foregoing prior to the third annual election of directors, such vacancies shall be filled in accordance with the terms of Section 3.5(a) hereof. Section 3.4 Removal Subject to the rights, if any, of the holders of Preferred Stock to elect additional Directors under circumstances specified in the Preferred Stock Designation and Section 3.5(a) hereof, any Director may be removed from office by the stockholders only for cause and only in the manner provided in the Certificate of Incorporation. 8 Section 3.5 Nominations of Directors; Election (a) Procedures for the First Three Annual Elections Through the annual election of Directors at the annual meeting of stockholders to be held in 1996, nominations for Directors whether to fill a vacancy created by resignation, removal or otherwise, shall be made in accordance with Article Ninth of the Certificate of Incorporation. (b) Procedures After the 1996 Annual Election of Directors (i) Eligibility for Election Subject to the rights, if any, of any class or series of the Corporation's preferred stock specified in the certificate of designations, preferences and rights relating to such class or series to elect additional Directors, including without limitation, under the circumstances specified in the Preferred Stock Designation and Section 3.5(a) hereof, only persons who are nominated in accordance with the following procedures will be eligible for election at a meeting of stockholders as Directors of the Corporation. (ii) Nominations Nominations of persons for election as Directors of the Corporation may be made only at an annual meeting of stockholders (i) by or at the direction of the Board of Directors, or (ii) by any stockholder who is a stockholder of record at the time of giving of notice provided for in this Section 3.5, who is entitled to vote for the election of Directors at such meeting, and who complies with the procedures set forth in this Section 3.5(b). All nominations by stockholders must be made pursuant to timely notice in proper written form to the Secretary. (iii) Stockholder Nominations To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than forty-five (45) calendar days before the date on which the Corporation first mailed its proxy materials for the prior year's annual meeting of stockholders. If the date of the annual meeting changes by more than thirty (30) days from the prior year, then the notice must have been received a reasonable time before the Corporation mails its proxy materials, but in any event, not less than twenty-five (25) calendar days prior to such mailing. To be in proper written form, such stockholder's notice must set forth or include (i) the name and address, as they appear on the Corporation's books, of the stockholder giving the notice and of the beneficial owner, if any, on whose behalf the nomination is made; (ii) a representation that the stockholder giving the notice is a holder of record of stock of the Corporation entitled to vote at such annual meeting and intends to appear in person or by proxy at the annual meeting to nominate the person or persons specified in the notice; (iii) the class and number of shares 9 of stock of the Corporation owned beneficially and of record by the stockholder giving the notice and by the beneficial owner, if any, on whose behalf the nomination is made; (iv) a description of all arrangements or understandings between or among any of (A) the stockholder giving the notice, (B) the beneficial owner on whose behalf the notice is given, (C) each nominee, and (D) any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder giving the notice; (v) such other information regarding each nominee proposed by the stockholder giving the notice as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, by the Board of Directors; and (vi) the signed consent of each nominee to serve as a director of the Corporation if so elected. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a Director must furnish to the Secretary that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. The chairman of the meeting or stockholders will, if the facts warrant, determine that a nomination was not made in accordance with the procedures prescribed by this Section 3.5, and if he or she should so determine, he or she will so declare to the meeting and the defective nomination will be disregarded. Notwithstanding the foregoing provisions of this Section 3.5, a stockholder must also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 3.5. Section 3.6 Regular Meetings Regular meetings of the Board of Directors may be held immediately after the annual meeting of the stockholders and at such other time and place either within or without the State of Delaware as may from time to time be determined by the Board of Directors. Notice of regular meetings of the Board of Directors need not be given. Section 3.7. Special Meetings Special meetings of the Board of Directors may be called by the Chairman or the President on one (1) day's notice to each Director by whom such notice is not waived, given either personally or by mail, telephone, telegram, telex, facsimile, or similar medium of communication, and will be called by the Chairman or the President in like manner and on like notice on the written request of five (5) or more Directors. Special meetings of the Board of Directors may be held at such time and place either within or without the State of Delaware as is determined by the Board of Directors or specified in the notice of any such meeting. Section 3.8. Quorum At all meetings of the Board of Directors, a majority of the total number of Directors then in office will constitute a quorum for the transaction of business. Except for the designation of committees as hereinafter provided and except for actions required by these By-Laws or the Certificate of Incorporation to be taken by a majority of the Whole Board or by eighty percent 10 (80%) of the Directors then in office, the act of a majority of the Directors present at any meeting at which there is a quorum will be the act of the Board of Directors. If a quorum is not present at any meeting of the Board of Directors, the Directors present thereat may adjourn the meeting from time to time to another place, time, or date, without notice other than announcement at the meeting, until a quorum is present. Section 3.9. Participation in Meetings by Telephone Conference Members of the Board of Directors or any committee designated by the Board of Directors may participate in a meeting of the Board of Directors or any such committee, as the case may be, by means of telephone conference or similar means by which all persons participating in the meeting can hear each other, and such participation in a meeting will constitute presence in person at the meeting. Section 3.10. Committees (a) Generally The Board of Directors, by resolution passed by a majority of the Whole Board, will designate executive, audit and compensation committees of not less than five (5) members of the Board of Directors. (b) The Executive Committee The Board of Directors may appoint an Executive Committee from time to time. The Executive Committee will have the authority to exercise the power of the Board of Directors in the management and business affairs of the company except in so far as it may otherwise be limited in the last sentence of this Subsection 3.10(b). The Executive Committee will be composed as the Board of Directors may, from time to time, determine. The Executive Committee will have and may exercise the powers of the Board of Directors granted to it by the Board of Directors from time to time, except the power to amend these By- Laws or the Certificate of Incorporation (except, to the extent authorized by a resolution of the Whole Board, to fix the designation, preferences, and other terms of any class or series of preferred stock), adopt an agreement of merger or consolidation, authorize the issuance of stock, declare a dividend or recommend to the stockholders the sale, lease, or exchange of all or substantially all of the Corporation's property and assets, a dissolution of the Corporation, or a revocation of a dissolution, and except as otherwise provided by the GCL. (c) The Audit Committee The Audit Committee will review the professional services to be provided by the Corporation's independent auditors and the independence of such auditors from the management of the Corporation. The Audit Committee will also review the scope of the audits by the Corporation's independent auditors, the annual financial statements of the Corporation, the Corporation's system 11 of internal accounting controls and such other matters with respect to the accounting, auditing and financial reporting practice and procedures of the Corporation as it may find appropriate or as may be brought to its attention. The Audit Committee will also meet from time to time with members of the Corporation's internal audit staff. (d) The Compensation Committee The Compensation Committee will review executive salaries, administer the bonus, incentive, compensation and stock option plans of the Corporation and approve the salaries and other benefits of the executive officers of the Corporation. (e) Other Committees The Board of Directors, by resolution passed by a majority of the Whole Board, may designate one or more additional committees, each such committee to consist of one or more Directors and each to have such lawfully delegable powers and duties as the Board of Directors may confer. (f) Terms; Appointment The Executive, Audit and Compensation Committees and each other committee of the Board of Directors will serve at the pleasure of the Board of Directors or as may be specified in any resolution from time to time adopted by the Board of Directors. The Board of Directors may designate one or more Directors as alternate members of any such committee, who may replace any absent or disqualified member at any meeting of such committee. In lieu of such action by the Board of Directors, in the absence or disqualification of any member of a committee of the Board of Directors, the members thereof present at any such meeting of such committee and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. (g) Powers Except as otherwise provided in these By-Laws or the GCL, any committee of the Board of Directors, to the extent provided in the resolution of the Board of Directors establishing such committee (subject to the limitations in Section 3.10(b) hereof), will have and may exercise such other powers and authority of the Board of Directors in the direction of the management of the business and affairs of the Corporation as the Board of Directors may from time to time prescribe by resolution. Any such committee designated by the Board of Directors will have such name as may be determined from time to time by resolution adopted by the Board of Directors. Unless otherwise prescribed by the Board of Directors, a majority of the members of any committee of the Board of Directors will constitute a quorum for the transaction of business, and the act of a majority of the members present at a meeting at which there is a quorum will be the act of such committee. Each committee of the Board of Directors may prescribe its own rules for calling and holding meetings and its method of procedure, subject to any rules prescribed by the Board of Directors, and will keep a written record of all actions taken by it. 12 (h) Composition of Committees A majority of the members of the Executive, Audit and Compensation Committees, and all of the members of any other committee the primary responsibilities of which include (i) reviewing the professional services to be provided by the Corporation's independent auditors and the independence of such firm from the Corporation's management, reviewing financial statements with management or independent auditors, and/or reviewing internal accounting controls, (ii) reviewing and approving salaries and other compensation, whether cash or non-cash, and benefits of the Corporation's executive officers, or (iii) subject to the nominations procedures set forth in the Certificate of Incorporation and these By-Laws, recommending candidates to the Board of Directors for nomination for election to the Board of Directors, will be non-employee Directors. (i) ALPA, IAM and IFFA Representation A Director elected by the holders of ALPA Preferred Stock, a Director elected by the holders of IAM Preferred Stock and a Director elected by the holders of IFFA Preferred Stock (collectively the "Labor Directors") shall be entitled to sit as voting members of any committee authorized hereby, including committees existing on the effective date hereof, which shall consider, review, or authorize the merger, consolidation, restructuring or business combination of the Corporation with, or into, any other entity or the sale, transfer or abandonment of significant assets of the Corporation. The Labor Directors shall serve one year terms on a rotating basis on the Compensation, Finance and Executive Committees. Section 3.11. Compensation The Board of Directors may establish the compensation for, and reimbursement of the expenses of, Directors for membership on the Board of Directors and on committees of the Board of Directors, attendance at meetings of the Board of Directors or committees of the Board of Directors, and for other services by Directors to the Corporation or any of its majority-owned subsidiaries. Section 3.12 Rules The Board of Directors may adopt rules and regulations for the conduct of meetings and the oversight of the management of the affairs of the Corporation. ARTICLE IV - OFFICERS Section 4.1 Officers; Titles, Selection, Term, and Qualification The Officers of the Corporation shall be a Chief Executive Officer, who may be designated as Chairman of the Board and/or President, one or more Vice Chairmen, one or more Vice Presidents (one or more who may be designated as Senior Vice President(s) or such other 13 descriptive title as the Board shall determine), a Treasurer, a Controller, a Secretary, and such other Officers and Assistant Officers as the Board of Directors may, from time to time, elect, each of whom shall be elected by and subject to the control of the Board of Directors. Each Officer shall hold office from the time he or she is elected or appointed and qualified, unless he or she shall resign, die, or be removed at an earlier date. Any number of offices may be held by the same person. Except as may be required by the GCL, any office may be left vacant from time to time. Section 4.2 Appointment of Staff and Assistant Officers The Chief Executive Officer of the Corporation may, except as provided in Section 4.1 hereof, create and fill any positions, including the positions of Staff, Regional, and Assistant Vice Presidents, Assistant Treasurers, and Assistant Controllers, that he or she may deem advisable, and may delegate that authority in whole or in part to any Officer or Officers, as permitted by the Certificate of Incorporation and the By-Laws. Section 4.3. Removal The Board of Directors may remove any Officer, with or without cause, at any time, but only by the affirmative vote of a majority of the Whole Board. All employees shall hold their positions at the discretion of, and may be removed at any time by, the Committee, Officer, or other person having the authority to employ them, as well as the Board of Directors. Section 4.4. Resignation Any Officer may resign at any time by giving written notice of such resignation to the Board of Directors, the Chief Executive Officer, or the Officer to whom he or she reports. Any such resignation shall take effect at the time specified therein or, if no time be specified, upon receipt thereof by the Board of Directors or one of the above named Officers and, unless specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 4.5. Vacancies Any vacancy in the Office of any Officer, however caused, may be filled by the Board of Directors or the Executive Committee. Section 4.6 Chairman of the Board The Chairman of the Board shall preside at all meetings of the Board of Directors at which he or she is present and shall have such other powers and duties as the By-Laws or the Board of Directors may from time to time prescribe. Section 4.7 Vice Chairman Each Vice Chairman shall oversee such of the daily operations of the Corporation and its subsidiaries and operating divisions as may be assigned by the Chief Executive Officer, and shall 14 have such powers and duties as the By-Laws or the Board of Directors or the Chief Executive Officer, pursuant to the authority of the Board of Directors, may from time to time prescribe. Section 4.8 President The President shall have such powers and duties as the By-Laws or the Board of Directors or the Chief Executive Officer, pursuant to the authority of the Board of Directors, may from time to time prescribe. Section 4.9 Chief Executive Officer The Chief Executive Officer shall have general charge of the business and affairs of the Corporation and shall exercise and perform the duties incident to the office of Chief Executive Officer of the Corporation, subject to the direction of the Board of Directors. He or she shall have such other powers and duties as the By-Laws or the Board of Directors may from time to time prescribe. During the absence of the Chief Executive Officer or his or her inability to act, the Officer designated by the Board of Directors shall exercise the powers of the Chief Executive Officer, subject to the direction of the Board of Directors. Section 4.10 Officer Vice Presidents Each Vice President who is an Officer shall have such powers and duties as the Board of Directors or the Chief Executive Officer, pursuant to the authority of the Board of Directors, may from time to time prescribe. Section 4.11 Treasurer The Treasurer shall have the care of all funds and securities of the Corporation and shall have such other powers and duties as the Board of Directors or the Chief Executive Officer, pursuant to the authority of the Board of Directors, may from time to time prescribe. Section 4.12 Controller The Controller shall have the supervision of the books of account of the Corporation and shall have such other powers and duties as the Board of Directors or the Chief Executive Officer, pursuant to the authority of the Board of Directors, may from time to time prescribe. Section 4.13 Secretary The Secretary shall record all the proceedings of the meetings of the stockholders, the Board of Directors, and the Executive Committee, and, unless otherwise directed, of the other committees of the Board of Directors, in books to be kept for that purpose. He or she shall have such other powers and duties as the Board of Directors or the Chief Executive Officer, pursuant to the authority of the Board of Directors, may from time to time prescribe. 15 Section 4.14 Assistant Officers Assistant Officers shall have such powers and duties as the By-Laws, the Board of Directors or the Chief Executive Officer, pursuant to the authority of the Board of Directors, may from time to time prescribe. Section 4.15. Bond The Corporation may, but need not, secure the fidelity of any or all of its Officers, agents, or employees by bond or otherwise. ARTICLE V - CAPITAL STOCK Section 5.1 Stock Certificates The interest of each holder of stock of the Corporation shall be evidenced by a certificate or certificates in such form as the Board of Directors may from time to time prescribe. Each certificate shall state the number and class of shares that it represents. Each certificate shall be signed by, or in the name of the Corporation by, the Chairman of the Board, the President or a Vice President and by the Treasurer or the Secretary, except that where any such certificate is countersigned (1) by a transfer agent other than the Corporation or its employee, or (2) by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any Officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon a certificate, shall have ceased to be such Officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such Officer, transfer agent or registrar at the date of issue. Section 5.2 Transfer of Stock Shares of stock shall be transferable on the books of the Corporation pursuant to the GCL and such rules and regulations as the Board of Directors shall from time to time prescribe. Section 5.3 Transfer Agent; Registrar The Board of Directors may appoint one or more transfer agents and one or more registrars for each class of stock it issues and may require each stock certificate to bear the signature of a transfer agent or a registrar or both. Section 5.4. Holders of Record The Corporation may treat the holder of record of a share of its stock as the complete owner thereof entitled to receive dividends thereon and to vote such share and otherwise entitled to all the rights and powers of a complete owner thereof, notwithstanding notice to the contrary. 16 Section 5.5. Fractional Shares The Corporation may, but shall not be required to, issue certificates for fractions of a share where necessary to effect authorized transactions, or the Corporation may pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or it may issue scrip in registered or bearer form over the manual or facsimile signature of an officer of the Corporation or of its agent, exchangeable as therein provided for full shares, but such scrip shall not entitle the holder to any rights of a stockholder except as therein provided. The Board of Directors shall have power and authority to make all such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates representing shares of the Corporation. Section 5.6. Lost, Stolen or Destroyed Certificates The Corporation may issue a new certificate of stock in place of any certificate, theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Board of Directors may require the owner of any lost, stolen or destroyed certificate, or his or her legal representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate. ARTICLE VI - INDEMNIFICATION PROCEDURES Section 6.1. Indemnification Procedures In furtherance of the indemnification permitted by Article Eleventh of the Certificate of Incorporation, but not in limitation thereof, the following procedures, presumptions, and remedies will apply with respect to advancement of expenses and the right to indemnification under the Certificate of Incorporation. When used herein the term "indemnitee" shall mean any person who is one of the persons set forth in Article Eleventh of the Certificate of Incorporation as being entitled to indemnification. (a) Advances All reasonable expenses incurred by or on behalf of an indemnitee in connection with any proceeding will be advanced to the indemnitee by the Corporation within thirty (30) calendar days after the receipt by the Corporation of a statement or statements from the indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such proceeding. Such statement or statements will describe in reasonable detail the expenses incurred by the indemnitee and, if and to the extent required by the GCL at the time of such advance, will include or be accompanied by an undertaking by or on behalf of the indemnitee to repay such amounts advanced as to which it may ultimately be determined that the indemnitee is not entitled. 17 If such an undertaking is required by the GCL at the time of an advance, no security will be required for such undertaking and such undertaking will be accepted without reference to the recipient's financial ability to make repayment (b) Procedures To obtain indemnification the indemnitee will submit to the Secretary of the Corporation a written request, including such documentation supporting the claim as is reasonably available to the indemnitee and is reasonably necessary to determine whether and to what extent the indemnitee is entitled to indemnification (the "Supporting Documentation"). The determination of the indemnitee's entitlement to indemnification will be made not less than sixty (60) calendar days after receipt by the Corporation of the written request for indemnification together with the Supporting Documentation. The Secretary will promptly upon receipt of such a request for indemnification advise the Board of Directors in writing that the indemnitee has requested indemnification. The indemnitee's entitlement to indemnification hereunder will be determined in one of the following ways: (i) by a majority vote of the Disinterested Directors (as hereinafter defined), if they constitute a quorum of the Board of Directors, or, in the case of an indemnitee that is not a present or former officer of the Corporation, by any committee of the Board of Directors or committee of officers or agents of the Corporation designated for such purpose by a majority of the Whole Board; (ii) by a written opinion of Independent Counsel (as hereinafter defined) if (1) a Change of Control (as hereinafter defined) has occurred and the indemnitee so requests or (2) in the case of an indemnitee that is a present or former officer of the Corporation, a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, a majority of such Disinterested Directors so directs; (iii) by the stockholders (but only if a majority of the Disinterested Directors, if they constitute a quorum of the Board of Directors, presents the issue of entitlement to indemnification to the stockholders for their determination); or (iv) as provided below. In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to clause (ii) above, a majority of the Disinterested Directors will select the Independent Counsel, but only an Independent Counsel to which the indemnitee does not reasonably object; provided, however, that if a Change of Control has occurred, the indemnitee will select such Independent Counsel, but only an Independent Counsel to which the Board of Directors does not reasonably object Except as otherwise expressly provided herein the indemnitee will be presumed to be entitled to indemnification upon submission of a request for indemnification together with the Supporting Documentation in accordance herewith above, and thereafter the Corporation will have the burden of proof to overcome that presumption in reaching a contrary determination. In any event, if the person or persons empowered hereunder to determine entitlement to indemnification has not been appointed or has not made a determination within sixty (60) calendar days after receipt by the Corporation of the request therefor together with the Supporting Documentation, the indemnitee will be deemed to be entitled to indemnification and the indemnitee will be entitled to such indemnification unless (i) the indemnitee misrepresented or failed to disclose a material fact in making the request for indemnification or in the Supporting Documentation or (ii) such indemnification is prohibited by law. The termination of any proceeding, or of any claim, issue, or matter therein, by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or 18 its equivalent, will not, of itself, adversely affect the right of the indemnitee to indemnification or create a presumption that the indemnitee did not act in good faith and in a manner which the indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation or, with respect to any criminal proceeding, that the indemnitee had reasonable cause to believe that his or her conduct was unlawful. In the event that a determination is made pursuant hereto that the indemnitee is not entitled to indemnification (i) the indemnitee will be entitled to seek an adjudication of his or her entitlement to such indemnification either, at the indemnitee's sole option, in (x) an appropriate court of the State of Delaware or any other court of competent jurisdiction or (y) an arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association; (ii) any such judicial proceeding or arbitration will be de novo and the indemnitee will not be prejudiced by reason of such adverse determination; and (iii) in any such judicial proceeding or arbitration the Corporation will have the burden of proving that the indemnitee is not entitled to indemnification. If a determination is made or deemed to have been made, pursuant hereto that the indemnitee is entitled to indemnification, the Corporation will be obligated to pay the amounts constituting such indemnification within five (5) business days after such determination has been made or deemed to have been made and will be conclusively bound by such determination unless (i) the indemnitee misrepresented or failed to disclose a material fact in making the request for indemnification or in the Supporting Documentation or (ii) such indemnification is prohibited by law. In the event that advancement of expenses is not timely made pursuant hereto or payment of indemnification is not made within five (5) business days after a determination of entitlement to indemnification has been made or deemed to have been made pursuant hereto, the indemnitee will be entitled to seek judicial enforcement of the Corporation's obligation to pay to the indemnitee such advancement of expenses or indemnification. Notwithstanding the foregoing, the Corporation may bring an action, in an appropriate court in the State of Delaware or any other court of competent jurisdiction, contesting the right of the indemnitee to receive indemnification hereunder due to the occurrence of any event described in subclause (i) or (ii) of the first sentence of this paragraph (a "Disqualifying Event"); provided, however, that in any such action the Corporation will have the burden of proving the occurrence of such Disqualifying Event. The Corporation will be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to the provisions hereof that the procedures and presumptions hereof are not valid, binding, and enforceable and will stipulate in any such court or before any such arbitrator that the Corporation is bound by all the provisions hereof. In the event that the indemnitee, pursuant to the provisions hereof, seeks a judicial adjudication of, or an award in arbitration to enforce, his or her rights under, or to recover damages for breach hereunder, the indemnitee will be entitled to recover from the Corporation, and will be indemnified by the Corporation against, any expenses actually and reasonably incurred by the indemnitee if the indemnitee prevails in such judicial adjudication or arbitration. If it is determined in such judicial adjudication or arbitration that the indemnitee is entitled to receive part but not all 19 of the indemnification or advancement of expenses sought, the expenses incurred by the indemnitee in connection with such judicial adjudication or arbitration will be prorated accordingly. For purposes of this Article VI: "Change in Control" means the occurrence of any of the following events: (1) The Corporation is merged, consolidated, or reorganized into or with another corporation or other legal entity, and as a result of such merger, consolidation, or reorganization less than a majority of the combined voting power of the then-outstanding securities of such corporation or entity immediately after such transaction are held in the aggregate by the holders of the voting stock immediately prior to such transaction; (2) The Corporation sells or otherwise transfers all or substantially all of its assets to another corporation or other legal entity and, as a result of such sale or transfer, less than a majority of the combined voting power of the then-outstanding securities of such other corporation or entity immediately after such sale or transfer is held in the aggregate by the holders of voting stock immediately prior to such sale or transfer; (3) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form, or report or item therein), each as promulgated pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), disclosing that any person (as the term "person. is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing thirty-five percent (35%) or more of the combined voting power of the voting stock; provided, however, that no person will be deemed a member of a "group" (as that term is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) for purposes of this Article VI solely by reason of being a party to the Stockholders Agreement dated as of November 3, 1993 by and among the Corporation and William F. Compton, Don R. Jacobs and Marcus P. Spiegel, as ALPA Trustees, Shawmut Bank, as IAM Trustee, Plan Trustee Committee of IFFA, Trans World Airlines Employees' Stock Ownership Plan, as IFFA Trustee, Glenn R. Zander, as Other Employee Trustee, and LaSalle National Trust, N.A., as Voting Trustee; or (4) The Corporation files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form, or report or item therein) that a change in control of the Corporation has occurred or will occur in the future pursuant to any then- existing contract or transaction. Notwithstanding the immediately above clauses (3) and (4), unless otherwise determined in a specific case by majority vote of the Board of Directors, a "Change in Control" will not be deemed to have occurred for purposes of such clauses solely because (x) the Corporation, (y) an entity in which the Corporation, directly or indirectly, beneficially owns fifty percent (50%) or more of the 20 voting securities (a "Subsidiary"), or (z) any employee stock ownership plan or any other employee benefit plan of the Corporation or any Subsidiary either Files of becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-l, Form 8-K, or Schedule 14A (or any successor schedule, form, or report or item therein) under the Exchange Act disclosing beneficial ownership by it of shares of voting stock, whether in excess of thirty-five percent (35%) or otherwise, or because the Corporation reports that a change in control of the Corporation has occurred or will occur in the future by reason of such beneficial ownership. "Disinterested Director" means a Director who is not or was not a party to the Proceeding in respect of which indemnification is sought by the indemnitee. "Independent Counsel" means a law firm or a member of a law firm that neither presently is, nor in the past five (5) years has been, retained to represent (i) the Corporation or the indemnitee in any matter material to either such party or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" will not include any person who, under the applicable standards of professional conduct then prevailing under the law of the State of Delaware, would be precluded from representing either the Corporation or the indemnitee in an action to determine the indemnitee's rights hereunder. The Corporation may purchase and maintain insurance to protect itself and any indemnitee against any expenses, judgments, fines, and amounts paid in settlement or incurred by any indemnitee in connection with any proceeding to the fullest extent permitted by the GCL as then in effect The Corporation may enter into contracts with any person entitled to indemnification hereunder or otherwise, and may create a trust fund, grant a security interest, or use other means (include without limitation a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided hereunder. ARTICLE VII - MISCELLANEOUS Section 7.1. Form of Records Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs, or any other information storage device; provided, however, that the records so kept can be converted into clearly legible written form within a reasonable time. The Corporation shall so convert any records so kept on the request of any person entitled to inspect the same. Section 7.2 Waiver of Notice Whenever notice is required to be given under any provision of the GCL, the Certificate of Incorporation or the By-Laws, a written waiver thereof, signed by a person entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent notice to such person. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except 21 when such person attends a meeting for the express purpose of objecting, at the beginning of such meeting, to the transaction of any business because such meeting had not been lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting of the stockholders or of the Board of Directors or of any committee thereof need be specified in any written waiver of notice. Section 7.3 Voting upon Stock Unless otherwise ordered by the Board of Directors, the Chairman of the Board, the President, the Secretary, or the Treasurer shall have full power and authority to attend and vote at any meeting of stockholders of any corporation in which the Corporation may own stock and to grant proxies and to give written consents in respect of such stock. The Board of Directors may from time to time confer like powers on any other person or persons. Section 7.4 Collections and Depositories Checks, drafts, and other instruments for the payment of money to the Corporation shall be endorsed for collection, either manually or by facsimile, by such Officer or Officers or other person or persons as may from time to time be specified by the Board of Directors or in a manner prescribed by the Board of Directors and shall be deposited in such banks, trust companies, or other depositories as may be designated from time to time by the Board of Directors or in a manner prescribed by the Board of Directors. Section 7.5 Checks Checks, drafts or other instruments for the payment of money by the Corporation shall be signed in such manner, either manually or by facsimile, by such Officer or Officers or other person or persons as may from time to time be specified by the Board of Directors or in a manner prescribed by the Board of Directors. Section 7.6 Fiscal Year The fiscal year of the Corporation shall begin on the first day of January and end on the thirty-first day of December in each year. Section 7.7 Corporate Seal The Corporate Seal of the Corporation shall be in such form as the Board of Directors may from time to time prescribe and the Secretary or the Treasurer or any Assistant Secretary or Assistant Treasurer may cause it or a facsimile thereof to be impressed or fixed or in any other manner reproduced on any instrument that is to be sealed with the Corporate Seal and may attest the same. 22 Section 7.8 Reliance upon Books, Reports, and Records Each Director, each member of a committee designated by the Board of Directors, and each officer of the Corporation will, in the performance of his or her duties, be fully protected in relying in good faith upon the records of the Corporation and upon such information, opinions, reports, or statements presented to the Corporation by any of the Corporation's officers or employees, or committees of the Board of Directors, or by any other person or entity as to matters the Director, committee member, or officer believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation. Section 7.9 Time Periods In applying any provision of these By-Laws that requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days will be used unless otherwise specified, the day of the doing of the act will be excluded, and the day of the event will be included. Section 7.10 Certain Defined Terms Terms used herein with initial capital letters that are not otherwise defined are used herein as defined in the Certificate of Incorporation. Section 7.11 Ratifications Any transaction, questioned in any law suit on the ground of lack of authority, defective or irregular execution, adverse interest of director, officer or stockholder, nondisclosure, miscomputation, or the application of improper principles or practices of accounting, may be ratified before or after judgment by the Board of Directors or by the stockholders, and if so ratified shall have the same force and effect as if the questioned transaction had been originally duly authorized. Such ratification shall be binding upon the Corporation and its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned transaction. Section 7.12 Authority for Certain Corporate Actions The following actions must be approved by the Board of Directors, which approval shall not be given over the dissenting vote of (i) the Directors elected by the holders of ALPA Preferred Stock, IFFA Preferred Stock and IAM Preferred Stock ("Labor Directors") plus (ii) two Directors other than the Labor Directors: (a) any sale, transfer or disposition of, in a single or series of transactions, twenty percent (20%) or more of the Corporation's assets, except for transactions in the ordinary course of business including aircraft transactions as part of a fleet management plan; (b) any merger or consolidation of the Corporation with or into another entity; (c) any business combination within the meaning of Section 203 of the GCL; 23 (d) a dissolution or liquidation of the Corporation; (e) any filing of a petition for bankruptcy, reorganization or receivership under any state or federal bankruptcy, reorganization or insolvency law; (f) any repurchase, retirement or redemption of the Corporation's stock, or securities prior to their scheduled maturity or expiration, except for mandatory redemptions of any redeemable preferred stock of the Corporation and for redemptions out of proceeds of any substantially concurrent offering of comparable or junior securities; (g) any acquisition of assets not related to the Corporation's current business as an air carrier in a single or series of related transactions in excess of $50,000,000 adjusted annually by reference to the Consumer Price Index as published from time to time by the Bureau of Labor Statistics; or (h) any sale of the Corporation's capital stock or securities convertible into capital stock of the Corporation to any person if (A) at the time of issuance or (B) assuming conversion of all outstanding convertible securities of the Corporation, such person or entity would own twenty percent (20%) or more of the outstanding capital stock of the Corporation. ARTICLE VIII - AMENDMENT AND SEVERABILITY OF BY-LAWS Section 8.1. Amendment (a) To the extent permitted in the Certificate of Incorporation and the By-Laws, the Board of Directors shall have power to adopt, amend or repeal By-Laws. To the extent permitted in the Certificate of Incorporation and the By-Laws, By-Laws adopted by the Board of Directors may be repealed or changed, and new By-Laws made, by the stockholders, and the stockholders may prescribe that any By-Law made by them shall not be altered, amended or repealed by the Board of Directors. (b) Notwithstanding any provision of the Certificate of Incorporation or these By-Laws to the contrary, the following provisions of these By-Laws shall not be amended prior to September 1, 2000 without the affirmative vote of the Directors elected by the holders of the ALPA Preferred Stock, IAM Preferred Stock and IFFA Preferred Stock: Section 3.10(i), Section 7.12 and this Section 8.1(b). 24 Section 8.2. SEVERABILITY If any provision or provisions of these By-Laws are held to be invalid, illegal, or unenforceable for any reason whatsoever: (i) the validity, legality, and enforceability of the remaining provisions of these By-Laws (including without limitation all portions of any paragraph of these By-Laws containing any such provision held to be invalid, illegal, or unenforceable, that are not themselves invalid, illegal, or unenforceable) will not in any way be affected or impaired thereby and (ii) to the fullest extent possible, the provisions of these By-Laws (including without limitation all portions of any paragraph of those By-Laws containing any such provision held to be invalid, illegal, or unenforceable, that are not themselves invalid, illegal, or unenforceable) will be construed so as to give effect to the intent manifested by the provision held invalid, illegal, or unenforceable. 25 EX-10.44 3 AGREEMENT AGREEMENT BETWEEN TRANS WORLD AIRLINES, INC. AND THE AIR LINE PILOTS IN SERVICE OF TRANS WORLD AIRLINES, INC. REPRESENTED BY THE AIR LINE PILOTS ASSOCIATION, INTERNATIONAL (EFFECTIVE SEPTEMBER 1, 1998) TABLE OF CONTENTS Section Page - - ------------------------------------------------------------------------------ 1 Recognition and Scope 1 2 General 12 3 Transportation 16 4 Compensation 19 5 Miscellaneous Pay Rules 25 6 Training and Qualifications 28 7 Trip and Training Expenses 39 8 Deadhead Time 43 9 Scheduling Policy 45 10 Scheduling of Pilots 65 11 Hours of Service 78 12 Reserve Schedule Policy 88 13 Moving Expenses 94 14 Vacation 96 15 Sick Leave with Pay 103 16 Physical Standards 105 17 Seniority 108 18 Leaves of Absence 111 19 Vacancies and Displacements 120 20 Furlough and Employment Protection 135 21 Grievance Procedure 139 22 System Board of Adjustment 143 23 Retirement, Trust and Savings Plans 148 24 Group Benefits 158 25 Agency Shop 166 26 Voluntary Dues / Service Charge Deduction 169 27 Internment, Prisoner, Missing or Hostage Benefits 171 28 Charter Flights 172 29 Agreement Precedence 173 30 Effective Dates and Duration 174 31 Definitions 175 TABLE OF CONTENTS Letters of Agreement Page - - ------------------------------------------------------------------------------- I Civil Reserve Air Fleet 180 II MAC Flying Letter 184 III Physical Standards 186 IV Exemptions - Agency Shop 187 V AIDS Letter 188 VI International Satellite Agreement 190 VII Professional Standards Letter 195 VIII 1957 Liability Letter 197 IX Training Records Availability During Liquidation Letter 198 X Crew Meal Availability Letter 199 XI FAA/Medical Reimbursement Policy Letter of Agreement 200 XII Participative Management Letter, Dated August 31, 1994 201 XIII Corporate Governance Letter, Dated July 8, 1998 204 XIV Regional Pilot Base Agreement 209 XV Engineering Watch Letter 216 XVI Trans States Exception Letter 217 XVII Term Sheet - Letter of Agreement 218 XVIII Furlough/Productivity Letter 221 XIX B727 Flight Engineer Letter of Agreement 222 XX Instructor Letter of Agreement (INS LOA) 224 XXI Line Instructor Pilots/Line Standards Pilots (LIP/LSP LOA) 236 XXII Non-Seniority List Simulator Instructors Letter 242 XXIII Reduced Rate Letter Dated May 21, 1996 244 XXIV Ratification Letter of Agreement 247 Memorandum, re Availability of Other Letters of Agreement and Certain MEC Resolutions 250 THIS AGREEMENT is made and entered into in accordance with the provisions of the Railway Labor Act, as amended, by and between TRANS WORLD AIRLINES, INC. hereinafter known as the "Company" or "TWA" and the AIR LINE PILOTS in service of TRANS WORLD AIRLINES, INC. as represented by the AIR LINE PILOTS ASSOCIATION, INTERNATIONAL, hereinafter known as the "Association" or "ALPA". In making this Agreement, the parties hereto recognize that compliance with the terms of the Agreement and the development of a spirit of cooperation is essential for mutual benefit and for the intent and purpose of the Agreement. It is hereby mutually agreed: SECTION 1 RECOGNITION AND SCOPE (A) Recognition (1) The Air Line Pilots Association, International, has furnished to the Company proof that a majority of the air line pilots employed by the Company has designated the Association to represent them and in their behalf negotiate and conclude an agreement with the Company as to hours of labor, wages, and other employment conditions covering the pilots in the employ of the Company in accordance with the provisions of the Railway Labor Act, as amended. (2) Further, the said Association has been duly certified by the National Mediation Board ("NMB") in Case No. R-3982, dated March 19, 1968 as the designated and authorized representative, for the purposes of the Railway Labor Act, as amended, of those employees of Trans World Airlines, Inc., known as flight engineers and student flight engineers undergoing training on a full-time basis. (B) Scope (1) Except as provided in Section 1(G) below, all present and future flying of any form performed by or for the Company or any Affiliate shall be performed by pilots on the TWA Pilots System Seniority List in accordance with the terms and conditions of this Agreement. Such flying shall include without limitation all revenue flying and non-revenue flying, whether scheduled or unscheduled, (1) on the Company's or an Affiliate's aircraft, or (2) under the Company's or an Affiliate's operational control, or (3) over the Company's or an Affiliate's present and future routes, route authorities, and/or extensions thereof, or (4) subcontracted either to or for any other carrier or entity, or (5) conducted by any other carrier under the TWA name, designator code, logo or marks. (2) Except as agreed in the Letter of Agreement dated July 6, 1998, all individuals who undergo pilot training to perform the Company's or an Affiliate's flying and all individuals who train or check pilots to perform the Company's or an Affiliate's flying, except for ground school classroom instructors and initial factory-conducted training in newly- purchased aircraft, shall be pilots on the TWA Pilots System Seniority List subject to the terms and conditions of the Agreement. (3) All present or future flying, pilot training or pilot services of any form performed for any other carrier by pilots on the TWA Pilots System Seniority List shall be performed under terms and conditions that are no less 1 Section 1(B)(3), cont. favorable than the comparable terms and conditions contained in the Agreement. (4) Neither the Company nor any Affiliate shall, without the Association's prior written consent, enter into any sale, lease, transfer or other disposition of the Company's or an Affiliate's aircraft, international routes or international route authority to any person(s) or entity (the "Buyer") where the Buyer or any air carrier that Controls or is under the Control of the Buyer uses such aircraft or international routes to provide or receive passenger feed to or from the Company pursuant to an agreement or an arrangement with the Company or an Affiliate other than an industry standard interline agreement or its substantial equivalent. (5) Neither the Company nor any Affiliate shall establish any pilot domicile outside the United States or its territories without the Association's prior written consent. (C) Successorship and Parent Companies (1) The Company and its Affiliates shall require any successor, assign, assignee, transferee, administrator, executor and/or trustee of the Company or of a Parent (a "Successor") resulting from the transfer (in a single transaction or in multi-step transactions) to the Successor of the ownership and/or Control of all or substantially all of the equity securities and/or assets of the Company (a "Successorship Transaction") to employ the pilots on the TWA Pilots System Seniority List in accordance with the provisions of the Agreement and to assume and be bound by the Agreement. (2) The Company and its Affiliates shall not conclude any agreement for a Successorship Transaction unless the Successor agrees in writing, as an irrevocable condition of the Successorship Transaction, to assume and be bound by the Agreement, to recognize the Association as the representative of the Successor's pilots, and to guarantee that the pilots on the TWA Pilots System Seniority List will be employed by the Successor in accordance with the provisions of the Agreement. (3) The Company shall not conclude, facilitate or permit any agreement or arrangement that establishes any Parent that is, Controls or is under the Control of an air carrier unless the Parent agrees in writing to be bound by Section 1 of the Agreement in the same manner as the Company. (D) Labor Protective Provisions (1) Successorship and Merger In the event of a Successorship Transaction in which the Successor is an air carrier or any person or entity that Controls or is under the Control of an air carrier (the "Merger Partner"), the Company shall require the Merger Partner to agree, and the Merger Partner shall agree, to employ the Company's pilots and to integrate the pre-merger pilot seniority lists of the Company and the Merger Partner pursuant to Association merger policy if the Merger Partner's pilots are represented by the Association and 2 Section 1(D)(1), cont. otherwise pursuant to Section 3 and 13 of the Allegheny- Mohawk Labor Protective Provisions ("LPPs"). (2) Pilot Transfer Rights in Substantial Asset Sales If the Company or any Affiliate, in a single transaction or a series of related transactions: (i) sells, transfers or disposes of assets which have produced more than twenty percent (20%) of the gross operating revenue of the Company over the twelve (12) months preceding the closing of the asset sale, transfer or disposition; or (ii) sells, transfers, or disposes of assets or operations which reduce(s) or reasonably can be expected to lead to a reduction in the level of available seat miles ("ASMs") operated by the Company at the closing of the asset sale, transfer or disposition by fifteen percent (15%) or more; (iii) sells, transfers or disposes of any international route or route authority; or (iv) sells, transfers or disposes of ten percent (10%) or more of the Company's aircraft fleet as of the closing of the aircraft sale, transfer or disposition (except as part of a phased transport aircraft replacement program which is being diligently pursued in good faith by the Company, and pursuant to which the Company in fact replaces such aircraft within 180 days) to a person or entity or to a group of persons or entities acting in concert (the "Purchaser") that is, Controls or is under the Control of an air carrier or that will operate as, Control or be under the Control of an air carrier following its acquisition of the Company assets (any such transaction or series of transactions that satisfies (i), (ii), (iii) or (iv) above, a "Substantial Asset Sale"), then: (a) The Association, by and through its TWA Master Executive Council ("MEC") shall determine, in its sole discretion, whether or not pilots from the TWA Pilots' System Seniority List (the "Transferring Pilots") shall transfer to the particular Purchaser(s) pursuant to the Substantial Asset Sale. The number of Transferring Pilots shall be determined by calculating the average pilot staffing on a monthly basis over the prior twelve (12) months attributable to the international route or route authority, aircraft and/or other assets or operations transferred to the particular Purchaser in connection with the Substantial Asset Sale. In addition to the above requirements the Company shall use its reasonable good faith efforts to have the particular Purchaser offer employment to the largest practicable number of TWA pilots as Transferring Pilots under the terms of this Section 1(D); and 3 Section 1(D)(2)(b) (b) The Transferring Pilots shall be selected on the basis of TWA system seniority on the TWA Pilots System Seniority List from those pilots who are qualified to operate the aircraft, route, or operation related to the Substantial Asset Sale; provided that for this purpose a pilot shall be deemed "qualified" if he or she is qualified without training (other than recurrent or substantially equivalent training, proficiency check or training necessary to qualify pilots on the operating procedures of the Purchaser) to operate the aircraft transferred to the Purchaser and/or such other aircraft as are intended to be operated by the Purchaser in connection with the assets transferred pursuant to the particular Substantial Asset Sale; provided further that in the event the Purchaser intends to operate different type aircraft than that operated by TWA immediately prior to such Substantial Asset Sale, a pilot shall be deemed "qualified" with respect to such different type aircraft if he or she is able to be trained and certified to operate such different type aircraft; and (c) The Company and its Affiliates shall require each particular Purchaser, and each particular Purchaser shall agree, (i) to employ the Transferring Pilots, (ii) to pay the Transferring Pilots at no less than the lesser of the rates of pay being paid by TWA or the particular Purchaser for the applicable seniority level at the time of the transfer; and (iii) to integrate the Transferring Pilots into the Purchaser's pilots seniority list pursuant to Association merger policy if the Purchaser's pilots are represented by the Association and otherwise pursuant to Sections 3 and 13 of the Allegheny-Mohawk LPPs. (3) Special Protections in a Carrier Fragmentation (a) If the Company sells, transfers or disposes of assets within any twelve (12) month period which, net of asset purchases or acquisitions during the same twelve (12) month period, (i) produced fifteen percent (15%) or more of the ASMs operated by the Company over the prior twelve (12) months, or (ii) produced fifteen (15%) percent or more of the Company's pilot staffing positions over the prior twelve (12) months, or (iii) produced fifteen percent (15%) or more of the Company's annual block hours over the prior twelve (12) months (the closing of any such transaction(s) which alone or in the aggregate satisfy the aforesaid percentage being referred to as a "Triggering Event"), then (i) no pilot on the Company's seniority list on the date of the Triggering Event shall be furloughed during the twelve (12) month period following the Triggering Event, or shall be furloughed in anticipation of any Triggering Event or for the purpose of depriving any pilot of protection under this paragraph; and 4 Section 1(D)(3)(a)(ii) (ii) during the time period in which any of the restrictions described in this Section 1(D)(3) are in effect, the Company will be permitted, at its discretion, notwithstanding any other provision of the Agreement, to require a pilot who would have been furloughed but for the restrictions described in this Section 1(D)(3) to utilize his or her accrued unused vacation. (b) The special protections described in this Section 1(D)(3) are in addition to the pilot transfer and seniority integration rights established in Section 1(D)(2) above in connection with Substantial Asset Sales. However, the Substantial Asset Sales governed by Section 1(D)(2) above shall not be counted in determining whether the Company has reached a Triggering Event (and thereby triggered the special protections) under this Section 1(D)(3) in any twelve (12) month period. (c) In addition, the special protections described in this Section 1(D)(3) shall not apply if the Company can demonstrate, by clear and convincing evidence, based on all the information available at the time of the Triggering Event, that the asset sales, transfers or dispositions that result in a Triggering Event will not result, directly or indirectly in the furlough of Company pilots during the twelve (12) month period following a sale, transfer or disposition. (4) General (a) The Company shall not conclude or enter into any agreement for any transaction or series of transactions that constitute a Substantial Asset Sale or a Merger unless the particular Purchaser or the Merger Partner, as applicable, agrees in writing to offer employment and integrate TWA pilots in accordance with the terms of this Section 1(D) or as otherwise agreed to by ALPA. The Company will not engage in a multiple party sale transaction or any other corporate transaction with the purpose or knowing effect of avoiding the applicability of this Section 1(D). (b) This Section 1(D) shall not apply to (i) any sale lease-back or any financing transaction in which the Company continues to use the financed assets in its operations or (ii) the sale of Trans World Express, Inc. or any or all of its assets. (c) The rights and protections provided the Association and the TWA pilots under this Section 1(D) are in addition to any other rights and protections contained in any other agreement involving the Association and the TWA pilots including other provisions of this Agreement. In the event of a conflict between Section 1 and any other provision of this Agreement, this Section 1 shall control. 5 Section 1(D)(5) (5) Acquisition of Airline Assets In the event (i) the Company acquires international routes or 20 or more aircraft from another carrier (the "Seller") and (ii) the Company's acquisition of such routes or aircraft materially increases the Company's pilot staffing needs and (iii) the terms of the Company's purchase agreement with the Seller require the Company to employ certain of the Seller's pilots with lateral seniority or seniority integration rights, then a reasonable number of transferring pilots from the Seller shall be integrated into the TWA Pilots System Seniority List pursuant to Association Merger Policy if the Seller's pilots are represented by the Association and otherwise pursuant to Sections 3 and 13 of the Allegheny-Mohawk LPPS; provided, however, that no company pilot shall be furloughed or suffer a reduction in pay status as a direct or indirect result of such seniority integration or such acquisition of routes or aircraft. (E) Bankruptcy (1) In the event a petition under Chapters 7 or 11 of the Bankruptcy Code concerning the Company is filed, then: (a) Neither that Company nor any Affiliate shall file any application seeking rejection or modification of any agreement between the Company and the Association pursuant to 11 U.S.C. Section 1113, including a request to implement interim changes in the Agreement pursuant to 11 U.S.C. Section 1113(e). (b) The Company and its Affiliates stipulate and agree that this Agreement permits the reorganization of the Company and assures that all creditors, the debtor and all affected parties are treated fairly and equitably in any reorganization within the meaning of 11 U.S.C. Section 1113. The Company and its Affiliates shall actively oppose a rejection or modification of the Agreement or implementation of interim changes to the Agreement if proposed or supported by any other party. (2) In the event the Agreement is rejected or modified pursuant to 11 U.S.C. Section 1113 notwithstanding Section 1(E)(1) above, then the difference between the rates of pay, rules and working conditions established in this Agreement and the post-rejection rates of pay, rules and working conditions for the Company's pilots shall accrue and be treated as an expense of administration pursuant to 11 U.S.C. Section Section 503(B)(1)(A) and 507 and shall be paid as an administrative priority pursuant to 11 U.S.C. Section Section 503(b)(1)(A) and 507(a)(1). (F) Remedies (1) The Company agrees, and shall require the particular Purchaser (or Successor or Merger Partner if applicable) to agree, to resolve all disputes concerning the interpretation or application of this Section 1 through final and binding arbitration on an expedited basis directly before the ALPA- TWA System Board of Adjustment sitting with a neutral 6 Section 1(F)(1), cont. arbitrator. The dispute shall be filed with the Company within ten (10) days of the interpretation or application of Section 1 and shall be heard no later than fifteen (15) days following the submission to the System Board and decided no later than thirty (30) days after submission (the provisions of Section 22 herein notwithstanding), unless the parties agree otherwise in writing; but in no event shall such arbitration delay the closing of the sale of the transferred assets. ALPA shall cooperate with the Company and the Purchaser in order that any dispute which is not decided at the time of closing will be arbitrated post-closing, with any determination to be binding on the Purchaser unless the Company and the Purchaser agree, with the consent of ALPA (which consent shall not be unreasonably withheld or delayed by ALPA), that such determination shall be and remain the sole obligation of the Company; provided that the Purchaser shall have the right to become a party to and participate in any such arbitration which could become binding upon such Purchaser. (2) The Company and the Association agree that the rights and obligations contained in Section 1 of this Agreement are equitable in nature, that there are no adequate remedies at law for the enforcement of such rights and obligations, and that the Association and the Company's pilots will be irreparably injured by any violation of this Section 1. The parties therefore agree that, in addition to any other rights and remedies available under law or the Agreement, this Section 1 shall be enforced by equitable remedies, including injunctions and specific performance, against the Company, its Affiliates and others in privity with the Company. (3) In addition, the parties agree that the equitable rights and obligations established in this Section 1 shall remain enforceable, through equitable relief and otherwise, until the Agreement is amended pursuant to Section 6 of the Railway Labor Act notwithstanding (a) any filing concerning the Company under any chapter of the United States Bankruptcy Code, (b) any attempted alteration, modification or rejection of the Agreement pursuant to any provision of the Bankruptcy Code or otherwise, (c) any attempted sale of the property of the Company pursuant to any provision of the Bankruptcy Code or otherwise, or (d) any imposition of an automatic stay with respect to the Company's property. (G) Commuter Carriers, Code Sharing and Block Seating (1) The Company, its subsidiaries and its corporate affiliates may acquire an ownership interest in commuter carriers and may operate such commuter carriers under the terms of separate collective bargaining agreements with the Association provided that any such commuter carriers comply with the restrictions contained in Sections 1(G)(2) through 1(G)(5) below. (2) Except as agreed in the September 5, 1995 Letter of Agreement pertaining to the use of ATR aircraft by Trans States Inc., the Company and its Affiliates will not operate, maintain any ownership interest in, or enter into any code sharing arrangement with, any 7 Section 1(G)(2), cont. United States air carrier as defined in 49 U.S.C. 40102 (a)(2) that operates any aircraft under the Company's designator code, name, logo or marks with: (a) a maximum seating capacity in excess of sixty (60) seats; (b) a maximum certified gross takeoff weight in excess of 60,000 pounds; (c) a maximum certified cruising speed in excess of 400 miles per hour; or (d) any Jet Aircraft as defined herein. Any carrier that satisfies all of the restrictions contained in this Section 1(G)(2) and that utilizes the Company's or an Affiliate's designator code is hereinafter referred to as a "TWA Commuter Carrier." For purposes of this subsection (G), "Jet Aircraft" is defined as any aircraft that uses a turbine-driven engine without an external propeller. (3) Notwithstanding the limitations in Section 1(G)(2) above, TWA Commuter Carriers may operate up to an aggregate of fifteen (15) Jet Aircraft with a maximum seating capacity of fifty (50) seats. (4) In addition to the fifteen (15) Jet Aircraft referred to in Section 1(G)(3) above, TWA Commuter Carriers may operate:(i) one additional Jet Aircraft for each additional three aircraft operated by TWA above its current fleet size of 184 aircraft until the TWA fleet size reaches 200 aircraft; and (ii) one additional Jet Aircraft for each additional two aircraft operated by TWA exceeding 200 TWA fleet aircraft. The maximum average seating capacity of the Jet Aircraft operated by TWA Commuter Carriers shall be: fifty (50) seats while the Company's fleet size is less than 190; fifty four (54) seats while the Company's fleet size is between 191 and 195; fifty six (56) seats while the Company's fleet size is between 196 and 200; and sixty (60) seats while the Company's fleet size exceeds 200. The relationship of the Company's fleet size to the number of Jet Aircraft that may be operated by TWA Commuter Carriers and the average seating capacity of the Jet Aircraft that may be operated by TWA Commuter Carriers is shown in Section 1(G)(9) below. (5) In no event will TWA Commuter Carriers operate more than a maximum aggregate of thirty (30) Jet Aircraft, and in no event will the certificated seating capacity of any Jet Aircraft operated by any TWA Commuter Carrier exceed seventy (70) seats. (6) As a limited exception to the restrictions contained in Sections 1(G)(2),(3),(4) and (5) above, the Company may enter into or maintain code sharing agreements with: (a) carriers other than United States air carriers (as defined in 49 U.S.C. 40102 (a)(2)) so long as the Company can demonstrate by clear and convincing evidence, that such code sharing arrangements do not result, directly or indirectly, in the furlough of any Company pilot or a reduction in pay status for any Company pilot; (b) United States air carriers (as defined in 49 U.S.C 40102 (a)(2)) other than TWA Commuter Carriers that permit such carriers to apply the Company's designator 8 Section 1(G)(6)(b), cont. code to their operations within the United States and its territories as long as (i) the number of quarterly block hours operated by such carriers utilizing the Company's designator code does not exceed four percent (4.0%) of the total number of block hours operated by the Company for the same quarter within the United States and its territories and (ii) the Company can demonstrate, by clear and convincing evidence, that such code sharing arrangements do not result, directly or indirectly, in the furlough of any Company pilot or a reduction in pay status for any Company pilot; provided however, the MEC may, in its sole discretion, increase the total number of block hours available for such operations to up to 10% of the total number of block hours operated by the Company for the same quarter within the United States; and (c) The number of quarterly block hours specified in Section 1(G)(6)(b)(i) above may be increased as follows: if the Company's fleet size increases to 193 aircraft, then the number shall be four and one-half percent (4.5%); if the Company's Fleet is at least 199 aircraft, then the number shall be five percent (5.0%). The relationship between the Company's fleet size and the number of quarterly block hours that may be operated by such United States air carriers is shown in Section 1(G)(9) below. (7) The Company and its Affiliate may only enter into block seating arrangements (i.e., the advance purchase or reservation of blocks of seats on other carriers for resale by the Company) aboard any aircraft operated by any person or entity other than the Company if and to the extent that the Company can demonstrate, by clear and convincing evidence, that any such block seating arrangement does not result, in the furlough of any Company pilot or a reduction in pay status for any Company pilots. (8) The Company will not furlough any pilot on the TWA Pilot System Seniority List as a result of the acquisition, expansion over TWA's domestic route system or operation of any TWA Commuter Carrier. (9) Summary Chart -- Sections 1(G)(4),(5) and (6)
Company Quarterly Code No. Of Jet Max. Avg. Aircraft Share Domestic Aircraft Seating Block Hours That That May Be Capacity Of May Be Operated By Operated By Jet Aircraft U.S. Air Carriers TWA Commuter Operated By Other Than TWA Carriers TWA Commuter Commuter Carriers Carriers - - ------------------------------------------------------------------------ 187-189 4.0% 16 50 190-192 4.0% 17 54 193-195 4.5% 18 54 196-198 4.5% 19 56 199-200 5.0% 20 56 201 + 5.0% 21 + 1 for 2 60 thereafter up to 30 Maximum
9 Section 1(G)(10) (10) In addition to and apart from the Jet Aircraft carrying only that TWA Commuter Carrier's and TWA's or Affiliate's designator code that TWA Commuter Carriers are otherwise authorized to operate by this Section 1(G), TWA Commuter Carriers may additionally operate a maximum of three (3) Jet Aircraft with a capacity of no more than seventy (70) seats for which that TWA Commuter Carrier has a code-sharing agreement involving both (a) TWA or an Affiliate and (b) a third-party code-sharing carrier ("Shared Code-Sharing Jet Aircraft"). These 3 Shared Code-Sharing Jet Aircraft are not subject to and will not count towards the maximum average seating limitations of Section 1(G)(4) and the 30 aircraft aggregate limitation of Section 1(G)(5). All other restrictions and limitations imposed by this Section 1(G) remain in effect for these Shared Code-Sharing Jet Aircraft. (H) Definitions The following definitions shall apply to the capitalized terms in the Section 1 of the Agreement: (1) Agreement. The term "Agreement" means and includes this --------- collective bargaining agreement between the Association and the Company and any and all other agreements between the Association and the Company. (2) Control. Person or entity A shall be deemed to "Control" ------- person or entity B if person or entity A, whether directly or indirectly, (a) owns securities that constitute, are exercisable for or are exchangeable into twenty percent (20%) or more of (i) entity B's outstanding common stock or (ii) securities entitled to vote on the election of directors of entity B, or otherwise owns twenty percent (20%) or more of entity B; or (b) maintains the power, right, or authority -- by contract or otherwise -- to direct, manage or direct the management of a substantial portion of entity B's operations, or provides a substantial portion of the controlling management personnel of entity B; or (c) maintains the power, right or authority to appoint or prevent the appointment of a majority of entity B's Board of Directors or similar governing body; or (d) maintains the power, right or authority to appoint a minority of entity B's Board of Directors or similar governing body, if such minority maintains the power, right or authority to appoint or remove any of entity B's executive officers or any committee of entity B's Board of Directors or similar governing body, to approve a material part of entity B's business or operating plans, or debt or equity offerings. (3) Parent. As used in the Agreement, the term "Parent" refers ------ to any entity that Controls the Company, whether directly or indirectly through the Control of other Entities that Control the Company. 10 Section 1(H)(4) (4) Affiliate. As used in the Agreement, the term "Affiliate" --------- refers to (i) any person or entity that Controls the Company whether directly or indirectly through the Control of other entities, or (ii) any person or entity that the Company Controls, whether directly or indirectly through the Control of other entities, or (iii) any other corporate subsidiary, parent or division of the Company, or any other Affiliate. 11 SECTION 2 GENERAL (A) Nothing in this Agreement shall be construed to limit or deny any pilot hereunder any rights or privileges to which he/she may be entitled under the provisions of the Railway Labor Act, as amended. (B) No pilot shall be required to pay for the use of any Company equipment required by the Company for personnel training. When circumstances warrant, the Company will replace or reissue required charts and manuals without charge to the pilot. (C) No pilot shall be required to pay a fine on any part of equipment damaged. (D) The recommendations of the Association shall be considered by the Company before making any change in the style, color, or materials of uniforms; such style shall be dignified and professional. For the purpose of this paragraph, the useful life of the current uniform is established as two (2) years. If a pilot is required to change in less than two (2) years of useful life, a pro rata share of the cost of the uniform will be paid by the Company. If a pilot is furloughed, he/she shall have the option of retaining his/her uniform or selling it to the Company, in which case he/she shall receive a pro rata share of the uniform cost. (E) Within sixty (60) days of signing this Agreement, the Company will provide each pilot with a copy, which shall include Letters of Understanding, Amendments, or Addenda to the Agreement. Copies shall be provided, in both a Jeppesen-sized booklet and shall be electronically available on the TWACREW website. Any Amendments to the Agreement completed subsequently shall be printed in similar format and distributed by the Company to each pilot for inclusion in his/her copy of the Agreement within sixty (60) days of signing of such Amendments. Additionally, it shall be electronically available. (F) (1) The Company will furnish pilot paychecks in sealed envelopes. Each pilot shall be extended the option of having his/her paychecks mailed to his/her home or another address of his/her choice, which shall include a bank provided the Company encounters no more difficulty in effecting mailing to a bank than it would in mailing the check to the pilot's Regional Chief Pilot. To facilitate the mailing of a paycheck to a bank it shall be the responsibility of the individual pilot to assure that his/her bank will accept the format of the Company's paycheck for the purpose of deposit by mail. Effective January 1, 2000, each pilot shall have the additional option to have his/her paycheck electronically deposited in a designated financial institution. If the pilot elects the electronic direct deposit option, his/her paycheck stub will be available at his/her domicile or the pilot may provide a self-addressed stamped envelope of appropriate size with the domicile administration for the purpose of mailing his/her paycheck stub. (2) The amount of the bi-monthly advances will be reviewed and adjusted (as necessary) at least each calendar quarter based on the average of projected ALV's for the following three (3) months. In the event the Company undertakes a replacement or overhaul of its existing payroll system, the 12 SECTION 2(F)(2), cont. Company shall modify the advance system to provide advances to individual pilots which are more closely based upon the pilot's projected monthly earnings. (3) The Company shall make available via hard copy or electronic transmittal a copy of each pilot's Flight Time Record/Earnings Statement at his/her domicile each month. (G) At an airport where a layover of more than two and one-half (2 1/2) hours but less than ten (10) hours is scheduled, and any layover at a domicile, an adequate rest area with reasonable accommodations shall be provided by the Company. For the purpose of this provision, reasonable accommodations shall require sufficient reclining chairs and /or lie down facilities. The Company will consult with a committee appointed by the TWA Pilots MEC for the purpose of assuring that, where existing floor space permits, such reclining chairs or lie down facilities are in a separate, quiet area. This provision shall not apply to through flights. When the Association determines that any crew rest area is not in compliance with this Section, it shall notify the Regional Chief Pilot of the domicile nearest such facility of the specific conditions(s) in need of correction. The Company shall promptly investigate and undertake to correct such conditions or advise the Association representative bringing such complaint within ten (10) business days of the specific circumstances that prevent it from doing so. Thereafter, if the particular condition has not been corrected to the satisfaction of the Association, the parties shall meet within ten (10) business days in order to seek a solution to the problem. (H) At the request of the Association, the Company will confer with and consider the recommendations of authorized Association representatives as to the adequacy of the parking areas and the quality of security measures at Company lots in which pilots park their automobiles at domiciles except as provided in Section 10(G)(6). At the pilot's option, the Company shall provide monthly parking for one (1) vehicle at a TWA domicile, or reimburse the pilot for parking at any station (receipts required), not to exceed the amount paid for one (1) vehicle at the STL domicile. (I) The Company will furnish, on magnetic or electronic media, a list of the earning codes and a roster of pilots' earnings for the previous year to the Association prior to February 1st of each year for the purpose of the Association determining the members' annual dues. (J) Neither the Company, its officers or agents, nor the Association, its officer or agents, or any employee covered by the Agreement, shall unlawfully discriminate against any employee or member on account of race, color, religion, national origin, sex, handicap or because the employee or member is a Vietnam era/disabled veteran. (K) Any pilot shall have the right to review his/her personnel file during normal office hours. No reasonable request(s) by the pilot for copies of any documents in his/her personnel file will be refused. The pilot shall be copied on any derogatory information added to his/her personnel file. The Company and the pilot shall be responsible for ensuring that no disciplinary or derogatory 13 SECTION 2(K), cont. information as to matters other than operating competency remain in the pilot's file for a period exceeding three (3) years. Disciplinary or derogatory records in the pilot's personnel file which are more than three (3) years but less than five (5) years old will be transferred and maintained in a separate file (hereafter the "Pilot Records Act file") from the pilot's personnel file. "Disciplinary records" means records of Company actions which were the subject of an investigation under Section 21(A) of this Agreement. The Company and the pilot shall be responsible for ensuring that no disciplinary or derogatory records more than five (5) years old and no record of disciplinary actions which were subsequently overturned are kept in the Pilot Records Act file. By appointment, documents in the Pilot Records Act file will be available for inspection and copying by the active pilot, but shall not be accessible to domicile flight operations personnel and shall not be used or considered in any subsequent disciplinary action. Pilot initiated grievance-related materials developed pursuant to Section 21(B) shall not be placed in such pilots' personnel file. All information relevant to the Pilots Records Improvement Act of 1996 shall be expunged not later than five (5) years from the separation of a pilot from the Company. If any disputes between the Company and the pilot arises about any inaccuracy, such dispute shall be subject to binding arbitration at the pilot's expense. (L) All notifications to pilots involving a change in base station assignments, temporary assignments to another domicile, promotions, demotions, furloughs and leaves of absence shall be stated in writing. (M) If a pilot on vacation or leave not exceeding forty-five (45) days, so requests in writing, the Company will notify the pilot by certified letter, return receipt requested, if he/she is to be displaced; provided, that such pilot at time of making such request gives the Company an address to which such notice is to be sent. Posting of the certified letter by the Company will be conclusive evidence that notice has been given. (N) The wearing of beards or other facial hair, with the exception of neatly trimmed and maintained sideburns or mustaches is prohibited. (O) Each calendar year the Master Chairman of the TWA Pilots Master Executive Council will be authorized nine thousand (9000) hours of flight pay loss caused by pilots being on ALPA business, including mutually beneficial projects/committees; exclusive of schedule committee members covered under Section (10)(B)(5). Such nine thousand (9000) hours shall be paid to the designated pilots by the Company but not billed to the Association. (P) The MD8/DC9 ice check shall be accomplished by properly trained and certified TWA personnel other than an operating pilot crewmember at stations staffed with TWA ramp servicemen and/or TWA mechanics. 14 SECTION 2(Q) (Q) Each TWA pilot shall be authorized a minimum of one hundred (100) daily "JX" transactions on home access to the CAMS system. The Company shall provide a toll free number for domestic telephone communications with CCS. (R) A pilot shall receive, upon his/her request, a readable copy of his/her training records which are maintained in the Company's Crew Administrative Management System (CAMS). The records to be provided are those currently accessible by using the following CAMS transactions: JXQI REGNUM FCQ JXQI REGNUM INV EQP STS JXTL REGNUM EQP STS Copies of the foregoing CAMS training records shall be provided along with a cover letter which identifies the records attached to it and includes a key to the codes used in the records. Each copy of the training record shall be dated and signed by a duly- authorized employee of Flight Operations Department to authenticate it as a true copy of the records maintained by TWA in CAMS. The Company will place a legal disclaimer containing wording of its choice on the cover letter and on each page of the copy of the training record. (S) Captains shall be granted Ambassador Club privilege cards. (T) The Company shall provide ALPA airport office space comparable to that currently utilized by the Association at each domicile where such airport facilities currently exist. (U) The Company shall withhold all state income taxes associated with a pilot's state of legal residence, as filed on his/her federal W-4 form. (V) A pilot eligible for vacation under Section 14 shall be entitled to three (3) calendar days off per calendar year for Urgent Personal Business. Such days shall be paid and credited in accordance with Section 14(C) for a bid or reserve pilot and shall be deducted from the pilot's vacation entitlement for the current year. If the pilot's current year vacation entitlement is less than the Urgent Personal Business debit and/or is exhausted, the pilot's accrued vacation entitlement will be debited for any resulting shortfall. (W) The Company may back date a pilot's written resignation only for just cause. 15 SECTION 3 TRANSPORTATION (A) Pilots will be afforded free and reduced fare transportation as established by Company policy on the date of signing of this Agreement which will not be changed or discontinued during the term of this Agreement without first giving the Association thirty (30) days notice of the reason therefore and affording the Association an opportunity to confer with the Company. The Company's policy as regards free and reduced fare transportation for pilots on Medical Leave and for the surviving spouse of a deceased pilot shall not be more restrictive than required by federal law. (B) A pilot retired in accordance with the terms of this Agreement or government regulation will be afforded free and reduced fare transportation as established by Company policy on the signing date of this Agreement; provided that such privileges shall not be more restrictive than those provided on page 13.13.01 dated November 20, 1969, in the Company's Management Policy and Procedure Manual (provided Federal Law Permits). (C) A pilot shall be afforded ACM privileges upon date of hire in accordance with the following: (1) Such ACM privilege shall have a lower priority than other Company business. (2) Priority for this ACM will be determined on the basis of the pilot's seniority number, up to one (1) hour prior to the scheduled departure time of the flight. Thereafter and until the flight departs, such ACM priority for any vacant ACM seat will be determined on a first come, first serve basis. A TWA pilot exercising his/her ACM privilege must personally list himself/herself electronically via a CAMS entry at the airport of departure if earlier than one (1) hour prior to the scheduled departure time of the flight. Within one (1) hour of the scheduled departure time of the flight, a TWA pilot may list either electronically via a CAMS entry at the airport of departure or on the appropriate ACM sign-in sheet at the departure gate. However, the TWA pilot using electronic sign-in shall have priority. The operating Captain of the flight shall have overall authority with regard to any question of priority. (3) In addition to the above, an "operations ACM form" shall be personally completed by a pilot prior to exercising the ACM privileges provided in this Section no earlier than two (2) hours prior to scheduled flight departure. The pilot shall indicate on such form: name, seniority number, payroll number, domicile, crew position, flight number and date, point of departure and destination. (4) A pilot exercising ACM privileges under this Section shall ride in the cabin if a seat is available. Further, such pilot shall not be subject to displacement from the flight by a similar category ACM at stations en route to the pilot's originally indicated destination. (D) The Captain of TWA flights shall have the authority to grant ACM jumpseat privileges to qualified non-TWA active pilots who are employed by carriers listed on TWA's FIP/17 list of approved carriers. A pilot from a carrier on TWA's FIP/17 list exercising 16 SECTION 3(D), cont. his/her ACM privilege must personally list himself/herself on the appropriate ACM sign-in sheet at the departure gate, noting the date and time of sign-in. These ACM/jumpseat privileges shall be available on all TWA route segments including international flights. Such privileges shall be subject to applicable laws and regulations. Non-TWA pilots will be subject to all TWA regulations and procedures governing non-revenue travel. The priority for use of the jumpseat by non-TWA pilots, as described above, shall be after TWA and/or non-TWA authorized personnel have been accommodated. (E) ACM dress code shall be business-casual attire. (F) Pilots assigned to training away from their domicile will receive a round-trip Class B pass for travel to and from the place where training is conducted. (G) Employees who voluntarily terminate or retire at age forty-five (45) with a minimum of fifteen (15) years of service will be provided with a calendar year complement of six (6) Class 9 adult trip passes and three (3) Class 9 children trip passes. Employees who retire will also be entitled to receive unlimited reduced rates. However, employees who voluntarily terminate will be entitled to unlimited reduced rates on TWA and will receive reduced rates on other airlines only to the extent such is authorized by appropriate interline agreements between the Company and other airlines. (H) New hire pilots shall be eligible to receive up to five (5) class 8 round trip passes while completing initial ground school and simulator training (prior to initial line qualification) for the purpose of visiting their home while on days off subject to the following: (1) The pass(es) may be utilized only by the new hire pilot. (2) Each class 8 pass is subject to all normal service charges and applicable surcharges. (3) The pass(es) shall be issued using the most direct routing between the location where the new hire pilot is receiving initial ground school or simulator training and the TWA airport nearest the pilot's home. (4) Eligibility for use of any other personal passes (non- business) by the pilot and/or the pilot's dependents shall be subject to the six (6) month waiting period. (I) The Company shall issue Class 3 passes to the following pilots: - MEC Master Chairman - MEC Vice Chairman - MEC Secretary-Treasurer - MEC Members - Negotiating Committee - Executive Director of TWA Pilot's 401/K Directed Account - Investment Committee - System Board Members and 3 alternates - System Grievance Chairman Such class 3 passes shall be used for Association business. 17 SECTION 3(J) (J) The Company shall issue Class 5 passes to the following pilots: - Governmental Affairs Committee Chairman - Housing / Crew Facilities Committee - Pilot Training Board - ALPA Accident Investigating Committee Chairman - Central Air Safety Committee Chairman Such class 5 passes shall be used for Association business. However, when used for TWA-ALPA business, such passes shall be first class, space available (FCSA). (K) The Company shall issue Class 5 passes to ALPA's TWA assigned Contract Administrators. Such Class 5 passes shall be used for Association business. (L) Effective January 1, 2000, a pilot's father-in-law and mother-in- law shall be afforded access to purchase up to eight (8) I.D. 90 tickets in a year for travel on TWA provided that such pilot's pass allotment benefit includes eligible dependent children. 18 SECTION 4 COMPENSATION (A) Captains (1) Composite Pay Effective as indicated below, a Captain shall receive composite pay for time credited for pay purposes, as provided in (F)(1) of this Section, in accordance with the Captain's total service with the Company as a flight deck crew member, as follows: (a) Small Widebody.
Effective: 9/01/98 3/02/99 9/01/99 9/01/00 9/01/01 8/01/02 2nd Year 94.80 97.59 101.90 110.29 120.67 132.90 3rd Year 95.62 98.43 102.78 111.24 121.71 134.04 4th Year 106.56 109.69 114.54 123.97 135.63 149.38 5th Year 107.48 110.65 115.53 125.05 136.81 150.68 6th Year 108.59 111.78 116.72 126.33 138.22 152.23 7th Year 109.84 113.08 118.07 127.79 139.82 153.99 8th Year 110.75 114.01 119.05 128.85 140.98 155.26 9th Year 111.14 114.41 119.47 129.31 141.47 155.81 10th Year 112.42 115.73 120.84 130.79 143.09 157.60 11th Year 112.70 116.01 121.14 131.11 143.45 157.99 12th Year 112.97 116.30 121.43 131.43 143.80 158.37 13th Year 114.71 118.08 123.30 133.45 146.01 160.81 14th Year 115.64 119.04 124.30 134.53 147.19 162.11 15th Year 116.58 120.01 125.31 135.63 148.39 163.43
(b) Narrowbody.
Effective: 9/01/98 3/02/99 9/01/99 9/01/00 9/01/01 8/01/02 2nd Year 88.41 91.13 94.68 100.77 108.79 117.07 3rd Year 89.23 91.97 95.55 101.69 109.79 118.15 4th Year 99.55 102.61 106.61 113.46 122.50 131.82 5th Year 100.49 103.58 107.62 114.53 123.66 133.07 6th Year 101.57 104.68 108.77 115.75 124.97 134.49 7th Year 102.81 105.96 110.10 117.17 126.50 136.13 8th Year 103.73 106.92 111.09 118.22 127.64 137.36 9th Year 104.49 107.70 111.90 119.09 128.57 138.36 10th Year 105.47 108.71 112.95 120.21 129.78 139.66 11th Year 105.79 109.03 113.29 120.56 130.17 140.08 12th Year 106.11 109.37 113.63 120.94 130.57 140.51 13th Year 107.84 111.15 115.48 122.90 132.69 142.79 14th Year 108.78 112.12 116.49 123.97 133.85 144.04 15th Year 109.73 113.10 117.51 125.06 135.02 145.30
19 Section 4(A)(2) (2) International Override The override for each hour credited under (F)(1) of this Section shall be as follows: September 1, 1998 $6.20 September 1, 1999 6.40 September 1, 2000 6.60 September 1, 2001 6.80 August 1, 2002 7.20 (B) First Officer and Flight Engineer (1) Pilots with less than one (1) year of service. (a) Monthly Salary A pilot who has completed less than one (1) year of service with the Company as a flight deck crew member shall receive a monthly salary as specified below and an hourly rate, if applicable, in accordance with Section 4(B)(1)(b). September 1, 1998 to June 30, 2000: $2500.00 July 1, 2000 to March 01, 2002 $2575.00 March 2, 2002 and thereafter: $2675.00 (b) Hourly Rate (i) Bid Run Holders Time credited above seventy-five hours (75:00) (as provided for in (F)(1) of this Section) shall be paid according to the following hourly rate: September 1, 1998 to June 30, 2000: $33.33 July 1, 2000 to March 01, 2002 $34.33 March 2, 2002 and thereafter: $35.67 (ii) Reserve Schedule Holders A reserve schedule holder with less than one (1) year of service as a pilot shall be paid the hourly rate indicated in Section 4(B)(1)(b)(i) above for time credited in excess of seventy- five hours (75:00) and any additional flying performed and/or trips obtained and flown via OFR. (2) A First Officer or Flight Engineer who has completed one (1) year of service with the Company as a flight deck crew member, shall be paid a percentage of the total pay of a Captain, as set forth in (A) above: 20 Section 4(B)(2), cont. Percentage of Captain's Pay
Year F/O F/E ---- --- --- 2nd 50% 50% 3rd 60% 60% 4th 61% 60% 5th 62% 60% 6th 63% 60% 7th 64% 60% 8th 65% 60% 9th 66.5% 60% 10th 67% 60% 11th 67.5% 60% 12th 68% 60% 13th 68.2% 60% 14th 68.3% 60% 15th 68.4% 60%
(C) Minimum Guarantees (1) A pilot who has completed one (1) year of service with the Company as a flight deck crew member, shall receive as a minimum guarantee for each full bid month of service, composite pay, at his/her applicable rates of compensation set forth in this Agreement as follows:
Reserve Schedule Holder Effective: Bid Run Holder Reserve Officer ---------- -------------- --------------- September 1, 1998 72 hours ALV minus 3 hours, not less than 72 hours September 1, 1999 73 hours ALV minus 3 hours, not less than 73 hours September 1, 2000 74 hours ALV minus 3 hours, not less than 74 hours September 1, 2001 75 hours ALV minus 3 hours, and thereafter not less than 75 hours
The guarantee of a pilot in International Operations shall include International Override (A)(2) above, except as provided in (C)(2) below. The guarantee for a pilot with less than one (1) year of service as a flight deck crew member shall be seventy-five hours (75:00). (2) In the event a pilot is on both the Domestic and International Operations during a month, the pilot's guarantee shall be prorated based on the actual hours performed on each operation, except that: 21 Section 4(C)(2), cont. (a) All pilots holding equipment reserve shall be on an international guarantee, if qualified. (b) A pilot who is involuntarily balanced on the other operation shall not have his/her guarantee prorated. (c) A reserve for narrowbody operations shall receive an international guarantee provided one (1) or more international flights are flown within the bid period. This international guarantee shall be compared to actual services performed and the pilot shall be paid based upon the greater amount. (3) When a Captain flies more than one (1) type of equipment during a bid month as a Captain, his/her monthly guarantee shall be prorated on the basis of the ratio of hours flown on each such type of equipment to the total hours flown in a month as Captain. (4) In the event a pilot changes categories during a month which results in the pilot moving from one major pilot status to another (such as First Officer to Captain), the pilot's guarantee shall be prorated as in (C)(2) & (C)(3) above. (5) In the event that the number of hours of a pilot's monthly minimum guarantee is changed during a bid month, the pilot shall be considered to have been on the guarantee of the greater number of hours for the entire month, subject to the provisions of (C)(1), (C)(2) and(C)(4) of this Section. (6) The provisions of (C)(3) above shall be applicable in a comparable manner to any pilot in a bid status other than that of Captain. (D) Training Pay (1) When a pilot with less than one (1) year of service with the Company as a flight deck crewmember receives any training, the pilot shall be paid in accordance with Section 4(B)(1) and credited in accordance with 4(D)(2)-(6). (2) An initial/upgrade Captain/First Officer who has completed one (1) year of service with the Company as a flight deck crew member, starting in ground school and continuing through completion of initial operating experience or until the effective date of his/her new category bid (whichever is later), will receive a guarantee equal to the average line value and composite pay rate of his/her current category bid award (i.e. First Officer or Flight Engineer). (3) For each day of Initial Operating Experience/Evaluations a pilot shall receive pay and credit the greater of Fixed Daily Rate (FDR) or services performed as calculated in accordance with Section 11. Further, a pilot who is line qualifying while performing as an operating member of the crew but is on board as an ACM shall receive pay for the services performed and two hours thirty minutes (2:30) credit for each day of line qualification. 22 Section 4(D)(4) (4) Notwithstanding the above, for each day of "Continuing Qualifications Training" (CQT), bid run and reserve pilots shall receive pay and credit of Fixed Daily Rate. Further, bid run holders who are assigned CQT training in the instant month by the Company after the close of bids (which occurs in the previous month) will receive pay and credit based on the greater of trips missed or Fixed Daily Rate. (5) In accordance with Section 6(A)(4), a pilot, except an initial/upgrade Captain/First Officer, who is benched between the effective date of his/her new category bid and the commencement of his/her training necessary to fulfill such bid, will receive a guarantee equal to the average line value and pay rate of his/her new category. The guarantee and pay rate of an initial/upgrade Captain/First Officer who is benched shall be the same as his/her category immediately preceding the effective date of his/her initial/upgrade category bid award. Alternatively, a pilot who has not commenced the necessary training prior to the effective date of his/her new category bid may be utilized by the Company in his/her previous category. Such pilot, except an initial/upgrade Captain/First Officer, will receive a guarantee equal to the average line value and composite pay rate of his/her previous category or new category, whichever is greater. The guarantee and composite pay rate of an initial/upgrade Captain/First Officer who is utilized shall be the same as his/her category immediately preceding the effective date of his/her initial/upgrade category bid award. The provisions of this paragraph (D)(5) shall not apply to a pilot whose failure to commence training is a result of his/her unavailability for training (i.e. sick leave, urgent personal business, absent without pay, military leave). Such pilot shall be paid in accordance with paragraph (F)(8) below. (6) Except as provided above, for each day of training a pilot shall receive pay and credit of FDR in accordance with his/her current category bid award. (E) Vacation Pay. For each day a pilot is on vacation, he/she shall be paid the FDR at the hourly rate determined by such pilot's mock category bid award for a full month vacation, or by his/her actual category bid award for partial month vacation. (F) General (1) The time credited for composite pay purposes shall be that time credited the pilot under Section 11(A)(7), except that in making the calculation for this purpose, deadhead time due under Section 8 shall be included in making the computation specified in Section 11(B). (2) Except as provided elsewhere in this Agreement, for purposes of determining composite pay when a change in calendar date occurs enroute, only that actual time flown prior to the end of the bid month in which the flight originated will be credited for pay purposes for that month. The time for 23 Section 4(F)(2), cont. changing the month shall be that of the zone of the station of last take off. (3) The appropriate pay rates contained in this Section will apply to pilots flying only the equipment defined by Sections 31(X) and 31(FF). (4) If the Company places new equipment into operation, other than as defined by Sections 31(X) and 31(FF), the Company shall be bound by the relationship of the Company's current pilot wage scale and the average wage paid by Alaska, America West, American, Continental, Delta, Northwest, United and/or US Airways ("OALs") for the new equipment in effect on the date of service. The new wages will be commensurate to the Company's current wage scale for the other equipment on the property. In the event the new equipment is not flown by the carriers listed, the pay rate for such equipment will be based on the equipment utilized by the carriers which is of equivalent weight to the new equipment. For example, if the average pay of the OALs is $150 for a top of the scale Captain on the new equipment and TWA's current scale is 85% of the OAL's average pay for the other equipment on the property, the new wage for such pilot will be $127.50 ($150 x 85%). In addition, the current rules and working conditions shall apply to the new equipment. (5) In the event of a merger between TWA and another carrier, the rates of pay next to become effective, or the rates of the merger partner, whichever is greater, will become effective the day immediately preceding the actual merger. (6) When a pilot in a category does no flying during a month in which he/she is entitled to a guarantee, such guarantee rate will be based on the pilot's current category bid. Determination of operation, and line or reserve, will be based on the pilot's mock bid award. (7) A pilot who is changing categories and who does no flying in the month in the new category will have his/her guarantee based on the new bid category on the effective date of such bid, except as otherwise provided in this agreement (initial/upgrades). (8) A pilot who is unavailable for training for his/her new category bid due to personal reasons (i.e. sick leave, urgent personal business, absent without pay, military leave) will be category changed as follows: (a) A pilot who acquires a higher category bid will be category changed on the effective date of the bid or upon commencement of training, whichever is later. (b) A pilot acquiring a bid in a lower category will be category changed on the effective date of the bid. This paragraph will be applied except in those cases where the bid has been deferred. 24 SECTION 5 MISCELLANEOUS PAY RULES (A) When the least senior pilot is assigned to a temporary vacancy by the Company as a result of the application of Section 19(F)(1)(a), the pilot's pay for the month(s) in which he/she is so assigned shall be the greatest of the following: (1) If the pilot is a bid run holder, the pilot's monthly bid award ALV minus two (2) hours, including international override if applicable; or (2) If the pilot is a reserve schedule holder, the pilot's reserve guarantee, including international override if applicable; or (3) The amount actually earned for services performed. Composite pay will be computed at the applicable rate for the pilot's normal category bid award if the pilot had not been so assigned. (B) If the Company does not post the bulletin provided for in Section 19(C), at least seven (7) days prior to the effective date of a displacement, at least seven (7) days will be allowed for pilots to bring their displacement preference up to date. For the period from effective date of displacement until the end of the seven (7) day bulletining period, the displaced pilot will be considered to be a reserve schedule holder in the category from which the pilot was displaced for flight assignment and pay guarantee purposes. (C) When a pilot serves on a charity, promotional or new Captain solo flight in a status other than the pilot's normal bid status, at his/her own request and with the approval of the Company, the pilot shall receive pay and flight time credit on the basis of the pilot's normal bid status or the status in which the pilot serves on the flight, whichever is lesser. (D) On each scheduled, charter and extra section flight, a pilot will be assigned to serve as Captain, and a pilot shall be assigned, when required, to serve as First Officer, or as Flight Engineer. (E) Management Pilot Flying/Pay Assignments (1) Pay Assignments: When a qualified pilot is scheduled by the Company for any flight defined in (D) above and is available and is not used, and any official or employee of the Company other than a pilot as defined in Section 31, check pilot ("LIP/LSP") or instructor pilot ("INS"), acts in place of the pilot who was not used, the pilot's compensation at regular rates, for such trip shall be credited and paid to the pilot who was scheduled to have made the flight exactly as if the pilot had flown the trip or trips (excluding non- scheduled deadhead pay). A pilot who has not been notified to report for a pay assignment must remain available for the flight until sixteen hours (16:00) prior to the scheduled departure time. When a qualified pilot cannot be scheduled by the Company for any flight defined in (D) above or is not available, all such flight pay and credit flown by an official or other employee of the Company shall be handled in the following manner: (2) Pool Time: At the end of each calendar month all unassigned flight pay and credits shall be totaled in each category. 25 Section 5(E)(2), cont. Beginning with the most senior pilot in a category, such pilot shall have credited to the pilot's monthly total an amount of such flight time credit up to but not exceeding his/her monthly bid award ALV. Any remaining flight pay credit hours shall be credited in seniority order within the category until all such credit hours are dissipated. When a qualified regularly assigned pilot is removed from his/her flight for route or equipment qualification purposes at Company request, the above shall apply. Accounting of such pool time will be provided to the Association at the System Schedule Committee meeting. (3) A pilot who has not completed one (1) year of service with the Company as a flight deck crew member will receive only flight time credit under the above conditions. (4) Management pilot flying: Trips may be flown by management pilots, after first being assigned to a bid run pilot, and the pay assignment provisions of this Section 5(E) will be applied. Such flying under this Section shall not be considered additional flying. (F) When a pilot is called to jury duty, the Company shall release the pilot from flight duty for the duration of such jury duty. The compensation received by the pilot for time on jury duty shall be the Fixed Daily Rate (FDR). Such pay and credit shall not accrue, however, so as to cause the pilot to exceed his/her average line value. (G) When a pilot is called to the airport for the purpose of acting as pilot on a flight or flights and that pilot is released from duty prior to such flight or flights he/she shall receive two (2) hours composite pay and credit. Except for flights local in nature, when a pilot is called to the airport for the purpose of acting as a pilot on a flight and that flight becomes airborne and lands at an airport other than the departure airport the pilot shall receive pay and credit at the single duty period daily pay and credit or the provisions of Section 11, whichever is applicable. (H) The provisions of (A) and (C) of this Section will not apply to training or route qualification time. (I) The Company may schedule pilots to fly flights of a local nature such as ferry flights at their home domicile or trip turn-around point immediately prior to or upon completion of a regular scheduled flight if they have been notified of such flights prior to departing their previous station. In such cases when notification is not practical or possible, each pilot shall have the option to decline such ferry flight. This paragraph shall not apply when completing interrupted flights, evaluation flights, or operating experience flights. (J) "Composite Pay" replaces flight pay and longevity pay for all purposes under this Agreement. (K) (1) The following definitions shall apply for purposes of this 5(K). (a) "Premium Pay" means the pay a pilot receives for the activities listed in paragraph (2) below. The Premium pay amount is to be calculated by the given fixed pay 26 Section 5(K)(1)(a), cont. factor as listed in paragraph (2) below, multiplied by the pilot's category pay rate, multiplied by each hour of such activity (as determined by the application of Section 11). (I.e., pay factor X category pay rate X hours = premium pay). (b) "Deferred Vacation" means the number of vacation days rescheduled under Section 14(E)(5). (2) Premium Pay shall apply as follows: Activity Pay Factor --------------------------------------------------- (a) Draft Flights 1.5 (b) Deferred Vacation 1.2 (L) In the calculation of pay for each single training assignment away from domicile, a pilot shall receive two hours thirty minutes (2:30) composite pay (no flight time credit) as compensation for reporting to such assignment. The provisions of this paragraph (L) shall not include a training assignment in which the pilot departs from and returns to his/her domicile for training at another location, unless the pilot is released for rest at such other location. 27 SECTION 6 TRAINING AND QUALIFICATIONS (A) GENERAL (1) Training Assignments (a) A pilot shall be required to enter training and/or checking to attain, regain or maintain qualifications. (b) To the extent possible all training, as a result of a category bid, shall be in system seniority order. (c) The Company will maintain a program for the training of Captains, First Officers and Flight Engineers and will provide such training to pilots who have been awarded a category bid in accordance with all of the provisions of Section 19, provided the pilots meet minimum regulatory qualifications for the training. The Company may require additional qualifications and will provide training for such additional qualifications provided the pilots meet all other regulatory requirements for such additional qualifications. At no time will the Company be required to provide aircraft flight training. (2) Notification and Logistics (a) Each pilot who is scheduled for training shall be notified by the Company, via the pilot's JXCAP and the TWACREW website, of the beginning and projected completion of any training and/or checking requirements. In addition, for informational purposes only, line familiarization/line qualification completion dates will be projected. (b) Except for Continuing Qualification Training (CQT), no pilot shall be required to attend any training and/or checking course with less than fourteen (14) calendar days notice. If a pilot is assigned training with less than fourteen (14) calendar days notice, he/she will have the opportunity to decline such training date without penalty. (c) The Company will maintain a page FIP/08 in CAMS and a page on the TWACREW website that details training logistics, including but not limited to hotels, transportation, training and program identifiers, and other mutually agreed upon information that would be useful to a pilot who will undergo training. (d) There shall be a written Flight Operations Training Manual indicating all courses of training which shall be readily available to pilots at the TWA Training Center and TWA domiciles. (e) In the event a pilot's training process is delayed for reasons other than pilot unavailability, the pilot shall not be utilized in his/her former category. (f) The Company will designate the domicile or domiciles at which training will be accomplished. If a pilot is unable to train at his/her domicile, the Company will assign the pilot to a designated domicile. If more 28 SECTION 6(A)(2)(F), cont. than one (1) assignment is to be made for initial/upgrade line familiarization or Initial Operating Experience (IOE), choices of assignments to locations will be offered in order of seniority of those to be assigned. (3) Daily Training/Scheduling (a) The provisions of this Section 6(A)(3) shall apply to required time in ground school and flight simulators and all briefing in connection therewith; however, the calendar day restriction of Section 6(A)(3)(e) shall not apply to time in flight simulators in connection with initial/upgrade training and any training course that requires a rating qualification. (b) All CQT assignments for monthly bidding purposes only shall be posted in each pilot's JXCAP in accordance with Section 9. (c) A pilot will not be required to attend ground school or take simulator training in excess of eight (8) hours per day, not including a one (1) hour meal break. The total elapsed time between the commencement and conclusion of such eight (8) hours of training shall not be scheduled to exceed twelve and one-half (12 1/2) hours. A pilot shall not be required to accept actual training duty on more than five (5) days in any consecutive seven (7) days assigned to training; provided, however, that the Company may require a pilot to attend training in excess of five (5) days in any consecutive seven (7) days in order to make up for a holiday falling on a normal ground school day. (i) A pilot will be considered as assigned to training on those days during which the pilot is scheduled/rescheduled and/or actually attends training, including days of rest within a single training assignment. (ii) A pilot shall receive sixteen hours (16:00) free from all duty after release from training at the pilot's domicile, or thirty hours (30:00) free from all duty after release from training at a point other than the pilot's domicile. Such pilot may elect to waive all but twelve hours (12:00) of this requirement for a duty-free period between simulator and IOE and/or checking provided the pilot notifies Training Support of his/her waiver election no later than one (1) day prior to the last scheduled simulator period. (iii) A pilot holding a reserve schedule shall immediately check his/her schedule via CAMS entry upon release from training. (d) Pilots will not be scheduled to take flight simulator CQT or proficiency checking after the hours of 2400 and before 0500 including any briefing time. The 29 SECTION 6(A)(3)(D), cont. Company may extend after 2400 CQT or proficiency checking originally scheduled to be completed at or before 2400. (e) Two (2) or more pilots shall not be scheduled for or normally receive more than four hours (4:00) in the flight simulator in any calendar day. No individual pilot will be scheduled for a simulator period to last longer than two hours and thirty minutes (2:30), except that Line Oriented Flight Training (LOFT) may be conducted in a flight simulator provided that the period does not exceed four hours.(4:00) There shall be a rest period of at least fifteen minutes between flight simulator periods. (f) A pilot assigned to flight simulator training shall receive adequate rest before starting flight simulator training. (g) A pilot attending any training shall be shown a copy of the instructor's and/or check airman's report on his/her progress/performance, if the pilot so requests. Each pilot attending training shall be provided with a ALPA/TWA Training and Standards Evaluation Form for each phase of training. (h) Proficiency checks/evaluations in the flight simulator shall be subject to the following: (i) No maneuvers will be graded during a proficiency check or CQT evaluation that are not required and/or approved by the FAA. (ii) Adequate time for a pilot to adapt to the particular flying characteristics of the flight simulator shall be given before a proficiency check/evaluation is given in a flight simulator. (iii) Proficiency checks/evaluations in a flight simulator shall be given as nearly as possible as an extension of flight simulator training, if such training is required, and shall not be given prior to such training. (4) Withheld Pending Training (WPT or "Benched") The Company may bench a pilot for the days within a bid period between the effective date of his/her new category bid and the commencement of his/her training necessary to fulfill such bid. Such pilot, except initial/upgrade Captains/First Officers, will receive a guarantee equal to the average line value and pay rate of his/her new category. The guarantee and pay rate of an initial/upgrade Captain/First Officer shall be the same as his/her category immediately preceding the effective date of his/her initial/upgrade category award. Alternatively, the Company may utilize a pilot who has not commenced the necessary training prior to the effective date of his/her new category bid. Such pilot will be utilized in 30 SECTION 6(A)(4), cont. his/her previous category. In addition, such pilot, except initial/upgrade Captains/First Officers, will receive a guarantee equal to the average line value and pay rate of his/her previous category or new category, whichever is greater. The guarantee and pay rate of an initial/upgrade Captain/First Officer shall be the same as his/her category immediately preceding the effective date of his/her initial/upgrade category award. The provisions of this paragraph (4) shall not apply to a pilot whose failure to commence training is a result of his/her unavailability for training (i.e. sick leave, urgent personal business, absent without pay, military leave). (5) Interruption or Delay of Training Subject to the Regional Chief Pilot's discretion, a pilot may request to have his/her scheduled training interrupted or delayed. Upon the pilot's return to work, the Regional Chief Pilot may either reinstate the pilot to the interrupted or delayed curriculum, subject to training availability, or return the pilot to his/her previously held category while awaiting reinstatement to the interrupted or delayed curriculum, subject to seniority and satisfactory completion of any necessary requalification training. (6) Withdrawal From Training A pilot who is attending any training program shall be afforded the option to withdraw from the training curriculum and handled in accordance with 6(C). The Pilot Training Board will be notified of any pilot(s) exercising the withdrawal from training option. (7) Training Records Availability A pilot shall receive, upon his/her request, a readable copy of his/her training records which are maintained in the Company's Crew Administrative Management System (CAMS). The records to be provided are those currently accessible by using the following CAMS transactions: JXQI REGNUM FCQ JXQI REGNUM INV EQP STS JXTL REGNUM EQP STS Copies of the foregoing CAMS training records shall be provided along with a cover letter which identifies the records attached to it and includes a key to the codes used in the records. Each copy of the training record shall be dated and signed by a duly-authorized employee of Flight Operations Department to authenticate it as a true copy of the records maintained by TWA in CAMS. The Company will place a legal disclaimer containing wording of its choice on the cover letter and on each page of the copy of the training record. (8) Notwithstanding the provisions of Section 2(K) the Company shall safeguard pilot training records. In the event the Company ceases regularly scheduled air line operations, it will use its reasonable best efforts to provide each pilot a 31 SECTION 6(A)(8), cont. copy of his/her current training records file as maintained by the Company pursuant to regulations of the Federal Aviation Administration, and any other applicable laws or regulations, within five (5) business days after written request and authorization submitted by the pilot. Further, the Company shall provide a copy of a pilot's training file to any third party or parties within five (5) business days after written request and authorization submitted by the pilot. In the event of a Chapter 7 or 11 filing under the United States Bankruptcy Code, the Company will at all times use its best efforts to cause these obligations to be performed. (9) Supplemental Instrument Procedures Training Crew members may schedule time on the FRASCA by telephone, for two-hour blocks based on available open slots, Monday- Friday, 0830 to 1700 (local time). Scheduled periods for such use are subject to cancellation by the Company if the time is needed for unanticipated TWA Training Center requirements. The use of the FRASCA in this manner by any pilot is voluntary, and pilots will not receive pay or credit for periods of such use. Further, the Company makes no warranty that the use of this training aid will enhance proficiency, nor will it be deemed a substitute for any Company required training. A pilot's use of, or failure to use, the FRASCA under the provisions of this paragraph will not be an issue in an arbitration or grievance proceedings concerning the pilot's proficiency. (10) An Advanced Qualification Program (AQP), or any similar alternative training program, that affects extending the elapsed time between the required simulator check(s) and/or simulator evaluation(s) shall not be implemented without mutual agreement between the parties. Such mutual agreement shall not be arbitrarily withheld. (11) The type of training and procedures for all training for Captains, First Officers and Flight Engineers will be established and changed as required by the Company, except as provided for in 6(A)(10), above. (B) INITIAL/UPGRADE TRAINING (Training and checking required to fulfill a category bid in a new status on an equipment type upon which the pilot may/may not have a prior qualification.) (1) Initial/Upgrade Captain IOE/Evaluation (a) Upon completion of ground and flight simulator training, a pilot will, if he/she so requests, be permitted up to thirty (30) days or up to fifty (50:00) hours of line familiarization prior to the IOE and check. To facilitate the accomplishment of such line familiarization, the Company has the discretion to do the following: (i) Assign a pilot to bid pairings as outlined below; or 32 SECTION 6(B)(1)(A)(II) (ii) Assign a pilot to a bid pairing wherein the Captain and/or First Officer is pay assigned. During periods of line familiarization and/or required IOE periods of initial/upgrade training, sufficient suitable First Officer time from domicile bid pairing selections may be assigned to a trainee each month as is necessary to accomplish line familiarization, IOE and check/evaluation. Such assignments shall not result in a reduction in the number of bid run holders at the domicile. (b) Initial/upgrade Captains shall receive a Progress Line Evaluation after the first twenty-five hours (25:00) of IOE. At the completion of the Progress Line Evaluation, the initial/upgrade Captain will be afforded one of the following options: (i) The pilot may be recommended for an Initial Captain Line Check/Evaluation; (ii) The pilot may be recommended to continue his/her IOE; (iii) The pilot may be recommended for additional training, and upon satisfactory completion, will continue the IOE; or (iv) Subject to the Regional Chief Pilot's discretion, the pilot may be assigned to receive up to six (6) months or up to five hundred hours (500:00) in the First Officer position on the same initial/upgrade equipment type. At the completion of this period, the pilot will commence IOE from the beginning. The five hundred hour (500:00) option may be recommended by the Chief Pilot at any time during the training program prior to commencement of the Initial Captain Line Check/Evaluation. (2) Initial/Upgrade First Officer IOE/Evaluation During the first twenty-five hour (25:00) period of IOE, Initial/Upgrade First Officers will be handled as outlined below: (a) The pilot may be recommended for an initial First Officer Line Check/Evaluation; (b) The pilot may be recommended to continue his/her IOE; or (c) The pilot may be recommended for additional Proficiency Training, and upon satisfactory completion, will continue the IOE. 33 SECTION 6(C) (C) FAILURE TO QUALIFY (1) General (a) Nothing herein shall diminish a pilot's right to a fair and adequate opportunity to complete training and qualify for a category assignment. (b) The Company shall immediately notify each member of the Pilot Training Board when any pilot fails to successfully complete any course of training. Such pilot shall be handled in accordance with the applicable provision of this Section 6(C). (c) A pilot who is unsuccessful in completing a course of training (including all required checks) shall be deemed to have failed to qualify and shall be subject to the provisions of Section 6(C)(1)(e) below. Such pilot shall be handled in accordance with Sections 6(C)(2) through (5). (d) A pilot who withdraws from training under Section 6(A)(6) above shall not be deemed to have failed to qualify but shall be subject to the provisions of Section 6(C)(1)(e) below. Such pilot shall be handled as follows: (i) All training records shall indicate that the pilot withdrew from training without prejudice. (ii) Such pilot shall be returned to his/her category held prior to entering training, subject to satisfactory completion of requalification training and seniority permitting. (iii) In the event the equipment to which the pilot is to be returned is no longer available or the pilot cannot hold such category bid in seniority order, such pilot may elect a displacement option under Section 19(G) to a previously held equipment within his/her present or lower status. Section 13 shall not apply to a pilot who elects the displacement option under this provision. (iv) A pilot withdrawing from initial/upgrade training will be subject to Section 6(C)(2)(b). (v) A pilot withdrawing from transition/differences training will be subject to Section 6(C)(3)(b). (e) A pilot who has failed to qualify as provided in paragraph (c) above and/or who exercised the withdrawal provision of Section 6(A)(6), the sum of which totals three (3), shall not be afforded a further opportunity to qualify in any status on any equipment and shall be permanently restricted to his/her current status and equipment, subject to satisfactory completion of requalification training and seniority permitting. 34 SECTION 6(C)(2) (2) Failure to Qualify - Initial/Upgrade Training (a) A pilot who fails to qualify and is not subject to the provisions of Section 6(C)(1)(e) shall be handled in accordance with the following: (i) Such pilot shall be returned to his/her category held prior to entering training, subject to satisfactory completion of requalification training and seniority permitting; or (ii) In the event the equipment to which the pilot is to be returned is no longer available or the pilot cannot hold such category bid in seniority order, such pilot may elect a displacement option under Section 19(G) to a previously held equipment within his/her present or lower status. Section 13 shall not apply to a pilot who elects the displacement option under this provision. (iii) In addition, an initial/upgrade Captain may elect to fill a permanent vacancy bid award as a First Officer on the failed equipment, subject to satisfactory completion of qualification/requalification training. (b) A pilot described in Section 6(C)(2)(a) or Section 6(C)(1)(d) who is not subject to the provisions of Section 6(C)(1)(e) shall be eligible to bid for any category requiring initial/upgrade training twelve (12) months after his/her failure to qualify or withdrawal, subject to bid vacancies being available and seniority permitting. (c) A pilot described in Section 6(C)(2)(b) who is awarded a bid requiring initial/upgrade training and who again fails to qualify shall be returned to his/her previous category, subject to satisfactory completion of requalification training and seniority permitting. If this failure causes the third failure to qualify in accordance with Section 6(C)(1)(e), the Company shall not be required to afford a further opportunity to qualify in a higher status on any equipment. (d) In the event the equipment to which the pilot is to be returned is no longer available or the pilot cannot hold such category bid in seniority order, as provided for in Sections 6(C)(2)(c) above, such pilot shall be afforded the displacement prerogatives under Section 19(G) to any equipment within his/her present status or in a lower status, if applicable. Section 13 shall not apply to a pilot who elects the displacement option under this provision. (e) A pilot who fails to requalify in a previous status and equipment under Sections 6(C)(2)(a), (c) and (d) or who fails to qualify under Sections 6(C)(2)(a) and (d) above will be handled under the provisions of Section 21. 35 SECTION 6(C)(3) (3) Failure to Qualify - Transition/Differences Training (a) A pilot who fails to qualify and is not subject to the provisions of Section 6(C)(1)(e) shall be handled in accordance with the following: (i) Such pilot shall be returned to his/her category held prior to entering training, subject to satisfactory completion of requalification training and seniority permitting; or (ii) In the event the equipment to which the pilot is to be returned is no longer available or the pilot cannot hold such category bid in seniority order, such pilot may elect a displacement option under Section 19(G) to a previously held equipment within his/her present or lower status. Section 13 shall not apply to a pilot who elects the displacement option under this provision. (b) A pilot described in Section 6(C)(3)(a) or Section 6(C)(1)(d) who is not subject to the provisions of Section 6(C)(1)(e) shall be eligible to bid for any category requiring transition/differences training twelve (12) months after his/her failure to qualify or withdrawal, subject to bid vacancies being available and seniority permitting. (c) A pilot described in Section 6(C)(3)(b) who is awarded a bid requiring transition/differences training and who again fails to qualify shall be returned to his/her previous category, subject to satisfactory completion of requalification training and seniority permitting. If this failure causes the third failure to qualify in accordance with Section 6(C)(1)(e), the Company shall not be required to afford a further opportunity to qualify in a category of the same status on any equipment. (d) In the event the equipment to which the pilot is to be returned is no longer available or the pilot cannot hold such category bid in seniority order, as provided for in Section 6(C)(3)(c) above, such pilot shall be afforded the displacement prerogatives under Section 19(G) to any equipment within his/her present status or in a lower status, if applicable. Section 13 shall not apply to a pilot who elects the displacement option under this provision. (e) A pilot who fails to requalify in a previous status and equipment under Sections 6(C)(3)(a), (c) and (d) or who fails to qualify under Sections 6(C)(3)(a) and (d) above or who possess no previous TWA status and equipment qualification shall be handled under the provisions of Section 21. 36 SECTION 6(C)(4) (4) Failure to Qualify - Requalification Training (a) A pilot who fails to qualify and is not subject to the provisions of Section 6(C)(1)(e) shall be handled in accordance with the following: (i) Such pilot shall be returned to his/her category held prior to entering training, subject to satisfactory completion of requalification training and seniority permitting; or (ii) In the event the equipment to which the pilot is to be returned is no longer available or the pilot cannot hold such category bid in seniority order, such pilot may elect a displacement option under Section 19(G) to a previously held equipment within his/her present or lower status. Section 13 shall not apply to a pilot who elects the displacement option under this provision. (b) A pilot described in Section 6(C)(4)(a) above who fails to requalify in a previous status or equipment or who possess no previous TWA status and equipment qualification shall be handled under the provisions of Section 21. (5) Failure to Maintain Qualifications (a) A pilot who fails to maintain qualification in his/her present category will be allowed to return to his/her previous category, subject to satisfactory completion of requalification training and seniority permitting. In the event the equipment to which the pilot is to be returned is no longer available or the pilot cannot hold such category bid in seniority order, such pilot may elect a displacement option under Section 19(G) to a previously held status and equipment. Section 13 shall not apply to a pilot who elects the displacement option under this provision. (b) A pilot described in Sections 6(C)(5)(a) above who fails to requalify in his/her previous status and equipment or who possess no previous TWA status and equipment qualification will be handled under the provisions of Section 21. (D) PILOT TRAINING BOARD (1) There shall be a Pilot Training Board (herein the "Board") for the purpose of: (a) Making recommendations and reviewing matters pertinent to the training of pilots and pilot training programs. (b) Discussing the circumstances of pilots in jeopardy of failing to complete a course of training or of pilots experiencing difficulty completing IOE. A course of training is defined as a initial, transition, upgrade or a special course of extended training. 37 SECTION 6(D)(2) (2) The Board shall consist of five (5) members, two (2) selected by the Association. Association members shall be TWA employees familiar with pilot training. The remaining members shall be the Director Flight Operations Training, and the respective Regional Chief Pilots or their designees. (3) When any pilot is in jeopardy of not completing a course of training including IOE, or a pilot is exercising the options under 6(A)(5) and 6(A)(6), the Company shall notify the entire Pilot Training Board by telephone or the most expeditious manner available. The Board members shall be apprised of the circumstances surrounding the pilot's difficulty so that members of the Board may review the progress of the pilot. Based on this review Board members may make recommendations regarding the pilot's difficulty which are intended to facilitate the pilot's successful completion of his/her course of training. Further, when the Company and/or the Association is advised that a pilot is subject to an action by the DOT/FAA/NTSB relative to the operation of a TWA aircraft when training/standards may be an issue, the entire Pilot Training Board shall be notified by telephone or the most expeditious manner available. The Board members shall be apprised of the circumstances surrounding the pilot's situation so that the Board may recommend appropriate remedial measures. Such recommendation shall be considered by the Company. (4) The Board has no authority to alter or override the decisions of the Managing Director Flight Operations Training in matters relative to training, or of the Regional Chief Pilot in matters relative to IOE. (5) No decisions of the Board shall limit a pilot's right to exercise his/her rights under Sections 21 and 22 of the Working Agreement and further, any recommendation made by the Board pursuant to three (3) above shall not be admitted at any grievance hearing convened under these sections of the Working Agreement. (6) For the purposes of (D)(1)(a) above, the Board shall meet whenever it deems necessary to resolve items brought to its attention, but no less than twice a year on mutually agreeable dates. (7) If necessary, the Company agrees to make available to each member of the Board a current Company pilot training manual. 38 SECTION 7 TRIP AND TRAINING EXPENSES (A) DOMESTIC OPERATIONS (1) A pilot's expense allowance while engaged in operations, including training, away from the pilot's domicile shall be one dollar and eighty cents ($1.80) per hour for each hour or fraction thereof commencing at the time the pilot is required to report at his/her domicile and continuing until the pilot is released at his/her domicile. (2) No expenses shall be allowed a pilot when the period of time spent away from the pilot's base station on a flight is less than four hours (4:00) or where a pilot leaves the pilot's base station and returns to such base station without a landing being made at a point other than the pilot's base station. (3) At all stations where a pilot is scheduled or actually lays over, the Company will provide suitable and adequate single rooms and transportation in accordance with the following: (a) Crew lodging facilities will be provided in a suitable hotel/motel of comfort and facilities comparable to those utilized by the Company for crew layover purposes as of October 21, 1981. Prior to the selection or change of a layover hotel/motel by the Company, the Association shall be given the opportunity to inspect such facility except where circumstances beyond the Company's control prevent such inspection. If the Association desires that the Company change the location of existing layover facilities, the Association shall notify the Company to this effect and will set forth the reasons therefor. The Company will conduct a prompt investigation and if appropriate action is necessary, will correct any deterioration of service or facilities as reported by the Association representative(s). Additionally, the Company and the Association shall review the suitability of hotels and transportation then in use on a quarterly basis. (b) A pilot scheduled to layover twenty hours (20:00) or less (block to block) may be provided hotel accommodations at the airport of the layover city. On layovers of over twenty hours (20:00), a pilot shall be provided hotel accommodations downtown unless the parties mutually agree to an airport layover hotel. (c) Transportation to or from hotel accommodations other than airport hotel(s)/motel(s) will be in suitable vehicles. When the Company provided transportation at layover stations is not available within thirty-five minutes (0:35) after scheduled block-in or actual block-in of the flight, whichever is later, the crew may utilize other means of ground transportation to the layover hotel and shall be reimbursed for such reasonable and actual transportation expenses on the regular Company expense account form. The use of alternate transportation and reimbursement therefore shall apply when Company provided transportation is unavailable within fifteen minutes (0:15) of the scheduled pickup time at the layover hotel. 39 SECTION 7(A)(4) (4) A pilot's expense allowance while assigned to any temporary duty or assignment away from such pilot's domicile, shall be two dollars and fifty cents ($2.50) per hour for each hour or fraction thereof away from his/her domicile, except that where the Company provides suitable lodging and transportation, a reduction to the per hour rate as prescribed in (A)(1) above may be made. (a) A reserve pilot will receive the applicable hourly expense allowance beginning at 0001 of the first day assigned to such temporary duty except that the reserve pilot will not receive expenses during his/her duty free days (at home), while on sick leave (at home), any time (after 2400 of that day) when released from such temporary assignment or any time such pilot is unavailable to perform the responsibilities of such assignment. (b) A pilot holding a bid run will receive the applicable hourly expense rate beginning at 0001 of the day of the pilot's first actual flight assignment and continue until midnight (2400) of either the day such pilot is released from the temporary assignment or that such pilot is unavailable to perform the responsibilities of the assignment. Any expense reimbursement for such portion of such period shall be subject to (E)(1) below. (5) When a pilot is required to report for flight duty at the pilot's domicile, to an airport in the same geographical area as, but other than, the airport from which the pilot's bid run operates, such pilot shall be furnished transportation by the Company from the regular airport to such other airport, or be paid twenty cents ($0.20) per mile plus necessary toll fees to drive the pilot's personal automobile between such airports; or when the pilot drives from the pilot's home to an airport other than the one from which the pilot's bid run operates, the pilot shall be paid transportation expenses as indicated above for the miles in excess of the distance from the pilot's home to the pilot's regular airport. When a pilot lands at the pilot's domicile, at an airport in the same geographical area as, but other than the airport from which the pilot's bid run operates, the Company shall provide return transportation to the departure airport at no out of pocket expense to the pilot. Expenses hereunder shall be in addition to those provided in (A)(1) above and compensation provided in Section 8 where such is due. In the event a pilot crew originates its trip at one airport and terminates at another airport at its domicile, on a scheduled basis, said pilot crew will be furnished direct one-way transportation, or in the alternative, if the Company shall so elect, will be paid the actual expense of such transportation one-way between the terminating and originating airports. For the purpose of this provision the pilot crew will be treated as a unit. 40 SECTION 7(B) (B) INTERNATIONAL OPERATIONS (1) When a pilot in International Operations is on a trip away from his/her domicile on Company business, as in (A)(1) above, the following shall apply: (a) At all stations where a pilot is scheduled or actually lays over, the Company will provide suitable and adequate lodging and transportation. Additionally, a pilot's expense allowance while engaged in operations away from domicile shall be two dollars ($2.00) per hour for each hour or fraction thereof while away from domicile. (b) Crew lodging facilities, as in (B)(1)(a) above will be selected from a list of first class hotels mutually agreed upon by the Company and the Association, and further, any such hotel selected shall be subject to inspection by the Association representative(s) as to suitability of accommodations prior to the Company contracting for such hotel. A copy of such hotel contract shall be provided to the Association representative(s). Should either the Company or the Association desire to change the location of existing layover facilities, the parties shall consult for the purpose of reaching agreement on mutually acceptable facilities unless conditions and circumstances beyond the Company's control preclude such agreement. Prompt investigation will be made and appropriate action taken by the Company to correct any deterioration of service or facilities as reported by the Association representative(s). Transportation to or from hotel accommodations located more than five (5) miles from the airport will be in vehicles of a type mutually agreed to by the Company and the Association representative(s). (c) When the Company does not provide such facilities as outlined above, reasonable actual expenses will be allowed therefor. (2) A pilot's expense allowance while assigned any temporary duty or assignment away from such pilot's domicile, shall be two dollars and fifty cents ($2.50) per hour for each hour or fraction thereof away from his/her domicile except that where the Company provides suitable lodging and transportation, a reduction to the per hour rate as prescribed in (B)(1) above may be made. If such assignment is outside the continental limits of the United States, the provisions of (B)(1) above shall apply except that the per hour expense rate shall be two dollars ($2.00). (3) At newly established layover stations, before any arrangements are made or allowances for lodging, transportation, meals, laundry, tips, and miscellaneous expenses are established, the Company will consult with the pilot representative(s) affected, and will put the reasonable recommendations of such representative(s) into effect if at all practicable. 41 SECTION 7(C) (C) DOMICILE TRAINING EXPENSES (1) A pilot assigned to training at the pilot's domicile (excluding completion of recurrent training bulletins, viewing of route qualification films, and attendance at special domicile meetings) shall receive twelve hours (12:00) expenses at the hourly rate provided in paragraph (A)(4) of this Section for each day of such training. (2) A pilot who bids or is displaced to another domicile and who is in training in the new domicile to fulfill that bid after the effective date of the bid award, shall receive training expenses and hotel accommodations in accordance with (D) below, until such time as the pilot is released for line training. (D) TRAINING EXPENSES AWAY FROM DOMICILE A pilot's expense allowance while assigned to the Company's training school (if at a location other than the pilot's domicile) shall be one dollar and eighty cents ($1.80) per hour or fraction thereof away from such domicile. The Company shall provide suitable and adequate single rooms as provided in (A)(3)(a) for a pilot training away from the pilot's domicile. In addition the Company shall reimburse each pilot for transportation expenses from the airport to the hotel and return for each training assignment. This reimbursement shall not exceed the roundtrip rate for taxi/limousine that serves these facilities. No such reimbursement need be made if transportation is furnished by other means (e.g. a crew lodging facility courtesy car). Any expense reimbursement for such portion of such period shall be subject to (E)(1) below. (E) GENERAL (1) In addition to the provisions of paragraphs (A) and (B) of this Section the Company may allow additional expenses covering any extraordinary conditions. (2) The hourly expense allowances under this Section are intended to reimburse pilots for only reasonable actual expenses. (3) A pilot shall be allowed to submit Company related (800) number phone fees on his/her expense report. 42 SECTION 8 DEADHEAD TIME (A) When a pilot, who has completed one (1) year of service with the Company as a flight deck crew member, deadheads on a flight or part thereof, to or from protecting a flight, such pilot shall receive full pay, full credit for each hour of such deadhead time. Pay will be based on the pay rates of the equipment used on the flight protected. Deadhead pay rates and credit under this Section will be prorated where periods of less than an hour are involved. (B) When deadheading is by surface transportation, it shall be paid as indicated above on the basis of scheduled flight time between the points. (C) Movement between the following airports by surface transportation for the purpose of taking out a flight or returning from a flight, will not be considered as deadhead time. Each pilot shall be compensated for such movement, at the pilot's domicile only, at $2.50 per hour. Between Normal Travel Time ------- ------------------ Newark LaGuardia 1:15 Newark Kennedy 1:30 LaGuardia Kennedy :45 Kennedy Islip 1:00 San Francisco San Jose 1:00 San Francisco Oakland 1:00 Los Angeles Ontario 2:15 Los Angeles Long Beach :40 Los Angeles Burbank 1:15 Los Angeles Santa Ana 1:30 The travel time provided in this paragraph (C) shall be considered as an extension of the trip hours and on-duty provisions of Section 11. (D) Prior to initiation of operations from airports other than those listed in paragraph (C) above, the Company shall consult with the Association for the purpose of establishing travel times and transportation arrangements pertinent to such operation. (E) A pilot scheduled to complete a flight assignment by deadheading from another station to such pilot's domicile shall be permitted to proceed directly to a location other than the pilot's domicile providing that prior to departing such other station, the pilot shall obtain approval from the appropriate planning authority. Such approval shall not be arbitrarily withheld. However, when crew rest is scheduled prior to deadheading return to domicile, 43 Section 8(E), cont. the pilot shall not depart the station before the termination of such rest period. Class B travel is authorized to any TWA station provided that such travel is completed on the same day as the deadhead return to domicile. When a pilot elects to utilize the provisions of this paragraph, expenses shall terminate at the block-out time of the flight upon which the pilot normally would have deadheaded to the pilot's domicile. (F) A pilot scheduled to begin a flight assignment by deadheading from the pilot's domicile to another station to originate a flight, shall be permitted to proceed directly to the other station to originate the flight providing that prior to departing for such other station, the pilot shall obtain approval from the appropriate scheduling authority and his domicile. Such approval shall not be arbitrarily withheld. The pilot shall bear the responsibility of reporting for the originating flight in sufficient time but in no case less than one hour (1:00) prior to scheduled departure. A pilot shall be responsible to ensure that he/she has reviewed all pertinent safety material prior to flight assignment. Notification of pilot direct reporting will be via the designated CAMS entry. Class B travel is authorized to any TWA station provided that such travel is completed on the same day as the deadhead to begin a flight assignment. When a pilot elects to utilize the provisions of this paragraph, expenses shall begin at the block-in time of the flight upon which the pilot normally would have deadheaded from his/her domicile. (G) When utilizing the provisions of Sections 8(E) and/or (F), a pilot shall be deemed to have actually performed the deadhead assignment as scheduled for the following purposes: 1) Duty time limitations; 2) Flight time limitations; 3) Flight time pay; and 4) Flight time credit as provided in Sections 8, 10, and 11 of this Agreement. 44 SECTION 9 SCHEDULING POLICY The scheduling of pilots out of each domicile shall be in accordance with seniority and category. Since all situations cannot be covered, any question of interpretation should be brought to the attention of the Regional Chief Pilot. If such an interpretation does not satisfy the pilot involved, such pilot shall nevertheless follow the instructions received from the Regional Chief Pilot and then may present a summary of the incident to his/her Domicile Schedule Committee Chairman. (A) Preparation of Bid Pairings (1) Prior to consulting with the System Schedule Committee the Managing Director - Flight Operations shall analyze the flight assignments and develop them into bid pairings for posting on a standard form or in electronic form. Such bid pairings shall include all known flight time assigned to the domicile and shall be developed in accordance with this policy. (2) Whenever a change of flight times, stops, or layover points occurs, or if flights are added or deleted after the closing of bid preference bidding, the decision regarding the posting of new bid pairing preference sheets shall be made by mutual agreement between the Domicile Schedule Committee Chairman and the Regional Chief Pilot. Such a decision shall be based on the extent of such changes and the time of the month. (3) Every effort shall be made to design bid pairings in such a manner that there is an assortment of pairings offering a variety of pairing characteristics (i.e., length of trip and departure/arrival time). (a) Prior to the posting of bid pairings, a pre-run solutions check shall be accomplished to ensure that there is a feasible bid run solution. The check shall take account of all staffing actions and prescheduled activities known at the time of the run. Pairings which will not provide a feasible pre-run solution check in a category shall be redesigned by being recombined with other flight assignments as necessary until a feasible pre-run solution check is accomplished. The Company shall provide a copy of the pre-run solution to the System Schedule Committee at the System Schedule Committee meeting. (b) Additionally, to the extent possible, the Company shall strive to ensure that the highest level of bid run satisfaction is achieved by the maximum number of pilots in each category. (4) Bid pairings shall be posted in such a manner as to reflect the flight number(s), dates of operation, and a projection of credited flight time. (5) Monthly bid pairings shall be developed which will achieve bid runs that can be constructed within the mutually agreed range of Target. 45 Section 9(A)(6) (6) A listing of all pilots who are scheduled for vacation, known training or leaves of absence shall be posted by category concurrently with the posting of bid pairings. (B) Bidding - Information Package and Process (1) Information permitting, pilots shall have ten (10) days to indicate their schedule preferences. A domicile flight assignment summary ("bid package") containing all pairings of flights to be flown by category to be effective the following month/bid period shall be available electronically via Home Access and preferential bid system ("PBS") stations, on the eighth (8th) of each month and bids shall close on the eighteenth (18th) of each month. Additionally, paper bid package(s) will be available in each pilot's domicile/satellite by the twelfth (12th) of each month. Changes to the above mentioned dates may only be made by mutual consent. The bid package will show all domicile bid pairings grouped by equipment, and the following information (a-t) shall be included. Also, (a-j) shall be provided in a summary format. (a) Flight Number (b) Equipment-Limo-Deadheading (c) Departure Time (Domestic-Domicile Local Time; International-Domicile Local and GMT) (d) Crew Change Station (e) Arrival Time (f) Schedule Stops (g) Layover Station and Time (h) Total Scheduled Block-to-Block (i) Total Trip Hours (j) Total Round-trip Credit (k) Crew Meal Segments (l) Target (m) Range (n) The estimated Reserve Staffing for each Category and the three (3) fixed-days-off (FDO) spreads as defined in Section 12(D)(2)(b). (o) A listing of all pilots who are scheduled for vacations and known training. (p) Layover Hotel/Limo names and contact telephone numbers (q) System Default Bid for each category, as developed and mutually agreed between the Company and the System Schedule Committee, when updated as necessary. A 46 Section 9(B)(1)(q), cont. reference to a location where the System Default Bid can be viewed and printed electronically. (r) A reference to a location where the name and the payroll number of each pilot who is qualified as a line check airmen by category can be viewed and printed electronically. (s) A reference to a location where the previous month's bid results, indicating those pilots awarded bid runs or reserve schedules by Category in seniority order can be viewed and printed electronically. (t) Final agreed values ("pad factors") for all legalities (e.g., 29:15 in 7, etc.). Bid packages are to be mailed via overnight delivery to pilots upon request when they are five (5) or more days late. (2) The Company will provide pilots with technical support during the introduction of the preferential bid system to enable pilots to efficiently and effectively utilize the monthly preferential bid system. An on-line tutorial program will be available and updated as required. Further, the Company shall provide a toll-free technical support line that will be staffed during the time that bids are open Monday through Friday from 0830 to 1730 Central Time. At all other times during the month, a voicemail facility will be utilized. (3) (a) Each pilot shall indicate his/her personal default bid and/or monthly schedule preferences electronically on the preferential bid system provided at each domicile/satellite and/or through Home Access. Additionally, each pilot may indicate his/her personal default bid through CAMS by utilizing the "JXPREF" entry. (b) The preferential bid entry system shall provide: (i) User-friendly interface features to enable a pilot to efficiently enter his/her preferences that will effectuate the processing and awarding of a bid run or reserve schedule in accordance with his/her preferences and seniority; (ii) Help features and bid entry system interface features to enable the pilot to successfully enter his/her preferences in the proper format. The system shall allow each pilot to identify and prioritize his/her preferences. (iii) The bidding pilot shall have access to his/her last month's bid award, input bid preferences and a way to determine the reasons for awards and/or denials of awards. (iv) Reports will be available to the System Schedule Committee such that the preferential bidding system's performance and other features can be 47 Section 9(B)(3)(b)(iv), cont. monitored and evaluated. (4) Each pilot shall indicate bid run or reserve schedule preferences on the preferential bidding system provided at each domicile/satellite or through Home Access. Sufficient choices to receive a bid award should be indicated. (5) As a guide for awarding pairing(s) to pilots who are short on time and for balancing purposes, each pilot may enter his/her balance preferences by use of the CAMS free form balance request (JXMVP). Such balancing preferences shall be input by 0600 Central Time on the 23rd of the month prior to the bid month to be processed on the 23rd of the month. Pilots who volunteer for a supplemental bid run will also use this CAMS transaction and date/time to express their trip preferences. (6) Whenever a bid assignment message announces a pilot's bid or assignment before bid preferences close and the effective date of the bid is on or before the first day of the bid period, the pilot shall be permitted to express his/her bid preferences provided such expression is made prior to the bid preference closing date and time. (7) Whenever it is known that a pilot will return from leave of absence or temporary assignment during the bid period that pilot shall be permitted to express his/her bid preferences provided such expression is made prior to the bid preference closing date and time. (8) A pilot shall bear the responsibility for having his/her bid preference indicated as provided in paragraph (B)(3) above during the bidding period. (9) A pilot may leave a self-addressed stamped envelope of appropriate size with the Manager-Flight Crew Administration for the purpose of mailing the bid package. (10) Pre-scheduled Activities: (training, vacation, ------------------------ medical/sick leave, etc.). (a) For the purposes of Training Golden Days (TGDs) input, an annotation alerting a pilot to anticipate CQT in the bid month shall be visible to the pilot in his/her JXCAP not later than the first day of the month prior to the bid month. (b) For the purposes of bidding, each pilot's known activities (except for unpaid leaves of less than one month) for the next bid month (including specific dates) shall be input and made available for viewing by the pilot not later than the fourteenth (14th) of the month prior to the bid month and shall not be changed without the concurrence of the pilot until twenty-four hours (24:00) after bid runs are awarded. (C) Awarding of Bid Pairings (1) Bid runs shall be developed from the awarded bid pairings in accordance with seniority and posted on a standard form or available electronically through the preferential bid system 48 Section 9(C)(1), cont. at each domicile/satellite and Home Access. (a) Short term (less than one month) leaves without pay will not be considered in the construction process of awarded bid runs or reserve schedules. (b) A pilot whose pre-scheduled activities preclude him/her being awarded his/her preference for a bid run or reserve schedule in accordance with seniority may be assigned a bid run or reserve schedule for the purposes of completing the run. After the bid run and reserve schedule awarding process is completed, such pilots shall be afforded an opportunity to accept the assigned bid run or reserve schedule or alternatively, exercise the provisions of Section 9(C)(5). (c) A pilot whose bid preferences may be equally satisfied by more than one pairing(s), work and non-working period(s) may have the determination of which such equally desired pairing(s), work and non-working period(s) he/she is awarded by the preferences of the pilot(s) junior to such pilot, in seniority order, who have submitted more specific bid preferences in the same bid category. (d) A pilot may enter bid preferences containing one or more conditional or specific reserve schedule criteria and shall be awarded such reserve schedule, seniority permitting. If the awarding of such schedule in accordance with a pilot's seniority would prevent a successful completion of bid awards, such pilot may be assigned a bid run or reserve schedule for the purposes of completing the run. After the bid run and reserve schedule awarding process is completed, such pilot shall be afforded an opportunity to accept the assigned bid run or reserve schedule or alternatively, exercise the provisions of Section 9(C)(5). (e) A Reserve Officer shall be temporarily assigned to the status of his/her qualification and shall be permitted to bid and be awarded a bid run in the same manner as if they were permanently assigned to the category. (f) Except as provided in Section 9(C)(1)(a) above, a pilot's schedule will be constructed such that he/she is contractually legal in all respects for all pairings and/or reserve schedules awarded vis-a-vis his/her known activities as reflected in CAMS at the closing of bids. The Company may exercise the provisions of Section 9(D) during the interval after bids have closed and before the award results are reflected in CAMS, except that any such balance award that causes an illegality in the pilot's next month bid award shall be removed upon bid run completion. Nothing in this paragraph shall limit a pilot's right to initiate changes to his/her schedule at any time. If such pilot initiated changes create any conflicts or illegalities versus their PBS award, any illegally awarded trips shall be removed from the award and the pilot shall be handled 49 Section 9(C)(1)(f), cont. under the initial balance process. (2) If a pilot fails to bid as provided in 9(B)(3), the pilot will either be awarded a bid run or reserve schedule, utilizing the pilot's personal default bid. If the pilot does not have a personal default bid, the appropriate system default bid will be used. (3) A pilot will not be awarded a bid (except for pay purposes only) on a type of equipment unless the pilot holds the necessary equipment qualifications, or it is anticipated that the pilot will complete such qualifications within the first five (5) days of the bid month being awarded. (4) A pilot who has completed transition and/or upgrade training on an equipment type in conjunction with fulfilling a new category bid will be afforded the opportunity for a guaranteed bid run award through the PBS, seniority notwithstanding, in the new category for one (1) month only. Such guaranteed bid run holder status shall be in accordance with Section 9(C)(3) above. A pilot who is awarded a bid run pursuant to this paragraph shall not be subject to displacement under Section 9(C)(5) below. (5) A pilot described in Section 9(C)(1)(b) or (d) above or whenever a pilot bidding, displacing, returning from leave of absence, training or temporary assignment or changing categories, arrives at a domicile after the awarded bid period has started and has not been awarded a bid, the pilot shall be handled in the following order: (a) If sufficient open time is available to construct a line reasonably close to the pilot's monthly ALV, a pilot shall be scheduled on such open time provided the pilot's seniority entitles the pilot to such open time. (b) If sufficient open time is not available, the pilot shall assume the line held by the most junior line holder provided the pilot is senior to the holder of said bid run in his/her category. (c) If unable to be handled as in (a) or (b) above, seniority permitting the pilot shall assume the line held by the most junior pilot holding a bid run as in (C)(8) below in his/her category. (d) If unable to be handled as in (a),(b) or (c) above, the pilot shall be assigned a reserve schedule. (e) If a pilot so elects, in lieu of (a),(b) or (c) preceding, the pilot may be given a reserve schedule. The Company shall attempt to contact such pilots for disposition by phone, and if unable then by an entry in the pilot's JXCAP. (6) Notwithstanding the balancing of pilots and distribution of open time provisions contained in Section 9(H) below, whenever a bid pairing(s) is re-bid or a flight(s) in a bid run must be substituted because of a schedule change during 50 Section 9(C)(6), cont. a month, the flight(s) for which the pilot is scheduled in the new period shall replace any flight(s) previously awarded for that period from earlier bidding, and such new flight(s) shall be considered to be a part of the pilot's original projection. Substitution of flight(s) under the provisions of this paragraph 9(C)(6) shall be limited to pilots who have lost flight(s) solely for the reason stated above. Additionally, the substitution of flight(s) as provided herein shall be assigned based upon the seniority within the category and the following priorities: (a) First, the new flight assignment(s) is substantially equal in pay and credit and days scheduled to operate to the original flight assignment; (b) Second, the new flight assignment(s)is substantially contained within the days that the original flight assignment was to operate; (c) Third, the new flight assignment(s) is substantially equal in pay and credit to the original flight assignment. (7) A pilot will not be awarded a bid run or reserve schedule if the pilot is expected to be absent from flying during the entire bid period, i.e., medical, personal leave, vacation, etc. (8) Supplemental Bid Runs. The Company shall develop --------------------- supplemental bid runs to provide for the post bid award protection of flight assignments that are un-sequenced and flight assignments that are otherwise vacated by pilots. If subsequent to the posting of bid run awards, but prior to the seventh day of the new bid period, a bid run can be developed for a category which totals the guarantee or more credited hours, such bid runs shall be awarded in seniority order to those pilots holding a reserve schedule in that category who have indicated a preference for a supplemental bid run subject to Section 12(D)(2)(b). Pilots may indicate such preference in accordance with the following: (a) Pilots desiring a supplemental bid run shall indicate this preference via an appropriate entry in the Preferential Bidding System. Such pilots shall input their preferences as to trips via the CAMS free form balance request (JXMVP) by 0600 Central Time on the 23rd of the month prior to the bid month to be processed on the 23rd of the month; or (b) Pilots desiring a supplemental bid run may input their preferences as to trips via the JXMVP by 0600 Central Time on the 23rd of the month prior to the bid month to be processed on the 23rd of the month. Supplemental bids will be awarded first to pilots who indicated a preference for such bids via the Preferential Bidding System. Any additional supplemental bids will then be awarded to pilots who input their preference as to trips 51 Section 9(C)(8), cont. via the JXMVP. After any such supplemental bid runs are awarded, any additional open time will be handled in accordance with Section 9(H). (9) The above notwithstanding, the Company shall not be required to award during the normal monthly bid award process First Officer pairings associated with Line Check Airman bid runs. Such pairings as provided under this Section 9(C)(9) shall not exceed the equivalent of thirty (30) First Officer Bid Runs based on the respective First Officer Category range of Target. Such open First Officer pairings shall be, to the extent possible, used for training which, as used herein, shall be limited to equipment training, requalification training, upgrade training, and checking. Whenever said bid runs or a portion thereof cannot be used in training as described above, the resultant vacant trip(s) shall be treated as open time and assigned in accordance with Section 9(H). The assigning of pilots to trips open due to such un- awarded First Officer bid pairings shall not result in any pay assignment to any pilot. The application of this provision shall not, for the duration of the Agreement, result in the creation of an excess of pilots for the purpose of subsequent system displacement actions. (10) During the monthly preferential bid process, First Officers with less than FAR 121.438b experience will not be awarded a pairing(s) that has been awarded to a Captain who does not meet the requirements of FAR 121.438b. (D) Balancing of Pilots (1) For the purpose of balancing, pilots will be classified as follows: (a) Class "A" Balance: Bid run pilots projected under -------- guarantee, upon completion of initial balancing on a seniority basis, will be classified as Class "A". A Class "A" pilot may enter balance preferences at any time by telephone contact or voicemail with CCS, or the CAMS free-form balance request (JXMVP). Initial balancing will normally commence on the twenty-third (23rd) of the month prior to the bid month. Notwithstanding the provisions of Section 9(B)(5), a Class "A" pilot may request that his/her balance preference be added to the JXMVP list at any time during the month. Trip Substitution: In addition to the Company or pilot adding a Class "A" balance trip, a Class "A" pilot may substitute a conflicting trip in his/her bid line with a Class "A" balance trip. Such trip substitution is limited to a Class "A" balance. (b) Class "M" Balance (Military): In accordance with Section 18(C)(4)(c), bid run pilots who drop an entire trip due to military and request to become available for balance for the number of days of the original trip over and above the military absence days taken will be classified as Class "M". (E.g. A five day trip 52 Section 9(D)(1)(b), cont. is dropped for two days of military absence, the pilot would be available for three days (M3) of flying.). A Class "M" pilot may enter balance preferences at any time by telephone contact or voicemail with CCS, or the CAMS free-form balance request (JXMVP). Notwithstanding the provisions of Section 9(B)(5), a Class "M" pilot may request that his/her balance preference be added to the JXMVP list at any time during the month. (c) Class "B" Voluntary Balance: Bid run pilots projected ------------------ under ALV credit hours but over guarantee due to the following will be classified as Class "B": - A flight cancellation - Irregular operation - When training results in a missed trip(s) that are greater than the value of the daily rate for such trip(s). In addition, pilots projected under guarantee due to low initial projection, as defined in Section 9(D)(2)(b), will be considered Class "B". Notwithstanding the provisions of Section 9(B)(5), a Class "B" pilot may request to be balanced at any time during the month by telephone contact with Crew Scheduling, by voicemail or by the CAMS free form balance request (JXMVP). Once the value of the Class "B" loss, as stated above, has been recovered, the pilot will not be considered for a Class "B" balance. (2) Additional Balance Rules: (a) Involuntary Balance: In the event a pilot's projected flight time credit for the month is less than the applicable hours of the pilot's guarantee, the Company may balance such pilot at any time during the month, subject to (D)(2)(b), below. (b) A bid run pilot whose initial awarded bid run is constructed to less than bid run guarantee will not be subject to balance as provided for in Section 9(D) unless such pilot indicates his/her request for balancing by voicemail or by the CAMS free form balance request (JXMVP). (c) Pay and Credit Calculations: If any trip commences (report time) in one (1) calendar month and ends in the following month, all of a pilot's calculable flight time pay and credit for the trip shall be paid and credited in the month earned. (d) Reserve Replacement Option (RRO): Subject to the approval of Crew Schedule, a Class "A", "M" or "B" 53 Section 9(D)(2)(d), cont. pilot may remove a reserve pilot from a flight up to the time the reserve pilot is required to report for the flight. In addition, a reserve pilot may be removed from a flight in mid-pairing by Crew Schedule if the remaining portion of the pairing is assigned to a Class "A", "M" or "B" pilot or at the Company's sole discretion to any pilot on the Volunteer Fly List. (e) Balance Limits: The block-to-block flight time on the balance trip to be flown shall not, when added to his/her already accumulated block-to-block flight hours and projected block-to-block flight hours, total more than category target plus range, unless the pilot consents. (f) Class "A" and "M" balancing may be done by the Company at any time and will always be run consecutively, Class "A" then Class "M", on a seniority basis. (3) Balance Avoidance: Pilots who are subject to balance for any ------------------ reason shall be allowed to request an opportunity to avoid balancing. Requests to avoid balance action must be communicated to Crew Scheduling and, if approved, the pilot's guarantee will be reduced to the current value of his/her services performed and projected services. The decision to permit balance avoidance will be subject to forecast reserve availability and operational considerations at the time of the request and will be at the sole discretion of the Company. Pilots who exercise the balance avoidance option and subsequently are again subject to balance will be handled in accordance with Section 9(D)1 and (D)2 above. (4) When a canceled flight is re-originated or an extra section or charter is operated in lieu thereof, it will be treated the same as the pilot's original flight assignment. (E) Bid Line Improvement Process (BLIP) (1) To provide more desirable flights for pilots in accordance with their seniority, the following Bid Line Improvement Procedure (BLIP) principles shall apply for bid run pilots. (2) Each bid run pilot shall be offered an opportunity to bid for any flight whether or not the desired flight(s) is advertised as open. Such BLIP preference must be input for each day, separately, and can reflect flight preferences for any other date of the bid period, subject to the provisions listed below: (a) BLIP preferences must be input by the pilot via CAMS CRT, home access, or voice-mail. Up to three (3) display screens will be available for all preference inputs (i.e. BLIP and TAS). BLIP preferences must indicate the flight number(s) and date(s) of the flights desired and the flight number(s) and date(s) of the flight(s) vacated (e.g. *A256/02DEC R323/03DEC*). 54 Section 9(E)(2)(b) (b) BLIP processing for each month shall commence with the first BLIP close time three (3) days prior to the first day of the month and will be in accordance with the parameters listed below based on local domicile time: DAILY BLIP ------------------------------------------------------------- Domicile Return 1st BLIP 2nd BLIP to Duty Close Close Time ------------------------------------------------------------- JFK D/I 0800 0800 1700 ------------------------------------------------------------- STL D/I 0800 0800 1700 ------------------------------------------------------------- SFO D/I 0700 0700 1600 ------------------------------------------------------------- LAX D/I 0700 0700 1600 ------------------------------------------------------------- (c) A pilot who is in any off-duty status and desires to return for his/her next scheduled flight must do so no later than the applicable local domicile time on the day prior to the next scheduled flight or the flight will be removed and placed in open time. (d) BLIP awards will be completed as soon as possible, not to exceed three hours (3:00) of the BLIP close, local domicile time. Flight(s) awarded to successful bidders shall be added to the pilot's monthly schedule (JXCAP) and the flight(s) vacated will be removed. Any pilot whose flight(s) is vacated due to a BLIP Preference Award to another flight(s) will lose all rights to the vacated flight(s). (e) Daily BLIP awards will be processed in seniority order and on a multiple pass system. If the automated CAMS system is unavailable during the BLIP award process, the process reverts to a single pass system and the completion time provisions of paragraph (d) above and the automated report provision of this paragraph shall not apply. An automated report of all BLIP requests showing those awarded and the reasons for those denied will be electronically available for all pilots to view for each BLIP run. (f) A BLIP transaction will be processed even if it causes the pilot to exceed ALV. (g) A pilot on ALPA business will be allowed to exercise the BLIP provisions of this section in seniority order for the purpose of ALPA Flight Pay Loss make-up. (Not applicable to the three (3) members of the System Schedule Committee reimbursed by the Company under Section 10(B)(5)). (h) Subject to Sections 9(E)(2)(j), 9(E)(2)(k) and 9(E)(3) below, a pilot may BLIP out of any flight(s) within the new bid month, and a pilot may BLIP from any day of the new bid period into a flight on the last three (3) days of the previous bid period. 55 Section 9(E)(2)(i) (i) BLIP requests that impinge on a pilot's golden days will be awarded and the pilot will forfeit those golden days impinged upon. (j) A pilot may BLIP out of a flight(s) that departs or impinges on a holiday. Requests to BLIP out of the holidays specifically listed below will be processed two (2) days and one (1) day before the scheduled departure date of the pilot's original flight(s). The award of such BLIP will be at the Company's discretion, notwithstanding the stated reserve requirements of paragraph (E)(3). Further, at all times a pilot may BLIP out of a pairing(s) that departs or impinges on one of the following holidays as long as he/she adds a pairing(s) that departs or impinges on the same holiday. Thanksgiving Day Christmas Day December 31 (k) BLIP preferences will be honored if such award does not generate more than forty-five minutes (0:45) of make-up guarantee at the completion of each award. A pilot's guarantee will be automatically subject to the reduction provisions of Section 9(D)(3), Balance Avoidance, for the make up guarantee. (l) BLIP requests for a domestic satellite pairing will be awarded in accordance with the normal BLIP procedures. BLIP requests for an international satellite pairing will be awarded in accordance with Letter VI, paragraph 18. (m) BLIP preferences shall not be honored if the award is in conflict with a required, pre-scheduled activity or vacation. However, BLIP preferences shall be honored if the award conflicts with a bid run pilot's days off or golden days. (n) Pilots awarded a BLIP assignment have the responsibility to "OK" that assignment. However, Crew Schedule shall notify pilots awarded BLIP flight(s) for the current or following day and those pilots who have no flight activities scheduled before the BLIP award flight(s). In the event it is not possible to contact a pilot who has a BLIP flight(s), a rework will not be made. Any flight(s) left open in this manner will be assigned in accordance with Section 9(H). (o) BLIP preferences requesting to add a trip on the date of the BLIP process shall be awarded provided the trip added departs after 1700 (local domicile time) and the trip removed does not depart on that process day. (3) BLIP preferences shall be awarded if there are sufficient reserves to cover all known openings for the duration of the trip(s). If the vacated trip is within seven (7) days of the BLIP award, the BLIP preference shall be awarded if there is one (1) reserve pilot in addition to the sufficient reserve 56 Section 9(E)(3), cont. requirement for the duration of the trip. The Company, in its discretion, may award a BLIP preference notwithstanding the stated reserve requirements of this paragraph. (F) Additional Flying (1) General (a) Pilots who notify the Company that they are available to fly on days they are not otherwise scheduled to fly may perform additional flying, subject to these Section 9 (F) provisions. After the bids are awarded and continuing throughout the month an eligible pilot may volunteer to fly time in addition to his/her monthly schedule. No pilot shall be required to perform additional flying. (b) Non-bid run pilots are restricted from Green Time, (9(H)(1)), for all additional flying. (c) Non-bid run pilots may use TAS and VFL to request additional flying on days off, reserve golden days off (RGD) and vacation days. Such flights must depart on a day off, RGD or vacation day and must be contained within the pilot's vacation or duty free period, including all required rest, except as provided in Section 9(F)(5). Non-bid run pilots may use TAS and VFL for RGD and vacation flying beginning forty-eight hours (48:00) prior to the commencement of the RGD or vacation period for flights departing within the pilot's RGD or vacation. Non-bid run pilots on days off may use TAS or VFL for flights departing within forty-eight hours (48:00). (2) Trip Add System (TAS) (a) To provide a structured mechanism for pilots to add flights to their schedules in accordance with equalization, the TAS principles shall apply for all pilots. (b) Each pilot shall be offered an opportunity to bid for any flight whether or not the desired flight(s) is advertised as open. Such TAS preference must be input for each day, separately, and can reflect flight preferences for any date(s) of the bid period, subject to the provisions listed below: (i) TAS preferences must be input by the pilot via CAMS CRT, home access, or voice-mail. Up to three (3) display screens will be available for all preference inputs (i.e. BLIP and TAS). TAS preferences must be input by specific request, by flight number(s) and date(s) of the flight(s) desired (e.g. *A256/02DEC**A323/03DEC*). (ii) TAS processing for each bid month shall commence with the first TAS close time three (3) days 57 Section 9(F)(2)(b)(ii), cont. prior to the first day of the bid month and will be in accordance with the parameters listed below based on local domicile time: DAILY TAS ----------------------------------------------------- Domicile 1st TAS Close 2nd TAS Close ----------------------------------------------------- JFK D/I 0800 1700 ----------------------------------------------------- STL D/I 0800 1700 ----------------------------------------------------- SFO D/I 0700 1600 ----------------------------------------------------- LAX D/I 0700 1600 ----------------------------------------------------- (iii) TAS awards will be completed as soon as possible, not to exceed three hours (3:00) of the TAS close hour. Flight(s) awarded to successful bidders shall be added to the pilot's monthly schedule (JXCAP). (iv) TAS preferences shall not be honored if the award is in conflict with required, pre- scheduled activity. However, a TAS award shall be honored if the award conflicts with a pilot's scheduled vacation or days off. TAS requests that impinge on a pilot's golden days will be awarded and the pilot will forfeit those days impinged upon. A TAS transaction will be processed even if it causes the pilot to exceed ALV. (v) TAS requests for a domestic satellite pairing will be awarded in accordance with the normal TAS procedures. TAS requests for an international satellite pairing will be awarded in accordance with Letter VI, paragraph 18. (vi) Pilots awarded a TAS assignment have the responsibility to "OK" that assignment. However, Crew Schedule shall notify pilots awarded a TAS flight for the current or following day and those pilots who have no flight activities scheduled before the TAS award flight. In the event it is not possible to contact a pilot who has a TAS flight, a rework will not be made. Any flight(s) left open in this manner will be assigned in accordance with Section 9(H). (vii) Out-of-domicile pilots may use TAS for flights departing within forty-eight hours (48:00) but shall be considered after in-domicile pilots. (viii) A pilot who removes a trip during a BLIP transaction may not add that trip during the associated TAS process immediately following such BLIP process. (c) A pilot on ALPA business will be allowed to exercise the TAS provisions of this section in equalization order for the purpose of ALPA Flight Pay Loss make-up. (Not applicable to the three (3) members of the System 58 Section 9(F)(2)(c), cont. Schedule Committee reimbursed by the Company under Section 10(B)(5)). (d) TAS is included in the pilot's schedule and treated as a part of the pilot's regularly assigned monthly schedule once the flight assignment is awarded. (3) Volunteer Fly List (VFL) (a) In addition to the TAS, the Company will maintain a list of pilots (Volunteer Fly List or VFL) who have notified the Company they are available to fly on days they are not otherwise scheduled to fly. The VFL will be available for all pilots to view via CAMS and home access. VFL requests will be awarded in accordance with equalization. (b) Pilots on vacation or reserve pilots on days off who become unavailable (i.e. illness) for scheduled additional flying will be returned to their previous scheduled activity. (c) The Company will offer open flights to pilots on the VFL in accordance with Section 9(H). Crew scheduling shall only call a pilot for a VFL trip based upon his/her requested preferences. (d) Pilots may accept or reject the offered flight assignment. Once accepted, the VFL trip will be included in the pilot's schedule and treated as part of the pilot's regularly assigned monthly schedule. Pilots must be legal, qualified and available to accept the entire assignment without causing a conflict with a scheduled trip or causing a trip drop due to illegality, training or reserve duty days unless such conflict or trip drop is approved by Crew Scheduling. (e) VFL preferences shall not be honored if the award is in conflict with required, pre-scheduled activity. However, a VFL award shall be honored if the award conflicts with a pilot's scheduled vacation or days off. VFL requests that impinge on a pilot's golden days will be awarded and the pilot will forfeit those days impinged upon. A VFL transaction will be processed even if it causes the pilot to exceed ALV. (f) VFL requests for a domestic satellite pairing will be awarded in accordance with the normal VFL procedures. VFL shall not apply to international satellite pairing(s). (g) Out-of-domicile pilots may use the VFL to request out- of-domicile flights but shall be considered after in- domicile pilots. 59 Section 9(F)(4) (4) Equalization: When two (2) or more pilots are requesting additional flying for the same day, the pilot with the least amount of additional flying pay hours in the current month and immediately preceding two (2) bid months will be given priority for the assignment. If the pilots requesting additional flying have an equal amount of additional flying pay hours, the senior pilot will be given priority for the assignment. (5) Activity Conflicts Notwithstanding the provisions of (F)(2) and (F)(3), TAS and VFL trip awards shall not be prohibited solely because the requested TAS or VFL trip overlaps between a pilot's RGDs, DOF or vacation days in the following circumstances, provided such trip does not result in any conflicts or illegalities with the pilot's scheduled activities, including all required rest: (a) A flight departs on a pilot's RGD and immediately continues to the pilot's vacation or DOF and the entire remainder of the flight assignment is contained within the pilot's vacation period and/or DOF. (b) A flight departs on a day of a pilot's vacation and immediately continues to the pilot's RGD and/or DOF and the entire remainder of the flight assignment is contained within the pilot's RGD and/or DOF. (c) A flight departs on a day of a pilot's DOF and immediately continues to the pilot's vacation and/or RGD and the entire flight remainder of the flight assignment is contained within the pilot's vacation and/or RGD. (d) A pilot on RGD, DOF or vacation who has a contiguous period of RGDs, DOFs or vacation may request a flight that departs on such subsequent set of RGDs, DOF or vacation provided the entire flight assignment is contained within the pilot's RGD, DOF or vacation. (G) Draft (1) In the event it is necessary to provide protection for the operation which cannot be provided by a pilot holding a reserve schedule, the Company may draft the most junior pilot in the category who is legal, qualified and available. Any pilot so assigned shall receive premium pay in accordance with Section 5(K) for each pay hour of such assignment. (2) Trip Protection for Draft Pilots A pilot who has a trip removed at the instant the draft occurs and as a direct result of the draft shall receive the greater of draft pay for the trip flown or the scheduled pay for the trip removed. The pilot shall be advised that the trip protection comparison will occur after the completion of the draft trip. 60 Section 9(H) (H) Distribution of Open Time Open time shall be distributed among pilots in accordance with the provisions of Section 9 within the classes described above in the following order: (1) Green time: Open time that develops after the bids are ---------- awarded and after initial balancing is completed but prior to forty-eight hours (48:00) of the scheduled departure of the open flight. Green time is processed and awarded for bid run pilots only, in the following order: CLASS "A" balance list CLASS "M" balance list CLASS "B" balance list BLIP TAS (2) Yellow time: Open time that is unassigned within forty-eight ------------ hours (48:00) of the scheduled departure of the open flight but prior to six hours (6:00) of scheduled departure of the open flight. Yellow time is processed and awarded for bid run and non-bid run pilot's in the following order: CLASS "A" balance list CLASS "M" balance list CLASS "B" balance list BLIP Option Time TAS VFL Reserve Pilot, in order to comply with Section 12(B)(3) (not counted against Option Time) Draft (3) Red time: Open time that remains unassigned within six hours --------- (6:00) of the scheduled departure of the open flight. Red time is processed and awarded for bid run and non-bid run pilots in the following order: CLASS "A" balance list CLASS "M" balance list CLASS "B" balance list Reserve pilot, at Company option VFL 61 Section 9(H)(3), cont. Draft A Class "A", "M" or "B" pilot may accept or reject assignment to a Red Time flight, at his/her sole discretion. (4) After an open flight is assigned to a pilot and accepted, the flight shall be considered as part of the pilot's regular schedule, subject to Section 9(D)(2)(d) and 12(C)(3). (I) Trading of Flights Mutual trading of flights between pilots holding a bid run shall be permissible, subject to the following provisions: (1) Each pilot must be legal to protect both the flight for which the pilot has traded and the pilot's next scheduled flight. (2) Such mutual trade shall not create make-up guarantee. (3) After a trade has been agreed upon and recorded, the flights so traded shall be considered as the regular flights of the respective pilots. (J) OFR - Offering A Trip (1) Bid run pilots may offer trips into open time (OFR). Until the offered trip is selected by another pilot or Crew Schedule, the offering pilot will remain responsible for the trip. If a bid run pilot, a pilot on vacation, or a non-bid run pilot during his/her days off selects the offered trip from open time, the trip will be dropped from the offering pilot's bid run and placed in the receiving pilot's JXCAP. The removed trip may not be re-acquired by the offering pilot. When an OFR trip is in Yellow Time, Crew Schedule may take the offered trip, subject to Section 9(K)(5). If Crew Schedule takes the trip, it will be removed from a pilot's bid run as if it had been transferred to another pilot. Crew Schedule may use the removed trip for balancing purposes or may assign it to an available reserve pilot. A selected trip must not conflict with any existing assignments and all contractual legalities must be observed. An OFR trip acquired by a reserve pilot must fall within vacation, DOF, RGD, or any contiguous combination thereof, including any reserve pilot required rest. A pilot on vacation shall be restricted from selecting an OFR trip that impinges on any holiday listed in Section 9(E)(2)(j). When the trip is dropped, the projected pay and credit, and the minimum guarantee of the offering pilot will be reduced by the amount of the pay and credit hours of the dropped trip. The projected pay and credit of a receiving bid run pilot will be increased by the number of pay and credit hours of the trip received. Pilots with less than one (1) year of service shall have his/her pay reduced/increased in accordance with the hourly rate of Section 4(B)(1)(b). The guarantee of the reserve pilot will not be offset by the pay and credit of the trip received. 62 Section 9(J)(2) (2) If a bid run pilot has a trip that extends into a month in which he/she is a reserve pilot, offers and subsequently has a trip removed in accordance with 9(J)(1) above, the day(s) on which the removed trip was to operate, in the reserve month, shall become inviolate duty-free period(s) ("Platinum Day(s)"). A pilot shall indicate to Crew Schedule, prior to the start of the inviolate duty-free period(s) ("Platinum Day(s)"), which of the period(s), if any, he/she prefers to waive and become available for duty to the Company. Compensation for such availability on the waived duty-free period(s) shall be at Fixed Daily Rate. (3) OFR is not subject to distribution on the basis of seniority or equalization. (K) Miscellaneous (1) Upon return to domicile from a flight or other authorized absence, a pilot shall okay his/her next schedule flight(s) or next training schedule, or determine his/her position on the reserve schedule. (2) Flight time and credit shall be reported for pay assigned to a bid run pilot concurrent with the reporting of flight time and credit for the pilot who actually flew the trip, subject to the provisions of Section 5(E). (3) When a pilot is advised that there will be a delayed departure after he/she reports to the field, the pilot will remain with the flight for four hours (4:00) International (two hours (2:00) Domestic) from report time; the pilot may request relief, but will remain with the flight until the relief has arrived at the field. (4) When for any reason a pilot becomes illegal for a future scheduled pairing, the Company will take no immediate action to resolve the illegality provided the illegal pairing departs more than seventy-two hours (72:00). The illegality will be clearly flagged in JXCAP in a manner visible to the pilot. The pilot may use the various provision of Section 9 to attempt to rearrange his/her schedule to eliminate the illegality. If the pilot has not done so by seventy two hours (72:00) prior to the illegal pairing's scheduled departure, the Company may resolve the illegality in accordance with normal scheduling procedures. Notwithstanding the above, a pilot on an active pairing will have his/her next pairing removed as a result of a projected illegality, either FAR or contractual. However, upon completion of his/her active pairing, the illegality will be re-evaluated. If the pilot is now legal, such pilot will be restored to his/her removed pairing. (5) Option time: Open time and OFR time within forty-eight hours ----------- (48:00) of departure at the company's option can be assigned to a reserve using the provisions of Section 12(C), subject to the following: In any bid month no more than thirty-five percent (35%) of the total reserve availability measured in hours can be 63 Section 9(K)(5), cont. assigned to reserves using the option time provisions. This bank of option time is computed for each category by multiplying the actual number of reserve days available by five hours (5:00), multiplied by thirty-five percent (35%). E.g., if the reserve days available is two hundred fifty (250), then the Option time for that category is 250 x 5.0 x 35% = 437.5 hours available for the Company to assign at its sole discretion to reserves within forty-eight hours (48:00) of open flight departure. Option time assignments in the first fifteen (15) days of each bid month will not be available to the company when more than fifty percent (50%) of total monthly option time has been assigned. Once option time is exhausted, all open trips will be assigned subject to the provisions of Section 9(H). (6) A pilot will not be scheduled to exceed one hundred (100) actual block hours in a calendar month in accordance with FAR's. A pilot will not be scheduled to exceed one thousand (1000) actual block hours in a rolling twelve (12) month period. To ensure that pilots are not limited from flying a normal schedule (an average of seventy-five hours (75:00)) in future months, a rolling twelve (12) month calculation will be done for each twelve (12) month period extending from the current month plus eleven (11) prior months through the current month plus eleven (11) future months. The most restrictive of the twelve (12) rolling totals will be used to limit current flying if necessary. Actual block hours will be used for all prior months. Actual or projected block hours will be used for the current and next month when specific flight assignments are known, and seventy-five block hours (75:00) will be assumed for all future months containing no flight assignments, except that scheduled vacations will be taken into account pro-rata. 64 SECTION 10 SCHEDULING OF PILOTS (A) General (1) Consistent with the concepts of participative management, it is the intent and purpose of this Section to provide for pilot participation in the development of pilot scheduling policies and procedures that will promote the most efficient and economical operation of flights, the best possible pairing or grouping of flights into bid runs by observing and, to the extent possible, honoring the collective preferences of the pilots, the most equitable assignment of flying time to domiciles, the most reasonable degree of stability of bids at each domicile, and the intent that Section 11(B) operate so as to effect favorable working conditions. Consistent with the above, the general concept of seniority will be given appropriate recognition. The assignment of time to domiciles and the pairing or grouping of runs to effect the purpose of Section 11(B) will not be done in such a manner as to effect a general deterioration of working conditions and domicile stability. The Company and the pilot representatives will consult with regard to the above as outlined herein, the Company retaining the right to determine the geographical location of domiciles, the assignment of flight time to domiciles, and the pairing or grouping of flights for purposes of bid runs. (2) The Company may assign both Domestic and International flights to pilot domiciles. At such combined Domestic/International domiciles the following shall apply: (a) In the event that unanticipated problems arise in connection with the operation of combined domiciles, representatives of the Company and the Association will meet at the request of either party to resolve such problems. (b) The Company may mix international and domestic flights within bid runs and within trip pairings when economically and operationally beneficial. (c) A pilot may bid domestic and/or international pairings in the monthly preferential bid system and shall be awarded such, seniority and qualifications permitting. If such pilot's seniority enables the pilot to hold an international bid run pairing(s) or reserve schedule, the pilot shall be compensated in accordance with paragraphs 10(A)(2)(d) and (e) below if the pilot is not qualified for international thirty (30) days after such bid award. A bid run pilot who was previously internationally qualified on the status and equipment of the international flight pairing(s) so awarded shall be qualified or pay protected for such pairing(s). (d) A pilot who holds a reserve schedule which protects an international operation or combined domestic and international operation in a 757/767 category shall receive the international guarantee. 65 Section 10(A)(2)(d), cont. A pilot who bids and is awarded a reserve schedule protecting a narrowbody category shall receive the international guarantee when one or more international flights are performed. Such narrowbody international guarantee shall be compared to actual services performed and the pilot shall be paid based upon the greater amount. (e) Once awarded a bid run or supplemental bid run containing a majority of flight credit hours on an operation, the pilot will be considered a bid holder on that operation. If no majority is present, the pilot shall be considered to be on the International Operation. (f) A pilot may volunteer for or voluntarily balance on a trip from one operation to the other within the month, qualifications permitting. A pilot shall be balanced on the operation he/she is flying, except that a pilot who is projected below guarantee may be involuntarily balanced on the other operation if no other balance trip is available on his/her operation. (Such balance shall not result in proration of the pilot's guarantee.) All such flying shall be paid at the rate of the operation actually flown. The Company will provide the appropriate manuals when required. (g) A pilot whose pairing originates with a deadhead to protect a flight, and such deadhead flight cancels, shall be re-protected on the next Company flight provided: (i) the flight the pilot is positioning for is unprotected; and (ii) the pilot will arrive at the station of the flight to be protected prior to the scheduled departure time of the flight being protected. This paragraph (g) shall also apply to equipment substitutions of Section 10(D). (B) System Scheduling Committee (SSC) (1) A SSC shall be established in accordance with the following provisions. A Basic SSC, composed of a maximum of three (3) members, as determined by the Association, shall be designated to meet for ten (10) months of the year. In addition, a total SSC, composed of a maximum of seven (7) members (representative(s) from each domicile and a chairman) shall meet on a semi-annual basis; March and September. (a) The SSC shall meet to consult with the Company concerning all pilot scheduling problems of the entire system not covered by the Scheduling Policies. In addition, the SSC shall consult with the Managing Director, Flight Operations as to the allocation of flying time to the various domiciles, the pairing or grouping of flights into bid runs, the stabilization 66 Section 10(B)(1)(a), cont. of bids at each domicile, domicile staffing and the PBS level of preference denials. (b) The SSC may request changes to the pairings and flight time allocation to the domicile(s), and the Company may allow such changes; provided, however, that such action by the Company will not alter the Company's right as provided in (A)(1) of this Section. (c) To the extent possible, the Company shall honor the requests from the SSC for approximate percentages of pairing lengths offered for bid (i.e. one (1) day, two (2) day, three (3) day, etc.). The intent is to provide pairings for bid proportionate to the request of the SSC; provided however, that such action by the Company will not alter the Company's right as provided in Section 10(A)(1) above. (d) The preferential bidding system may only be modified/upgraded by mutual consent of the Association and the Company. Any modifications or changes including: program upgrades, templates, line construction parameters (e.g., CBA/FAR pad, stacking factor, unawarded time allowances, and operation buffer factors) shall be by mutual agreement. Further, the Company and the Association will upon the request of either party meet to consult, review and agree on system hardware and software improvements which will promote the most efficient and economical operation of the pilot monthly preferential bid system. (2) All changes or amendments to the System Scheduling Policy shall be mutually agreed to by the Pilots' Negotiating Committee and the Managing Director, Flight Operations; however, the Managing Director, Flight Operations may make temporary changes in the System Scheduling Policy when such changes are necessary to continue efficient operation of flights. In such event, the Managing Director, Flight Operations shall, without delay, consult the Negotiating Committee for the purpose of resolving a mutually approved amendment to cover the problems which required the temporary changes. For the purposes of this paragraph, the System Scheduling Policy shall contain the definition of pilot scheduling terms, the Federal Aviation Regulations interpretations, and the procedures to be followed during irregular operations not covered by Domicile Scheduling, paragraph (C) of this Section. (3) When any of the provisions of the System Scheduling Policy or procedures are in conflict with any of the provisions of the Working Agreement, the Working Agreement shall govern. (4) The Company will notify the SSC whenever a change is planned in flight schedules which would result in an increase or decrease in bid requirements at a domicile. The Company will provide the SSC with a copy of the planned pairings for the future month no later than three (3) days prior to the opening of bids. Flight time allocation and re-pairing of flights as provided in (B)(1) above shall be accomplished in accordance with the provisions of this paragraph (4). 67 Section 10(B)(5) (5) Pilot members of the SSC (i.e. both the basic and total committees as provided in Section 10(B)(1) above) shall be entitled to expenses as provided in Section 7(A)(1), and shall be entitled to reimbursement for flight pay loss incurred while attending meetings convened by the Company for the purpose provided in Section 10(B)(1) above. In addition, the chairman of the SSC shall be entitled to expenses if he/she attends the Basic SSC meetings. Such reimbursement shall be computed by the same method as is currently used in determining flight pay loss for other pilots who are off schedule on ALPA business. (6) For the purpose of monitoring the bid awards process and consulting with the Company concerning problems associated with the process, flight time loss and expenses will be provided for two (2) members for two (2) months following full implementation of preferential bidding. Thereafter, flight time loss and expenses will be for one (1) member up to three (3) times annually. Such reimbursement shall be computed by the same method as is currently used in determining flight pay loss for other pilots who are off schedule on ALPA business. In addition, the Managing Director-Crew Resources and Administration or his/her designee and one (1) pilot member of the SSC shall meet to review the line construction parameters for the new bid month. Such flight time loss and expenses will be at the Association's expense. The Managing Director-Crew Resources and Administration and the chairman of the SSC shall schedule such review meeting at the SSC meeting preceding the bid award process. (7) The Company may construct as many bid runs as it deems necessary to efficiently operate the airline. (a) "Monthly Flying Time" means the sum of total daily flying time in each category multiplied by the number of days in the calendar month and from the resulting figure shall be subtracted the total inoperative time of those flights that do not operate each day of the month. To this resulting figure will be added all time scheduled to be credited under the provisions of Section 11 (i.e. flight time credit under 11(B), flight pay assignment, vacation time, sick pay, training credit, deadhead credit, call out pay, equipment substitution protection credit, jury duty credit), charter and ferry flights. (b) "Target" (TGT) means the amount of hours determined by dividing all monthly flying time for the bid period for each category by the number of bid run pilots available for the bid period by each category. All bid runs shall be constructed within a range of TGT of at least plus or minus (+/-) four hours (4:00) and no more than plus or minus (+/-) five hours, (5:00) provided further that the minimum bid run shall be seventy-two hours (72:00) and the maximum bid run shall be eighty-five hours (85:00). 68 Section 10(B)(7)(b), cont. The Company shall calculate TGT, as stated above, separately for each category. The allocation of monthly flying time for each equipment type and the number of estimated reserve pilots in each category shall be determined at the sole discretion of the Company. Each month may be planned and flown with a different monthly TGT from seventy-six hours (76:00) to eighty-one hours (81:00), or any fractional part thereof. All bid runs shall be constructed within a range of TGT for each status and equipment at each domicile. All monthly flying time shall be considered in determining TGT. Additional flying and OFR trip pay and credit extending from the previous month into the bid month shall not be considered during the bid award process, however if such time, when added to the TGT plus range exceeds FAR limits minus FAR pad factor, that portion of such time which exceeds FAR limits minus FAR pad shall be considered in the bid award process. Target/High Bid Run Exception. The Company may, at its ----------------------------- discretion, set the Target up to a maximum of eighty- four hours (84:00) and allow bid runs to be created up to a maximum of eighty-eight hours (88:00) for three (3) bid months (not including December) each calendar year ("Exception"). This Exception may be applied on a category by category basis. When the Company elects to utilize this Exception for a category or categories, all of the other provisions of this Section 10(B)(7) shall continue to apply. (c) "Fixed Daily Rate" (FDR) means the number of hours of pay and credit fixed at a value of two hours thirty minutes (2:30) (i.e. 75 Hr./30 Days). For bid run construction purposes, all activities whose credit depends on a daily rate shall be valued using the FDR. (d) "Average Line Value" (ALV) means the total credit of all awarded bid runs, excluding supplemental bid runs, by category divided by the number of bid runs, excluding supplemental bid runs, by category. For the purposes of this paragraph, "total credit" includes additional flying and OFR trip credit extending from the previous month into the bid month. (e) Estimated Reserve Count as published in the bid package is the forecast number of reserve schedule holders. During bid processing the actual reserve count may vary from the Estimated Reserve Count. (8) The SSC shall receive and review the Company's annual flying plan (updated quarterly), and vacancy projection, monthly report on staffing and the calculation of the next month's target. In addition, the Company shall produce other information pursuant to a reasonable request by the ALPA Schedule Chairman at least twenty-one (21) days in advance of the meeting in the form requested. 69 Section 10(B)(8), cont. Once the target has been received and reviewed by the SSC, it may not be changed except by mutual agreement of the Association and the Company. No change will result in the reduction of the target and no change will be considered except in unusual circumstances that could not be reasonably anticipated. Every effort will be made to notify the pilots in the categories whose target(s) have changed and the bids will remain open for a minimum of seven (7) days following the effective date of the change. Any time parameters (e.g., GDO, RGD and balancing) associated with the original bid closing dates will be extended consistent with the revised closing date. (9) The Company shall maintain a reserve staffing complement sufficient to perform all reserve duties, to assure that pilots holding a bid run will fly in accordance with the established scheduled policies, and seniority is observed in the bid award process. The Company may award as many reserve schedules as deemed necessary in each category to protect the operation. (C) Domicile Scheduling (1) A Domicile Scheduling Committee shall be established at each domicile to consult with the local Regional Chief Pilot concerning all problems of pilot scheduling that are of concern only to that domicile. (a) All changes or amendments to the Domestic, International or combined Domicile Scheduling Policies as contained in Section 9 shall be mutually agreed to; however, the Managing Director, Flight Operations may make temporary changes in such Scheduling Policies when such changes are required to continue efficient operation of flights. In such an event, the Managing Director, Flight Operations, shall without delay, consult the Negotiating Committee for the purpose of resolving a mutually approved amendment to cover the problems which required the changes. For the purpose of this paragraph, the Domestic, International and combined Domicile Scheduling Policies will be limited to those matters and procedures relating to orderly methods for scheduling pilot personnel which are not covered in the working agreement. (b) For each category at each domicile, bid pairings shall be posted, bid and awarded in accordance with Section 9(A), 9(B), 9(C), 10(A), 10(B), and 10(C) and the appropriate Schedule Policy. Whenever such policy provides for "supplemental bid runs", these shall be construed to be bid runs. Reserve Schedule holders will be placed in a domicile/equipment reserve complement and may be utilized on either operation, qualifications permitting. (c) Concurrently with posting and bidding of bid pairings, as provided in Sections 9 and 10, reserve schedules 70 Section 10(C)(1)(c), cont. shall be posted and bid. A pilot may bid and be assigned a bid run or a reserve schedule in his/her category in accordance with seniority. (d) Pilot statuses for the purpose of this provision are Captain, First Officer, and Flight Engineer. Each pilot in each such category who does not hold a bid run shall hold a reserve schedule. (e) Pilots may bid reserve conditional upon being or not being able to be awarded a bid run or reserve schedule by such bid preference attributes as: days working/not-working; top down position on the reserve list as determined by pilots already awarded reserve; and any of the conditional attributes in the Preferential Bidding System. (f) Bid Pilot Duty-Free Periods ("Golden Days") (i) A bid run pilot may designate as inviolate up to three (3) periods of up to forty-eight hours (48:00) each. These periods must be selected from the duty free periods contained in the pilot's awarded or assigned bid run, and may be selected by such pilot any time prior to the first BLIP process for the new month. During such inviolate duty free periods a bid pilot shall not be required to perform any line flight duty with the Company which includes report and/or release time, except that he/she may be required by the Company to complete a flight assignment which has become non-routine. (ii) In the event completion of the flight assignment encroaches on the designated duty free days, the pilot may designate another duty free period to replace the one encroached upon. If unable to re-designate another duty free period in the current month because of any scheduled training, vacation, etc., such re- designation may be made in the following month. (iii) A pilot may not be scheduled for CQT, or a proficiency check, during his/her designated inviolate duty free periods but may be scheduled for more lengthy forms of training. (iv) The pilot may not designate an inviolate period which includes one of the holidays listed in Section 9(E)(2)(j). (v) With Company concurrence the pilot may designate up to three (3) consecutive forty-eight hour (48:00) periods as inviolate. (vi) Notwithstanding paragraph 10(C)(1)(f)(i) above, the Company may balance a pilot in accordance with Section 9(D)(1) if golden days have not been designated. 71 Section 10(C)(1)(g) (g) "Training Golden Days" (TGD). Pilots may indicate sets of forty-eight hour (48:00) TGD preferences equal to the amount in Section 10(C)(1)(f)(i) beginning on the first day of the month prior to the bid month. To the extent possible, such TGDs shall be observed in seniority order when pre-scheduling available recurrent training (e.g., CQT or its equivalent). Input of TGD's shall close twenty-four hours (24:00) prior to the opening of bids. (h) A pilot shall be paid and credited for all flight time pay and credit in the month so earned, subject to Section 11(B). (2) Domestic Scheduling Rules (a) The original monthly projection for pilots holding a bid run shall not exceed the range of target as provided in Section 10(B)(7)(b). (b) In the event a pilot's projected flight time credit for the month is less than the applicable hours of the pilot's guarantee, the Company may balance such pilot at any time during the month subject to the application of Section 9(D). (c) If any trip commences (report time) in one (1) calendar month and ends in the following calendar month, all of a pilot's calculable flight time pay and credit earned for the trip shall be paid and credited in the month earned, subject to Section 11(B). (d) The Company may schedule a pilot holding a reserve schedule to complete his/her last trip of the month, if at the time of leaving his/her domicile, the scheduled block to block flight time to be flown on the trip prior to the end of the month will not, when added to his/her already accumulated credited hours, total more than his/her monthly bid award ALV. Additional flying shall be disregarded in making this calculation. (3) International Scheduling Rules (a) The original monthly projection for pilots holding a bid run may not be constructed to exceed the range of target as provided in Section 10(B)(7)(b) except the range of Target may be exceeded if the projection consists of a single flight assignment. Single flight assignment means a flight or series of flights scheduled to depart from the pilot's domicile and return to the pilot's domicile. It is the intent that the exception set forth in this paragraph will be used only where necessary for efficient scheduling. When pilots are scheduled to exceed the monthly bid award ALV on a single flight assignment, all credit hours scheduled in excess of that ALV shall be paid and credited at the rate of 1.5 hours for each such hour, prorated. 72 Section 10(C)(3)(b) (b) The Company may schedule a pilot holding a reserve schedule to complete his/her last trip of the month, if at the time of leaving his/her domicile, the scheduled block-to-block flight time to be flown on the trip prior to the end of the month will not, when added to his/her already accumulated block-to-block hours, total more than his/her monthly bid award ALV. However, in no event shall such reserve schedule holder be scheduled out of his/her domicile for flight duty if he/she has accumulated credited hours equal to or in excess of his/her monthly bid award ALV. Additional Flying shall be disregarded in making this calculation. (c) If the scheduling of pilots under paragraph (b) above, results in scheduled hours in excess of the monthly bid award ALV within a month, all credit hours scheduled in excess of such ALV shall be paid and credited at the rate of 1.5 hours for each such hour, prorated in the month earned. (d) In the event a pilot's projected flight time credit for the month is less than the applicable hours of the pilot's guarantee, the Company may balance such pilot at any time during the month subject to the application of Section 9(H). (e) If any trip commences (report time) in one (1) calendar month and ends in the following calendar month, all of a pilot's calculable flight time pay and credit for the trip shall be paid and credited in the month earned, subject to Section 11(B). (D) Equipment Substitution (1) In the event that a different type of equipment should be substituted on any scheduled flight assignment, or segment thereof, of a pilot holding a bid run at the pilot's domicile on origination, (including a satellite/pilot base), the pilot may be required to deadhead into position to protect any segment of the pilot's flight assignment. In the event an equipment substitution occurs on a segment to which a pilot is positioning to protect, the pilot shall receive pay and credit for the scheduled time of such equipment substituted flight segment, or the flight and duty time rigs in Section 11, whichever is greater. A pilot who is scheduled to deadhead on that flight that he/she is being pay protected due to an equipment substitution to protect his/her next segment, and such deadhead flight cancels, such pilot will be re-protected on the next flight providing that particular flight will allow the pilot to arrive at the station of the flight to be protected prior to the scheduled departure time of the flight being protected. The pilot shall receive pay and credit for the scheduled time of such original flight assignment, or the flight and duty time rigs in Section 11, whichever is greater. 73 Section 10(D)(2) (2) Should an equipment substitution occur as in paragraph (1) above on a flight or segment thereof, of a non bid run holder that was scheduled as additional flying or OFR and the non bid run holder is released, he/she will receive call out pay/credit only, as defined in Section 5(G). Such pay/credit will not be offset against the non bid run holder guarantee. If the non bid run holder is required to deadhead into position to protect any segment of the flight assignment, he/she will receive pay and credit for the scheduled time of such original flight assignment, or the flight and duty time provisions in Section 11, whichever is greater. Such pay and credit will not be offset against the non bid run holder guarantee. (3) Should an equipment substitution occur at other than the pilot's domicile, as described in (1) and (2) above, or while transiting the pilot's domicile, the pilot, or non bid run holder on additional flying or OFR, shall be scheduled as an extra crew member in accordance with Section 5 of the FOPM (System Schedule Policy). Such pilot shall be paid and credited for the scheduled pay and credit in his/her original flight assignment or for what he/she actually flies, whichever is greater. Such pay and credit will not be offset against the non bid run holder guarantee. (E) Pairing Restoration Notwithstanding the provisions of Sections 9(D), 9(E), 9(F) and 9(H), the Company will restore crews affected by cancellation prior to report at domicile and/or release at domicile, due to non-routine operations, to the remaining unprotected legs of their original pairing. Restoration of crews to the re-paired remainder of their original pairing in the event of a cancellation, as set forth above, will be subject to the Company's discretion in the event an emergency is declared by the Company. When the Company does not restore crews to their pairing(s), as set forth above, due to an emergency, the Company shall notify the System Schedule Committee in writing within ten (10) days after the emergency of the reasons supporting the Company's actions. For the purpose of this provision an "emergency" is defined as any event, including a meteorological condition, that disrupts more than seven percent (7%) of the total daily system flight segments. (F) Bank (1) The Company shall establish a "positive/negative bank" for each pilot with over one (1) year of service as a flight deck crew member. The bank balance will be limited to no more than fifty hours (50:00) positive and ten hours (10:00) negative. (2) Pay hours accrued in excess of the monthly ALV shall be eligible for deposit in the bank, subject to the bank limit. (3) A bid run pilot who completes a month with less than ALV may elect to borrow or withdraw from his/her bank an amount necessary to bring his/her pay hours up to ALV, subject to the bank limit. (4) Pilots may withdraw any positive balance without regard to ALV. 74 Section 10(F)(5) (5) A pilot shall notify the Company of his/her election to deposit, withdraw or borrow pay hours for a designated month, specifying the number of hours to be deposited or borrowed. Such notification must occur no later than five (5) days after the end of the designated month. (6) A pilot with sufficient bank hours above his/her guarantee equal to or greater than the time of an OFR trip drop may charge the OFR to his "bank" as a withdrawal and without adjustment to monthly guarantee or ALV. (7) The hourly rate of pay used to compute the dollar amount to be deposited, withdrawn or borrowed will be the pilot's guarantee rate for the designated month. Deposit amounts will be debited to the designated month and credited to the following month. Borrowed or withdrawn amounts will be credited to the designated month and debited to the following month. Credited amounts will not offset a pilot's guarantee. (8) When a pilot ceases employment with the Company, any positive bank balance will be added to the pilot's final paycheck; any negative balance will be deducted from the pilot's final paycheck. (G) Satellite Scheduling (1) The following are approved satellites and may be associated for any given month with any present domicile (i.e., JFK, LAX, STL, SFO): Satellites ---------------------------------------------------- BOS LAS DFW EWR SFO DEN IAD RFD TPA PHL ONT BUR SAN LGB OAK PHX SJC MIA/FLL The above list may be amended by mutual agreement between the Association and the Company. Ninety (90) days prior to any domiciles closing, the Company will meet with the Association to discuss the inclusion of the closed domicile under the provisions of this Agreement for the purpose of minimizing disruption to the pilots involved. All pilots at a domicile that is closed shall be allowed an unrestricted displacement option to any domicile. (2) In addition to the satellites provided in paragraph (1) above, any present domicile may be a satellite of another domicile for equipment not flown by the domicile/satellite as of December 8, 1985. 75 Section 10(G)(3) (3) It is not the intent of this Section 10(G) to dilute seniority at a present domicile. Any non-stop flight of four hours (4:00) or more between any satellite and a present domicile or between two present domiciles shall be flown by a domicile in accordance with normal flight time allocation rules. Exceptions may be approved by the System Schedule Committee. (4) Satellite pairings operating out of the satellite airport shall be identified by a separate code and posted for bid in domicile bid packages. Unawarded pairings that originate and terminate at a satellite shall be placed into open time and awarded in accordance with pilot open time preferences. If sufficient open time is known to exist at a satellite, open time may be advertised at the satellite. (5) Satellite pairings shall be awarded to pilots bidding such pairings either by specific pairing, satellite or generic satellite preferences in accordance with Section 9(B) and may be awarded to pilots who have not indicated a preference to avoid satellite pairings. However, pilots who have indicated a preference to avoid satellite pairings may be involuntarily assigned to such pairings and will be handled in accordance with paragraph (8) below. In addition to legal rest, a no-activity buffer "satellite pad" shall be scheduled between any domicile and satellite pairing and any two pairings of different satellites. Back- to-back same-satellite pairings shall not have any satellite pad between those pairings. These satellite pads shall be mutually agreed between the Company and the Association. (6) Pilots awarded satellite pairings shall report directly to the satellite one hour (1:00) prior to the scheduled departure time of the satellite flight assignment. A pilot whose bid award contains a majority of satellite pairings at one location shall, upon request, be provided a mailbox and suitable free parking at that satellite. A pilot whose bid award contains any satellite pairing(s) may contact his/her Regional Chief Pilot to obtain a parking pass and/or for instructions on parking arrangements at that satellite which will be subject to reimbursement. All duty limitations, trip credit, duty credit and expenses for flights originating and terminating at the satellite shall be based on satellite report and release times for pilots awarded satellite pairings. (7) Reserve coverage of satellite flights shall be provided by the domicile reserves, except that the Company may advertise and award satellite reserve schedules to pilots that bid such reserve schedules if the operation warrants. The proportion of satellite reserve schedules to domicile reserve schedules shall be determined by the Company. For a pilot awarded a satellite reserve schedule, the roles of the domiciles and the satellite shall be reversed for the purpose of the provisions of this Section 10(G). (8) Domicile reserves, domicile drafted pilots, and domicile pilots involuntarily balanced on or involuntarily assigned 76 Section 10(G)(8), cont. to open satellite flights shall be provided Class B transportation (or positive off-line transportation if appropriate) from the domicile to the satellite if requested. For all pilots assigned satellite flights under this paragraph, expenses, trip credit and duty credit provided in Section 11 of the Working Agreement shall be based on domicile report and release times. Duty limitations will be the same as the rescheduled maximums in the Diurnal Table in Section 11(C) of the Working Agreement for the originating and terminating duty periods of such flight assignment. A pilot may elect to report directly to the satellite under this paragraph and will then have his/her duty limitations and expenses based on the satellite report and release times. A pilot so reporting shall be provided Class B transportation if requested. In addition, for the co-terminal satellite the pilot shall be provided transportation from the domicile to the satellite. If a pilot elects to provide his/her own transportation to the co-terminal satellite, he/she shall receive an expense allowance of twenty dollars ($20.00) for each such flight assignment in addition to the expense of long term parking at the co-terminal satellite, payment of which shall be made pursuant to the pilot submission of Form G118. 77 SECTION 11 HOURS OF SERVICE (A) General (1) A pilot shall devote his/her entire professional flying service to the Company unless granted a specific exception by his/her Regional Chief Pilot which shall not be arbitrarily withheld. To apply for such an exception to engage in outside aviation employment, the pilot shall submit a request in writing to his/her Regional Chief Pilot which shall include: The name, address and phone number of the outside employer. The nature of such employment. The expected duration of such employment. A written statement from both the pilot and the outside employer that such employment shall not conflict with the pilot's duties and flight time limitations as a TWA pilot. Notwithstanding the foregoing, nothing in this Agreement shall be construed to prevent any pilot from affiliating with the military services of the United States. (2) Reasonable effort shall be made to schedule a pilot who holds a bid run as the result of his/her domicile bid preference in a manner which will, as nearly as possible, use all the pilot's allowable monthly hours as provided in (5) below. (3) The provisions of this Section are not intended to determine the number of pilots at a domicile but are intended to apply after operation of the provisions of Section 10. (4) No pilot shall be required to keep the Company advised of his/her whereabouts on the pilot's days off. However, if a pilot is subject to a Class A balance for any reason, he/she shall indicate where he/she may be contacted until the Class A balance is satisfied. (5) A pilot shall not be scheduled by the Company to exceed his/her monthly bid award ALV as provided in (7) below except as provided in Sections 9 and 10 of this Agreement. (6) If, as a result of a pilot being in training during the latter portion of a calendar month, he/she accumulates flight time credit sufficient to exceed his/her maximum allowable monthly limitations, such excess shall be paid and credited in the month earned. (7) For purposes of this provision, and (5) above, credited flight time shall consist only of: (a) Flight time credit as provided in Section 11(B). (b) Flight pay assignment as specified in Section 5(E). 78 Section 11(A)(7), cont. (c) Vacation time as specified in Section 14(C). (d) Sick pay time as specified in Section 15. (e) Training credit time as specified in Sections 4(D) and 6(A)(4). (f) Call-out pay as specified in Section 5(G). (g) Equipment substitution protection credit as specified in Section 10(D), as appropriate. (h) Jury Duty as specified in Section 5(F). (B) Minimum Credit (1) When a pilot returns to his/her domicile from a trip, the pilot will be credited with flight time credit as determined in the following manner: (a) The credit for each leg of the trip will be the greater of actual block-to-block or scheduled block- to-block time on each leg. (b) Additional credit resulting from the application of the provisions of (A)(7) of this Section will be added to the greater of the actual block-to-block or scheduled block-to-block time on each leg. (c) The amounts computed in (a) and (b) above for each on- duty period shall be totaled and the result compared with the total averaged credit amount earned under 2(d) below, and the pilot shall be credited with the greater. (d) The amount computed in (c) above for each on-duty period on the trip shall be totaled and the result compared with the credit earned under (3)(b) below and the pilot shall be credited for purposes of (A)(5) of this section with the greater. (2) Duty Time (a) "On-Duty Period," for the purposes of this Section 11(B)(2) only, means all the time which passes from the time a pilot is required to report, or actually reports, whichever is later for a flight assignment and shall continue until fifteen minutes (0:15) after block-in time for Domestic and one hour (1:00) after block-in time for International at the conclusion of the flight assignment. If a pilot commences or completes an on-duty period by deadheading as provided in (2)(b) below, the on-duty period shall begin at the block-out or end at the block-in time of the flight. A pilots "On-Duty Period" shall run continuously until broken by one of the following: (i) A scheduled or actual layover period of not less than nine hours and fifteen minutes (9:15) (block-in to block-out), or 79 Section 11(B)(2)(a), cont. (ii) For domestic operations, at other than the pilot's scheduled layover station, an actual FAR legal rest period (but not less than nine hours and fifteen minutes (9:15) block-in to block- out), or (iii) Release to return to domicile. (b) All time spent in deadheading, which has been pre- scheduled in a flight pattern, will be included in a pilot's on-duty period. All other time spent deadheading will be included in a pilot's on-duty period, except this shall not apply to deadheading to or from a pilot's domicile unless deadheading pursuant to paragraph 23 of Letter VI. (c) When a pilot deadheads at Company request from domicile to protect a flight at another station, the pilot shall be deemed to be on duty for purposes of this Section 11(B)(2), upon arrival at that station, unless he/she is immediately released for a period of two hours (2:00) rest for each one hour (1:00) of deadheading with a maximum of ten hours (10:00) block- in to block-out. (d) A pilot who operates a flight or flights during an on- duty period as provided in (2)(a) above, shall receive flight time credit of: (i) one hour (1:00) for each two hours (2:00) of such on-duty time (prorated) between the hours of 0600-2159 local departure, or any portion thereof, or (ii) one hour (1:00) for each one hour forty-five (1:45) minutes of such on-duty time (prorated) between the hours of 2200-0559 local departure, or any portion thereof, with a minimum of five hours (5:00) for a single duty period flight assignment or during: 1998 an average of four hours forty minutes (4:40), 1999 an average of four hours fifty minutes (4:50), and 2000 an average of five hours (5:00) per duty period for flights containing more than one (1) duty period. The total duty credit for the entire pairing shall be compared to the total services performed on the pairing and the pilot shall receive the greater. (e) Credit due under (d) above shall be computed as an extension of the final portion of the last leg flown as an operating crew member at the completion of his/her "on-duty" period. (3) Time Away From Domicile (a) For the purposes of this Section, "Trip Hours" means all the time which passes from the time a pilot is required to report, or actually reports, whichever is later, at the airport of such pilot's domicile prior 80 Section 11(B)(3)(a), cont. to proposed flight departure, until fifteen minutes (0:15) after block-in time for Domestic and one hour (1:00) after block-in time for International, after arrival at the pilot's domicile for a legal rest, free from all duty with the Company. If a pilot departs his/her domicile as a deadheading crew member for the purpose of protecting a flight, trip hours shall commence at the block-out time of the flight; if a pilot arrives at domicile as a deadheading crew member, trip hours shall be considered to end at the block-in time for the flight. When surface transportation is involved between the airports listed in Section 8(C), the appropriate tabulated travel time will be included in a pilot's trip hours. (b) For each trip, a pilot shall receive a minimum flight time credit of one hour (1:00) for each four hours (4:00) through 1998. Beginning January 1, 1999, one hour (1:00) for each three hours forty-five minutes (3:45) and, beginning July 1, 1999 and thereafter, one hour (1:00) for each three hours thirty minutes (3:30) trip hours as defined in (a) above, prorated. (c) Credit due under (b) above shall be computed as an extension of the final portion of the last leg flown as an operating crew member. (d) The provisions of Section 11(B)(2) and (3) above shall not apply to the following: (i) Flights local in nature. (ii) While assigned to duty within the scope of Section 5(I). (iii) Flights in which a landing has not been made at an airport other than the airport of takeoff except when the flight returns to the airport of takeoff due to an emergency as defined by Chapter 9 of the FOPM. (iv) Excess trip hours resulting from the pilot's request to deadhead on flights other than those offered by the Company. (4) If a strike, work stoppage, picketing by other employee groups, or personal reasons, results in additional trip hours for a pilot, such additional trip hours shall not be included in the computation outlined in this Section 11. (5) A pilot who, in the course of his/her duties for the Company, is held hostage, is interned, is held captive, or is missing as a result of hostile action by any person, group of persons, or foreign government, shall receive flight pay and credit under (B)(3) above for a period of three hundred forty hours (340:00) beginning at the block-out time of the flight segment on which the hostile action occurred, unless the pilot is released prior to the expiration of three hundred forty hours (340:00). At the expiration of such period, the pilot shall come under the provisions of Section 27. 81 Section 11(C)(2) (C) Flight Time/Duty Time Limitations - Domestic Operations (1) A pilot may not be scheduled to exceed eight hours (8:00) duty aloft between required rest periods. (2) Pilots shall be scheduled for block-in to block-out rest plus report and release, as shown in the following chart based on their scheduled duty aloft within any twenty-four consecutive hours (24:00).
- - ----------------------------------------------------------------------------------------------------------------------- Start Here Column A Column B Column C Column D - - ----------------------------------------------------------------------------------------------------------------------- Amt. of Duty Normal Scheduled Actual Rest If Scheduled or Aloft Minimum Rest May Be May Be Reduced Actual is Less Scheduled Rest: Reduced To: To: Than Amt. in Col. Within Any 24- A, the Next Hour Period: Minimum Rest Must Not be Less Than: - - ----------------------------------------------------------------------------------------------------------------------- Less Than 8 1 + 9 + :15 1 + 9 1 + 8 + :15 1 + 10 + :15 Hours - - ----------------------------------------------------------------------------------------------------------------------- At Least 8 1 + 10 + :15 1 + 9 1 + 8 + :15 1 + 11 + :15 Hours but Less than 9 Hours - - ----------------------------------------------------------------------------------------------------------------------- 9 Hours or 1 + 11 + :15 1 + 9 + :15 1 + 9 + :15 1 + 12 + :15 More - - ----------------------------------------------------------------------------------------------------------------------- Note: If rest is reduced on a schedule basis as in Column B or in actual operation as in Column C, the next rest period must begin within twenty- four hours (24:00) of the start of the reduced rest period and cannot be less than the rest shown in Column D above. - - -----------------------------------------------------------------------------------------------------------------------
(3) A pilot's on-duty period (including all deadheading), shall mean all the time which passes from the time a pilot is required to report, or actually reports, whichever is later, for his/her flight assignment and shall continue until fifteen minutes (0:15) after the block-in time of the last flight of his/her on-duty period. The fifteen minutes (0:15) as above shall not apply when completing an on-duty period by deadheading, but will end at the block-in time of such deadhead flight. The appropriate maximum on duty limitations are determined by the diurnal chart below. 82 Section 11(C)(3), cont. [GRAPH] Report Time - Local Departure Station A pilot may be scheduled to be on-duty in accordance with the above chart. The maximum scheduled on-duty period is thirteen hours (13:00), during the hours of 0600 and 1700. Between the hours 1700 and 2400 this scheduled on-duty maximum shall decrease on a minute by minute basis until it reaches a low of six hours (6:00) scheduled on-duty at 2400. The six hours (6:00) maximum scheduled on-duty period shall be maintained between the hours of 2400 and 0400 subject to the provision outlined below. Beginning at 0400 and continuing until 0600, the scheduled on-duty maximum shall increase at the rate of three and one half minutes (3 1/2) for each minute until the thirteen hours (13:00) scheduled on-duty maximum is again reached at 0600. Between the hours of 2130 and 0443, the following exceptions shall apply to the maximum scheduled on-duty period: (a) A non stop flight for which a pilot reports during these hours may be scheduled up to a maximum of eight hours and thirty minutes (8:30) provided that flight segment is the only one scheduled during that on-duty period. (b) An on-duty period containing two (2) flight segments for which a pilot reports during these hours may be extended by two hours (2:00) up to a maximum of eight hours and thirty minutes (8:30). (c) An on-duty period containing three (3) flight segments for which a pilot reports during these hours must be scheduled in accordance with the chart. The scheduled on-duty periods as outlined in the above chart and in paragraphs (a), (b) above and this paragraph (c) are subject to the extensions listed in paragraphs (i) and (ii) of this Section 11(C)(3). The rescheduled on-duty maximums shall be one hour (1:00) more than those listed above as scheduled on-duty maximums. 83 Section 11(C)(3)(c), cont. The maximum on-duty shall be as follows: 0500 - 1759: 15:00 hrs 1800 - 2059: 14:00 hrs 2100 - 0459: 13:00 hrs (i) The scheduled on-duty times reflected above may be extended up to two hours (2:00) in order to allow for deadhead to domicile at the conclusion of a flight pairing, (except charter flights are limited to a maximum of fifteen hours (15:00) including deadhead). This extension can be scheduled for deadhead only. A reserve schedule holder subject to this extension will be allowed twelve hours and thirty minutes (12:30) free from duty after arrival at his/her domicile. (ii) The maximum on-duty times reflected above may be exceeded at the discretion of the Captain. (iii) A pilot's on-duty period cannot be broken by an off-duty period of less than ten hours (10:00), scheduled block-in to block-out, or less than nine hours and fifteen minutes (9:15) actual block-in to block-out. When applicable the co- terminal times listed in Section 8(C) shall be added to both the scheduled and the actual off- duty periods above. A reserve pilot's on-duty period cannot be broken by an off-duty period at his/her domicile of less than twelve hours and thirty minutes (12:30), block-in to block-out, or more where required by FARs. (4) No pilot shall be assigned any duty with the Company during any rest period specified above. (5) A pilot shall not be scheduled for duty aloft if his/her total flight time will exceed thirty hours (30:00) in any seven (7) consecutive day period. The twenty-four hour (24:00) period free of duty every seven days, as required by FAR, shall be at the pilot's domicile. (D) Flight Time/Duty Limitations - International Operations (1) For the purposes of this Section 11(D), a pilot's on-duty period (including all deadheading) shall mean all the time which passes from the time a pilot is required to report, or actually reports, whichever is later, for a flight assignment and shall continue until forty-five minutes (0:45) after block-in time of the last flight of his/her on- duty period. The forty-five (0:45) minute period as above shall not apply when completing an on-duty period by deadheading but will end at the block-in time of such deadhead flight. The on-duty period as above cannot be broken by an off-duty period of less than thirteen hours thirty minutes (13:30) scheduled or less than eleven hours thirty minutes (11:30) actual block-in to block-out. For the purposes of this Section 11(D) and Section 11(B) above, the 84 Section 11(D)(1), cont. standard international domicile report time for working flights (not deadheading flights) shall be one hour and thirty minutes (1:30) prior to departure. (2) For purposes of this Section 11(D), a two (2) pilot crew shall consist of one (1) Captain and one (1) First Officer. A three (3) pilot crew shall consist of one (1) Captain and two (2) First Officers. On non-stop flights in excess of twelve hours (12:00) duty aloft a four(4) pilot crew shall consist of at least one (1) Captain and any combination of the remaining three (3) pilots (e.g. one (1) Captain and three (3) First Officers, two (2) Captains and two (2) First Officers etc.). (a) Two pilot crew flight time/duty limitations. (i) A pilot may be scheduled to a maximum of eight hours (8:00) duty aloft; twelve hours thirty minutes (12:30) on-duty on flights which include an ocean crossing. The maximum duty period for pilots operating under this paragraph is fifteen hours (15:00) (extendable to sixteen hours (16:00) at the Captain's discretion). (ii) During a single duty period a pilot will not be scheduled to exceed: a. Eastbound: More than two (2) operating segments, or deadhead plus one (1) operating segment. b. Westbound: More than two (2) operating segments plus deadhead to domicile. (iii) The Company shall endeavor to accomplish the deadheading of two (2) pilot crews by the most direct method. (iv) A pilot shall not be scheduled for duty aloft for more than eight hours (8:00) during any twenty-four consecutive hours (24:00), unless he/she is scheduled for an intervening rest period at, or before, the termination of eight scheduled hours (8:00) aloft. Such rest period shall equal twice the number of hours aloft since the last preceding rest period, and in no case shall the rest period be less than thirteen hours thirty minutes (13:30) scheduled block-in to block-out nor less than eleven hours thirty minutes (11:30) actual block-in to block-out. If a pilot flies over eight hours (8:00), he/she will receive a minimum of eighteen hours (18:00) rest actual block-in to block-out. (b) Three (3) pilot crew flight time/duty limitations. A pilot may be scheduled in accordance with (i), (ii) or (iii) below, as applicable, on flights which include an ocean crossing. 85 Section 11(D)(2)(b)(i) (i) On flights scheduled to be flown nonstop: the maximum scheduled duty aloft is twelve hours (12:00) duty aloft; the maximum scheduled on- duty is fifteen hours (15:00). (ii) On flights scheduled for one (1) intermediate stop: the maximum scheduled duty aloft is ten hours thirty minutes (10:30); the maximum scheduled on-duty is fifteen hours (15:00). (iii) On flights scheduled for two (2) intermediate stops: the maximum scheduled duty aloft is ten hours (10:00); the maximum scheduled on-duty is fifteen hours (15:00). (iv) A pilot's rest period shall equal twice the number of hours aloft since the last preceding rest period, and in no case shall the rest period be less than thirteen hours thirty minutes (13:30) scheduled (block-in to block- out) nor less than eleven hours thirty minutes (11:30) actual (block-in to block-out), and in no case shall more than sixteen hours (16:00) scheduled (block-in to block-out) be required. (c) Four (4) pilot crew flight time/duty limitations A pilot may be scheduled in excess of twelve hours (12:00) duty aloft. On such flights the maximum scheduled on-duty is sixteen hours (16:00) and the maximum landings is two (2). On flights scheduled for two (2) landings, there shall be two (2) captains. A pilot's rest period shall equal twice the number of hours aloft since the last preceding rest period, and in no case shall the rest period be less than thirteen hours thirty minutes (13:30) scheduled (block-in to block-out) nor less than eleven hours thirty minutes (11:30) actual (block-in to block-out), and in no case shall more than sixteen hours (16:00) scheduled (block-in to block-out) be required. (d) If the actual flight time for a flight scheduled for eight hours (8:00) or less exceeds eight hours (8:00) more than fifty percent (50%) of the time in two (2) consecutive months, then in the following two (2) months such flight shall be scheduled with a three (3) pilot crew in accordance with (b) above and such three (3) pilot crew shall continue to be assigned to this flight until the actual flight time for this flight is eight hours (8:00) or less, more than fifty percent (50%) of the time in a subsequent consecutive two (2) month period. If the actual flight time for a flight scheduled up to twelve hours (12:00) exceeds twelve hours (12:00) more than fifty percent (50%) of the time in two (2) consecutive months, then in the following two (2) months such flight shall be scheduled with a four (4) pilot crew in accordance with (c) above and such four 86 Section 11(D)(2)(d), cont. (4) pilot crew shall continue to be assigned to this flight until the actual flight time for this flight is twelve hours (12:00) or less, more than fifty percent (50%) of the time in a subsequent consecutive two (2) month period. For purposes of this paragraph (d), two (2) consecutive months means from the twentieth (20th) of the first month to the twentieth (20th) of the third month (i.e. January 20 to March 20). (3) When a pilot deadheads under this Section 11(D), the maximum scheduled on-duty times referred to in (a) and (b) above may be extended for an additional period of up to two hours (2:00) in order to allow for deadhead to a flight deck crew member's domicile at the conclusion of a flight pairing. This extension may be scheduled for deadhead purposes only, but in no event shall it be scheduled to exceed sixteen hours (16:00) on duty. A reserve bid holder subject to this extension will be allowed a minimum of twelve hours and thirty minutes (12:30) free from duty after arrival at his/her domicile. The minimum rest period preceding a duty period consisting solely of deadhead/return to domicile shall be eleven hours (11:00), (block-in to block-out), except when such deadhead follows on eastbound ocean crossing in which case such minimum rest shall be thirteen hours and thirty minutes (13:30) scheduled, eleven hours and thirty minutes (11:30) actual, (block-in to block-out). (4) Pilots required to deadhead eastbound or westbound across the Atlantic, Pacific, or any portion thereof, will not be required to act as operating crew members thereafter without an intervening rest period. This provision shall not apply to flights in the Caribbean. (5) No pilot shall be assigned to any duty during any rest period. (6) The duties of the First Officers shall be assigned by the Captain on three (3) and four (4) pilot crews. Each First Officer shall be qualified to relieve both operating positions en route. (7) Operating Flight Crew Seat / Facilities: (a) For duty periods greater than eight hours (8:00) and less than twelve hours (12:00) aloft, the Company shall block the first row, left seat on the aircraft now designated as Row 1, Seat 1, non-smoking section in the First Class cabin for use as the operating flight crew seat. (b) For duty periods greater than twelve hours (12:00) aloft, the Company shall provide adequate sleeping quarters in accordance with FAR 121.485(a). Such sleeping quarters shall be as level as practicable during cruise flight and shall have an approximate surface of 78 x 30 inches. Further, there shall be suitable means to ensure occupant privacy. 87 SECTION 12 RESERVE SCHEDULE POLICY DOMESTIC and INTERNATIONAL (A) GENERAL (1) The Company shall maintain a reserve staffing complement sufficient to perform all reserve duties and to assure that pilots holding a bid run will fly in accordance with established scheduling policies. Reserve requirements will be met by constructing reserve schedules. The Company may award as many reserve schedules as deemed necessary in each category to protect the operation. Further, blocks of reserve day availability (RDAs) may be placed in open time and be assigned in the same manner as other additional flying. Any pilot that acquires a reserve block will receive the fixed daily rate (FDR) or services performed, whichever is greater, for each day of such reserve duty. Further, any pilot that acquires such RDA will be considered a Short Call Reserve as outlined in Section 12(B)(3)(a) below for the duration of the assignment. Volunteer reserve duty and any resulting flying, shall be paid and credited as additional flying for bid run holders and reserve pilots. (2) At domiciles where both domestic and international operations are flown, the Company may establish an equipment reserve complement combining domestic and international operations. (3) A reserve schedule holder, or a reserve officer, may not be scheduled to exceed his/her monthly bid award ALV except as provided in Section 10(C)(2)(d) and 10(C)(3)(b). (B) RESERVE CONTACT/AVAILABILITY (1) All reserve schedule holders shall be required to be available by telephone or pager. A reserve schedule holder using a pager must respond within fifteen (15) minutes of being contacted. (2) Any pilot returning from RGD, vacation or any duty-free period will be responsible for any reserve assignment given at the times in Section 12(B)(3)(a)(v). (3) Reserve schedule holders will be placed on Short Call or Long Call in accordance with the following: (a) Short Call (i) Reserve schedule holders who are not on flight duty, days off, lost time, or an approved release from crew schedule are eligible to be placed on Short Call. 88 SECTION 12(B)(3)(A)(II) (ii) Short Call reserve schedule holders are required to be within two-hours thirty minutes (2:30) of their domicile/satellite/pilot base. The two- hour thirty minute (2:30) contact is measured from the first attempt by crew schedule to contact such pilot. (iii) Reserve schedule holders on Short Call shall not exceed the lesser of twenty percent (20%) of the number of reserve schedule holders awarded in the instant category, or fifty percent (50%) of the number of reserve schedule holders available on the instant day both rounded up to the next whole number, and never less than two (2) if available. (iv) A reserve schedule holder with a known activity assigned that day, or one that will be released in accordance with Section 12(B)(4) below, shall not count toward the number on Short Call. (v) The Short Call assignments shall normally be available for viewing via CAMS CRT, home access, voice-mail or telephone contact with CCS after 1200 and 2000 Central Time. Pilots are responsible to okay this Short Call assignment by 1300 and 2100, respectively. In addition, any time a pilot on Short Call is called out for a flight assignment, CCS shall call the next reserve schedule holder on the list, who shall then position himself/herself for Short Call. (vi) A reserve schedule holder shall leave Short Call only through flight assignment, training assignment, any type of duty-free period, or released by the Company. (b) Long Call (i) Reserve schedule holders who are not on flight duty, days off, lost time or Short Call will be considered on Long Call. (ii) Pilots on Long Call will be required to position for Short Call or a flight assignment within eight hours (8:00) if contacted between the hours of 0400-1559, local domicile time, or within seventeen hours (17:00) if contacted between the hours of 1600-0359, local domicile time. These times are measured from the first attempt by crew schedule to contact such pilot. (4) Pilots within twelve hours (12:00) of the beginning of reserve golden days (RGDs), vacation, or any duty-free period shall be released from the requirement to be within two-hours and thirty minutes (2:30) of the domicile/satellite/pilot base at which he/she is based and the requirement to be available by telephone or pager, unless such pilot is notified prior to those twelve hours (12:00) that: 89 SECTION 12(B)(4)(A) (a) he/she is assigned a flight, or (b) notwithstanding the provisions of paragraph 12(B)(6), due to reserve availability, the instant pilot's services are required. (5) Flight assignments departing prior to 12:00 local domicile time will normally be assigned prior to 23:00 local of the previous day. (6) No attempt shall be made to contact a pilot holding a reserve schedule unless he/she is needed for a duty assignment. (7) If necessary for operational reasons, the Company may assign additional reserve schedule holders to Short Call, in the order specified by paragraph (C)(1) below, in excess of the provisions in paragraph (B)(3)(a)(iii) above. Such additional reserve schedule holders shall be assigned for twenty-four hours (24:00), renewable to a maximum of forty- eight hours (48:00). The end time of such assignments shall be considered an in-time for the purposes of Section 12(C)(1)(b). (C) ASSIGNMENT OF OPEN TIME (1) Flights assigned to reserve schedule holders not on their days off shall be in the following order: (a) All reserve schedule holders who have requested flight assignments, in seniority order, shall be placed on Short Call. Such requests must be expressed to CCS via CAMS or voicemail. Pilots shall be able to view the reserve list in order to identify those pilots who have indicated a "request" option. The request is valid for a calendar day, expiring at midnight local domicile time, and may not be taken out once input. At the expiration of his/her "request", the reserve schedule holder will revert to his/her first-in, first-out position on the reserve list, as determined by Section 12(C)(1)(b). A reserve schedule holder may not exercise this option once his/her credit projection is over his/her guarantee minus ten (10) hours, exclusive of additional flying and OFR. (b) Reserve pilots will be assigned on a first-in, first- out basis. First-in time shall be determined by the release time of the last duty assignment, or 0001 of the first day of the month for pilots not out on a duty assignment at the beginning of the month. The first-in time for a reserve schedule holder returning to service from Reserve Golden Days (RGDs), vacation, any type of duty-free period, or a Short Call assignment under Section 12(B)(7) shall be the end time of such event. If the "in" time above is the same for two or more pilots, reserve list placement shall be made in inverse order of seniority. 90 SECTION 12(C)(2) (2) Notwithstanding (C)(1) above, a reserve schedule holder with less than FAR 121.438b experience will not be assigned a pairing(s) that has assigned to it another pilot who does not meet the requirements of FAR 121.438b. (3) A reserve schedule holder who has been assigned to an open flight may be removed from such flight to protect any other flight if no other reserve is available. Further, a reserve pilot may be removed from an assigned flight in accordance with Section 9(D)(2)(d). (4) Subject to Section 12(D)(4), assignment of a reserve to a flight shall normally consider the ability of the reserve to complete the flight assignment within the reserve's duty- days and shall not impinge on the reserve's scheduled duty- free periods. (D) RESERVE SCHEDULES/DUTY-FREE PERIODS (1) Subject to Section 12(E) below, pilots shall receive not less than the following number of twenty-four hour (24:00) periods at their domicile (either temporary or permanent) free from all duty with the Company during each full month of service as a reserve schedule holder or reserve officer: Bid month duration : 31 days 30 days ------- ------- Effective 1998 : 14 13 01 January 1999 : 13 13 01 January 2000 : 13 12 01 January 2001 : 12 12 Proration of such duty free-periods under this provision shall be to the nearest whole period. The foregoing notwithstanding, the duty-free periods under this provision shall not be prorated for days lost for ALPA business or death in family as provided in Section 15(I). (2) The Company shall award sufficient reserve schedules to perform all reserve duties in each pilot category. The number of reserve schedules will be estimated and published as the estimated reserve count. Upon award, the reserve schedules will be sequentially numbered. Reserve schedules shall be awarded in accordance with the following: (a) Reserve schedules shall be built in seniority order by the preferential bid system using the pilot's appropriate bid preference entries as provided for in Section 9(B). (b) In addition to the requirements of Section 12(D)(2)(a) above, the Company shall also publish three (3) reserve schedules of time (one each) for each pilot category, which shall include the first, middle, and the last parts of each month as single, continuous duty-free periods, in the amounts determined by paragraph (D)(1) above. Should a change in Federal Air Regulations affect the provisions of this paragraph, the parties shall meet and negotiate amendments to this paragraph. Pilots awarded these reserve schedules shall not be awarded supplemental bid runs. The 91 SECTION 12(D)(2)(B), cont. Company is not required to award these reserve schedules if not bid. If a pilot has an activity (other than additional flying and OFR) already scheduled on a date which would otherwise be awarded off, the impinged day(s) off shall instead be awarded as close as possible to the end of the first spread, the beginning of the last spread, or to both ends of the middle spread. (c) Pilots may request up to four (4) blocks of days off. However, no block may contain less than three (3) days off unless otherwise requested by the pilot. Each spread of days off must be separated by at least three (3) duty days. The duty-free period preferences expressed by the pilot shall be granted to the extent possible and shall not contain any black out periods. (3) A pilot's duty-free period(s) may never be changed retroactively. Except as provided in Section 12(D)(4) below, a pilot's duty-free period(s) may be changed prospectively by mutual agreement between the pilot and the Company. However, when no other reserve pilot is available for the flight and the open flight is in Red Time as defined in Section 9(H), the Company may change such duty-free period(s) without the pilot's consent. If the open flight is in Yellow Time, the Volunteer Fly List must first be run. The Company shall not allow an open flight in Yellow Time to go unstaffed until Red Time in order to avoid running the VFL. (4) In the event a non-routine operation prevents the pilot from returning to his/her domicile in time to take his/her duty- free period within the month in which it was scheduled he/she shall, if he/she holds a reserve schedule the following month, be granted only those missed days off in addition to his/her regular scheduled duty-free period(s) the following month. In the event the pilot is a bid run holder the following month, he/she shall receive the FDR for each day, or portion thereof, such pilot is unable to take his/her duty-free days in the month in which they were awarded. Such pay shall not be offset against any pay guarantees. When operationally necessary to move a reserve's duty-free periods to protect the operation, the Company will make every effort to relieve the reserve prior to the commencement of his/her duty-free period. Duty-free periods moved under this provision shall be rescheduled on a one- for-one basis, or the pilot may elect to receive the FDR in lieu thereof. Such pay and credit shall not be offset against his/her guarantee. (5) Reserve "Golden Days" (RGDs). A reserve schedule holder may designate as "golden" a period of consecutive duty-free twenty-four (24) hour periods, not to exceed six (6) periods of the pilot's duty free periods. A pilot may not designate as an RGD a day listed in Section 9(E)(2)(j). Such RGD designation may be made via CAMS or direct telephone contact with CCS not later than forty-eight hours (48:00) prior to the beginning of the bid month. 92 SECTION 12(D)(6) (6) Trading of Reserve Days Off: Reserve schedule holders may trade blocks of duty-free periods with other reserve schedule holders. Such duty-free blocks must be equal twenty-four (24) hour periods. The minimum number of days between traded duty-free periods must not be less than three (3) days. However, where the majority of flight pairings in a category exceed three (3) days, the Company may require more than three (3) days between traded duty-free periods. (E) RESERVE GUARANTEE OPTION (RGO) A reserve schedule holder's guarantee shall be as set forth in Section 4(C). At the time of bidding, a reserve schedule holder may request his/her guarantee be increased by two days at the FDR. The Company shall have sole discretion to approve such request. If approved, the pilot's allotted duty-free periods shall be reduced by two (2). Such reduction may also be requested after the start of the bid period. The reduction of the specific twenty-four hour (24:00) periods shall be mutually agreeable between the pilot and crew schedule. A pilot desiring to exercise the RGO shall so indicate in his/her monthly bid or via the appropriate CAMS entry. (F) MISCELLANEOUS (1) Reserve rest. In addition to the reserve rest requirements set forth in Section 11(C)(3), the following shall apply: If a reserve pilot is called to the airport for the purpose of acting as a pilot on a flight assignment, and is subsequently removed from the flight assignment for any reason after report time, that pilot shall receive the minimum rest stipulated in Section 11(C)(3). Additionally, the provisions of Section 5(G) shall apply if the pilot is removed after report. (2) When notified, the Company shall advise the pilot of the flight identification and report/release times. (3) For a reserve schedule holder who has completed one (1) year of service with the Company as a flight deck crew member, Section 9(F) additional flying shall not be offset against his/her guarantee. A reserve schedule holder with less than one (1) year of service as a flight deck crew member shall be compensated for Section 9(F) additional flying in accordance with Section 4(B)(1)(b)(ii) of the Agreement. 93 SECTION 13 MOVING EXPENSES (A) Pilots who are displaced will be considered involuntarily transferred. Such pilots who are involuntarily transferred within the United States to a new domicile which is more than 75 miles from their current domicile shall be afforded the following relocation benefits. For the purpose of this Section 13, such relocation benefits shall be associated with the geographic relocation of the pilot's principal residence in the former domicile to within a 125 mile radius of the new domicile: (1) The Company will arrange for and cover the cost of shipment of up to 15,000 pounds of personal household goods and personal belongings, including charges for packing and unpacking, insurance, and, if necessary, storage for a period not to exceed thirty (30) days at either end of the move. (2) Expenses for the moving of up to two (2) vehicles shall be allowed each pilot at the rate of twenty cents ($0.20) per mile for the most direct AAA mileage route between the pilot's former and new domicile. The payment will be the mileage's set forth in the table below. Employees will be expected to travel a minimum of 300 miles per day. MILEAGE'S BETWEEN DOMICILES Between AND Mileage ------- --- ------- JFK STL 999 JFK LAX 2787 JFK SFO 2923 STL LAX 1837 STL SFO 2113 LAX SFO 384 (3) A one-time lump-sum relocation allowance up to two thousand five hundred dollars ($2,500.00) will be provided to the pilot to help defray the costs of temporary living and incidentals. Receipts are not required. No additional payments or reimbursements will be provided for hotels, meals, car rental, telephone calls, taxis or other incidental relocation expenses except as may be provided herein. An additional lump-sum relocation allowance up to two hundred fifty dollars ($250.00) will be provided for the pilot's spouse to help defray the cost of home finding at the new domicile. Receipts are not required. If a pilot voluntarily leaves TWA's employ within twenty- four (24) months from the date of transfer, the pilot shall repay TWA the lump-sum relocation allowance(s) he/she received as follows: Proportion of Months of service completed at new allowance(s) to be domicile prior to voluntary termination repaid to TWA --------------------------------------- ------------------ Less than three months 100% Three or four months 95% Five or six months 90% Seven or eight months 85% Nine or ten months 80% Eleven or twelve months 75% 94 Section 13(A)(3), cont. Thirteen or fourteen months 70% Fifteen or sixteen months 60% Seventeen or eighteen months 50% Nineteen or twenty months 40% Twenty-one or twenty-two months 25% Twenty-three or less than twenty-four months 10% (4) When a pilot so requests, he/she shall be allowed reasonable travel time after receiving notification of his/her involuntary transfer until reporting at the new domicile. On moves within the United States this shall be calculated on a travel rate of three hundred (300) miles per day. Such pilot, who has not been given at least two (2) weeks notice, shall be given three (3) days additional time to the above. The time allotted in this paragraph shall be given without prejudice to the monthly guarantee. (B) When a pilot who was assigned to a domicile because there was no successful bidder subsequently moves from such domicile because of displacement under Section 19, moving expenses to the new domicile shall be allowed in accordance with this Section 13. (C) Successful bidders to newly established or re-established pilot domicile(s) will be considered involuntarily transferred for purposes of this Section 13. Such newly established or re- established pilot domicile(s) shall be so considered for a period of not less than nine (9) months from the effective date of the first bid to such domicile; except this provision shall not apply to bidders for a vacancy which was created by a pilot leaving such domicile. (D) In the event a domicile is permanently closed by the Company, all pilots in the domicile at the date of closing shall be considered to have been involuntarily transferred for the purposes of this Section 13. (E) Pilots transferred from one domicile within the United States to another domicile within the United States by any means other than a displacement will be considered a voluntary transfer and will bear their own expenses, except that space available transportation shall be furnished to such pilots and their families. For the purpose of this Section 13, pilots who exercise the Displacement Replacement Option will not be considered involuntarily transferred. 95 SECTION 14 VACATION (A) ELIGIBILITY No pilot shall be eligible for a vacation until such pilot has completed one (1) year of service with the Company. However, the Company may, at its option, schedule a pilot with less service to take vacation accrued during the previous calendar year prior to completion of the pilot's first full year of service. (B) SCHEDULE OF VACATION ENTITLEMENT Each calendar year a pilot shall be given a vacation, the number of days of which shall be based upon the number of full months worked in the preceding calendar year, according to the following schedules: Calendar days to be allowed for vacation according to the number of years of service with the Company completed prior to January 1 of the year vacation is to be taken. Effective for vacations to be taken in 1998:
------------------------------------------------------------------------------------- Months Worked Less Than 8 through 22 Years and Prior to 8 Years 21 Years Over January 1 ------------------------------------------------------------------------------------- 1 1 3 3 ------------------------------------------------------------------------------------- 2 2 5 6 ------------------------------------------------------------------------------------- 3 3 8 9 ------------------------------------------------------------------------------------- 4 5 10 12 ------------------------------------------------------------------------------------- 5 6 13 15 ------------------------------------------------------------------------------------- 6 7 15 18 ------------------------------------------------------------------------------------- 7 9 18 21 ------------------------------------------------------------------------------------- 8 10 20 24 ------------------------------------------------------------------------------------- 9 11 23 27 ------------------------------------------------------------------------------------- 10 12 25 30 ------------------------------------------------------------------------------------- 11 13 28 33 ------------------------------------------------------------------------------------- 12 15 30 36 -------------------------------------------------------------------------------------
96 SECTION 14(B), cont. Effective for vacations to be taken in 1999:
------------------------------------------------------------------------------------------ Months Worked Less Than 8 through 22 through 26 Years and Prior to 8 Years 21 Years 25 Years Over January 1 ------------------------------------------------------------------------------------------ 1 1 3 3 4 ------------------------------------------------------------------------------------------ 2 2 5 6 7 ------------------------------------------------------------------------------------------ 3 3 8 9 10 ------------------------------------------------------------------------------------------ 4 5 10 12 13 ------------------------------------------------------------------------------------------ 5 6 13 15 16 ------------------------------------------------------------------------------------------ 6 7 15 18 20 ------------------------------------------------------------------------------------------ 7 9 18 21 23 ------------------------------------------------------------------------------------------ 8 10 20 24 26 ------------------------------------------------------------------------------------------ 9 11 23 27 29 ------------------------------------------------------------------------------------------ 10 12 25 30 33 ------------------------------------------------------------------------------------------ 11 13 28 33 36 ------------------------------------------------------------------------------------------ 12 15 30 36 38 ------------------------------------------------------------------------------------------
Effective for vacations to be taken in 2000:
------------------------------------------------------------------------------------------ Months Worked Less Than 8 through 22 through 26 Years and Prior to 8 Years 21 Years 25 Years Over January 1 ------------------------------------------------------------------------------------------ 1 1 3 3 4 ------------------------------------------------------------------------------------------ 2 2 5 6 8 ------------------------------------------------------------------------------------------ 3 3 8 9 11 ------------------------------------------------------------------------------------------ 4 5 10 12 14 ------------------------------------------------------------------------------------------ 5 6 13 15 17 ------------------------------------------------------------------------------------------ 6 7 15 18 21 ------------------------------------------------------------------------------------------ 7 9 18 21 25 ------------------------------------------------------------------------------------------ 8 10 20 24 28 ------------------------------------------------------------------------------------------ 9 11 23 27 31 ------------------------------------------------------------------------------------------ 10 12 25 30 36 ------------------------------------------------------------------------------------------ 11 13 28 33 38 ------------------------------------------------------------------------------------------ 12 15 30 36 40 ------------------------------------------------------------------------------------------
97 SECTION 14(B), cont. Effective for vacations to be taken in 2001:
------------------------------------------------------------------------------------------ Months Worked Less Than 8 through 22 through 26 Years and Prior to 8 Years 21 Years 25 Years Over January 1 ------------------------------------------------------------------------------------------ 1 1 3 3 4 ------------------------------------------------------------------------------------------ 2 2 5 6 8 ------------------------------------------------------------------------------------------ 3 3 8 9 11 ------------------------------------------------------------------------------------------ 4 5 10 12 15 ------------------------------------------------------------------------------------------ 5 6 13 15 18 ------------------------------------------------------------------------------------------ 6 7 15 18 22 ------------------------------------------------------------------------------------------ 7 9 18 21 26 ------------------------------------------------------------------------------------------ 8 10 20 24 29 ------------------------------------------------------------------------------------------ 9 11 23 27 33 ------------------------------------------------------------------------------------------ 10 12 25 30 34 ------------------------------------------------------------------------------------------ 11 13 28 33 38 ------------------------------------------------------------------------------------------ 12 15 30 36 42 ------------------------------------------------------------------------------------------
Effective for vacations to be taken in 2002 and thereafter:
------------------------------------------------------------------------------------------ Months Worked Less Than 8 through 22 through 26 Years and Prior to 8 Years 21 Years 25 Years Over January 1 ------------------------------------------------------------------------------------------ 1 1 3 3 5 ------------------------------------------------------------------------------------------ 2 2 5 6 8 ------------------------------------------------------------------------------------------ 3 3 8 9 11 ------------------------------------------------------------------------------------------ 4 5 10 12 15 ------------------------------------------------------------------------------------------ 5 6 13 15 18 ------------------------------------------------------------------------------------------ 6 7 15 18 22 ------------------------------------------------------------------------------------------ 7 9 18 21 26 ------------------------------------------------------------------------------------------ 8 10 20 24 29 ------------------------------------------------------------------------------------------ 9 11 23 27 33 ------------------------------------------------------------------------------------------ 10 12 25 30 37 ------------------------------------------------------------------------------------------ 11 13 28 33 40 ------------------------------------------------------------------------------------------ 12 15 30 36 44 ------------------------------------------------------------------------------------------
For the purpose of this paragraph, a month worked shall be any month for which an employee accrues at least thirty-five hours (35:00) pay. When a pilot is placed on vacation as a result of an extended illness during the same calendar year during which it was earned, no additional vacation shall be accrued during that vacation period. (C) PAY AND CREDIT For each day a pilot is on vacation, he/she shall be paid the Fixed Daily Rate (FDR) at the hourly rate determined by such pilot's mock 98 SECTION 14(C), cont. category bid award for a full month vacation, or by his/her actual category bid award for partial month vacation. (D) SENIORITY At each domicile a pilot shall be awarded a vacation based upon his/her pilot seniority within the category held on January 1 of the year the vacation is to be taken. In the event a pilot does not hold a category on January 1, the last day the pilot held a category shall be used in lieu of January 1. (E) LIMITATIONS (1) Status For the purposes of this Section, pilot statuses are as follows: Captain, First Officer, and Flight Engineer. (2) Selections Provided that adequate vacation selections exist and have not been allocated to more senior pilots, a pilot may select his/her vacation within the following limits: (a) Each pilot may select a single primary vacation equivalent to his/her entitlement in paragraph (B) of this Section, as applicable. (b) Each pilot entitled to fifteen (15) days or less must select a single vacation. (c) Each pilot entitled to thirty (30) days or less, but more than fifteen (15) days, may split to one (1) primary selection of fifteen (15) days, and another split period equal to the remainder of his/her entitlement. (d) Each pilot entitled to forty-four (44) days or less, but more than thirty (30) days may split to one (1) primary selection of thirty (30) days, or one (1) primary and one (1) split of fifteen (15) days each and another split equal to the remainder of the pilot's entitlement. (3) Quarters The vacation year is broken into four (4) calendar quarters of three (3) consecutive months. Each pilot may be awarded only one (1) vacation selection in any quarter, except when selections in all other quarters have been exhausted. (4) Monthly Allocation During each of the bid months of June, July and August, at least six percent (6%) per month of the total vacation days in each category, but never less than one (1) vacation period of thirty (30) days duration, or its equivalent reduced duration, shall be available for award. During each of the bid months of September, November and December, at least five percent (5%) per month of the total vacation days 99 SECTION 14(E)(4), cont. in each category, but never less than one (1) vacation period of thirty (30) days duration, or its equivalent reduced duration, shall be available for award. A pilot scheduled for normal retirement during the vacation year shall have the option of deferring the entire vacation or any split portion(s) provided the pilot notifies his/her Regional Chief Pilot on or before August 31. (5) Involuntary Vacation Rescheduling All of a pilot's scheduled vacation period(s) for the succeeding year shall not be cumulative and must be taken within the calendar year. (a) Primary Vacation Period A pilot's primary vacation period may not be changed without the pilot's consent, except upon thirty (30) days written notice, unless the Company does not have sufficient pilots to maintain schedules and in no event without fifteen (15) days written notice except with the pilot's consent. A pilot's primary vacation period may not be changed solely for reasons of change of the pilot's category. (b) In the event Company operations require that a pilot's primary vacation be deferred, the pilot may have the option to have his/her vacation bought back by the Company or to take it later in the calendar year (when a later period is available) or in the succeeding year. (i) A pilot whose vacation is bought back or deferred shall be considered by the Company as available to fly for the entire vacation period. (ii) When a later period is available, a pilot who has elected to take his/her vacation later in the calendar year shall have priority to such period over a pilot who has not had a vacation deferred. (iii) In the event a pilot is required or chooses to take deferred vacation in the succeeding year, the pilot shall bid it in accordance with the provisions of this Section, time permitting. (iv) A vacation deferred under this Section 14(E)(5) shall not be changed without the pilot's consent unless no other qualified pilot is available in the domicile to protect the Company's operation and in any event shall be granted not later than the year succeeding the year of original deferment. Such deferred vacation shall not be changed without fifteen (15) days written notice. In the event a pilot is awarded more than one (1) vacation in a succeeding year as the result of such deferment, the vacation awarded as the higher preference shall be the 100 SECTION 14(E)(5)(B)(IV), cont. vacation period to which the pilot has the priority right outlined as above. (c) Split Vacation Period(s) A pilot's split vacation period(s) may be changed in accordance with (a) and (b) above and may also be changed as a result of a change in the pilot's category, without written notice and without the pilot's consent. (F) BIDDING PROCEDURES (1) The Company will provide a vacation bid preference form to each pilot prior to September 20. These bid forms will indicate the possible choices available in each month, for the following year. The bid forms will be so designed to allow the options described in paragraphs (B), (D) and (E) of this Section. (2) Each pilot must bid via preference form or electronic bidding (CAMS, home access, etc.) on or before October 15. A pilot who has not submitted a vacation preference by this date will have vacation assigned to him/her by the Company. (3) The results of the vacation bidding will be posted on or before November 1. (4) Mutual trading of equal vacation periods (i.e. any period that could be bid under paragraph (E)(2) above) will be permitted within a Category. (G) TERMINATION AND FURLOUGH In the event a pilot's service with the Company is terminated, the pilot shall be paid vacation pay as follows: (1) If the pilot is furloughed, or if the pilot has completed a year of service with the Company and resigns with the giving of two (2) weeks written notice or is discharged, the pilot shall be paid for all vacation time earned and accrued to date of furlough, resignation or discharge. (2) If the pilot resigns and fails to give at least two (2) weeks written notice of resignation, he/she shall receive no vacation pay whatsoever. (3) This entire paragraph (G) shall not apply where the furlough is occasioned by an Act of God, circumstances over which the Company has no control, or strikes or other work stoppages of employees of the Company. (H) VOLUNTARY VACATION MOVEMENT A pilot may elect to move his/her vacation days within an awarded vacation sequence and must be taken consecutively. The pilot must advise the Company of his/her election no later than thirty (30) 101 SECTION 14(H), cont. days prior to the beginning of the month in which the vacation is to be taken. (I) VACATION FLYING (1) Sixty (60) days prior to the beginning of the bid period in which a pilot's vacation is scheduled a pilot can notify the Company that he wants his vacation bought back by the Company. The Company may, at its option, buy the pilot's vacation. If the Company decides to buy back the pilot's vacation, the pilot will be notified of the Company's acceptance no less than thirty (30) days prior to the beginning of the bid period and a check will be issued to the pilot on the next flight pay check of the month following the scheduled vacation for the full value of his/her vacation. The pilot is then considered by the Company as available to fly for the entire vacation period. The Company may not exercise this provision if there are pilots on furlough other than pilots exercising a Recall Bypass Option. (2) A pilot may elect to fly on his/her vacation without advance notification to the Company and fly only those trips he/she elects to fly to the extent that trips are available to him/her in accordance with Section 9(F). 102 SECTION 15 SICK LEAVE WITH PAY (A) A pilot will be credited, for sick leave purposes, with five (5) hours of sick leave credit for each month of service with the Company as a flight crew member up to a maximum accrual of one thousand (1000) hours. (B) When sick leave credit is used, the normal re-accrual rate shall be six (6) hours for each month of service thereafter as a pilot with the Company until the pilot's sick leave account is restored to the level prior to the illness. In lieu of the foregoing, when a pilot is continuously sick for four (4) months or more, such pilot shall enter into a special re-accrual schedule for each month of service thereafter as a pilot with the Company until the pilot's sick leave account is restored to the level prior to the illness, pursuant to the following schedule: Sick Leave remaining Reaccrual rate per month -------------------- ------------------------ Less than 500 Hours 14 Hours Less than 750 Hours 10 Hours Less than 1000 Hours 8 Hours A pilot who has exhausted sick leave credit and is then placed on medical leave of absence as a result of an extended illness shall, upon return to active service and completion of requalification, reaccrue sick leave according to the above special schedule up to the level prior to the illness. (C) Sick leave credit shall accrue during any month in which the pilot accrues at least thirty-five (35) hours pay. (D) A pilot who holds a bid run will be entitled to sick leave on the first day he/she is unable to report for scheduled duty. A pilot who does not hold a bid run will be entitled to sick leave on the first day that he/she is unavailable for reserve duty; if such pilot has actually been on duty on a day during which he/she later is unable to report for duty, the pilot shall not be entitled to sick leave for that day. (E) A pilot who holds a bid run shall be paid on the basis of the scheduled flight pay and credit of the trip or trips missed within the bid period as a result of actual sickness or injury, and his/her sick leave account charged accordingly, to the extent that such pilot has accrued sick leave credit. No pay and credit shall be awarded so as to cause the pilot's total credited hours for the month to exceed his/her monthly bid award ALV. (F) A pilot who holds a reserve schedule shall be paid and credited sick leave at the fixed daily rate for each day he/she is unavailable for duty as a result of actual sickness or injury, and his/her sick leave account charged accordingly, to the extent that such pilot has accrued sick leave credit. No pay and credit shall be awarded so as to cause the pilot's total credited hours for the month to exceed his/her monthly bid award ALV. (G) A pilot who has not been awarded a bid as a result of actual sickness or injury will be awarded a mock bid based on his/her current category. A pilot awarded a mock bid run schedule will receive pay and credit in accordance with paragraph (E) above. A pilot awarded a mock reserve schedule will receive pay and credit in accordance with paragraph (F) above. The pilot's sick leave account shall be charged accordingly, to the extent that such 103 SECTION 15(G), cont. pilot has accrued sick leave credit. (H) In the event a pilot misses two (2) or more consecutive trips due to illness or misses three (3) or more nonconsecutive trips due to illness in any contiguous three (3) month period, or a reserve calls off sick three (3) times in any contiguous three (3) month period, only the domicile Regional Chief Pilot or Assistant Chief Pilot may contact a pilot in order to request a physician's certificate to verify such illness(s). Any such request shall be limited to the illness at issue. (I) A pilot eligible for sick leave under this Section 15 shall also be entitled to seven (7) calendar days off per calendar year on account of death in the pilot's immediate family. Immediate family shall be limited to a pilot's spouse, children, father, mother, grandparents, step-father, step-mother, father-in-law, mother-in- law, sister, brother, step-sister, and step-brother. These days shall be paid as follows: A Bid Run Pilot shall receive pay and credit for any trip(s) missed during these seven (7) days based upon the scheduled flight time(s) including items credited toward flight time limitations as set forth in Section 11. A Reserve Pilot shall receive pay and credit according to paragraph (F) above. There shall be no prorating of reserve days off based on a pilot's usage of days off in this paragraph. (J) A pilot's sick leave credit shall be restored for any sick leave credit utilized within the month under Paragraphs (D), (E), (F), and (I) above to the extent such pilot accrues flight pay and credit in excess of his/her ALV. (K) During absence due to industrial injury, a pilot shall be entitled to receive from the Company the difference between Workman's Compensation and the pilot's earnings for the number of days the pilot is on paid sick leave status with the Company. (L) A pilot laid off due to a reduction in force shall have the sick leave accrued prior to furlough credited to him/her in the event of recall. (M) Except as provided in paragraph (E) above, the foregoing rules shall be applied to each bid period separately. 104 SECTION 16 PHYSICAL STANDARDS (A) A pilot shall not be required to submit to any Company physical examinations in excess of one (1) in any twelve (12) month period without the pilot's consent unless it is apparent that the pilot's health or physical condition is seriously impaired, in which case the pilot's personal physician shall be furnished a copy of the Company's medical examiner's report when so requested in writing by the pilot. A pilot who takes a Company physical examination at a location other than his/her domicile shall be furnished Company transportation and shall be entitled to expense allowance as set forth in Section 7(A)(4) of this Agreement. (1) Any pilot hereunder who fails to pass a Company physical examination may, at his/her option, have a review of his/her case in the following manner: (a) The pilot may employ a qualified medical examiner of his/her own choosing and at his/her own expense for the purpose of conducting a physical examination for the same purpose as the physical examination made by the medical examiner employed by the Company. (b) A copy of the findings of the medical examiner chosen by the employee shall be furnished to the Company, and in the event that such findings verify the findings of the medical examiner employed by the Company, no further review of the case shall be afforded. (c) In the event that the findings of the medical examiner chosen by the employee shall disagree with the findings of the medical examiner employed by the Company, the Company will, at the written request of the employee, ask that the two (2) medical examiners agree upon and appoint a third qualified and disinterested medical examiner, preferably a specialist, for the purpose of making a further physical examination of the employee. (d) The said disinterested medical examiner shall then make a further examination of the pilot in question and the case shall be settled on the basis of said medical examiner's findings. (e) The expense of employing the disinterested medical examiner shall be borne one-half by the pilot and one- half by the Company. Copies of such medical examiner's report shall be furnished to the Company and to the pilot. (2) Any information obtained by or as a result of a Company physical examination shall be confidential between the doctor, the pilot, and those supervisory and administrative personnel concerned with the pilot's physical condition with the understanding that medical details will not be divulged by the doctor without the pilot's consent. The above notwithstanding, there is no intent to restrict the use of medical information necessary to arrive at a correct medical diagnosis, nor to interfere with the processes of this Section or the Grievance Section of this Agreement, nor to interfere with or prevent investigations required in legal processes. 105 SECTION 16(A)(3) (3) The Company shall reimburse a pilot for any FAA/TWA required medical expenses he/she may incur which is denied by a Company offered medical plan because it was not "medically necessary". This shall apply to both the situation where specific medical testing required by TWA and/or any tests required by the FAA requisite to the issuance of the Airman's Medical Certificate. This shall not apply to the cost of those regular six (6) month annual FAA physical examinations which are necessary and required by law to maintain a pilot license(s). (4) The Company shall not require a pilot to possess an FAA Medical Certificate, including its waiver policy, in excess of the certificate required by the FAA for the capacity in which the pilot is currently serving (i.e., Captain, First Officer, International First Officer, International Relief Officer and Flight Engineer). (5) The Company Medical Department shall advise the Chairman of the ALPA Aeromedical Committee prior to the implementation of new tests which are to be administered to all pilots during the annual Company physical examination. (6) Notwithstanding the foregoing, a pilot who possesses a first or second class medical certificate with waivers may be required to meet operational qualifications as determined by Flight Operations. (a) In the application of this paragraph, if Flight Operations determines that a pilot with a first or second class medical certificate with waivers does not meet the Company's operational qualifications, such pilot will be eligible to receive disability benefits if not disqualified under the provisions of Article 1.11 of the Retirement Plan for Pilots of Trans World Airlines, Inc. (otherwise known as the "A" Plan). (b) In reference to the disqualifications under Article 1.11 of the "A" Plan referring to war, a pilot on Company business who is disabled as a result of war is not thereby disqualified from receiving the benefits referred to in such Plan. (B) Crew meals, when provided, shall be nutritionally balanced and shall include at least one (1) low fat meal. At the request of either party, the Company and the Association shall, within ten (10) business days, meet and discuss crew meal provisioning for flights not normally scheduled for passenger meal service. (C) A pilot on leave under Section 18(B) or (E) may apply for any open position with TWA, subject to the requisite qualifications. A pilot shall have a preferential opportunity for the position over non-employee applicants. Except for Sections 1(C), 1(D), 17(A)(9) and 17(A)(10), the provisions of this Agreement shall not apply to a pilot who accepts another position within the Company while on leave under Section 18(B) or (E). (D) The Company shall maintain an effective Employee Assistance Program which shall make available services to pilots and their 106 SECTION 16(D), cont. eligible dependents consistent with the goals of the Joint Policy Statement on Special Health Services dated August 26, 1976. Furthermore, a pilot shall have access to an effective Employee Assistance Program whether or not he/she is in a job jeopardy situation. Such access, however, shall not abridge, limit or prejudice in any way the Company's right to assess appropriate discipline. (E) Notification for FAA required drug and alcohol testing shall be in accordance with the policy in the Flight Operations Policy Manual, except such notification in St. Louis shall be in writing and delivered in person. No pilot shall be required to wait for such drug/alcohol test more than one hour (1:00) after the scheduled or actual block-in of his/her flight, whichever is later. In the event a pilot is tested "positive" by any alcohol or drug test, he/she shall be handled in accordance with the Flight Operations Policy Manual. 107 SECTION 17 SENIORITY (A) GENERAL (1) Seniority as a pilot shall be based upon the length of service as a pilot with the Company or with other companies whose operations have been taken over by the Company prior to the signing of this Agreement. (2) Seniority shall begin to accrue from the date a pilot is first employed by the Company as an airline pilot and shall continue to accrue during such period of employment except as otherwise provided in this Agreement. On January 1, 1944, and henceforth, the date of employment as a pilot shall establish such pilot's position on the System Seniority List, and when two (2) or more pilots are employed on the same date, they shall be placed on such Seniority List according to their age (i.e., the oldest pilot shall receive the lowest number). (3) Seniority shall govern all pilots in case of promotion and demotion, their retention in case of reduction in force, their assignment or reassignment due to expansion or reduction in schedules, their reemployment after release due to reduction in force, and their choice of vacancies provided that the pilot's qualifications are sufficient for the operation to which such pilot is to be assigned. In the event that a pilot is considered by the Company not to be sufficiently qualified, the Company shall immediately furnish such pilot written reasons therefor. This Section shall apply except as otherwise stipulated in this Agreement. (4) Any pilot once having established a seniority date hereunder shall not lose that date except as provided in this Agreement. (5) When a junior pilot is promoted over a senior pilot, by reason of the failure of the latter to qualify in turn, the senior pilot shall continue to retain his/her position on the Pilots? System Seniority List. (6) Any pilot whose services with the Company are permanently severed shall forfeit his/her seniority rights. (7) In the event Trans World Airlines, Inc. purchases or absorbs another airline, the Pilots' System Seniority List of Trans World Airlines, Inc., and of the Company being purchased or absorbed shall, at the time of such purchase or absorption, be determined by agreement between the representatives of the respective pilot groups involved. (8) A pilot transferred to non-flying or supervisory duty shall retain and continue to accrue seniority, provided that such pilot maintains at all times a valid airline pilots' competency certificate or certificates. If such pilot shall permit his/her specified certificate or certificates to lapse, he/she shall retain the seniority already accrued to the time of such lapse and shall have a period of no more than one (1) year in which to regain such specified certificate or certificates. If the pilot does regain such specified certificate or certificates within one (1) year, 108 SECTION 17(A)(8), cont. the pilot's seniority shall recommence to accrue from the date his/her certificate or certificates are so regained. (9) When a pilot is transferred to non-flying or supervisory duty on account of sickness or injury, or becomes sick or injured while on such non-flying or supervisory duty, the pilot shall retain and continue to accrue seniority during such period of sickness or injury whether or not he/she is able to maintain his/her airline pilot certificate or certificates required for his/her status, until the pilot is able to return to flying duty or is found to be unfit for such duty for a continuous period of five (5) years. (10) A pilot who returns to active service from a leave, including but not limited to, leaves of absence pursuant to Section 18; extended sick leave or from training center, non-flying or supervisory duty who does not have a category bid award, shall have a vacancy created for him/her by the Company in a category in his/her status according to systemwide seniority and the equipment ranking of Section 19(D)(2)(d). If the pilot does not have the qualifications normal for his/her seniority, he/she will be afforded the opportunity to obtain such qualifications at the earliest reasonable opportunity. (11) Any dispute arising hereunder concerning the physical fitness of such pilot shall be settled in accordance with Section 16. (B) SENIORITY LIST (1) January 1 of each year, the Company shall make a seniority list compiled in accordance with this Section, readily available to pilots. Such a list shall be known as the Pilots' System Seniority List and shall contain the names of all pilots entitled to seniority whether active or inactive and the date of such assignment of each pilot. (2) All pilots shall be listed on the Pilots' System Seniority List and each pilot shall be permitted a period of sixty (60) days after posting of such list in which to protest in writing to the Company any omission or incorrect posting affecting such pilot's seniority. (3) In the event such pilot does not file a protest with the Company within such sixty (60) days, he/she shall not thereafter be entitled to file such protest. (C) PROBATIONARY PERIOD (1) Pilots shall be on probation for a period not to exceed one (1) year from date of the pilot?s first completed simulator proficiency check; however, such probationary period shall not exceed fifteen (15) months from date of initial employment as a pilot with TWA. Probationary pilots returning from a leave of absence or furlough shall be required to serve the remaining portion of his/her probationary period, if any, or three (3) months, whichever is greater. Nothing in this Agreement shall be construed to prevent the Company from releasing, furloughing or reemploying a pilot during this probationary period, 109 SECTION 17(C)(1), cont. regardless of his/her position on the Pilots' System Seniority List. (2) Notwithstanding any other provisions of this Agreement, the Company shall not be required to honor a flight deck crew member's bid for category vacancies effective prior to the completion of the pilot's probationary period; however, such pilot shall be afforded displacement prerogatives under Section 19. At initial employment, the pilot shall make an election as to a category preference and insofar as possible, such pilot?s request will be honored on a seniority basis, provided, however, that no pilot upon initial employment shall fill a category vacancy on a small widebody as defined in Section 31(FF) unless all pilots on the seniority list have had an opportunity to bid and be awarded such a vacancy on the basis of seniority. 110 SECTION 18 LEAVES OF ABSENCE (A) PERSONAL LEAVE (1) Except for leaves beginning in the bid months of July, August and December, the Company shall grant up to five percent (5%) of the pilots in a category a leave of absence for any period measured in thirty (30) day increments up to a maximum of five (5) years. For the second and subsequent personal leave requests, the Company may consider the requirements of service. When such leaves are granted, the pilot shall retain and shall continue to accrue seniority during such period, provided that during such period the pilot maintains his/her appropriate pilot's certificate or certificates required for his/her status. If, during any leave the pilot shall permit his/her appropriate pilot's certificate or certificates, required for his/her status to lapse, his/her seniority shall accrue only to the date of such lapse. (2) A pilot shall be granted a leave of absence for a period not to exceed four (4) years to accept a position with the Association, or to perform any duties relating to Council Activities, or to accept an executive position with any agency of the Federal Government, directly connected with aviation. Notwithstanding the foregoing, a pilot shall be granted a leave of absence for a period not to exceed eight (8) years to accept a position as an elected full time Officer of the Air Line Pilots Association, International. Such pilot will continue to accrue all seniority and longevity credit for pay purposes while on such leave of absence, provided that during such period the pilot maintains his/her appropriate pilot's certificate or certificates required for his/her status. (3) Notwithstanding the above, the Company shall offer leaves of absence to all pilots prior to furloughing any pilot. Such leaves shall be granted subject to the following: (a) A minimum of ninety (90) days per leave, and then in increments of ninety (90) days up to a maximum of two (2) years. (b) For each furlough, leaves shall be granted in a number equal to the number of pilots to be furloughed, but in no case shall the Company be required to grant more than a total of thirty (30) leaves per furlough. (c) Leaves, in (b) above, shall be offered equally among Captains, First Officers, and Flight Engineers in order of seniority within each status. (d) Pilots desiring a leave of absence under this Section 18(A)(3) must notify the Managing Director of Flight Operations by telegram within thirty (30) days of the date a future furlough is announced, however, in no case shall the Company be required to grant a leave if the pilot has not requested such leave prior to twenty (20) days of the effective date of such furlough. (e) In the event pilots returning from leaves of absence would cause other pilots to be furloughed, additional 111 SECTION 18(A)(3)(E), cont. leaves of absence shall continue to be offered as in (a), (b), and (c) above. (f) Upon the recall of all furloughed pilots, leaves of absence shall be subject to cancellation, by increment, in order of inverse seniority and in equal number in each status. (g) Pilots on leave of absence under this Section 18(A)(3) shall be considered to be in active service for the purpose of administering Section 4(F)(6). (h) In the event that an announced furlough is averted, a leave of absence granted under this Section 18(A)(3) and contingent upon such furlough may be subject to cancellation. (i) All pilots granted a leave of absence from the Company shall file proper addresses with Trans World Airlines' Flight Operations Department. Any change in address must be supplied to the same department immediately. (4) All pilots shall be eligible for personal leave under the Family And Medical Leave Act of 1993 (FMLA) after twelve (12) months of continuous active service with the Company. Notwithstanding the provisions of the FMLA, the following shall apply to pilots under the Agreement: (a) The Company shall not require a pilot to substitute sick leave or vacation for unpaid leave taken under the FMLA without the written consent of the pilot. (b) Pilots shall continue to accrue seniority and longevity under the Agreement for the period of any FMLA leave. (B) MEDICAL LEAVE When leaves are granted on account of sickness or injury, a pilot shall retain and continue to accrue seniority whether or not he/she is able to maintain his/her appropriate pilot's certificate or certificates required for his/her status, until such pilot is able to return to duty or is found to be unfit for such duty except that in no case shall leaves for sickness or injury exceed a total continuous period of five (5) years, commencing from the date the pilot first goes on sick leave, or if the pilot has exhausted sick leave, commencing at the time the pilot is first disabled. Return to duty after a leave granted under this paragraph shall be subject to a reasonable qualifying period not to exceed six (6) months. (1) During the period a pilot is on leave as provided above, the Company may require the pilot to submit to a Company physical examination at least once each twelve (12) months. When such examination is scheduled by the Company at a location other than in the immediate area of the pilot's residence, the Company shall furnish transportation and reasonable actual expenses for the pilot, and shall make a reasonable effort to schedule such examination at the pilot's convenience. 112 SECTION 18(B)(2) (2) A pilot shall be eligible to return to active service whenever a pilot's leave has not exceeded a period of five (5) years, as provided above, the pilot shall be eligible for return to active service with the Company in a flight deck operating crew position available to him/her, consistent with the physical standards provided in Section 16(A)(4), subject to the limitations provided in (B)(4) and (5) below. To be eligible to return to active service, the pilot's medical certificate may not contain any operational limitation which would prevent the pilot from being routinely scheduled for flight duty, and further such pilot's medical certificate must be applicable to general commercial aviation. (3) In the event a pilot elects not to exercise the displacement prerogatives provided in Section 19(A)(3), henceforth the pilot shall not be eligible for return to active service with the Company unless the pilot possesses a first class FAA medical certificate. (4) In the event a pilot elects not to return to active service with the Company at any time that he/she is able to maintain a second class FAA medical certificate as described in Section 16(A)(4), henceforth such pilot shall not be eligible for return to active service with the Company unless he/she possesses a first class FAA medical certificate. (5) A pilot on medical leave under this Section will be entitled to remain for a period not to exceed five (5) years in the Company's Group Insurance program. (C) MILITARY LEAVE (1) Upon notice, any pilot shall be granted military absence or leave, without pay, as provided by effective federal regulations applying thereto. (2) Upon return to active flight status, reemployment rights and benefits shall be governed by and limited to the protection afforded in the Uniformed Services Employment and Reemployment Rights Act of 1994, as amended, 38 U.S.C. ?4301 et seq. (3) A pilot granted an excused absence under this paragraph (C)(3) for a weekend drill, annual service requirement, other military requirement, or military leaves of absence (31 days or more) shall upon request by the Company provide a copy of his/her orders. (4) A pilot under (C)(1) whose military absence is for fewer days than the length of his/her awarded trip shall have his/her month?s pay guarantee reduced by the number of days of the original trip multiplied by the daily average, and shall have the following options: (a) Split the trip once at the domicile and fly one (1) of the two (2) portions, provided such splitting 113 SECTION 18(C)(4)(A), cont. generates no additional penalty time/pay beyond the original trip; or (b) Drop the entire trip with no further action provided the pilot's projection is not below guarantee; or (c) Drop the entire trip, and become available for a Class "M" balance for the number of days of the original trip over and above the military absence days taken. In accordance with Section 9(D)(1)(b), a Class "M" pilot may enter balance preferences at any time by telephone contact or voicemail with CCS, or the CAMS free-form balance request (JXMVP). [E.g. A five day trip is dropped for two days of military absence, the pilot would be available for three days (M3) of flying.] (D) GENERAL (1) Any dispute arising hereunder concerning the physical fitness of the pilot concerned shall be settled in accordance with Section 16. (2) A pilot on leave shall not, without prior written permission of the Company, engage in aviation employment and, in no case, shall engage in employment which may bring discredit upon the Company. (3) Return from leave shall be accomplished as set out in Section 17(A)(10). (4) A pilot returning from leave of absence will be paid, during any necessary requalification period, at the rate appropriate to the pilot's category at the time he/she returns to duty with the Company; provided, that a pilot who returns from a personal leave of absence, as defined above, in excess of six (6) months duration will be paid at the current rate for the category he/she held at the time of commencement of the personal leave. (5) All pilots granted a leave of absence from the Company shall file proper addresses with Trans World Airlines' Flight Operations Department and the Air Line Pilots Association. Any change in address must be provided to the Company and the Association. (6) A pilot on leave under Section 18(B) or (E) may apply for any open position with TWA, subject to the requisite qualifications. A pilot shall have a preferential opportunity for the position over non-employee applicants. Except for Sections 1(C), 1(D), 17(A)(9) and 17(A)(10), the provisions of this Agreement shall not apply to a pilot who accepts another position within the Company while on leave under Section 18(B) or (E). (E) MATERNITY (1) A flight deck crewmember, upon discovery that she is pregnant, shall promptly notify the Company. Such pregnant flight deck crewmember who continues to meet the standards of Section 16(A)(4) will be permitted, but not required, to 114 SECTION 18(E)(1), cont. continue in service as an active flight deck crewmember through her twenty-fourth (24th) week of pregnancy. A pregnant pilot who elects to continue in active flight status must submit to the Company, prior to her next flight, a written medical release from her physician confirming her medical fitness to perform as an active flight deck crewmember for the following six (6) week period. Thereafter, she must continue to submit a written medical release from her physician confirming her medical fitness to perform as an active flight deck crewmember for each following six (6) week period. Should the pilot elect to withdraw from active flight status due to her pregnancy prior to her twenty-fourth (24th) week, she shall immediately notify the Company. (2) A flight deck crewmember who has ceased to perform flight duties pursuant to paragraph (1), above, shall utilize her accumulated sick leave and, upon exhaustion of her sick leave, be placed on a medical leave of absence for the remaining term of her pregnancy and for a period of up to six (6) weeks following the birth of the child or eight (8) weeks, if delivery is by cesarean. While the flight deck crewmember is on paid or unpaid leave, she shall be entitled to the same terms and conditions of employment as would be applicable to any other illness or disability. (3) A flight deck crewmember covered by this paragraph (E) is expected to return to active flight status within six (6) weeks following the birth of the child or eight (8) weeks, if delivery is by cesarean, unless she is unable to return for reasons due to her health, in which case, the provisions of the Agreement pertaining to the use of sick leave and the granting or extending of a medical leave shall be applicable. A pilot who makes written application prior to the end of six (6) or eight (8) week period in paragraph (2) above, shall be granted a personal leave of absence from the conclusion of their sick leave or medical leave of absence through the end of the sixth (6th) calendar month following the month in which the child was born. (4) Return to active service in a flight deck operating crew position shall be subject to the provisions of Section 18(B) and Section 17(A)(10). (F) PATERNITY ABSENCE (1) A pilot whose spouse is pregnant shall be granted a maximum of fifteen (15) days continuous, paternity absence for normal delivery [twenty-one (21) days, if delivery is by cesarean], commencing on the date of delivery. (2) A pilot who adopts a dependent child not currently living in the pilot's home shall be granted a maximum of fifteen (15) days continuous, paternity absence, commencing on the date of adoption. (3) A pilot whose spouse is pregnant or who is adopting a dependent child not currently living in his home may elect to divert his monthly sick leave accrual to a paternity bank. The pilot may accrue up to forty hours (40:00) in his 115 SECTION 18(F)(3), cont. paternity bank. The sick leave bank and the paternity bank, when combined, must not exceed one thousand hours (1000:00). (4) A pilot may utilize his accrued paternity bank and/or earned and accrued vacation provided that scheduled vacation periods shall not be cumulative and shall be taken within the calendar year, or he may be placed in a non-pay status. Upon exhaustion of his paternity bank and/or vacation, the pilot shall be placed on unpaid paternity absence for the remainder of the fifteen (15) day period [twenty-one (21) day period, if delivery by cesarean]. (5) Requests for this absence and the diversion of sick leave accruals into a paternity bank must be accompanied by medical and/or legal documentation. Such documentation must be provided no later than the date of the requested absence and/or diversion. (G) PILOT ALTERNATE MONTH JOB SHARING PROGRAM The availability of the Pilot Alternate Month Job Sharing Program (the "Program") shall be announced in conjunction with the furlough notice required by Section 20(B) and Section 18(A)(3). In order to help avert a furlough, eligible pilots may voluntarily elect to participate in job sharing which will consist of a period during which a pilot will alternate monthly between flying (a "work-month") and personal time off (a "PTO-month"). Individual commitments to the job sharing program from participating pilots will be required for a period of not less than four (4) months. (1) Eligible Pilots: Pilots in the category which are in excess, as determined by the Company, to the number of pilots necessary to meet the staffing requirements for such category group and who are not junior to a pilot being actually furloughed. (2) Participation: A pilot who wishes to participate in job sharing must submit a Request for Job Sharing Form indicating that pilot's agreement to participate in the Program in accordance with the provisions listed herein and the pilot's preferences (as listed below) regarding which alternating months he/she wishes to work or have off. Request for Job Sharing Forms will be kept on file by the Company. Pilots may update or cancel their request at any time provided that in order to be effective for any month, the update or cancellation must be received by the Managing Director, Crew Resources and Administration, not later than the close of business on the sixth (6th) day of the month preceding the month for which the pilot either wishes to request job sharing or cancel job sharing. (Note: as indicated below, a pilot may not voluntarily withdraw/cancel his/her participation in the Program during the first four (4) months.) To update a request a pilot must submit a new Request for Job Sharing Form. A request may be canceled by written notice to the Company. 116 SECTION 18(G)(2), cont. Job sharing alternate month choices are: (a) Flying during odd numbered months only (i.e. January, March, etc.) alternating with PTO during even numbered months (the "odd series"). (b) Flying during even numbered months only (February, April, etc.) alternating with PTO during odd numbered months (the "even series"). (c) No preference for an odd series or even series rotation. The pilot will accept either series as assigned by the Company. A pilot may indicate on the Request for Job Sharing Form his/her preference for odd series only, an even series only, or a willingness to accept either but with a preference for one series over the other. If a pilot indicates odd series only or even series only, such pilot will be awarded job sharing only if his/her choice can be granted. If a pilot indicates a willingness to accept either an odd or even series the Company will, to the extent possible, comply with the pilot's request. (3) Awarding of Job Sharing Slots: The Company will balance the requests for job sharing taking into account, to the extent possible, pilots' preferences for an odd or even series. The Company will award pilots job sharing in seniority order within a category group for which job sharing is applicable subject to the Company's ability to evenly balance participants on odd and even series. For example, if the only slot(s) available were for an odd series, a more junior pilot who indicates a willingness to accept an odd series would be granted job sharing while a more senior pilot who requested job sharing, only if it could be granted for an even series, would be denied job sharing. The Company will determine each month the number of slots which will be available for job sharing. Those slots shall be filled first by pilots who are continuing participation in the program and then by pilots who are requesting to initiate participation in job sharing. A pilot once awarded participation in the Program will not be involuntarily removed from job sharing solely because a more senior pilot has requested to initiate participation in the program. (4) Withdrawal from Job Sharing: A pilot may voluntarily withdraw from job sharing after his/her first four (4) months of participation (i.e. two (2) work-months and two (2) PTO-months). If TWA reduces the number of job sharing slots available in any category, participants will be removed from job sharing, to the extent possible, in inverse seniority order subject to the maintenance of a balance between odd and even series participants. Subject to the foregoing, a pilot who has been awarded job sharing will continue in the program until: (a) Written notice from the pilot that he/she desires to cancel his/her participation in job sharing. (The written notice must be received by the Company no 117 SECTION 18(G)(4)(A), cont. later than the close of business on the sixth (6th) day of the bid month which will be the pilots last month of participation in job sharing.) (b) Notice from TWA to the pilot that his/her participation in job sharing is being terminated. Such notice may be given if an imbalance occurs among the participants due to extended illness, resignations, retirements, other terminations, a reduction in the number of slots available to job sharing, etc. Determination of the number of slots available for job sharing shall be determined solely by the Company. Notice to the pilot will be given no later than the twelfth (12th) day of the month immediately preceding the month for which participation will be terminated. (c) A pilot entitled to sick leave pay or disability who becomes ill or sustains an injury during a work-month and who does not return to schedule prior to midnight of the last day of that work-month, will be removed from job sharing and maintained on sick leave/disability until such pilot returns to active flight status. When the pilot returns to active flight status from any such absence, he/she will return to full time service. Such a pilot may then reapply for participation in job sharing. (d) A pilot awarded a vacancy to a new status or domicile will be removed from job sharing. Such pilot may then reapply for job sharing based upon his/her new category. (e) A pilot who lacks sufficient seniority to continue to hold a monthly bid (bid run or reserve) on the equipment for which the pilot was awarded job sharing, will be removed from job sharing. (5) Bidding: A pilot participating in job sharing will bid in the normal manner for his/her work-months. A pilot must be available for work on the first day of his/her work-months. (6) Scheduling: (a) A pilot awarded reserve must be available for contact on the first day of his/her work-month. (b) A bid run holder is responsible to contact crew schedule prior to the start of his/her work-month in order to "OK" his/her line and be informed of any balance trips which may have been assigned. (c) All flight assignments (bid runs, trades, balance flights, transitions, reserve flight assignments, etc.) which report during the work-month but end during the PTO-month will be flown to completion. PTO will commence the day following the day in which the last leg (whether working or deadhead) of the pairing that extended into the PTO-month blocks in. Flights extending over the end of the month may not be dropped. All time flown in the PTO-month will be paid in the PTO-month. 118 SECTION 18(G)(6)(D) (d) A pilot participating in job sharing will continue to have the ability to submit standing bids and to be awarded vacancies. (7) Other Provisions: (a) A pilot will continue to accrue all seniority and will retain insurance coverage and his/her normal pass privileges during his/her PTO-month. (b) A pilot will accrue vacation and sick leave in accordance with Sections 14(B) and 15(C). (c) A pilot who has authorized deductions to be taken from his/her pay (i.e. for the credit union, savings bonds, additional federal withholding, etc.), will continue to have those deductions made as applicable for his/her work-month. If a deduction is normally made from an advance check, the deduction would continue to be made from the advance check(s) issued during the pilot's work-month. If a deduction is from the flight check, the deduction will be made from the flight check applicable to the work-month (e.g. if the work- month is February, the flight check deduction would be on the March flight pay check). Deductions will be made from all flight checks to the extent there is net pay to cover the deductions. The pilot is responsible in the PTO-month for any required payments which would normally be handled through payroll deduction. (d) A pilot is responsible to ensure that he/she has reviewed any bulletins and updated revisions to his/her manual that were issued during the pilot's PTO-month prior to reporting for his/her first flight in a work month. 119 SECTION 19 VACANCIES AND DISPLACEMENTS (A) General (1) All changes in categories of pilots resulting from vacancies and displacements, and from subsequent vacancies and displacements resulting therefrom, shall be simultaneously effected in accordance with procedures established in this Section. (2) Except as provided otherwise in this Agreement, this entire Section 19 shall be subject to Section 17. (3) Other bidding, displacing, and assignment provisions of this Section 19 notwithstanding, a pilot who is unable to maintain the medical certificate required by the FAA to serve in his/her status, but who does secure a FAA medical certificate as described in Section 16(A)(4), may be afforded displacement options, subject to the limitations prescribed in (4) below. This paragraph (3) shall be subject to Section 16. (4) Other provisions of this Agreement notwithstanding, the bidding, assignment and displacement rights of any flight deck crew member serving as such with a second or third class FAA medical certificate shall be as follows: (a) Displace a less senior pilot in accordance with normal displacement procedures. (b) If unable to displace as in (a) above, he/she shall be subject to Section 18(B), provided, however, that no provision of Section 15 (sick leave with pay) shall apply to such pilot. While subject to the provisions of Section 18(B), the pilot shall have the priority right to bid and retain a flight engineer category vacancy available to pilots in preference to any more senior pilot who meets the physical standard for any pilot status other than flight engineer. (c) The pilot shall not be subject to the provisions of Section 6(B) of the Agreement. (5) Except as hereinafter provided, all changes in categories of pilots shall be made from the Standing Bids or FAX Bids of pilots who file such bids with the Company. (6) An electronic file of Standing Bids shall be maintained by the Company and controlled by the TWA Flight Operations Department. It is the responsibility of each pilot to keep his/her Standing Bid current with his/her desires. The standing bid format shall be mutually agreed upon and considered as being a part of the pilots' Agreement and that the instructions and prerogatives listed thereon shall be binding to both parties. (7) A Standing Bid may be changed only by the pilot and shall not be canceled by the Company. (8) Annual Manpower Planning Message: A manpower planning message will be electronically available in the fourth quarter of each calendar year. This message will be informative only and will estimate: (1) the next year's 120 Section 19(A)(8), cont. flying levels; (2) category targets; (3) staffing complement in each category; (4) seniority projections for individual categories; and (5) anticipated vacancies. In the event the annual flying information is unavailable, this message may be postponed with the concurrence of the System Schedule Committee Chairman. (B) FAX Bids (1) A pilot who does not have a Standing Bid on file expressing his/her current preferences may send a FAX to the Managing Director-Crew Resources and Administration. Any such FAX, whether for the purpose of bidding a vacancy, requesting assignment, or exercising displacement prerogatives, shall hereinafter be referred to as such pilot's "FAX Bid". FAX bids apply exclusively to the current Bid Message and expire simultaneously with the Bid Message. (2) A FAX Bid shall specifically describe the pilot's preferences and shall, where appropriate, refer to the number of the Company's bulletin announcing a vacancy or displacement which resulted in such FAX Bid. Said FAX signature shall include the pilot's current category, payroll number and system seniority number. (3) It is the responsibility of a pilot to file a FAX Bid before the bulletined deadline date of any vacancy or displacement affecting such pilot if he/she does not have a Standing Bid on file. Absent a Standing Bid or FAX Bid, the default bid procedure of Section 19(D)(2) below shall control. (4) Any pilot's FAX Bid will automatically pre-empt his/her Standing Bid whether or not such FAX Bid results in a change in his/her category. Standing Bids may not be filed or revised by FAX Bid. (C) Bid, Assignment, and Displacement Bulletins (1) The Company shall publish bulletins announcing vacancies, displacements, and assignment of pilots resulting from such vacancies and displacements. All such bulletins shall be numbered consecutively during a calendar year, and they shall be transmitted expeditiously to, and posted without delay at all domiciles, training centers, all overseas layover stations and satellites. (2) A bulletin announcing a vacancy or displacement will state the effective date, the categories involved, the cause of the vacancy or displacement, the name and seniority number of the pilot(s) displaced and the closing date of the bid message. The closing date shall not be less than seven (7) days from the date such bulletin is posted. (3) A bulletin announcing the results of all bidding for, or assignments to, permanent vacancies, and announcing all displacements, shall be transmitted within five (5) business days after the specified deadline and shall refer, where appropriate, to the bulletin number which announced such vacancy, displacement, or assignment. Such announcement bulletin shall be posted as stated in (C)(1) above and will 121 Section 19(C)(3), cont. state the effective date, the categories involved, and the name and seniority number of the successful bidders, pilots displaced, or pilots assigned. (D) Permanent Vacancies (1) Subject to (A)(1) of this Section, a permanent vacancy in a category shall exist and shall be bulletined in the manner specified in Section 19(C)(2) above and filled whenever: (a) The total monthly flying time and/or need for reserve duties in any category is altered resulting in an increased requirement or, (b) Annual Seniority Realignment Bid: Notwithstanding (D)(1)(a), vacancies will be bulletined for each category that had less than three percent (3%) of total staffing awarded bids throughout the preceding calendar year. The number of such vacancies to be bulletined shall be no less than three percent (3%) of each affected category, rounded to the next highest number, based on the category staffing levels at the time of the Annual Seniority Realignment Bid message. This Realignment Bid shall be bulletined in January with a future effective date no later than 1 May of the same year. (2) Bidding for Permanent Vacancies: (a) Pilots shall be afforded the right to bid for category vacancies on a seniority and percentile basis. Subject to Section 6(C) and Section 19(K), bid awards shall be in accordance with the seniority percentile preferences indicated by the pilot. (b) Pilot bids shall be considered in seniority order and each pilot's bid shall be determined before considering the next junior pilot's percentile bid. A pilot's percentile bids shall be considered in preference order. The number of pilots already awarded a bid in the instant pilots desired category plus one (1) (to account for the instant bidder) shall be divided by the total number of pilots already holding bids in the category plus the remaining number of vacancies published for bid (the "resultant percentile"). If the resultant percentile is equal to or less than the pilot's indicated percentile preference, the pilot shall be awarded the bid. If the resultant percentile is greater than the pilot's indicated percentile, the pilot will not be awarded the bid and each of the pilot's remaining preferences will then be considered in order until the pilot is awarded a bid. When a pilot is awarded a category bid pursuant to a percentile bid, all inferior percentile preferences are thereafter disregarded. If a pilot indicates insufficient percentile preferences (the pilot is too junior to hold any of his/her percentile bids indicated), then he/she shall be awarded a category bid in accordance with the Default Bid. All percentile bids must be in whole numbers (e.g. not 60.7%). 122 Section 19(D)(2)(c) (c) When a pilot is awarded a category bid, that pilot is not guaranteed that his/her resultant percentile and seniority on his or her category award will remain constant over time. After the pilot receives the category bid award, the resultant percentile is thereafter disregarded and serves no further purpose. (d) There shall be equipment ranking from highest to lowest as follows: B757/B767/A321 B737/A319/A320 MD8 DC9 B727 At such time that an equipment type other than those listed above is introduced, the parties shall meet and agree on the ranking of such equipment within thirty (30) days of the announced order of such equipment. (e) If a pilot fails to bid or insufficient choices are posted on the pilot's standing bid or FAX Bid, the pilot's bid preference shall be assumed and awarded in the following order, seniority permitting: (i) Present category, (i.e. B757/B767 Captain STL). (ii) Current status and next lower equipment at his/her domicile (next lower category) in accordance with the following order, (i.e. B757/B767/A321 Captain STL to MD8 Captain STL). (iii) Current status in the equipment order above, in any domicile. (iv) The next lower status in the equipment order above, at his/her domicile. (v) The next lower status in the equipment order above, in any domicile. (f) A pilot shall be trained to effect his/her bid award to a permanent category in accordance with Section 6(A)(1)(c). (3) Filling vacant categories Subject to (a) and (b) below, when a category remains vacant as a consequence of insufficient bidders after an advertised bid message, the least senior First Officer on the system shall be assigned to fill a Captain vacancy in a category and the least senior Reserve Officer with First Officer qualifications on the system shall be assigned to fill a First Officer vacancy in a category and the least senior Reserve Officer with Flight Engineer qualifications on the system shall be assigned to fill a vacancy in the Flight Engineer status in a category. (a) A pilot aged fifty (50) or older may voluntarily bypass upgrade training to Captain or First Officer. 123 Section 19(D)(3)(a), cont. Once exercised, such pilot will be restricted to his/her current status until the age of sixty (60), and his/her current equipment to age sixty (60) if a widebody aircraft or for five (5) years if his/her current equipment is a narrowbody aircraft. Once the pilot qualifies on a widebody equipment type he/she shall be restricted until age sixty (60). If the pilot's current equipment is no longer flown at his/her domicile, such pilot shall be allowed an opportunity to qualify on new equipment in his/her status at his/her domicile. (b) The Company may, at its option, allow any First Officer who is forty-five (45) years of age or older at the time upgrading training is offered, to decline such training. A Flight Engineer forty-five (45) years of age or older may decline such upgrading training. (4) Contingent Captain and Contingent Flight Engineer Vacancies (a) General The Company may at its option establish contingent vacancy bid positions in any Captain or any narrowbody Flight Engineer category. The Company may assign a Captain contingent vacancy bid holder as needed to fly as a Captain or First Officer and the contingent bid holder so assigned shall continue to receive Captain pay. The Company may assign a Flight Engineer contingent vacancy bid holder as needed to fly as a Flight Engineer or First Officer. Such Flight Engineer shall be paid as a First Officer when so assigned. All flight assignments shall be in accordance with Section 12 except when a contingent pilot bids and is awarded a bid run pursuant to Section 19(D)(4)(e) below. (b) Definitions For purposes of this Section 19(D)(4) only: (i) "Basic status" means the status of the category bid award associated with a contingent vacancy (i.e. the basic status associated with a "Contingent Captain" bid award is Captain; the basic status associated with a Contingent Flight Engineer is Flight Engineer). (ii) "Alternate status" means the status of First Officer when associated with a contingent pilot (i.e. the alternate status associated with a "Contingent Captain" bid award is First Officer; the alternate status associated with a Contingent Flight Engineer is First Officer). (iii) "Status change" means the movement by the Company of a contingent pilot from the basic status to the alternate status or from the alternate status to the basic status. 124 Section 19(D)(4)(c) (c) Pay (i) Contingent Captains shall receive the Captain's rate of pay at all times. Section 4(C)(4) of the Agreement shall not be applicable to Contingent Captains. (ii) Contingent Flight Engineers shall receive the Flight Engineer rate of pay and guarantee except when assigned to fly as First Officer which shall be paid at First Officer rate of pay. Section 4(C)(4) of the Agreement shall be applicable to Contingent Flight Engineers. (iii) Section 4(C)(5) shall apply to contingent Captains and contingent Flight Engineers. (d) Special Characteristics and Limitations (i) Contingent vacancies shall be considered permanent separate categories for purposes of Section 19 of the Agreement. For all other purposes, except as stated by this Section 19(D)(4), a contingent shall be considered as a bid position within the basic status. (ii) Displacements Pilots holding any category award may, through the displacement process, bid and be awarded contingent vacancies, seniority permitting. E.g., a 727 Captain (STL/CAP/727) may displace into a 727 Contingent Captain (JFK/CCP/727) position. However, a category bid award holder must affirmatively bid a contingent vacancy to be awarded it (no pilot will be awarded a contingent bid as a result of a default bid). (iii) The Company's discretion to publish contingent vacancies and award contingent bids is limited by the number of First Officers in the category. The following table shall control: --------------------------------------------------- Number of First Maximum Associated Officers in the Contingents: Category: --------------------------------------------------- Up to fifty (50) Four (4) --------------------------------------------------- Fifty-one to one Six (6) hundred fifty (51-150) --------------------------------------------------- Above one hundred fifty Five percent (5%), capped (150) at fifteen (15). --------------------------------------------------- (iv) In no event shall the number of contingents exceed the number of reserve schedule holders in the basic status except at the LAX and SFO domiciles. At LAX and SFO, the following shall apply: (aa) When there are thirty-five (35) or more bid runs in a category at either domicile, 125 SECTION 19(D)(4)(D)(IV)(AA), cont. the above exception shall not apply to that domicile. (bb) Pilots temporarily assigned after the bid closing must be awarded a supplemental bid run. (v) The Company is not obligated to publish any minimum number of contingent vacancies. (vi) Contingent pilots shall not be counted for the purposes of target calculations. Subsequent to the bid award process, contingent pilots shall be counted as a reserve schedule holder for the purposes of Sections 9(E)(3) and 10(B)(9). (e) Monthly bidding Contingent bid holders shall be reserve pilots eligible to bid only reserve schedules. Whenever it is known, prior to monthly bid closing that he/she will be utilized in the alternate status (First Officer) for the entire month, he/she shall be able to exercise his/her full seniority for bidding purposes. (f) Status Changes (i) The Company may status change a contingent pilot not more than four (4) times during any bid month, not including status changes caused by additional flying or OFR. Mid-pairing status changes shall not be permitted. Contingent pilots may additional fly or OFR only in the status as of the time the pilot indicates his/her availability and is awarded additional flying or OFR. The Company shall not status change a pilot solely to allow him/her to request additional flying or OFR. (ii) The Company shall notify the pilot via telephone and CAMS (JXCAP) of any changes in his/her contingent assignment. (g) Reserve Rules (i) Segregated reserve lines for Contingent Captains and Contingent Flight Engineers will be published for monthly bidding. Duty Free periods will be awarded in accordance with Section 12(D)(2)(a) and (c). (ii) There shall be no dual status reserves except at the SFO and LAX domiciles. (iii) Contingent Flight Engineers shall be status changed in accordance with seniority and availability. Contingent Captains shall be status changed in inverse order of seniority and availability unless a more senior Contingent Captain requests the status change. 126 SECTION 19(D)(4)(G)(IV) (iv) The Company may status change a basic Flight Engineer prior to status changing a basic Captain. (h) Bidding Restrictions A pilot's bid from any Flight Engineer category to any Contingent Flight Engineer category shall be considered an "upward status bid" for purposes of Section 19(K) of the Agreement. However, a Contingent Flight Engineer shall not be restricted from bidding any First Officer category vacancy on the same equipment as he/she holds in the Contingent Flight Engineer category. (i) The Company's obligation to train/maintain currency of experience. (i) In the event that a Contingent Flight Engineer has not been trained to fulfill his bid award in both the basic and alternate status within forty-five (45) days after the effective date of his/her bid, the contingent pilot shall not be restricted to reserve and may bid his/her full seniority in the basic status until such time as the pilot is fully trained. (ii) In the event that a Contingent Flight Engineer has not been used in the basic or alternate status within any ninety (90) day period, the contingent pilot shall not be restricted to reserve and may bid his/her full seniority in the basic status, until requalified. A Contingent Flight Engineer who must requalify as a First Officer in any training device shall be paid as a First Officer for such requalification training. (iii) Any pilot who is a successful bidder for a permanent category vacancy in a different domicile shall be considered as transferring at the pilot's request for the purpose of Section 13, and will not be entitled to moving and relocation expenses. A pilot assigned to a permanent category domicile vacancy in a different domicile in accordance with Section 19(D)(3) shall be considered as transferring at Company request, and the provisions of Section 13 will apply. (5) Declining A Bid A pilot shall be afforded the option to decline a bid, except a displacement bid. Such pilot shall notify his/her Regional Chief Pilot in writing within ten (10) days after the bid results are posted of his/her desire to exercise this provision. When a pilot exercises this provision the Company will be obligated to fill such vacancy within the guidelines set forth in Section 19(E)(4) below. A pilot electing to decline a bid in accordance with this provision 127 SECTION 19(D)(5), cont. shall remain in his/her present category. Such pilot shall be eligible to bid for any category twelve (12) months after declining the bid, subject to bid vacancies being available and seniority permitting. (E) FUTURE EFFECTIVE BIDS (1) Future effective bids shall not be bulletined more than ten (10) months in advance. (2) In the event of a change in future effective bid requirement effective dates, pilots who have been awarded future effective bids may be advanced or deferred as follows: (a) Bids will be advanced in accordance with seniority order of pilots awarded the earliest effective date, except that the most senior pilot holding any future effective date bid who expresses a desire to be advanced to the earliest possible date may do so provided he/she is qualified or it is practicable for the Company to qualify such pilot for the earlier effective date. Advancement of bids shall be subject to paragraph (2)(c) below. (b) Bids will be deferred in accordance with inverse seniority order of pilots awarded bids on the date immediately preceding the date to which the bids are being deferred. (c) A pilot who bids and is awarded a future effective bid, for a specific date but who is senior enough to have been awarded an earlier future effective bid, will not be advanced unless he/she is the most junior future effective bid holder in the month from which bids are being advanced. (d) If either paragraph (2)(a) or (2)(b) above is utilized, the junior pilot holding a future effective bid for that category may be deferred or his/her bid canceled. (3) Pilot Options in the Event of Bid Cancellation In the event that a pilot's future effective bid is canceled by the Company ("the instant pilot") and other future effective category bids were awarded to pilots subsequent to the award date of the canceled bid and prior to the date of cancellation ("subsequent bid"), then the following provisions shall apply: (a) The instant pilot shall have the option to remain in his/her current category, seniority permitting, and the Section 19(K) restriction of the canceled bid shall be waived; or (b) If but for the Section 19(K) restrictions the instant pilot would have been awarded a subsequent bid according to his/her standing bid and provided a junior pilot ("junior pilot") was awarded such bid, the instant pilot may elect to be placed into such subsequent bid. Such instant pilot will assume the 128 SECTION 19(E)(3)(B), cont. effective date of the subsequent bid. All Section 19(K) restrictions associated with the subsequent bid award shall apply. Such instant pilot will not be entitled to moving expenses under Section 13. No such junior pilot shall have his/her future effective bid canceled as a result of an action taken under this paragraph. (4) Replacement Future Effective Vacancy (a) A replacement future effective vacancy may be awarded when a pilot, who has been awarded a future effective bid in accordance with this Section 19, utilizes Section 6(A)(6), and shall be awarded when a pilot utilizes Section 19(D)(5) of the Agreement to vacate such future effective bid award. (b) Eligibility of pilots for a replacement future effective vacancy shall be determined by utilizing the standing bids that were on file at the time the original future effective bid was closed. The award of the replacement future effective vacancy shall be in accordance with the applicable provisions of the Agreement except that the pilot awarded the replacement future effective vacancy shall have a one time option to accept or reject the award. The pilot awarded the replacement future effective vacancy shall not be subject to any restrictions due solely to his/her instant election to reject the replacement future effective vacancy award. (c) The award of the replacement future effective vacancy regardless of the pilot's election to accept or reject such replacement vacancy shall fulfill the Company's obligation under paragraph (4)(a) above. In the event the pilot awarded the replacement future effective vacancy rejects the award, the Company may continue the process until the replacement future effective vacancy is filled. (d) The Company may backfill any subsequent vacancy created by the award of a replacement future effective vacancy. A backfill vacancy shall be awarded in the same manner as the future effective replacement vacancy and pilots awarded such backfill vacancy shall be afforded the same rights of refusal. (e) The System Schedule Committee will be notified of any pilot(s) awarded replacement future effective or backfill bids. (F) TEMPORARY VACANCIES (1) A temporary vacancy in a category shall exist whenever it is anticipated that a pilot holding a permanent bid in the category will be unavailable for flight duty for a period of ninety (90) days or less, or an increase in requirements subsequent to the closing of the monthly bid period. In such event, unless the Company provides sufficient pilots in the category to protect open time caused by the temporary 129 SECTION 19(F)(1), cont. unavailability of a pilot, it shall be filled as follows for any period not exceeding ninety (90) days: (a) The Company may temporarily assign the most senior pilot(s) (in descending order) in the category at domicile(s) with excess pilots who has a standing bid on file, and in the absence of any such pilot(s) then the least senior pilot(s) in the category at the domicile(s) with excess pilots shall be temporarily assigned. Such pilot shall be entitled to expenses under Section 7(A)(4), and automobile expenses under Section 13(A) when approved by the Company. (b) If a temporary vacancy is not filled as in (1) above, it may be filled pursuant to Section 19(D)(4), Contingent Vacancies. (c) In filling a vacancy under (a) above, the availability of pilots shall be duly considered. (d) Notwithstanding the ninety (90) days or less restriction of (1) above, whenever a permanent vacancy filled by a pilot not possessing Captain qualifications creates a temporary shortage of pilots in such permanent status at the domicile, the Company may alleviate the shortage by filling the vacancy temporarily in accordance with (1) above during the period the pilot is upgrading to Captain qualifications. This provision shall apply even though such period may be ninety (90) days or longer, but no pilot shall be temporarily assigned involuntarily for longer than ninety (90) days if a more junior pilot who is Captain qualified is then available for such assignment. (2) Subject to (1)(a) above, a pilot awarded a bid run or reserve schedule for a temporary vacancy will remain to complete such assignment but will not forfeit any bidding rights. (3) A pilot temporarily assigned to a category will be used the same as permanent bid run or reserve schedule holders in such category at the assigned domicile, and shall be entitled to the same scheduling rights as other pilots in his/her assigned category at a domicile. (4) Reserve pilots may be given single trip assignments which shall not be considered temporary assignments. Pilots assigned in accordance with this provision will receive pay and credit calculated from departure from domicile to return to domicile. (G) DISPLACEMENTS OF PILOTS (1) Subject to Section 19(A)(1) and paragraph (3) below, a pilot may be displaced from his/her category whenever the total monthly flying time and/or need for reserve duties in that category is altered resulting in a decreased requirement. (2) If a pilot has not indicated a preference for exercise of his/her displacement prerogative, either by Standing Bid or 130 SECTION 19(G)(2), cont. by Fax Bid, the pilot shall at the deadline date of his/her displacement automatically be displaced to the default bid procedure, described in Section 19(D)(2)(e) above. (3) Subject to paragraph (2) above, a displaced pilot has the prerogative to displace a pilot in any category, provided he/she is senior to such pilot. (4) Once the pilot has indicated his/her displacement prerogative, the Company shall effect the displacement of the most junior pilot in the category or, in the alternative, create a vacancy in that category for the displacing pilot, provided the pilot is senior to the most junior pilot in the category. (5) In the event of displacements within a domicile, any temporary bid run or reserve schedule holders or assignees will be displaced before any permanent bid run or reserve schedule holder. (6) The domicile to which a pilot is assigned or successfully bids, upon completion of initial ground school and transition training, will establish the pilot's first domicile. (7) In the event a bid displacement bulletin announces future displacements in a bid category at a domicile, the least senior pilot(s) shall be displaced from the category. (8) Displacement Replacement Option: Whenever displacements are announced in a category, any pilot in that category senior to any pilot subject to the displacement message may elect the displacement replacement option. At any time prior to the deadline of the displacement, the more senior pilot may exercise the same rights of displacement as any pilot who would have been displaced. The pilot exercising the option does so at the junior pilot's seniority. Pilots who elect the Displacement Replacement Option are restricted from the use of the provisions of Section 19(D)(5). (H) AVERTING VACANCIES AND DISPLACEMENTS Vacancies and/or displacements may be canceled or averted whenever changes in requirements become known in advance of the closing date of an announcement bulletin, as provided in Section 19(C)(3), provided that such change in requirements will be effective within a calendar month either side of such closing date. (I) RESERVE OFFICER ASSIGNMENTS (1) All reserve officers in excess of the number needed to fill the requirements of the Company's operations may be assigned to domiciles as designated by the Company, subject to the following: (a) Such assignment will be offered in order of seniority to sufficiently qualified reserve officers at the domicile or domiciles where the Company determines that an excess exists. 131 SECTION 19(I)(1)(B) (b) If an insufficient number of reserve officers at such domicile or domiciles volunteer for such assignment, the assignment will be made in inverse order of seniority from among sufficiently qualified reserve officers at such domicile or domiciles. (c) The term "sufficiently qualified" shall refer to a pilot who has all route and equipment qualifications except for landing renewal, proficiency check or CQT. It is understood that assignments under this paragraph (I) are not for the purpose of filling bid vacancies. (d) A reserve officer assigned as above will be entitled to expenses as provided in Section 7 if such assignment is for ninety (90) days or less; or to expenses provided in Section 13, if such assignment is for more than ninety (90) days. (2) A reserve officer may request transfer to another domicile reserve officer assignment. If such transfer is approved by the Company, the expense provisions of paragraph (I)(1)(d) above will not apply. (3) All reserve officers must be awarded a category bid to a status prior to one hundred twenty (120) days from date of hire as a pilot. (J) MUTUAL TRADES The Company shall grant requests for a mutual trade of domicile in accordance with the procedures and restrictions outlined below. (1) Mutual trades shall be processed twice a year, once during the second quarter and once during the fourth quarter of the year. (2) The Company shall have the option of when it will allow trade requests to be submitted, when it will award the trades and the effective date of any transfers. The Company shall normally allow a minimum of fifteen (15) days for the submission of mutual trades requests. (3) Mutual trade requests will be processed from the Mutual Trade standing bids (JXSBP) in CAMS. (4) The Company shall not be required to grant any trade which may generate training. (5) Mutual trades shall only be granted between pilots in the same status and equipment and shall be granted on the basis of seniority, subject to qualifications and (4) above. (6) Any trade granted in accordance with this provision is irrevocable. (7) No part of Section 13 shall apply to any pilot transferred under this provision. 132 SECTION 19(K) (K) RESTRICTIONS (1) A pilot who is awarded a future effective bid that requires more than three (3) days but less than ten (10) days of training shall be eligible for a subsequent bid award effective twelve (12) months after he/she is awarded the bid. (2) A pilot who is awarded a future effective bid that requires ten (10) or more days of training shall be eligible for a subsequent bid award effective twenty-four (24) months after he/she is awarded the bid. (3) A pilot who is awarded a future effective bid as a First Officer on a small widebody aircraft that requires ten (10) or more days of training shall be eligible for a subsequent bid award effective twenty-four (24) months after he/she is awarded such bid. During this restriction period, the Company may disallow an upward status bid which would otherwise be permitted by paragraph (4) below. (4) A pilot with a current 19(K) restriction shall be eligible for a bid award to a higher status without restriction; however, a pilot who is awarded an upward status bid pursuant to this paragraph shall carry the remainder of his/her old category restriction to the new status and equipment. (5) A pilot who downbids to a lower status that will require more than ten (10) days of training may be subject to a thirty-six (36) month restriction from the date of the bid award. During this restriction period, the Company may disallow an upward status bid which would otherwise be permitted by paragraph (4) above. The thirty-six (36) month restriction specified herein shall not prevent a pilot who downbids from being awarded an upgraded category vacancy on the same equipment. The thirty-six (36) month restriction shall be reduced by twelve (12) months or less, as applicable, from the effective date such pilot commences training to fill a category vacancy on the same equipment. If a pilot downbids to a category vacancy on either the DC9 or the MD8, he/she shall receive the benefit of the reduced restriction if he/she upgrades on either the DC9 or MD8. (6) A pilot who bids to the DC9 or to the MD8 and who requires differences training shall be eligible for a subsequent bid award effective twelve (12) months after he/she is awarded the bid. (7) A pilot who is restricted under this Section 19(K) may bid for and be awarded a category vacancy in the same status and equipment to which he/she is currently restricted (e.g. JFK 757/767 CAP to STL 757/767 CAP). (8) If a pilot is displaced from his/her current category and as a result incurs initial/transition training, such pilot may be subject to a displacement training restriction not to exceed twelve (12) months from the date of the pilot's displacement award announcement. Such restriction, if imposed by the Company, shall only restrict a pilot from being awarded any future category vacancy which requires 133 SECTION 19(K)(8), cont. initial equipment qualification. This paragraph (8) shall not affect a pilot's right to bid to a higher status as described in paragraph (4) above. (9) A pilot shall be eligible to bid and, subject to seniority, be awarded a category vacancy thirty-six (36) months from his/her date of hire as a pilot ("new hire pilot"). For the duration of said restriction, the Company may disallow an upward status bid otherwise permitted by paragraph (4) above and the provisions of paragraph 10(c) below shall not apply to new hire pilots. (10) General (a) For the purposes of this Section 19(K), a "day" means a calendar day which includes only basic aircraft ground school and simulator training. Time off between such days of training is not included. (b) The Company may, at its option, waive the restrictions of this Section 19(K). (c) The restrictions of Section 19(K) above shall not restrict a pilot from receiving a bid award to the B737 or A319/320/321 equipment types, seniority permitting, ("restriction waiver") until the staffing level for the respective equipment in the instant status reaches seventy-five (75) pilots. (E.g., the restriction waiver will cease for the Captain categories on the equipment type when there are seventy-five (75) Captains on the equipment type.) In the event there is a twelve (12) consecutive month period with no deliveries of equipment type, such 19(K) restriction waivers shall also cease. A pilot receiving a bid award to the B737 or A319/A320/A321 will then be subject to the appropriate 19(K) restriction. 134 SECTION 20 FURLOUGH AND EMPLOYMENT PROTECTION (A) FURLOUGH AND EMPLOYMENT PROTECTION (1) Pilots furloughed due to a reduction in force, on return to duty shall be allowed, for seniority and longevity purposes, all time accrued prior to such furlough. All such furloughs shall expire at the end of ten (10) years from the effective date of such furloughs. Reemployment shall be subject to the furloughed pilot's passing a satisfactory physical examination at the time of reemployment, and being in possession of a valid airman's certificate as defined in Section 31 of this Agreement. Notwithstanding the above, a pilot who, at the time of furlough, was operating under less than a first class FAA Medical Certificate will be allowed to return to service provided the medical certificate which he/she possesses at the time of recall is of at least the same class certificate which he/she held at the time of furlough and contains no additional waivers or limitations. (2) Pilots employed as pilots prior to July 1, 1977 shall continue to accrue seniority and longevity during the period of furlough. Pilots employed as pilots after July 1, 1977 shall continue to accrue seniority and longevity for all purposes except for longevity pay. Pilots with less than one (1) year accrued longevity will continue to accrue longevity for longevity pay purposes until such time that he/she has accrued one (1) year of longevity. (3) After reemployment the pilot shall be required to serve the unexpired portion of his/her probationary period. All such re-employed pilots shall be recalled to the domicile from which he/she furloughed. If the domicile from which the pilot was furloughed no longer exists, moving expenses will be paid from such former domicile to the domicile to which the pilot is recalled in accordance with the provisions of Section 13 respecting transfers at Company request. (B) In case of furlough, the Company will notify all pilots to be furloughed at least thirty (30) days in advance of the effective date of the furlough; except that the thirty (30) days notice requirement shall not apply where the furlough is occasioned by Act of God, circumstances over which the Company has no control, or strikes or other work stoppages of employees of the Company. The Company may require such pilots, who will be furloughed, to perform normal flight duties during the notice period. (C) (1) All pilots furloughed from the Company shall, at the time of furlough, file proper addresses with TWA Flight Operations Department. Any change of address must be supplied to the same department immediately. Any furloughed pilot failing to notify the TWA Flight Operations Department within fourteen (14) days of receipt of recall notice that he/she will report for duty, or failing to return to duty by the date stated in the recall notice, which shall not be less than twenty-one (21) days of notice, will be considered out of service unless a justifiable reason be presented therefor. The preceding sentence shall not apply where the furlough is occasioned by Act of God, circumstances over which the Company has no control, or strikes or other work stoppages of employees of the Company, except that upon return to normal operating conditions all pilots shall return to duty 135 SECTION 20(C)(1), cont. promptly upon receiving notice to do so from the Company. Any pilot who fails promptly so to return, will be considered out of service unless a justifiable reason be presented therefor. (2) Recall Bypass Option (a) Furloughed pilots may file a recall bypass option with the office of the Managing Director-Flight Operations. This option may be updated at any time prior to the announcement of recall. (b) Once a recall program is announced, furloughed pilots falling within the recall number who do not have a recall bypass option on file will not be eligible for bypass. (c) Furloughed pilots who have a recall bypass option on file will not be offered recall but will be passed over. Such pilots withdrawing their recall bypass option will be offered a recall during the next recall on the basis of their seniority. (d) The Company will not be required to recall any pilot when a recall is not required regardless of the seniority of the pilot involved. (e) Seniority will govern the cancellation of the bypass option. (f) The bypass option will terminate as soon as the Company announces the recall of the last furloughed pilot. (g) This entire recall bypass does not apply in situations wherein pilots have been furloughed due to Acts of God, circumstances over which the Company has no control, strikes or other work stoppages by employees of the Company. (3) Furlough Replacement Option (FRO) (a) The availability of FRO's will be announced in conjunction with the Furlough Notice and Section 18(A)(3) leaves. The pilot will have fifteen (15) days from the announcement to file a request for an FRO with the Managing Director-Flight Operations. All those requested will be granted on the basis of seniority and qualification and staffing requirements as determined by the Company. (b) Any pilot awarded an FRO will be afforded all benefits of this Section (except that the pilot shall not be permitted to elect the lump sum option) including furlough pay and furlough benefits based upon the pilot who would have been furloughed. The Company will not be exposed to any additional expense in furloughing a senior pilot than it would have been, had the junior been furloughed. 136 SECTION 20(C)(3)(C) (c) The number of furloughs announced will be reduced from the original number by the amount of FRO's awarded in addition to any leaves granted under Section 18. (d) Any benefits obtained hereunder will not affect early or normal retirement either in pay or timeliness. (e) Pilots taking this option will have the same rights of recall as the pilot that would have been furloughed including recall bypass. (f) If a pilot is operating under an equipment restriction (Section 19(K)), the pilot shall not be permitted to exercise a FRO. Additionally, a pilot who has changed status within the previous twelve (12) months and required more than refresher training, will not be eligible for FRO. Any pilot with less than one (1) year of active service remaining prior to normal retirement, will not be eligible for FRO. (D) (1) A pilot who has two (2) or more years of service with the Company as a flight deck crew member and who is furloughed shall receive furlough pay calculated at the rate of four percent (4%) of the total aggregate whole months of active service with the Company as a flight deck crew member to a maximum of one hundred twenty (120) months. (2) The amount of furlough pay due per month shall be the guarantee due the pilot for the last full month worked. (3) A pilot eligible for furlough pay shall receive pay starting at time of furlough, or if in a non-pay status, at the time he/she is available to return to active pay status and payments for the amount due shall be at regular pay periods and continue until all furlough pay credit is used; except that in no event shall any such pay be due after effective date of recall by the Company. (4) A pilot recalled by the Company and who is later furloughed shall again be entitled to furlough pay calculated on the pilot's aggregate whole months of active service with the Company as a flight deck crew member as in paragraph (1) above. (5) A pilot will only be eligible for that portion of his/her monthly furlough pay which exceeds the amount of his/her monthly salary if such pilot remains in the employ of the Company in any position. (6) The provisions of this paragraph (D) will not apply where the furlough is occasioned by Act of God, circumstances over which the Company has no control, or strikes or other work stoppages of employees of the Company, except that the same shall be applicable, (with the exception of the time at which furlough pay is first due) as of the cessation of such strike or other work stoppage of employees of the Company, to any pilot who is not recalled at the same time the Company first recalls pilots furloughed as a result of such strike or work stoppage. 137 SECTION 20(D)(6), cont. Notwithstanding the foregoing, in the event of a liquidation of the airline or permanent cessation of all commercial flight operations prior to September 1, 1999, all pilots furloughed following or in contemplation of such liquidation or cessation shall be entitled to furlough pay as provided for in Section 20(D)(1) through (5), above, immediately upon the effective date of furlough. (E) In consideration of the Company's program to operate turbo-jet aircraft with a three-pilot member crew, the Company will not furlough any pilots No.1 through No.1581 on the TWA Pilots? System Seniority List of December 28, 1961. The foregoing does not alter the current status of any pilot previously furloughed, and does not apply in any case where the Company does not require the services of a pilot because of Act of God, circumstances over which the Company has no control, or strikes or other work stoppages. (F) Furloughed pilots (not including those whose furlough is occasioned for any of the reasons stated in paragraph (D)(6) above), may elect to withdraw their entire retirement benefit in a lump sum payment pursuant to the provisions of Article 8 of the TWA Retirement and Trust Annuity Plans for Pilots and Flight Engineers. (G) Any pilot furloughed having more than twelve (12) years of seniority with the Company as a flight deck crew member at the time of his/her furlough shall have his/her pass and reduced rate travel privileges on TWA for such pilot, his/her spouse and eligible dependents, (i.e., such privileges as are in effect on the date of his/her furlough) extended for a period of one (1) year from the date of his/her furlough, subject to his/her annual allotment. (H) (1) The Company shall provide to pilots furloughed and who have twelve (12) or more years of service with the Company as a flight deck crew member group life (basic only) including AD & D, medical and dental insurance, for a period of one (1) year from their date of furlough. The Company shall provide similar insurance coverage to furloughed pilots having less than twelve (12) years of service with the Company as a flight deck crew member for a period of ninety (90) days from their date of furlough. (2) Coverage as provided in (1) above will be discontinued if the pilot obtains other insurance coverage as a result of his/her obtaining other employment. 138 SECTION 21 GRIEVANCE PROCEDURE (A) DISCIPLINE AND DISCHARGE (1) In no event will a pilot be disciplined or discharged from the Company without a thorough, impartial, and expeditious investigation of the alleged cause. The Company will advise the pilot and an LEC Officer of such investigation prior to its commencement and further that he/she is entitled to union representation throughout said investigation. At the conclusion of the investigation, the Company will notify the pilot and the LEC Officer, in writing by certified mail, of any discipline or discharge action contemplated by the Company. Receipt by the pilot of the notice will be presumed to be no later than the fifth business day after the date of mailing. Further, no pilot shall be disciplined or discharged without a hearing, provided that within ten (10) business days of receiving the notification in writing as stipulated above, the pilot or an LEC Officer makes written request for a hearing to the Regional Chief Pilot at the pilot's domicile. The date of said request will be the date of mailing which, if necessary, must be established by the pilot. New York: St. Louis: --------- ---------- TWA Flight Operations Flight Operations Hanger 12, Room 202 P.O. Box 10236 JFK Int'l Airport Lambert Int'l Airport Jamaica, N.Y. 11430 St. Louis, MO 63145 Copies of such requests shall also be sent to the Vice President, Flight Operations Corporate Headquarters. (2) Should the pilot or an LEC Officer fail to request a hearing within the prescribed time limits, the Company may thereafter effect discipline or discharge and shall notify the pilot by certified mail of such action and the precise reason(s) for it. In such case the discipline or dismissal shall be final. (3) When a hearing, as provided in (1) above, is requested, such hearing shall be held by a Flight Operations official of the Company designated by the Company for that purpose or his / her designee, and shall be held within ten (10) business days after the Company receives written notification from the pilot or an LEC Officer requesting such hearing. (4) Prior to such hearing, the Company shall furnish the pilot and an LEC Officer a copy of the precise charge or charges against him/her. Copies of all materials relied upon by the Company in making the decision to effect discipline or discharge will be supplied at least three (3) business days prior to the hearing. Upon written request, the pilot shall be granted a postponement of the hearing, not in excess of ten (10) business days, in which to prepare and to secure the presence of witnesses. Such request for a hearing postponement shall be made to the Regional Chief Pilot, at the pilot's domicile. Notwithstanding the provisions of (A) (6) below, a pilot requesting postponement of the initial hearing as provided in this paragraph may be removed from 139 SECTION 21(A)(4), cont. the payroll for the duration of such postponement. However, in the event the grievance is sustained at the initial or any subsequent hearing, such days shall be restored to the pilot. Upon written request from the pilot or the Association, the Company will make available at such hearing consistent with operational requirements, witnesses who are employed by it. When witnesses are called, the provisions of Section 22(Q) shall apply. At such hearing the pilot shall have the right to be represented by a Company employee of his/her choice or by his/her duly accredited representative or legal counsel. (5) Within ten (10) business days after the close of such hearing, the Company shall notify the pilot of its decision in writing and shall furnish the pilot and his/her duly accredited representatives or legal counsel and an LEC Officer a copy thereof. Such copies will be sent by certified mail. (6) Nothing in this Section shall be construed to prevent the Company from holding a pilot out of service prior to the written notification provided for in Paragraph (A)(1), or during the course of the hearing and decision provided for in Paragraphs (A)(3) and (5) of this Section. However, during any such period that a pilot is held out of service by the Company, he/she shall, if a bid run holder, be paid trips missed for the initial month or part of a month and the daily rate applicable to his/her current category bid award for any subsequent month or part of a month. A reserve schedule holder shall be paid the reserve daily rate applicable to his/her current category bid award, not to exceed the appropriate category ALV (exclusive of previously completed ETO or Volunteer Flying). (B) OTHER GRIEVANCES Any pilot or group of pilots covered by this Agreement who have a grievance concerning any action of the Company affecting them, except matters involving discipline or dismissal, shall have such grievance considered in accordance with the following procedure: (1) Grievances under this paragraph (B) must be filed within sixty (60) days after the pilot(s) has, or reasonably would have had knowledge of the matter giving rise to the grievance. When a group of pilots has a grievance, they shall select a representative to act in their behalf. (2) A written request for discussion setting forth a statement of the facts out of which such grievance arose, and the provision or provisions of the Agreement, if any, upon which the grievance is based shall be filed with the pilot(s) Regional Chief Pilot with copies to the Vice President - Flight Operations and ALPA Representation Department, 3221 McKelvey Road, Suite #200, Bridgeton, MO 63044. In order to allow for adequate preparation by the grievant and/or an Association representative, the Company, upon timely written request from an Association representative and proper release from the grievant, if necessary, shall provide an 140 SECTION 21(B)(2), cont. Association representative information specifically related to the circumstances of the instant grievance. This information must not otherwise be available to the grievant or an Association representative. Furthermore, the Company shall provide such information to the pilot and/or an Association representative at least three (3) days prior to the discussion. If the Company cannot provide the requested information prior to said three (3) days, the discussion shall be postponed up to ten (10) business days to allow the Company to comply with this time limit. (3) Within ten (10) business days after receipt of the request for discussion outlined above, the Company will conduct such discussion, and within ten (10) business days from the receipt of the previously mentioned request or within six (6) business days after such discussion was held, whichever is later, the Regional Chief Pilot shall issue a written decision concerning the matter to the pilots. (C) APPEAL If the decision under paragraph (A)(5) or (B)(3) is unsatisfactory, appeal by the pilot(s), if made, shall be to the Trans World Airlines Pilot's System Board of Adjustment as provided in Section 22, provided such appeal is made within thirty (30) days from the date of receipt by the pilot(s), or his/her duly accredited representative or representatives, of the decision of the Company. All submissions to these System Boards of Adjustment shall be in conformity with paragraph (I) of Section 22. Grievances appealed to the Trans World Airlines Pilot's System Board of Adjustment under this paragraph, shall immediately be docketed by the parties for presentation to the next quarterly session of these System Boards of Adjustment, as such are provided for in Paragraph (F) of Section 22. However, in no event shall a case be docketed for hearing before the System Board within thirty (30) days of the date of appeal in order to allow time for preparation of cases, etc. (D) GENERAL (1) If any decision made by the Company under the provisions of this Section is not appealed by the pilot affected within the time limit prescribed herein for such appeal, the decision of the Company shall become final and binding. Time limits provided in this Section 21 may be extended by agreement in writing. (2) Witnesses and representatives who are employees of the Company shall receive free positive space coach transportation over the lines of the Company from the point of Company duty or the station nearest the person's residence to the point of discussion or hearing, as the case may be, and return. 141 SECTION 21(D)(3) (3) Notification in writing required hereunder shall be accomplished through the use of Certified Mail with Return Receipts, or other means mutually agreed upon in writing. (4) Nothing in this Agreement shall extend the right of investigation and hearing to a pilot during his probationary period as described in Section 17(C). (5) If, as a result of any hearing or appeal therefrom as provided herein, a pilot is exonerated, he/she shall, if he/she has been held out of service, be reinstated without loss of seniority and shall be paid for such time lost in an amount which he/she would have ordinarily earned had he/she been continued in service during such period. (6) If, as a result of any hearing or appeal therefrom as provided herein, the pilot shall be exonerated, the personnel record shall be cleared of the charges. (7) When it is mutually agreed that a stenographic report is to be taken of the investigation and hearing in whole or in part, the cost will be borne equally by both parties to the dispute. In the event it is not mutually agreed that a stenographic report of the proceedings shall be taken, any written record available taken of such investigation and hearing made by either of the parties to the dispute shall be furnished to the other party to the dispute upon request, provided that the cost of such written record so requested shall be borne equally by both parties to the dispute. (8) The hearing or discussion, as the case may be, will be held at the aggrieved pilot's home domicile, unless otherwise agreed to by such pilot and the Company. (9) The Company and the Association shall sponsor a "Bi-Monthly Grievance Conference" (or "the Conference") for the purpose of resolving, if possible, grievances. The Conference shall be held between the tenth (10th) and twentieth (20th) day of every other month. The place of the conference shall alternate between a location designated by the Company and one designated by the Association. Representatives of the Company, the Association and the grievant, if other than the Association, may attend. Any grievance may be submitted for review and potential resolution. There shall be no written transcript of the Conference; however, each party is free to maintain written notes. Such review and written notes shall not be admitted in any proceeding under Sections 21 or 22. Each party shall bear its own costs. 142 SECTION 22 SYSTEM BOARD OF ADJUSTMENT (A) The term "Company" as used in this Section shall be construed to mean Trans World Airlines. The term "Association" as used in this Section shall be construed to mean Air Line Pilots Association, International. (B) In compliance with Section 204, Title II, of the Railway Labor Act, as amended, there is hereby established a Pilots' System Board of Adjustment for the purpose of adjusting and deciding disputes which may arise under the terms of this Agreement and which are properly submitted to it. This Board shall be known as "Trans World Airlines Pilots' System Board of Adjustment". Unless otherwise indicated herein, the term "Board" shall be construed to mean the "Trans World Airlines Pilots' System Board of Adjustment" as defined in paragraph (C)(1) below. (C) (1) The Trans World Airlines Pilots' System Board of Adjustment shall consist of five (5) members, two (2) of whom shall be selected and appointed by the Association and two (2) by the Company. The fifth member of the Board (neutral referee) shall be selected from a panel of at least seven (7) neutral referees which shall be established by mutual agreement between the Association and the Company within sixty (60) days from the date of signing of this agreement. If no agreement can be reached at that time, either the Company or the Association may petition the National Academy of Arbitrators or the American Arbitration Association for the appointment of one (1) or more neutral referees. Once established, changes may be made in said panel by mutual agreement of the parties hereto at any time. Additionally, each party shall have the right to unilaterally strike one (1) neutral referee from the total group not more than once every six (6) months. The replacement shall be by mutual agreement of the parties. (2) Further, there shall be a special four-member System Board of Adjustment consisting of the two (2) Association and the two (2) Company members selected and appointed to the five- member System Board of Adjustment. By mutual agreement between the Company and the Association, the four-member Board shall meet to hear a specific case(s) which has been properly submitted to the five-member System Board. When such request is agreed to, this System Board shall meet within ten (10) working days from the date it received the request, to consider this case(s). All provisions of this Section applicable to the five-member System Board of Adjustment shall also be applicable to the special four-member System Board of Adjustment. Moreover, the decisions of this four-member System Board of Adjustment in all disputes properly referred to it shall be issued by the Board within five (5) working days after the close of the hearing, and in the event of a decision of deadlock the Board shall promptly notify the parties to the case of such deadlock decision, including the date thereof, and such case shall be immediately docketed for a hearing at the next meeting of the five-member System Board of Adjustment. (3) Further, there shall be a special three-member System Board of Adjustment consisting of one (1) Association member, one (1) Company member and a neutral referee selected from the panel of neutral referees established in paragraph (C)(1) of 143 SECTION 22(C)(3), cont. this Section. By mutual agreement between the Company and the Association, the three-member System Board shall meet to hear a specific case(s) which has been properly submitted to the five-member System Board. When such request is agreed to, the three-member Board shall meet within sixty (60) days. (a) The three-member System Board shall meet at the pilot domicile where the grievant is based unless another location is mutually agreed upon by the parties. (b) The Company and the pilot shall each be permitted one (1) representative for the presentation of their respective case before the three-member System Board. The Company and the pilot/or the pilot's designated representative shall each be afforded one hour (1:00) to present their main case and thirty minutes (0:30) for rebuttal. These time limits may be extended upon the unanimous agreement of the three-member System Board. There shall be no stenographic transcript or post-hearing briefs in cases presented before the three-member System Board. (c) Awards of the three-member System Board shall be issued within five (5) working days after the close of the hearing. The award shall be no more than two (2) pages and shall briefly set forth the basis of the award. Awards of the three-member System Board shall be on a no precedent, no referral basis. (D) The two (2) Association members and the two (2) Company members of the Board shall serve for one (1) year from the date of their appointment or until their successors have been duly appointed. The terms of office for these members of the Board shall be staggered so that only one term expires in each calendar quarter (a Company member's term expiring in the first quarter, an Association member's term expiring in the second quarter, and so forth). Vacancies in the membership of the Board shall be filled in the same manner as is provided herein for the selection and appointment of the original members of the Board. (E) The fifth member of the Board (neutral referee) shall be selected from the panel of referees provided in (C)(1) above at least forty-five (45) days prior to the original scheduled date of the applicable System Board. Lacking mutual agreement, the alternate strike method shall be used to select a neutral from this panel, with the Company initiating first rejection after January 1, 1976, and alternating first rejection thereafter. (F) Appointments of Association members and Company members of the Board shall be made by the respective parties within thirty (30) days from the date of the signing of this Agreement and said appointees shall meet alternately in the city where the general offices of the Company and the Association are maintained (unless a different place of meeting is agreed upon by the Board), within forty-five (45) days from the date of the signing of this Agreement, and shall organize and select a Chairman and a Vice Chairman, both of whom shall be members of the Board. The term of the office of Chairman and Vice Chairman shall be one (1) year. Thereafter the Board shall designate one (1) of its members to act as Chairman and one (1) to act as Vice Chairman for one (1) year 144 SECTION 22(F), cont. terms. Each officer so selected shall serve for one (1) year or until his/her successor has been duly selected. The office of Chairman shall be filled and held alternately by an Association member of the Board and by a Company member of the Board. When an Association member is Chairman, a Company member shall be Vice Chairman, and vice versa. The Chairman or, in the absence of the Chairman, the Vice Chairman, shall preside at meetings of the Board and at hearings and shall have a vote in connection with all actions taken by the Board. After the organizational meeting referred to herein, the System Board of Adjustment shall thereafter meet in the city where the general offices of Trans World Airlines, are maintained (unless a different place of meeting is agreed upon by the Board) during the second week of January, the second week of April, the second week of July, and the second week of October each year, provided that at such times there are cases filed with the Board for consideration, and shall continue in session until all matters before it have been considered, unless otherwise mutually agreed upon. By mutual agreement, the System Board may be rescheduled once to another date or dates within the current calendar quarter, but in no event shall it be rescheduled to meet in another calendar quarter. (G) The System Board of Adjustment shall have jurisdiction over disputes between any employee covered by this Agreement and the Company, growing out of grievances or out of interpretation or application of any of the terms of this Agreement. The jurisdiction of the Board shall not extend to proposed changes in hours of employment, rates of compensation, or working conditions covered by existing agreements between the parties hereto. (H) The Board shall consider any dispute properly submitted to it by the President of the Association or by the Vice President-Flight Operation of the Company when such dispute has not been previously settled in accordance with the terms provided for in this Agreement. (I) All disputes properly referred to the Board for consideration shall be addressed to the Chairman with a copy to the Director, Labor Relations-Flight and a copy to the pilot's Regional Chief Pilot. Five (5) copies of each petition, including all papers and exhibits in connection therewith, shall be forwarded to the Chairman, who shall promptly transmit one (1) copy thereof to each member of the Board. Each case submitted shall show: (1) Question or questions at issue. (2) Statement of facts out of which the dispute arose and the particular provision or provisions of the Agreement, if any, alleged to have been violated. (3) Position of employee or employees. (4) Position of Company Either party may submit the dispute and its position to the Board with a copy to the Company and the date of posting of such copy will be the significant date for purposes of the thirty (30) day period provided in Section 21(C) of this Agreement. No matter shall be considered by the Board which has not first been handled 145 SECTION 22(I), cont. in accordance with the provisions of Section 21 of this Agreement; provided that by agreement of the parties, matters may be submitted directly to the Board. (J) Upon receipt of notice of the submission of a dispute, the Chairman, or Vice Chairman, shall docket it for the next regular meeting of the Board subject to Section 21(C) or, if any two (2) members of the Board consider the matter of sufficient urgency and importance, then at such earlier date and at such place as the Chairman (Vice Chairman) and any two (2) members of the Board shall agree upon, but not more than fifteen (15) days after such request for meeting is made by any two (2) said members, and the Chairman shall give the necessary notices in writing of such meeting to the Board members and to the parties to the dispute. Upon receipt of notice of the submission of a dispute involving a termination of employment pursuant to Section 21(A), the Chairman or Vice Chairman of the Board shall docket a System Board to convene and hear such dispute within sixty (60) days from the date of the first step Section 21(A) denial and that either party may extend such sixty (60) day period for an additional ninety (90) days. (K) Employees covered by this Agreement may be represented at Board hearings by such person or persons as they may choose and designate, and the Company may be represented by such person or persons as it may choose and designate. Evidence may be presented either orally or in writing or both. On request of individual members of the Board, the Board may, by a majority vote, or shall at the request of either the Association representatives or the Company representatives thereon, summon any witnesses who are employed by the Company and who may be deemed necessary by the parties to the dispute, or by either party, or by the Board itself, or by either group of representatives constituting the Board. The number of witnesses summoned at any one time shall not be greater than the number which can be spared from the operation without interference with the services of the Company. (L) A majority vote of all members of the Board shall be competent to make a decision. The parties to the dispute shall be notified in writing of the decision of the Board within sixty (60) days of the close of the hearing before the Board. This sixty (60) days time limit may be extended by mutual agreement between the parties to this Agreement in writing. (M) Decisions of all Boards in all cases properly referable to them shall be final and binding upon the parties hereto. (N) Nothing herein shall be construed to limit, restrict or abridge the rights or privileges accorded either to the employees or to the employer, or to their duly accredited representatives, under the provisions of the Railway Labor Act, as amended, and the failure to decide a dispute under the procedure established herein shall not, therefore, serve to foreclose any subsequent rights which such law may afford or which may be established by the National Mediation Board by orders issued under such law with respect to disputes which are not decided under the procedure established herein. 146 SECTION 22(O) (O) The Board shall maintain a complete record of all matters submitted to it for its consideration and of all findings and decisions made by it. The foregoing "complete record" does not necessarily include stenographic transcripts of all testimony of witnesses who appear before the Board. (P) Each of the parties hereto will assume the compensation, travel expense, and other expenses of the Board members selected by it. The reasonable expenses and compensation of referees appointed in accordance with paragraph (C) above, will be borne equally by the parties hereto. (Q) Each of the parties hereto will assume the compensation, travel expense, and other expenses of the witnesses called or summoned by it. Witnesses who are employees of the Company shall receive free positive space transportation over the lines of the Company from the point of duty or assignment to the point at which they must appear as witnesses and return, to the extent permitted by law. (R) The Chairman and the Vice Chairman, acting jointly shall have the authority to incur such other expenses as, in their judgment, may be deemed necessary for the proper conduct of the business of the Board and such expense shall be borne one-half by each of the parties hereto. Board members who are employees of the Company shall be granted necessary leaves of absence for the performance of their duties as Board members. Board members who are employees of the Company shall each be furnished a Class 3 Term Pass for transportation over the lines of the Company for the purpose of attending meetings of the Board to the extent permitted by law. (S) It is understood and agreed that each and every Board member shall be free to discharge his/her duty in an independent manner, without fear that his/her individual relations with Company or with the employees may be affected in any manner by any action taken by him/her in good faith in his/her capacity as a Board member. 147 SECTION 23 RETIREMENT, TRUST AND SAVINGS PLANS Except as specifically amended hereunder, all provisions of the following retirement plans (collectively, the "Plans"), as in existence on September 1, 1994, and related documents, shall remain in full force and effect: the Retirement Plan for Pilots (the "A-Plan"); the TWA Pilots Directed Account Plan (the "DAP"); the Section 401(k) Plan for Pilots (the "401(k) Plan"); and the Excess Employee Benefit Plan for Pilots. Amendments to the Plans which are required hereunder shall be effective as of the dates specified, except as prohibited by law and subject to the approval of the U.S. Treasury Department and other appropriate governmental agencies, and except as otherwise provided. (A) THE RETIREMENT PLAN FOR PILOTS OF TRANS WORLD AIRLINES, INC. (the "A-Plan" or the "Plan") (1) The A-Plan shall be established and maintained by the sponsor as a plan "qualified" under Section 401(a) of the Internal Revenue Code. (2) Effective as of January 8, 1993 (the "Closing Date"), in furtherance (and not in limitation) of certain provisions of that certain Settlement Agreement (the "Settlement Agreement") dated as of January 5, 1993 among Trans World Airlines, Inc., the Official Unsecured Creditors' Committee of Trans World Airlines, Inc., the Pension Benefit Guaranty Corporation, the International Association of Machinists and Aerospace Workers, the Independent Federation of Flight Attendants, the Air Line Pilots Association, International, the Transport Workers Union of America, Carl C. Icahn, the Icahn Entities and Pichin Corp., the following shall apply to the Plan (with the capitalized terms used below being defined in the Settlement Agreement): (a) Effective January 8, 1993, Pichin Corp. (also known as the "Icahn Sponsor") shall assume the Plan, and from and after such assumption, the following shall be applicable: The Icahn Sponsor shall be the plan sponsor, contributing sponsor and plan administrator of the Plan, and shall have the authority to control and manage the Plan and its assets, subject to the assignment of certain specific responsibilities to the Benefits Administrator, the Retirement Board and/or Retirement Committee, the Company, and any other Persons or groups named in the Plan; and subject to the restrictions on amendments to the Plan set forth in paragraph (b) below. The Icahn Sponsor, the Company, and any other Person or groups named in the Plan with assignments of specific responsibilities under the Plan may, in a writing acknowledged by the designee, designate other Persons or groups to carry out any or all of their responsibilities in connection with the Plan, pursuant to section 405(c)(1)(B) of ERISA. (b) Benefits Administrator. From and after assumption of the Plan by the Icahn Sponsor, the Company and its successors and assigns shall have and retain all rights, powers, discretions, authorities and responsibilities as the benefits claim administrator for the Plan (the "Benefits Administrator"), and shall manage and control the operation and administration of 148 SECTION 23(A)(2)(B), cont. the Plan with respect to the determination and payment of Plan benefits and disclosure to Participants for all purposes under Title I of ERISA. Subject to the assignments stated in the Plan of certain responsibilities to the Retirement Board (as defined in the Plan), as provided in this Section and the Plan: (i) The Benefits Administrator may, in a writing acknowledged by the designee, designate other Persons or groups to carry out any or all of its responsibilities in connection with the Plan pursuant to section 405(c)(1)(B) of ERISA. (ii) The authority of the Benefits Administrator to operate and administer the Plan includes, but is not limited to the authority: (A) To make and enforce rules and regulations necessary or proper for the benefits administration of the Plan; (B) To interpret the Plan, including questions of benefit eligibility, in good faith; (C) To compute the amount of benefits payable to any Participant or beneficiary under the Plan in accordance with the provisions of the Plan, and to determine to whom such benefits shall be paid; and (D) To authorize the payment of benefits under the Plan. (iii) After the Closing, the Benefits Administrator shall carry out the duties, powers and obligations of the plan administrator with respect to disclosure to Participants under Title I of ERISA. (iv) All determinations and other actions taken by the Benefits Administrator and the Retirement Board under the Plan and ERISA shall be conclusive and binding, except that the Icahn Sponsor shall have the right to bring an action under ERISA Section 502(a)(3) to seek to enjoin any act or practice of the Benefits Administrator or the Retirement Board or any other Persons and groups named in the Plan or with responsibilities under the Plan, that violates the terms of the Plan. (v) The Benefits Administrator may seek reimbursement from the Plan for costs, fees and expenses incurred in carrying out its duties under the Plan (including the Benefits Administrator's responsibilities on the Retirement Board). The Icahn Sponsor shall cause the Plan to make reimbursement to the Benefits Administrator for reasonable costs, fees and expenses to the extent permitted by the terms of the Plan and the provisions of ERISA. (vi) Except as required by ERISA, as named fiduciaries of the Plan, the Benefits Administrator, the Icahn Sponsor and the 149 SECTION 23(A)(2)(B)(VI), cont. Retirement Board shall not be liable for the act or omission of another named fiduciary who is carrying out the responsibility allocated to such other named fiduciary. (vii) The Icahn Sponsor and the Benefits Administrator shall cooperate in good faith and timely provide such information to each other as may be necessary for each to perform its obligations in respect of the Plan properly. (viii) The Icahn Sponsor shall cause the Plan to make benefit payments and take any and all related actions in accordance with the determinations and instructions of the Benefits Administrator. (ix) The Benefits Administrator will provide prompt notice to the Icahn Sponsor of all determinations made by the Benefits Administrator and the Retirement Board and shall respond to reasonable requests of the Icahn Sponsor for additional information necessary for the Icahn Sponsor to perform its responsibilities under the Plan properly. (c) Limit on Lump Sum Payments. The Icahn Sponsor will not by amendment to the Plan or otherwise make available early retirement lump sum benefits (except those already provided under the frozen Plan) or other inducements to Participants who are then active or temporarily furloughed or striking employees of the Company without the Company's prior written consent. The Company may give or withhold such consent in its discretion and judgment, which shall be based upon a good faith determination as to whether the action proposed by the Icahn Sponsor will adversely affect the Company's operations. The sole remedy of the Icahn Sponsor in respect of this provision shall be specific performance or injunctive relief. (d) Fiduciary Standards. The Plan will be administered and its assets invested in good faith in compliance with all applicable fiduciary and prudent investment standards, including assuring adequate liquidity to meet all payment obligations of the Plan when due. The Company and/or the Benefits Administrator shall have the right to direct the Icahn Sponsor to amend the Plan to provide for, and use Plan assets to make unsubsidized lump sum payments to Participants of the Plan as designated by the Company, subject to the requirements of applicable law and consistent with the cash flow needs of the Plan. The Icahn Sponsor shall provide the Company and the PBGC copies of asset management and other reports obtained in the ordinary course by the Icahn Sponsor or the Plan trustees. The Icahn Sponsor shall also provide, at the expense of the Company, such other information and data respecting the Plan as the Company may reasonably request. The Icahn Sponsor will provide the PBGC with such information and data respecting the Plan as the PBGC is entitled to request under applicable law. The 150 SECTION 23(A)(2)(D), cont. Company will promptly provide the Association copies of the asset management and other reports, data and information respecting the Plan which the Company receives from the Icahn Sponsor. (e) Actuarial Changes. No actuarial change will be made in respect of the Plan unless the Company and the PBGC are given prior written notice of such change by the Icahn Sponsor, accompanied by a certification from the Plan's enrolled actuary establishing that such change is justified. Subject to all requirements of applicable law, the Icahn Sponsor will continue to retain the Plan's presently enrolled actuary through December 31, 1995, provided that such actuary does not materially change its current actuarial assumptions; and the Icahn Sponsor may continue such actuary beyond such date. The enrolled actuary shall at all times be independent and shall not be affiliated with Icahn or any of the Icahn Entities and shall not be otherwise employed by Icahn or any of the Icahn Entities. The Icahn Sponsor shall not take any action to direct the actuary to make any material change to the current actuarial assumptions with respect to the Plan. (f) Plan Amendments. The Plan will be amended by adoption of the amendments described below, to the extent permitted by law, to implement the Settlement Agreement and to implement the additional amendments previously agreed upon by the Company and the Association. Among other matters the amendments to implement the Settlement Agreement will accomplish the following changes in the Plan: (i) At least fifteen (15) days before January 8, 1993 (the "Freeze Date"), the Association shall have consented to, and the Company shall have adopted, an amendment freezing the Plan to cease further benefit accrual under the Plan, effective on the Freeze Date. In accordance with ERISA Section 204(h), not fewer than 15 days before the Freeze Date, the Company shall issue written notice of such amendment, setting forth the text of the amendment and its effective date. The Company shall have issued such notice to: each participant in the Plan, or the person designated in writing to receive notice on behalf of the participant; each participant who is an alternate payee pursuant to a qualified domestic relations order, or the person designated in writing to receive notice on behalf of the alternate payee; and the Association. (ii) As of the Closing Date, the Company shall adopt and the Icahn Sponsor and the Association shall approve, and the PBGC shall not object to, final versions of: a. Four Plan amendments that effectuate existing agreements between the Company 151 SECTION 23(A)(2)(F)(II), cont. and the Association to amend the Plan or are required by law, as set forth in Exhibit Q-1 of the Settlement Agreement; and b. Two amendments that relate to annuity purchases and that effectuate assumption of the Plan by the Icahn Sponsor with the Company retaining benefits administration functions in accordance with the Settlement Agreement, as set forth in Exhibit Q-2 of the Settlement Agreement. As soon as practicable after the Closing Date, the Company shall execute, the Icahn Sponsor and the Association shall approve, and the PBGC shall not object to final versions of two (2) amendments to the Plan listed in Exhibit Q-3 (i.e. amendment to conform Plan to the Tax Reform Act of 1986 and amendment to the Plan to determine the Directed Account Plan offset to be applied in determining disability benefits payable under the Plan) that the Company and the Association agree are necessary to effectuate existing collective bargaining agreements, to comply with applicable law, or that the parties otherwise agree were intended to be effective before January 1, 1993. After the Closing Date, additional amendments are permitted as provided below. (iii) To the extent permitted by applicable law and not inconsistent with the transactions contemplated by the Settlement Documents, the Plan will be amended to provide that any Participant who is employed by a purchaser or other Successor, as a result of a transaction involving the sale of any of the Company's assets, shall have a right to elect to take an unsubsidized monthly early retirement benefit. The actuarial present value of the unsubsidized early retirement benefit which may be elected by such Participant shall be equal to the actuarial present value of such Participant's benefits at normal retirement age (using Plan assumptions regarding interest rate and mortality as stated in Hewitt Associates' January 1, 1992 actuarial report on Plan funding). (iv) After the Closing Date, the Plan may be amended only by the Icahn Sponsor and only (A) if required by applicable law or to maintain tax- qualified status, or (B) to provide for payment of unsubsidized lump sum benefits to Participants when such amendment is requested by the Company and consistent with applicable law and the Plan's cash flow needs, or (C) to provide for the payment of unsubsidized lump sum benefits to Participants, consistent with the provisions of the Settlement Agreement, or (D) with the express written consent of the Company 152 SECTION 23(A)(2)(F)(IV), cont. and the PBGC prior to a Non-Standard Termination of the Plan, to permit the purchase of insurance company annuities to provide only benefits guaranteed under Section 4022(a) of ERISA, or (E) if explicitly permitted by the Settlement Documents, or (F) if approved by the Association and the Company, and not objected to by the PBGC, in the case of any other amendments not inconsistent with the purposes and provisions of the Settlement Agreement. The Icahn Sponsor shall give prompt notice to the Company, the PBGC and the Association of Plan amendments after the Closing Date. (g) Purchase of Annuities. The entity that is the Plan sponsor as of the date the Settlement Agreement is fully executed shall on the first Business Day thereafter cause the Plan to purchase insurance company annuities for Participants whose retirement from the Company became effective before October 29, 1992 and who terminated service with the Company before October 29, 1992 (provided that the number of retirements effective between September 18, 1992 and October 29, 1992, including without limitation retirements of Disability Participants under the next sentence, shall not exceed 60 participants under the Plan). In the event that the disability retirement date of certain Participants ("Disability Participants") is determined to have been effective before October 29, 1992, the Plan sponsor at the time that determination is made shall, as soon as practicable after receiving notice of such determination from the Association, cause the Plan to transfer assets to an insurance company to purchase insurance company annuities for Disability Participants who terminated service with the Company before October 29, 1992, subject, however, to the limitations applicable under the preceding sentence with respect to retirements effective between September 18, 1992 and October 29, 1992. (h) The Icahn Sponsor may merge the Plan with the other defined benefit plan covering employees of the Company upon the occurrence of certain Significant Events, pursuant to Section 9 of the Settlement Agreement. (i) The Icahn Sponsor may request that the Plan be terminated by the PBGC in a Non-Standard Termination upon the occurrence of a Significant Event, pursuant to Section 10 and other provisions of the Settlement Agreement. At any time after the date of termination up to and including the tenth anniversary of the date of termination, the Company may request the PBGC to reinstate and restore to the Company the Plan terminated in a Non-Standard Termination, pursuant to Section 13 of the Settlement Agreement. (j) The Icahn Sponsor shall have the right to terminate the Plan in a Standard Termination, pursuant to Section 11 of the Settlement Agreement. The Company will promptly give the Association a copy of any 153 SECTION 23(A)(2)(J), cont. notice the Company receives from or issues to Icahn or any of the Icahn Entities and/or Icahn Sponsor with respect to a termination of the Plan. In the event of a Standard Termination of the Plan as described in Section 4041(b) of ERISA, the selection of an insurer to provide annuities to Participants shall only be from among insurance companies which (whether or not applicable law would permit a lower rating) are then rated at least A or better by at least two (2) of the following rating services: Moody's Investors Services, Inc., Standard & Poor's Corporation and Duff and Phelps; and whose selection in all events complies with applicable law; provided that if there are not five (5) insurance companies which are rated at least A or better by two (2) such rating services, then the selection of an insurer to provide annuities may be made from the five (5) top rated insurance companies so long as the selection is in accordance with the fiduciary requirements of ERISA. (3) Supplemental Agreement - Defined Contribution Plan. Pursuant to Section 15 of the Settlement Agreement: The Company will enter into an agreement after the Closing and prior to the confirmation of a final Plan of Reorganization, which will become effective on the Effective Date as part of its Plan of Reorganization (the "Supplemental Agreement"), pursuant to which it will establish or maintain non-abusive defined contribution plans for the Company employees to which it will make annual contributions at the end of calendar years 1993, 1994 and 1995 for such employees equal to two percent (2%) of W-2 earnings in the aggregate. Four (4) separate non-abusive defined contribution plans will be established, one (1) for the members of each of the Association, IFFA and IAM and the fourth (4th)for the Company's other union and non-union employees as a group. The annual contribution will be allocated to these four (4) defined contribution plans as determined by the Unions and by TWA for non-union employees as a group and need not be pro rata on the basis of W-2 earnings of each group. In any year in which interest on the Company's debt securities is paid in full in cash, as permitted in the Agreements in Principle with the Unions, and provided no Deferral Note is then outstanding, the Company's aggregate contribution for that year to such defined contribution plans will be increased from 2% of W-2 wages to 2.67% of W-2 wages. The 2%, or if effective, the 2.67% contribution level will be increased to 3.3% of W-2 wages for calendar year 1996 and for each subsequent year of the Unions' respective collective bargaining agreements thereafter, unless and until the collective bargaining agreements, or the pension provisions thereof, are renegotiated and amended. Each Union shall determine the allocation of benefits as to the Company employees represented by such Union; provided that such allocation complies with applicable laws and regulations. (4) The Company shall make payments on the "Settlement Note(s)" pertinent to the Plan as required by the Settlement Agreement, and shall make the minimum funding payment due with respect to the Plan on January 15, 1993. 154 SECTION 23(A)(5) (5) The Plan shall be amended and restated effective as of January 8, 1993 to reflect all amendments to the Plan required by the Settlement Agreement. (6) As the Company, the Association and the Icahn Sponsor were unable to reach agreement as to the determination of the benefits of certain Members of the A-Plan, the parties adopt the following Letter of Agreement: (a) Prior to March 31, 1993, the Icahn Sponsor will file a request with the appropriate District Director of the Internal Revenue Service (the "IRS") for a determination that none of the amendments to the Plan adopted through the date of filing of such request adversely affect the continued qualification of the Plan. The determination letter request will specifically include a description of Section 6.4 of the Plan as in effect prior to its amendment as of January 1, 1990, and a description of the amendments made to Section 6.4 of the Plan as of January 1, 1990 and as of the date the Plan is "frozen". The determination letter request will state that, under the amendments in question, a Member is entitled to a minimum retirement benefit equal to 2.5% multiplied by the Member's years of Continuous Service and highest Earnings as of the date the Plan is frozen, but that the Association contends that certain aspects of the amendments violate section 411(d)(6) of the Code. (b) The Icahn Sponsor shall provide the Association and the Company with advance notice of the determination letter request, and promptly provide thereafter a copy of such request and all other materials submitted to the IRS. In addition, each party shall promptly provide to the others copies of all correspondence or other documents submitted to the IRS or provided by the IRS with respect to the determination letter request. Notwithstanding the foregoing, both the Icahn Sponsor and the Association may delete from any correspondence or other document covered by this Paragraph any confidential information unrelated to Section 6.4 of the Plan. (c) The Icahn Sponsor will not object to, and will, if necessary to the grant thereof, support requests made by the Association or the Company to file comments or meet with the IRS in order to set forth or espouse its position regarding Section 6.4 of the Plan. Each party shall promptly notify the others of any such request for conference with the IRS. (d) Each party will bear its own fees and expenses in connection with this matter. (e) If the IRS should decline to make a determination with respect to the request filed pursuant to paragraph (a), the parties shall retain all their rights and remedies to resolve this matter through all appropriate avenues. 155 SECTION 23(A)(6)(F) (f) The Plan shall be operated and administered in accordance with the amendment to Section 6.4(B) of the Plan executed by the Company on or about December 24, 1992 (assuming, for this purpose, that neither 6.10 nor any other provision of the Plan requires any modification thereof); provided, however, if the IRS makes a final determination that operation and administration of the Plan in accordance with such amendment will adversely affect the tax qualified status of the Plan, the Plan shall be operated and administered after such determination and until any change, modification or reversal of such determination (by reason of a court decision or otherwise) in a manner that complies with the IRS' final determination, and such retroactive corrections as required by such final determination shall be made. (g) This Letter of Agreement shall be filed with the Bankruptcy Court for approval at the same time the amendments to the Plan contemplated by the Settlement Agreement are filed with the Bankruptcy Court for approval. The amendment freezing the Plan is rescinded if this Letter of Agreement is not executed by the Icahn Sponsor on or before the Closing (as defined in the Settlement Agreement). (B) In the event there is any conflict, concerning any retirement, trust or savings plan that covers airmen employed by TWA and represented by ALPA, between this Agreement and the agreement entitled "Agreement in Principle Between Trans World Airlines, Inc. and the Air line Pilots in the Service of Trans World Airlines, Inc. as Represented by the Air Line Pilots Association, International," executed August 24, 1992 on behalf of the Air Line Pilots Association, International, Trans World Airlines, Inc., and the Official Unsecured Creditors' Committee of Trans World Airlines, Inc. (the "Agreement in Principle"), the Agreement in Principle shall govern; provided, however, that if there is any such conflict between the Agreement in Principle and any agreement between TWA and ALPA which is effective after the effective date of the applicable provision of the Agreement in Principle, then the later agreement shall govern. (C) TWA PILOTS' DIRECTED ACCOUNT PLAN (the "DAP") (1) The Directed Account Plan shall be established and maintained by the Company as a plan "qualified" under Section 401(a) of the Internal Revenue Code. (2) The Company shall contribute to the Directed Account Plan 11% of each Participant's monthly compensation, plus a supplemental 3.31072262% of each Participant's monthly compensation pursuant to Section 23(A)(3) of this Collective Bargaining Agreement. The Company's contributions shall be paid to the DAP trustee on the first business day of each month. If such contributions are not paid on the first business day of the month, TWA shall pay interest at a floating rate equal to prime + three percent (3%) per annum from the date due until the date paid. (3) The terms of the Directed Account Plan, as agreed upon by the Company and the Association, are hereby incorporated by 156 SECTION 23(C)(3), cont. reference and made a part of this Collective Bargaining Agreement. (4) The Company and the Association reserve the right, at any time by joint agreement, to amend, in whole or in part, any or all of the provisions of the Directed Account Plan. (5) The Company and the Association, by joint agreement, may terminate the Directed Account Plan. (D) SECTION 401(K) PLAN FOR PILOTS (1) The 401(k) Plan shall be established and maintained by the Company as a plan "qualified" under Section 401(a) of the Internal Revenue Code. (2) A Participant in the 401(k) Plan may make salary deferral contributions of up to eleven percent (11%) of his/her compensation. Such contributions shall be transmitted by the Company to the trustee on the first business day of the month following the end of the calendar month in which such contributions are withheld from the Participant's paycheck(s). (3) The terms of the 401(k) Plan, as agreed upon by the Company and the Association, are hereby incorporated by reference and made a part of this Collective Bargaining Agreement. (4) The Company and the Association reserve the right, at any time by joint agreement, to amend, in whole or in part, any and all provisions of the 401(k) Plan. (5) The Company and the Association, by joint agreement, may terminate the 401(k) Plan at any time. (E) EXCESS EMPLOYEE BENEFIT PLAN FOR PILOTS (1) The Excess Employee Benefit Plan for Pilots, adopted effective January 1, 1993, shall be maintained by the Company for the purpose of permitting participants of the TWA Pilots Directed Account Plan to receive contributions under the Excess Employee Benefit Plan for Pilots equal to amounts that would have been contributed under the Directed Account Plan but for the limitations on contributions imposed by Section 415 and/or Section 401(a)(17) of the Internal Revenue Code of 1986, as amended. (2) The terms of the Excess Employee Benefit Plan for Pilots, as agreed upon by the Company and the Association, are hereby incorporated by reference and made a part of this Collective Bargaining Agreement. (3) The Company and the Association reserve the right, at any time by joint agreement, to amend, in whole or in part, any and all provisions of the Excess Employee Benefit Plan for Pilots. (4) The Company and the Association, by joint agreement, may terminate the Excess Employee Benefit Plan for Pilots at any time. 157 SECTION 24 GROUP BENEFITS Except as specifically amended hereunder, all provisions of Section 24 of the agreement dated September 1, 1994 and all provisions of the following group benefits, shall remain in full force and effect: (A) The Group Medical and Dental Benefit Plan administered by the Company authorized third party administrator, as described in the "A World of Benefits From TWA Universal Benefit Plan" Summary Plan Description dated September, 1997, shall be amended as follows: (1) The In-Network deductible under the Medical Plan shall be $200 per family. (2) Covered Expenses under the Medical Plan shall include in- hospital expenses incurred for newborn children. (3) Preventive Health Care Benefits In-Network, after a $10 office visit co-payment, the Medical Plan shall pay for routine exams, including Pap smears and mammograms, not to exceed the following: Six (6) visits, including immunizations, up to 1 year of age; Three (3) visits per calendar year, including immunizations, from ages 1 to 2 years; Two (2) visits per calendar year, including immunizations, from ages 2 to 6 years; One (1) visit per calendar year age 6 and older. Out-of-Network, the Medical Plan shall pay fifty percent (50%) of expenses for routine exams, including Pap smears and mammograms, after the annual deductible has been satisfied, not to exceed the above schedule. (4) Home Health Care Benefits In-Network, the Medical Plan shall pay ninety percent (90%) of expenses for up to sixty (60) home health care visits per calendar year, after $50 of the $200 deductible has been satisfied. Out-of-Network, the Medical Plan shall pay seventy percent (70%) of expenses for up to sixty (60) home health care visits per calendar year, after the full deductible has been satisfied. (5) Hospice Care Benefits The Medical Plan shall pay eighty percent (80%) of hospice care expenses, incurred in a hospice care facility or at home, after the $200 annual deductible has been satisfied, up to a maximum benefit of $10,000 per individual. (6) Dental Plan Benefits The Group Dental Plan effective January 1, 1999 includes a Preferred Provider Organization (PPO) which provides three (3) levels of comprehensive benefits based upon whether the service is obtained through the PPO network (In-Network), outside the PPO network (Out-of-Network), or through a 158 Section 24(A)(6), cont. voluntarily elected Dental Health Maintenance Organization (DHMO). Employees who live in areas where no PPO network is available are paid in accordance with the In-Network benefits. In-Network shall be defined as at least two (2) general practitioners within a ten (10) mile radius. Features of the Group Dental Plan are as follows:
IN-NETWORK (PPO) -------------------------------------------------------------------------------------------------------------- DENTAL SERVICE BENEFITS PAYABLE DEDUCTIBLE MAXIMUM -------------- ---------------- ---------- ------- -------------------------------------------------------------------------------------------------------------- Class I 100% of network None $3000 per calendar (Preventive) fees year per member (Oral Exams) inclusive of Class (X-rays) I, II, III -------------------------------------------------------------------------------------------------------------- Class II 90% of network $100 per calendar $3000 per calendar (Minor fees year per member year per member Restorative) inclusive of Class inclusive of Class (Periodontal) II and III I, II, III (Fillings) (Root Canals) -------------------------------------------------------------------------------------------------------------- Class III 60% of network $100 per calendar $3000 per calendar (Major fees year per member year per member Restorative) inclusive of Class inclusive of Class (Crowns) II and III I, II, III (Bridges) (Dentures) -------------------------------------------------------------------------------------------------------------- Class IV 50% of network $100 per member $1500 per member for (Orthodontics) fees for life life -------------------------------------------------------------------------------------------------------------- OUT-OF-NETWORK (PPO) -------------------------------------------------------------------------------------------------------------- DENTAL SERVICE BENEFITS PAYABLE DEDUCTIBLE MAXIMUM -------------- ---------------- ---------- ------- -------------------------------------------------------------------------------------------------------------- Class I 90% of None $3000 per calendar (Preventive) reasonable and year per member (Oral Exams) customary inclusive of Class (X-rays) charges I, II, III -------------------------------------------------------------------------------------------------------------- Class II 75% of $100 per calendar $3000 per calendar (Minor reasonable and year per member year per member Restorative) customary inclusive of inclusive of Class (Periodontal) charges Class II I, II, III (Fillings) (Root Canals) -------------------------------------------------------------------------------------------------------------- Class III 50% of $100 per calendar $3000 per calendar (Major reasonable and year per member year per member Restorative) customary inclusive of inclusive of Class (Crowns) charges Class III I, II, III (Bridges) (Dentures) -------------------------------------------------------------------------------------------------------------- Class IV 50% of $200 per member $1500 per member for (Orthodontics) reasonable and for life life customary charges -------------------------------------------------------------------------------------------------------------- 159 Section 24(A)(6), cont. DENTAL HMO -------------------------------------------------------------------------------------------------------------- DENTAL SERVICE BENEFITS PAYABLE DEDUCTIBLE MAXIMUM -------------- ---------------- ---------- ------- -------------------------------------------------------------------------------------------------------------- Class I 100% of network fees None None -------------------------------------------------------------------------------------------------------------- Class II 90% of network fees None None -------------------------------------------------------------------------------------------------------------- Class III 80% of network fees None None -------------------------------------------------------------------------------------------------------------- Class IV 60% of network fees None None -------------------------------------------------------------------------------------------------------------- Classes for DHMO same as for PPO
(7) The "Reasonable and Customary" schedule applied by a Company authorized third party administrator to covered non-negotiated medical expenses and to covered dental expenses shall be based on the ninety-fifth percentile (95%)of the current database. (8) Acute Care Prescription Drug Program There shall be no deductible. (9) Medical Plan Prescription Drug Benefits The Plan will cover prescription drug expenses for drugs administered in a hospital facility. Such expenses shall be paid in accordance with the in-network and out-of-network Plan benefits applicable to hospital charges. Employees living outside an INTEQ pharmacy area will be permitted, by exception through Employee Benefits, to submit their drug charges through the Medical Plan. Additionally, in the event the employee must fill a prescription outside the INTEQ pharmacy area, the employee by exception through Employee Benefits will be permitted to submit their drug charges through the Medical Plan. The Plan will pay eighty percent (80%) of drug charges, after the two hundred dollar ($200.00) annual family deductible has been satisfied, for such authorized prescriptions filled outside an INTEQ pharmacy area. (10) Chiropractic Care Benefits Chiropractic benefits will be paid at eighty percent (80%) of reasonable and customary, subject to no deductible, limited to twenty (20) visits per member per year. These visits are not subject to medical necessity. (11) If a pilot on duty in a foreign country requires medical attention and the Medical Plan is not accepted, the Company shall guarantee payment for hospitalization and other major medical expenditures covered under the Medical Plan. Upon return to the United States, the cost of the treatment shall be reimbursed to the Company and/or the employee in accordance with the Medical Plan as if the accident or illness had occurred in the United States. The Company shall provide on the insurance card, on an attrition basis, an internationally accessible telephone number available to allow foreign medical providers access to such pre-payment or coverage guarantee. 160 Section 24(A)(12) (12) Retiree Group Medical/Dental/Prescription Drug Coverage Effective on the signing of this Basic Agreement, any future pilot and flight engineer retirees will be subject to all negotiated changes affecting active pilots and flight engineers. (13) Retiree Group Medical Coverage If a pilot/flight engineer retires (normal, early with 10 or more years of service and a minimum age of fifty (50) years, postponed, or disability), all medical and dental coverage will be continued until he/she becomes eligible for Medicare solely on the basis of age. His/her spouse's coverage will also be continued until he or she becomes eligible for Medicare solely on the basis of age. A pilot/flight engineer who retires (normal, early with 10 or more years of service and a minimum age of fifty (50) years, postponed, or disability) will be eligible to purchase medical coverage for him/herself and spouse under the Post-65 PPO Medical Plan to supplement Medicare when they become eligible for Medicare solely on the basis of age. (14) Right of Reimbursement If a loss or injury is sustained by an employee or a covered family member and if such loss or injury is caused by the act or omission of a third party, health care benefits provided under the Plan will be paid only on the condition that the employee or family member (or his/her legally authorized representative if the Plan member is legally incapable) shall agree in writing: To pay the insurer or Plan Sponsor to the extent of such benefits provided, upon collection of damages with respect to such Plan member whether by action at law, settlement, or otherwise. (B) The Group Insurance Benefits underwritten and/or administered by Connecticut General Life Insurance Company: - Group Term Life Insurance Policy Number 0223755-01-E - Disability Income Insurance Policy Number 0223755-23-E - Accidental Death and Dismemberment Insurance Policy 0223755-10-E as described in the "TWA Group Benefits - Pilots & Flight ------------------------------------- Engineers - Disability Income Insurance, Life Insurance, Retiree ---------------------------------------------------------------- Life Insurance and Accidental Death & Dismemberment Insurance" -------------------------------------------------------------- booklet dated December 1989. (1) In accordance with the Letter of Agreement between the Company and the Association, dated July 12, 1991, the Company provided Accidental Death and Dismemberment Insurance (AD&D) outlined on pages sixteen (16) and seventeen (17) of the TWA Group Benefits Booklet dated December, 1989 shall be modified in order to provide special coverage for losses resulting from war or acts of war (declared or undeclared) while traveling on Company business as follows: (a) The Limitation regarding any loss resulting from "war or any act of war" shall be deleted. 161 Section 24(B)(1)(b) (b) The insurance will pay for losses covered in the AD&D policy in those instances where death or dismemberment results from events which are covered by, or which would have been covered by, the "War Risk" insurance policy in effect for TWA pilots on July 12, 1991. (c) The AD&D payment under these circumstances is not subject to the monetary limit for all losses as outlined in the War Risk Policy. (d) The following schedule shall be applicable: Monthly Basic Earnings Principal Sum ---------------------- ------------- Less than $1,200 $120,000 $1,200 but less than $1,600 $135,000 $1,600 but less than $2,000 $145,000 $2,000 but less than $2,400 $150,000 $2,400 but less than $3,000 $160,000 $3,000 and over $170,000 The above schedule replaces, for losses as referenced in paragraph (b) above, the existing schedule of principal sums which remains in force for other losses due to accident as prescribed by the AD&D Plan. (2) An optional Survivor Income Benefit Plan funded by life insurance shall be offered to all pilots. Such Survivor Income Benefit Plan shall provide the same benefits as provided under the Survivor Income Option under the Retirement Plan for Pilots of TWA (the "A Plan") except that such benefits shall not be limited by pre-1993 earnings. (3) The Disability Income Insurance Benefit shall be equal to forty percent (40%) of a pilot's Basic Earnings, up to a maximum of $4500 per month. Such benefit shall not be reduced by any benefits payable under a compulsory state disability income plan to which a pilot is required to contribute. All other provisions of the current Disability Income Insurance Benefit Plan shall remain in effect. (4) The Special Disability Income Insurance Benefit shall be equal to forty percent (40%) of a pilot's Basic Earnings, up to a maximum amount of $4000 per month. Such benefit shall not be reduced by any benefits payable under a compulsory state disability income plan to which a pilot is required to contribute. All other provisions of the current Special Disability Income Insurance Benefit Plan shall remain in effect. (C) Survivor Medical Benefits administered by a Company authorized third party administrator as described in the "Survivor Medical ---------------- Group Insurance Plan for Survivors of Pilots and Flight Engineers" ----------------------------------------------------------------- booklet, Effective April 1, 1982. The dependent's premium cost for the benefits described in this plan shall be $45.05 per month per covered person. 162 Section 24(D) (D) Effective January 1, 1999, a new Post-65 PPO Medical Plan, underwritten by a Company authorized Third Party Administrator will be made available to TWA retirees. The current 65 Plus enrollees will be given the option of converting to the new Post- 65 PPO Medical Plan or remaining under the old 65 Plus Plan. All future retirees will only be eligible for the new Post-65 PPO Medical Plan. The Post-65 PPO Medical Plan premiums will be $45.05 per month per covered person. Provisions of this Post-65 PPO Medical Plan are: ------------------------------------------------------------------------------------------ Post-65 PPO Medical Plan
------------------------------------------------------------------------------------------ In-Network Out-of-Network ------------------------------------------------------------------------------------------ Annual Deductible $750 per individual $1,000 per individual $1,500 per family $2,000 per family ------------------------------------------------------------------------------------------ Hospital Coverage 90% 80% after deductible after deductible and $200 per confinement ------------------------------------------------------------------------------------------ Coinsurance 90% 80% Scheduled/Units after deductible after deductible ------------------------------------------------------------------------------------------ Out-of-Pocket Maximum $2,000 per individual $3,000 per individual $4,000 per family $6,000 per family ------------------------------------------------------------------------------------------ Doctor Office 90% 80% Visit after deductible after deductible ------------------------------------------------------------------------------------------ Prescription Brand 80% Brand 80% Generic 90% Generic 90% Mail Order $20 Mail Order $20 after deductible after deductible ------------------------------------------------------------------------------------------ Plan Maximum $1,000,000 per insured ------------------------------------------------------------------------------------------
(E) Pilot Additional Life Program The existing Pilot VEBA Retiree Life Program and the Voluntary Additional Life Insurance for Pilots will be replaced by a new program described below. The key provisions are: (1) Guaranteed issue upon portability when terminating or retiring from TWA; (2) Guaranteed issue up to $100,000 for new enrollees; (3) Open enrollment period and guaranteed issue for all current active employees up to their individual current coverage level; (4) Guaranteed rates for three years; (5) Rates shall remain fixed upon portability at retirement; and (6) Existing members of the Retiree VEBA will be a closed group, keeping the existing rates and coverages. 163 Section 24(E), cont. Provisions of Pilot Additional Life Program - - ---------------------------------------------------------------------------- EMPLOYEE: - - ---------------------------------------------------------------------------- BENEFIT FORMULA 1,2,3,4, or 5 times Basic Annual Earnings or Flat $150,000 - - ---------------------------------------------------------------------------- REDUCTION FORMULA Reduces to At Age ---------- ------ 65% 70 50% 75 - - ---------------------------------------------------------------------------- BENEFIT MAXIMUM $500,000 - - ---------------------------------------------------------------------------- BENEFIT MINIMUM $10,000 - - ---------------------------------------------------------------------------- GUARANTEE ISSUE LIMIT $100,000 - - ---------------------------------------------------------------------------- WAIVER OF PREMIUM Included - - ---------------------------------------------------------------------------- PORTABILITY Included at Termination of Employment or Retirement - - ---------------------------------------------------------------------------- CONVERSION Included - - ---------------------------------------------------------------------------- ACCELERATED BENEFIT 50% of Face Amount Up to $250,000 ============================================================================ DEPENDENT: - - ---------------------------------------------------------------------------- SPOUSE BENEFIT $5,000 Increments Up to $500,000 - - ---------------------------------------------------------------------------- CHILDREN BENEFIT $2,000 Increments Up to $10,000 - - ---------------------------------------------------------------------------- GUARANTEE ISSUE LIMIT $25,000 for Spouse - - ----------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------- Employee Rates Spouse Rates - - --------------------------------------------------------------------------------------------- (Monthly Rate / $1000 of Covered Age Rate Age Rate Payroll) --- ---- --- ---- Volume - # < 30 0.08 < 30 0.06 30-34 0.11 30-34 0.08 35-39 0.16 35-39 0.08 40-44 0.22 40-44 0.14 45-49 0.35 45-49 0.37 50-54 0.57 50-54 0.65 55-59 0.92 55-59 1.00 60+ 2.10 60+ 1.50 Child 0.18 Rate - - --------------------------------------------------------------------------------------------- RATE GUARANTEE 3 Years - - --------------------------------------------------------------------------------------------- PARTICIPATION REQUIREMENTS 50 Lives or 15% - - ---------------------------------------------------------------------------------------------
(F) Miscellaneous Accident Insurance underwritten by the Zurich Insurance Company policy number GTK050113, as described in the 164 Section 24(F), cont. "TWA Benefits, Miscellaneous Accident Insurance Program" booklet, -------------------------------------------------------- dated January 1, 1994. (G) Voluntary Personal Accident Insurance underwritten by the Zurich Insurance Company policy number GTK050112, as described in the "TWA Benefits, Voluntary Personal Accident Insurance Program" ------------------------------------------------------------- booklet, dated January 1, 1994. The pilot's portion of the cost of this Plan shall be twenty-seven cents ($0.27) per $10,000 per month for single coverage and thirty-seven cents ($0.37) per $10,000 per month for family coverage during 1998. Future premiums will be determined by Plan experience. The coverage exclusion for any loss caused by, contributed to, or resulting from war or act of war shall be eliminated. (H) In the event a Pilot's group benefits claim is denied in whole or in part by the insurance carrier, the pilot may, in accordance with his/her rights under the Employee Retirement Income Security Act of 1974 as amended (ERISA), submit a written request to the Manager - TWA Employee Benefits for a review of his/her denied claim. The Manager - TWA Employee Benefits or a designee will perform a complete review of the claim and will advise the Pilot of the findings within sixty (60) days after receiving the Pilot's ERISA review request. If the findings of the Manager - TWA Employee Benefits are not satisfactory to the Pilot, the matter may be referred by the Chairman of the MEC or his designee to the Pilots System Board of Adjustment pursuant to Section 21 (C) of this Collective Bargaining Agreement. 165 SECTION 25 AGENCY SHOP (A) SERVICE CHARGE LIABILITY Each regularly assigned pilot of the Company covered by this Agreement shall be required, as a condition of employment, beginning sixty (60) days after the effective date of this Agreement or sixty (60) days after the completion of his probationary period, whichever shall last occur (1) to be or become a member of the Association, or (2) to pay to the Association a monthly service charge equal to the Association's regular monthly dues, initiation fee, and periodic assessments, including MEC assessments, which would be required to be paid by such pilot if a member; provided that neither membership nor the payment of a service charge shall be required in respect to any such pilot (a) for whom membership is not available upon the same terms and conditions generally applicable to any other member, or (b) as to whom membership was denied or terminated for any reason other than failure to tender periodic dues, initiation fees and assessments uniformly required by the Association or the TWA MEC as a condition of acquiring or retaining membership. The Association shall treat members and non members alike in calculating the amounts due, in establishing the due date of payments and in determining whether a pilot's account is delinquent. For the purposes of this Section 25, a regularly assigned pilot of the Company shall include a Training Pilot regularly assigned to a domicile but shall not mean pilots assigned to a Management Position. (B) DELINQUENCY If a pilot of the Company who is required by the provisions of paragraph (A) above to pay the service charge therein specified becomes at least sixty (60) days delinquent in the payment or tender of such service charge, the Vice President- Finance/Treasurer of the Association or the person designated by him or her (herein "Vice President-Finance") shall notify such pilot by certified mail, return receipt requested, copy to the Vice President-Labor Relations of the Company or his/her successor or designee, that he/she is delinquent in the payment of such service charge and is subject to discharge as an employee of the Company. Such notice shall also inform the pilot that he/she must remit or tender the required payment to the Vice President-Finance within a period of fifteen (15) days after receipt by him/her of the notice herein referred to or be discharged. The notice of delinquency required under this paragraph shall be deemed to be received by the pilot ("the 25(B) receipt"), whether or not it is personally received by him, when mailed by the Vice President- Finance by certified mail, return receipt request, to the pilot's last known address or to any other address that has been designated by the pilot. It shall be the duty of every pilot covered by this Agreement to notify the Association's Membership Services Department of every change in his home address, or of an address where the notice required by this paragraph can be sent and received by the pilot, if the pilot's home address is at any time unacceptable for this purpose. (C) CERTIFICATION OF DELINQUENCY If, upon the expiration of the fifteen (15) day period after the 25(B) receipt, the pilot remains delinquent by reason of failure to pay or tender the required sum, the Vice President-Finance shall certify in writing to the Vice President-Labor Relations of 166 SECTION 25(C), cont. the Company or his/her successor or designee, copy to the pilot, both by certified mail, return receipt requested, that the pilot has failed to make or tender payment within the allowed period and is therefore to be discharged. The Vice President-Labor Relations of the Company or his/her successor or designee, shall thereupon take proper steps to discharge such pilot from the service of the Company. Termination shall be effective twenty-one (21) days after receipt by the Company of the notice provided for herein. (D) PROTEST PROCEDURE A protest by a pilot whose discharge is requested by the Association as a result of an interpretation or application of Section 25 shall be limited to the following procedure and the provisions of Sections 21 and 22 of this Agreement shall not apply: (1) A pilot who believes that the provisions of Section 25 have not been properly interpreted or applied, as they pertain to him/her, may submit his/her request for review in writing within five (5) days from the date of receipt of notice by him/her in the form of his/her copy of notice to the Company with respect to him/her as provided in Paragraph (C). Such request must be submitted to the Vice President-Labor Relations of the Company or his/her successor or designee who will review the protest and render a decision in writing with respect thereto no later than five (5) days following the receipt of the request of review. (2) The Vice President-Labor Relations of the Company or his/her successor or designee, shall forward his/her decision to the pilot with a copy to the official of the Association who shall promptly be designated in writing by the Association for this purpose. Said decision shall be final and binding on all interested parties unless appealed as hereinafter provided. If the decision is not satisfactory to either the pilot or the Vice President-Finance, either may appeal the decision by filing a notice of appeal. Such notice shall be sent to the Company, to the other party and to the National Mediation Board within ten (10) days of the receipt of the decision and must contain a request for the National Mediation Board to provide a list of five (5) neutral referees. A neutral referee may be agreed upon by the pilot and the Association within ten (10) days after receipt of the list of neutral referees. If the parties cannot agree on a neutral referee, a referee will be chosen from the panel supplied by the National Mediation Board. The alternate strike method shall be used to select a neutral referee with the pilot initiating the first rejection. Such final selection of a neutral referee shall be accomplished within ten (10) days after receipt of the list of neutral referees. If the parties have not reached agreement by the alternate strike method within the aforementioned ten (10) day period, the period, the first name listed on the five (5) name panel provided by the National Mediation Board shall be designated the neutral referee. (3) The decision of the neutral referee shall be requested within thirty (30) days after the hearing of the appeal 167 SECTION 25(D)(3), cont. unless otherwise agreed by the pilot and the Association and shall be final and binding on all parties to the dispute. The fees, charges and other reasonable expenses of such neutral referee shall be borne equally by the pilot and the Association. (E) STATUS PENDING APPEAL During the period in which a protest is being handled under the provisions of Section 25 and until final decision by the Vice President-Labor Relations, or his/her successor or designee, or neutral referee, the pilot shall not be discharged from the Company or lose any seniority or other rights under the Agreement solely for the reason of non-compliance with the terms and provisions of Section 25, provided, however, that the Company shall not be required to award the pilot a category bid which requires any training. (F) DISCHARGE A pilot discharged by the Company under the provisions of this Section shall be deemed to have been "discharged for cause" within the meaning of the terms and provisions of this Section and the provisions of Sections 21 and 22 of this Agreement shall not apply. (G) INDEMNIFICATION The Association agrees that it shall indemnify the Company and save the Company harmless from any and all claims, awards or judgments (including court costs) awarded to an employee or employees against the Company by virtue of the misinterpretation or misapplication of any of the terms of Section 25. (H) DISCHARGE DELAY Other provisions of Section 25 to the contrary notwithstanding, the Company shall not be required to terminate the employment of any pilot until such time as the services of a qualified replacement are available, provided that in the judgment of the Company such replacement is currently required for the orderly continuation of the Company's operation. The determination of whether a qualified replacement is available shall be the exclusive responsibility of the Company. The Company may not, however, retain any pilot in the service under the provisions of this paragraph for a period of more than four (4) months from the date of the final decision in the case. 168 SECTION 26 VOLUNTARY DUES/SERVICE CHARGE DEDUCTION (A) The Company shall deduct from the monthly pay of each pilot employee whose name appears on the TWA Pilots' System Seniority List and remit to the Air Line Pilots Association membership dues uniformly levied (not including initiation fees, fines, penalties or assessments) in accordance with the Constitution and Bylaws of the Association and as prescribed by the Railway Labor Act, as amended, a monthly amount equal to the Association's regular and usual monthly dues, which monthly amount would be required to be paid by such pilot if a member, provided such pilot voluntarily executes the agreed-upon form, known as the "Dues Deduction" or "Dues Check Off" form, which shall be prepared and furnished by the Air Line Pilots Association, International. (B) All Dues Deduction or Dues Check Off forms will be submitted through the VICE PRESIDENT -FINANCE/TREASURER of the AIR LINE PILOTS ASSOCIATION to "ALPA Membership Services" or the person designated by him or her (herein "Vice President - Finance") who will forward the original signed copy to the Manager - Payroll of the Company, care of Trans World Airlines, Inc., Kansas City Administrative Center, Kansas City, Missouri 64513. A properly executed Dues Deduction or Dues Check Off form, filed with Manager - Payroll before the 15th day of any month will become effective the 1st of the month following its receipt. Illegible or improperly executed forms will be returned to the said Vice President - Finance of the Air Line Pilots Association. (C) Any notice of revocation as set forth in the Dues Deduction or Dues Check Off form must be in writing, signed by the pilot, and delivered by registered mail, addressed to the Manager - Payroll of the Company, with copy to the Vice President - Finance of the Air Line Pilots Association. Dues Deduction or Dues Check Off forms and notices so received by the Company will constitute notice of the Company on the date received and not when mailed. (D) The Company will remit to the Air Line Pilots Association a check in payment of all dues collected each month after the payday on which deduction was made. These remittances will be subject to normal accounting practice with respect to adjustments necessary because of the methods involved in the deduction procedure. The Company remittance of Association membership due to the Association will be accompanied by a list of names, payroll register number, station numbers and amount of deductions of the pilots for whom deductions have been made in that particular month, arranged in order of their payroll register numbers. (E) A pilot who has executed a Dues Deduction or Dues Check Off form and who resigns or is otherwise terminated from the employ of the Company shall be deemed to have automatically revoked his/her assignment and if he/she is recalled or reemployed, further deductions of Association dues will be made only upon execution and receipt of a new Dues Deduction or Dues Check Off form. (F) Except as provided in paragraph (H) below, collection of any back dues owed at the time of starting deductions for any pilot, and collection of dues missed because the pilot's earnings were not sufficient to cover the payment of dues in the specific pay period, and collection of dues missed because of accidental errors in the accounting procedures will be the responsibility of the 169 SECTION 26(F), cont. Association and will not be subject to payroll deductions, and the Company shall not be responsible in any way because of such missed collections. (G) Deductions of membership dues shall be made from the 25th of the month paycheck on the basis of one and ninety-five one hundredths percent (1.95%) of gross earnings, provided there is a balance in such paycheck sufficient to cover the amount after all other deductions authorized by the employee relating to health benefits or pension benefits or required by law have been satisfied. In the event of termination of employment, the obligation of the Company to collect dues shall not extend beyond the month in which the pilot's last day of work occurs. (H) For pilots who have executed the Dues Deduction or Dues Check Off form and effective January 1, 2000, the Company will implement an audit system that will provide for the collection of any dues owed subsequent to such execution which cannot be deducted in accordance with paragraph (G) above due to insufficient funds. (I) In cases where a deduction is made which duplicates a payment already made to the Association by a pilot, and where a deduction is not in conformity with the provisions of the Association Constitution and Bylaws, refunds to the pilot will be made by the Association. (J) Trans World Airlines, shall not be held liable for any claims which may be made by the pilots by virtue of the wrongful (other than willful) application or misapplication of any of the terms herein. (K) The term "dues" as it is employed in this Section will be deemed to include service charges assessed in lieu of dues. 170 SECTION 27 INTERNMENT, PRISONER MISSING OR HOSTAGE BENEFITS (A) Any pilot who, in the course of his/her duties for the Company, is held hostage, is interned, is held captive, or is missing as a result of hostile action by any person, group of persons, or foreign government, shall receive compensation equal to his/her average pay hours earned for the twelve (12) month period immediately preceding said action or the pilot's monthly bid award ALV, whichever is greater, each month subject to the following: (1) Compensation paid under this paragraph shall begin at termination of the period described in Section 11(B)(5) and shall be prorated when less than a full month is involved. (2) Compensation paid under this paragraph shall be in lieu of all pay, salary, foreign service allowance, or expense allowance which might otherwise be payable to the pilot. (3) Pilots who have not completed one (1) year of service with the Company as a pilot will receive only their annual salary prorated. (4) Payments made pursuant to this Section 27 shall continue until death is established or until the pilot has been missing for twenty-four (24) months and the Company has issued a Certificate stating that such pilot is presumed to be dead. The pilot shall maintain and continue to accrue seniority and longevity during any such period and shall be considered in the service of the Company in fixing his/her rate of compensation. (B) The monthly compensation allowable under this Section shall be: (1) Credited to the pilot on the books of the Company, and thereafter held for his/her account without interest; or (2) Disbursed by the Company to the person or persons designated by the pilot for that purpose, if the pilot has so requested the Company in substantially the form prescribed by the Company for that purpose. (C) Any amounts credited to the account of a pilot, or paid to a beneficiary in accordance with the provisions of paragraph (B) of this Section, shall not be required to be returned by such beneficiary or the estate of the pilot even though it shall be established that such payments were made after the death of the pilot, nor shall such amounts be a charge against the estate of the pilot; provided that any such beneficiary shall have furnished the Company with any evidence indicating the death of such pilot promptly after its receipt. 171 SECTION 28 CHARTER FLIGHTS (A) GENERAL (1) Charter pairings shall be awarded in accordance with Section 9. (2) The Company may offer any charter pairing to a pilot who is specifically requested by the charter purchaser. (a) The requested pilot shall have the option to accept or decline the pairing. (b) If a pilot other than the requested pilot is removed from a charter pairing as a result of the application of paragraph 2 above, he/she shall be pay assigned for such pairing. (B) CHARTER WORK RULES/PAY AND CREDIT The following provisions shall be in effect for pure charter pairings. (1) A pilot assigned to a charter flight shall be paid and credited as set forth in Section 11(B). (2) A charter flight duty period inclusive of any deadhead positioning segments may be scheduled for fifteen hours (15:00) for Domestic and International Operations unless a longer scheduled on-duty period is provided for in Section 11. (3) A pilot who deadheads in connection with any charter operation shall be subject to the provisions of Section 8. (C) "EXTENDED CHARTER" OR "SPECIAL INTEREST" FLIGHTS (1) An "Extended Charter" or "Special Interest" flight is a flight chartered by a single chartering agency or interest, the length and/or nature of which requires or would deem desirable the continuous assignment of the same pilot and/or pilots for a total period scheduled to be away from the domicile in excess of the applicable category monthly bid award ALV multiplied by four hours (4:00) (ALV x 4 hrs.). Awarding of such flights shall be handled according to (A) above. (2) A pilot assigned to such flight as outlined in (C)(1) above shall be paid and credited in accordance with Section 11(B). Such pay and credit generated in excess of his/her monthly bid award ALV shall be paid in the month earned. (3) A pilot assigned to an "Extended Charter" or "Special Interest" flight for a continuous period in excess of thirty (30) days may, after thirty (30) days, request relief from such assignment from the Regional Chief Pilot and such relief will be granted providing notice of at least seventy- two hours (72:00) is given prior to traversing a TWA station. (4) The provisions of (A)(2) shall apply to an "Extended Charter" or "Special Interest" flight(s). 172 SECTION 29 AGREEMENT PRECEDENCE This Agreement and the attached Letters shall supersede and take precedence over all Agreements, Supplemental Agreements, Amendments, Letters of Understanding, Arbitration Awards, and similar related documents executed between the Company and the Association prior to the signing of this Agreement, provided that all rights and obligations, monetary or otherwise, contained therein and which may have accrued prior to the effective date of this Agreement under said Agreements, Supplemental Agreements, Amendments, Letters of Understanding, Arbitration Awards, and similar related documents, for the pilots of the Company shall remain in effect until satisfied or discharged in accordance with the terms thereof. 173 SECTION 30 EFFECTIVE DATES AND DURATION Unless otherwise stated in this Agreement, the provisions of this Agreement shall become effective on September 1, 1998 and the entire Agreement shall remain in full force and effect through October 1, 2002, and shall renew itself without change for yearly periods thereafter, unless written notice of change is served in accordance with Section 6, Title 1 of the Railway Labor Act, as amended, by either party hereto not sooner than sixty (60) days but not later than thirty (30) days prior to October 1, 2002, or, a subsequent anniversary of such date, unless the parties mutually agree otherwise. IN WITNESS WHEREOF, the parties hereto have signed this Agreement this 1st day of September, 1998. TRANS WORLD AIRLINES, INC. AIR LINE PILOTS ASSOCIATION INTERNATIONAL /s/ /s/ - - ------------------------------- ---------------------------------- Thomas C. Irwin Joseph A. Chronic Vice President Chairman, TWA MEC Flight Operations /s/ ---------------------------------- J. Randolph Babbitt President WITNESSES: WITNESSES: /s/ /s/ - - ------------------------------- ---------------------------------- Terry L. Hayes Douglas J. Gabel Director Labor Relations Chairman TWA MEC Negotiating Committee /s/ /s/ - - ------------------------------- ---------------------------------- D. Annett F. A. Mooney /s/ /s/ - - ------------------------------- ---------------------------------- H. Hamann G. J. Flor /s/ /s/ - - ------------------------------- ---------------------------------- B. Miller S. E. Beatty /s/ /s/ - - ------------------------------- ---------------------------------- J. Murray D. C. Holtzman /s/ - - ------------------------------- J. Perez /s/ - - ------------------------------- J. Gibbs 174 SECTION 31 DEFINITIONS As used in this Agreement, except as otherwise provided: (A) "Active Pay Status" means whenever a pilot is receiving compensation under any sections of this Agreement, except Section 27. (B) "Additional Flying" means trips assigned through the Trip Add System and the Volunteer Fly List. (C) "Average Line Value" (ALV) means the total credit of all awarded bid runs, excluding supplemental bid runs, by category divided by the number of bid runs, excluding supplemental bid runs, by category. For the purposes of this paragraph, "total credit" includes additional flying and OFR trip credit extending from the previous month into the bid month. (D) "Basic Agreement", "Collective Bargaining Agreement" (CBA) and "Working Agreement" mean this TWA-ALPA Agreement. (E) "Bid month" or "month" shall mean the following inclusive periods: January 30 days January 1-30 February 30 days January 31-March 1 (Leap year 31 days) March 30 days March 2-31 April 30 days April 1-30 May 31 days May 1-31 June 30 days June 1-30 July 31 days July 1-31 August 31 days August 1-31 September 30 days September 1-30 October 30 days October 1-30 November 31 days October 31-November 30 December 31 days December 1-31
(F) "Bid Run Pilot" means a pilot who is awarded a scheduled sequence of trips for a monthly bid period. (G) "Block-to-Block" time shall mean that period of time beginning when an aircraft first moves from the ramp blocks, for the purpose of flight, and ending when the aircraft comes to a stop at the ramp blocks at the next point of landing. (H) "Calendar Month", consistent with FAR limitations, shall mean the following inclusive periods: January 31 day January 1-31 February 28 days February 1-28 (Leap year 29 days) March 31 days March 1-31 April 30 days April 1-30 May 31 days May 1-31 175 Section 31(H), cont. June 30 days June 1-30 July 31 days July 1-31 August 31 days August 1-31 September 30 days September 1-30 October 31 days October 1-31 November 30 days November 1-30 December 31 days December 1-31
(I) "Captain" means the pilot who holds a bid as a Captain and is in command of an aircraft at anytime he/she is aboard such aircraft for the purpose of commanding a flight, and who is responsible for all phases of the operation of such aircraft including but not limited to the safety of the passengers, crew members, cargo and airplane. All air carrier personnel assigned to a flight are under the direct control and authority of the Captain and responsible to him/her. The Captain shall be properly qualified to command such aircraft and hold a currently effective airman's certificate which authorizes him/her to serve as a pilot in command. Any disagreement relating to the foregoing will be handled after the completion of the flight through the appropriate authority. (J) "Category" means a domicile, equipment type and status (e.g., STL MD8 Captain). (K) "Category Award" and "Category Bid Award" mean the assignment of a pilot to fill a category vacancy pursuant to Section 19 (e.g. STL MD8 Captain). (L) "Domestic operations" means all duty, flying and deadheading within the contiguous forty-eight (48) states of the United States, Washington, DC., Alaska and Canada. (M) "Draft" means the assignment to an open flight of the most junior pilot in the category who is legal, qualified and available, in accordance with Scheduling Policy. A pilot who is drafted shall receive premium pay as set forth in Section 5(K) of this Agreement. (N) "Duty Aloft" means the entire period during which a pilot is assigned as an operating crew member of an airplane crew during block-to-block time. (O) "Equalization" means when two (2) or more pilots are requesting additional flying for the same day, the pilot with the least amount of additional flying pay hours in the current month and immediately preceding two (2) bid months will be given priority for the assignment. If the pilots requesting additional flying have an equal amount of additional flying, the senior pilot will be given priority for the assignment. (P) "First Officer" means a pilot who is second in command on a flight, or third or fourth in command when designated so by the Captain on three (3) or four (4) pilot B757/767 international operations, respectively, whose duties are to assist or relieve the Captain in the manipulation of the controls and in the navigation of the aircraft while under way, including take-off and landing of such aircraft; who is properly qualified to serve as and holds a currently effective airman's certificate authorizing 176 Section 31(P), cont. him/her to serve as a First Officer; and who holds a bid as a First Officer or is a Reserve Officer with First Officer qualifications. For the Company's international operations, on turbo-jet aircraft only, a First Officer's qualifications shall include an Airline Transport Pilot certificate and rating on the type turbo-jet aircraft in which he/she serves as First Officer except that the rated First Officer requirement shall not apply when operating aircraft with a maximum gross take-off weight of 200,000 pounds or less on international flights operating to and from domestic cities and cities in Mexico, the Caribbean and Central America. (Q) "Fixed Daily Rate" means the number of hours of pay and credit fixed at a value of two hours thirty minutes (2:30) (i.e. 75 Hr./30 Days). For bid run construction purposes, all activities whose credit depends on a daily rate shall be valued using the FDR. (R) "Flight Engineer" means an employee who is the occupant of the third seat on three-pilot turbo-jet crews, who is responsible while in flight or enroute for the safe and efficient mechanical, electrical and electronic functioning and the air-worthy condition of the aircraft, irrespective of the means of propulsion, and its components (including recognition and correction of their malfunctioning) and for manipulation of its engineering controls and all related ground and flight duties as assigned and who is properly qualified to serve as such and holds such valid and currently effective certificates as are required by applicable Federal regulations and a currently effective commercial license and instrument rating. In addition, Flight Engineer refers to an employee who has been awarded a bid to fill a domicile vacancy or a Reserve Officer with Flight Engineer qualifications. (S) "Guarantee" means: For pilots who have completed one (1) year of service with the Company as a flight deck crew member:
Effective: Bid Run Holder Reserve Schedule Holder ---------- -------------- Reserve Officer --------------- September 1, 1998 72 hours ALV minus 3 hours, not less than 72 hours September 1, 1999 73 hours ALV minus 3 hours, not less than 73 hours September 1, 2000 74 hours ALV minus 3 hours, not less than 74 hours September 1, 2001 and thereafter 75 hours ALV minus 3 hours, not less than 75 hours
The guarantee for a pilot with less than one (1) year of service as a flight deck crew member shall be seventy-five hours (75:00). (T) "International operations" means all duty, flying and deadheading not specifically defined as domestic operations. (U) "Mile" means a statute mile of 5,280 feet. 177 Section 31(V) (V) "Mock Bid" means a bid awarded in the pilot's current category in accordance with his/her seniority and used solely for the purposes of determining the pilot's job (bid/reserve) and operational indicator (domestic/international). (W) "Monthly Flying Time" means the sum of total daily flying time in each category multiplied by the number of days in the calendar month and from the resulting figure shall be subtracted the total inoperative time of those flights that do not operate each day of the month. To this resulting figure will be added all time scheduled to be credited under the provisions of Section 11 of the current collective bargaining agreement (i.e. flight time credit under Section 11(B), flight pay assignment, vacation time, sick pay, training credit, deadhead credit, call out pay, equipment substitution protection credit, jury duty credit), charter and ferry flights. (X) "Narrowbody" means all models of the following equipment types: A319, A320, B737, MD8, DC9, B727 and any aircraft type with a maximum gross weight of 176,000 pounds or less. (Y) "Offering A Trip" or "OFR" shall mean a mechanism for bid run pilots to offer trips into open time in accordance with Section 9. Until the offered trip is selected by another pilot or Crew Schedule, the offering pilot will remain responsible for the trip. (Z) "Permanent Transfer" means any transfer or combination of transfers in excess of ninety (90) days in any one (1) period of assignment. (AA) "Pilot" means Captain, First Officer, Flight Engineer, and Reserve Officer, as herein defined. (BB) "Rescheduled" as used in Section 11 of this Agreement means a change in flight assignment after a pilot has reported for duty at his domicile, layover station, or crew change station. (CC) "Reserve Officer" means a pilot with First Officer or Flight Engineer qualifications, who is assigned to serve as a First Officer or Flight Engineer, but who has not been awarded a bid to fill a domicile vacancy. (DD) "Reserve Schedule" means a sequence of alternating periods of availability for flight duty, and periods free from duty at a pilot's domicile to which a pilot is assigned as the result of his/her bid on such pilot's domicile bid preference sheet. (EE) "Scheduled for Duty Aloft" means the assignment of a pilot on the basis of the flight time established in the operations schedules, rather than the actual flight time. (FF) "Small Widebody" means all models of the following equipment types: B757, B767, A321 and any aircraft type with a gross weight greater than 176,000 pounds but less than 500,000 pounds. (GG) "Status" means a bid status and shall be considered to be in descending order as follows: Captain, First Officer, and Flight Engineer. 178 Section 31(HH) (HH) "Target" means the amount of hours determined by dividing all monthly flying time for the bid period for each category by the number of bid run pilots available for the bid period by each category. All bid runs shall be constructed within a range of TGT of at least plus or minus (+/-) four hours (4:00) and no more than plus or minus (+/-) five hours (5:00), provided further that the minimum bid run shall be seventy-two hours (72:00) and the maximum bid run shall be eighty-five hours (85:00). This definition is subject to the Exception of Section 10(B)(7)(b). (II) "Trip Add System" or "TAS" means a structured mechanism for pilots to add flights to their schedules in accordance with equalization and the provisions of Section 9. (JJ) "Vacancy" means a requirement for a pilot in a category. (KK) "Volunteer Fly List" means a list maintained by the Company of pilots who notify the Company that they are available to fly on days they are not otherwise scheduled to fly, in accordance with the applicable provisions of Section 9. 179 LETTER I LETTER OF AGREEMENT BETWEEN TRANS WORLD AIRLINES, INC. AND THE AIR LINE PILOTS IN THE SERVICE OF TRANS WORLD AIRLINES, INC. AS REPRESENTED BY THE AIR LINE PILOTS ASSOCIATION INTERNATIONAL THIS LETTER OF AGREEMENT is made and entered into in accordance with the provisions of Title II of the Railway Labor Act, as amended, by and between TRANS WORLD AIRLINES, INC., it successors or assigns (hereinafter known as the "Company" or "TWA") and the Air Line Pilots in the service of TRANS WORLD AIRLINES, INC. as represented by the AIR LINE PILOTS ASSOCIATION, INTERNATIONAL (hereinafter known as the "Association" or "ALPA"). SECTION 1 It is mutually agreed and understood by and between the parties to this Letter of Agreement that the provisions hereof shall be applicable only to the Company's Civil Reserve Air Fleet Operation (CRAF). It is further agreed and understood that all Sections of the Basic TWA/ALPA Agreement, as hereinafter defined, except those Sections which are specifically modified or excepted by this Letter of Agreement shall be applicable to the Company's "CRAF Operation". SECTION 2 DEFINITIONS (A) The word "Agreement" when used in this Letter of Agreement means the Agreement between Trans World Airlines, Inc., and the Air Line Pilots in the service of Trans World Airlines, Inc., as represented by the Air Line Pilots Association, International, signed July 20, 1977. (B) The term "CRAF Operation" for the purposes of this Letter of Agreement means all flight operations conducted in accordance with the agreement between Trans World Airlines, Inc., and the Department of Defense covering such operation but shall not include the Company's certificated service or commercial charter service or any other Government operation. SECTION 3 COMPENSATION Rates of compensation on the Company's "CRAF Operation" shall be those specified in the Agreement for pilots based on International Operations, provided that a pilot assigned to such operation shall receive, as a minimum guarantee, monthly compensation equal to his average earnings during the two calendar months preceding such month of assignment. 180 LETTER I, cont. SECTION 4 EXPENSES A pilot assigned to the Company's "CRAF Operation" shall receive trip and moving expenses in accordance with the Agreement. SECTION 5 FILLING OF VACANCIES (A) In anticipation of the emergency nature of the "CRAF Operation", the Company shall keep on file a currently effective CRAF standing Preference List. The Company shall advertise such Preference List by appropriate pilot bulletin at least once each year. A pilot may submit or withdraw a bid for assignment to the "CRAF Operation" at any time by sending a telegram/fax to the Staff Vice-President - Flying; or by maintaining his/her current preferences in the appropriate section of the electronic Standing Bid Form. When submitting such a bid a pilot shall specify whether he/she is bidding for a captain, first officer, or flight engineer vacancy. The Company will publish a copy of such Preference List each calendar year for posting at all domiciles, it being understood that such copies cannot always be completely current. (B) In the event of implementation of the Company's "CRAF Operation" during the first sixty (60) days of such operation, vacancies shall be filled in the following order: (1) Assignment by status of pilots who have bids on file in accordance with (A) above as of midnight of the day preceding official announcement of the implementation of the Company's "CRAF Operation". To the extent the requirements of the operation will permit, such assignments shall be made in order of seniority. (2) In the event existing CRAF vacancies are not filled in accordance with (1) above, the Company may assign pilots, but bid status, in inverse order of seniority to the extent the requirements of the operation will permit. (3) In the event the Company is unable to fill CRAF vacancies with qualified pilots under (1) or (2) above, assignment will then be made from the standing Preference List in order of seniority to the extent the requirements of the operation will permit. (4) If CRAF vacancies still exist after application of (1), (2), and (3) above, pilots will then be assigned in inverse order of seniority to the extent the requirements of the operation will permit. (C) Pilots assigned under (B) above will be considered as having been assigned to temporary duty for the purposes of Section 4 above. (D) The Company may exclude from assignment of pilots under (B)(1) and (2) above any pilot who is not fully qualified for the operation. (E) Not later than sixty (60) days after the implementation of the Company's "CRAF Operation" all CRAF assignments shall be open for bid in accordance with Section 19 of the Agreement. Following such initial sixty (60) day period, pilots shall be assigned to and displaced from the Company's "CRAF Operation" in accordance with 181 LETTER I, cont. the provisions of Section 19 of the Agreement to the extent the requirement of such operation will permit. (F) The parties to this Agreement recognize that some of the pilots in the employ of TWA have obligations as reserves in the armed forces of the United States and any assignments made to the Company's "CRAF Operation" would be subject to such obligations. SECTION 6 INSURANCE BENEFITS A pilot assigned to the Company's "CRAF Operation" will be eligible for continued participation in the applicable Company's Employees' Insurance Program. In addition thereto a pilot so assigned shall be entitled to insurance protection as set forth on page 10.72.06 of the Company's Management Policy and Procedure Manual, paragraph 1, dated October 21, 1965. SECTION 7 RETIREMENT BENEFITS A pilot assigned to the Company's "CRAF Operation" will be eligible for continued participation in the Retirement Plan for Employees of TWA and the Pilots or Flight Engineers Trust Annuity Plan. Contributions to the subject plans shall be based on the earnings of a pilot while assigned to the Company's "CRAF Operation". SECTION 8 SICKNESS AND INJURY BENEFITS A pilot assigned to the Company's "CRAF Operation" shall be covered by Section 15 of the Agreement. SECTION 9 BENEFIT ASSIGNMENTS A pilot assigned to the Company's "CRAF Operation" shall be covered by Section 27 of the Agreement. The Company shall call to the attention of a pilot assigned to the "CRAF Operation" the options set forth in paragraph (B) of Section 27 of the Agreement and afford such pilot the opportunity to select one of such options. An appropriate form will be made available for this purpose. SECTION 10 GENERAL The Company shall provide each pilot in its employ with a copy of this Letter of Agreement. 182 LETTER I, cont. SECTION 11 DURATION THIS LETTER OF AGREEMENT shall become effective on December 1, 1966, and shall remain in full force and effect concurrently with the Agreement signed September 1, 1994. IN WITNESS WHEREOF, the parties hereto have signed this Letter of Agreement this 1st day of September 1994. FOR TRANS WORLD AIRLINES, INC. - - ---------------------------------- /s/ Mr. Martin J. Farber Director, TWA Labor Relations FOR THE ASSOCIATION - - ---------------------------------- /s/ Keith A. Bounds Chairman, TWA MEC Negotiating Committee FOR THE AIR LINE PILOTS IN THE SERVICE OF TRANS WORLD AIRLINES, INC. - - ---------------------------------- /s/ J. Randolph Babbitt, President 183 LETTER II LETTER OF AGREEMENT BETWEEN TRANS WORLD AIRLINES, INC. AND THE AIR LINE PILOTS IN THE SERVICE OF TRANS WORLD AIRLINES, INC. AS REPRESENTED BY THE AIR LINE PILOTS ASSOCIATION INTERNATIONAL THIS LETTER OF AGREEMENT is made and entered into in accordance with the provisions of Title II of the Railway Labor Act, as amended, by and between TRANS WORLD AIRLINES, INC., it successors or assigns (hereinafter known as the "Company" or "TWA") and the Air Line Pilots in the service of TRANS WORLD AIRLINES, INC. as represented by the AIR LINE PILOTS ASSOCIATION, INTERNATIONAL (hereinafter known as the "Association" or "ALPA"). The Air Line Pilots Association, International and Trans World Airlines, Inc., in the interest of national defense, hereby agree: 1. That the pilots in the service of Trans World Airlines, Inc., will continue to perform all duties which are necessary to enable the Company to operate military flight on which Trans World Airlines carries exclusively military traffic for the United States Government, even though such pilots withdraw from commercial airline service because of unresolved labor disputes of any type, including disputes arising out of negotiations for a new contract. 2. That pay and other benefits for such pilots who perform duties in connection with such military flights, pursuant to paragraph 1 hereof, will: (a) for any period prior to the opening date of the contract between the parties be governed by the then existing contract unless modified by agreement of the parties and, (b) after the opening date of the contract be governed by either the contract that existed during the said labor dispute or the contract negotiated, if any, as a settlement of such dispute, whichever is more beneficial to such pilots. 3. That this is consistent with the long-standing policy and performance of the Air Line Pilots Association, International. 4. In the event any such pilot is assigned to perform duties in connection with such military flights, pursuant to the terms of paragraph 1 hereof, the Vice President of Industrial Relations or his designee shall supply to the Association a written certification that such duties are necessary to enable the Company to operate such military flights. 184 LETTER II, cont. 5. This Agreement shall be effective March 2, 1968 and shall continue in full force concurrent with the basic Working Agreement signed July 20, 1977. 6. This Agreement shall not apply to any military flights the Company may operate for any other carrier. Further, this Agreement shall not apply to military flights the Company may contract for during the term of a strike other than those military flights contracted for as a result of a contract renewal or a new contract signed subsequent to the expiration of a contract. Signed this 20th day of July 1977. FOR TRANS WORLD AIRLINES, INC. /s/ D. J. Crombie Vice President, Industrial Relations WITNESS: /s/ Darrell K. Merrill FOR THE AIR LINE PILOTS IN THE SERVICE OF TRANS WORLD AIRLINES, INC. /s/ J. J. O'Donnell, President WITNESS: /s/ Wayne L. Haggard /s/ R. F. Roberts /s/ Gerald J. Riani /s/ Albert J. Mundo /s/ Thomas J. Kennedy /s/ John P. Donlan, Jr. 185 LETTER III December 10, 1964 Mr. Wayne L. Haggard 3100 Crest Drive Manhattan Beach, California Dear Mr. Haggard: This will confirm our understanding in connection with the disability retirement minimum set forth in the TWA-ALPA Agreement signed January 8, 1965. In the event the Federal Aviation Agency or its successor agency establishes higher physical standards for a pilot to be certified in the operation of future types of Company aircraft, failure to meet such new qualifications shall not entitle a pilot to disability benefits as provided in the aforementioned Agreement. If the above accurately reflects our understanding, please obtain the signature of Mr. Ruby as indicated below and return to this office. Sincerely, /s/ Kenneth L. Meinen /s/ Wayne L. Haggard 186 LETTER IV September 25, 1975 Mr. John P. Donlan Master Executive Chairman Air Line Pilots Association Pan Am Building 200 Park Avenue New York, New York 10017 Dear Mr. Donlan: This is to confirm our understanding concerning the application of the provisions of Section 25 of the recently concluded agreement between Trans World Airlines, Inc., and the Air Line Pilots Association. As used in Paragraph (A) of that Section, the term "Management" is deemed limited to the following: 1. Pilots on the corporate staff. 2. General Managers - Flying. 3. One Manager - Pilots - who acts as Assistant General Manager - Flying in each domicile. 4. Staff Vice President - Flight Operations Training. 5. Pilot management reporting directly to the Staff Vice President - Flight Operations Training. Very truly yours, --------------------------------- /s/ D. J. Crombie, Vice President TWA Industrial Relations 187 LETTER V LETTER OF AGREEMENT BETWEEN TRANS WORLD AIRLINES, INC. AND THE AIR LINE PILOTS IN THE SERVICE OF TRANS WORLD AIRLINES, INC. AS REPRESENTED BY THE AIR LINE PILOTS ASSOCIATION INTERNATIONAL THIS LETTER OF AGREEMENT is made and entered into in accordance with the provisions of Title II of the Railway Labor Act, as amended, by and between TRANS WORLD AIRLINES, INC., it successors or assigns (hereinafter known as the "Company" or "TWA") and the Air Line Pilots in the service of TRANS WORLD AIRLINES, INC. as represented by the AIR LINE PILOTS ASSOCIATION, INTERNATIONAL (hereinafter known as the "Association" or "ALPA"). WHEREAS, the Company wishes to install in its aircraft the Airborne Integrated Data System (AIDS) an may, at future times, desire to install other improved systems for the recording and collection of in-flight data; and WHEREAS, the parties are in agreement that the improved recording and collection of data through the constant in-flight monitoring of equipment will contribute to safety by the early identification of equipment problems, and also constitute a valuable tool for accident investigation, and should be supported by all, with appropriate safeguards against improper use, NOW, THEREFORE, it is agreed between the parties that the use of AIDS and other equipment for the recording and collection of in-flight data by the Company will be in accordance with the following: 1. The pilots in the service of the Company accept the AIDS system and their duties attendant thereto. 2. AIDS and other similar equipment may be used without limitation to obtain mechanical information. 3. Such equipment may likewise be used to monitor operational trends, to evaluate the effectiveness of training, to identify possible needs for procedural changes and to assist in accident investigation. Data obtained through AIDS systems which is used to determine operational trends will not identify specific crew members associated therewith. 4. Information obtained through the use of AIDS and other equipment for the recording and collection of in-flight data will not be used as a basis for disciplinary action nor will data be introduced by the Company in any grievance 188 LETTER V, cont. proceedings or System Board of Adjustment proceedings unless the Association introduces AIDS data. 5. Data obtained through these systems will not be disclosed to third parties. However, such data will be made available to the pilot upon his request or to authorized Government agencies for accident and incident investigation purposes only and only after demand by such agencies. 6. In order to prevent the use of data for purposes injurious to the Company or its employees, raw data shall not be retained for periods longer than required by Federal Agencies, except that bulk raw data necessary for maintenance and operational purposes may be retained for periods up to ninety days. 7. Upon request by properly authorized Association representatives the Company will make available to such representatives AIDS information relating to accidents and incidents. 8. This Agreement shall apply to the Airborne Integrated Data Systems (AIDS) and to any other system for the recording and collection of in-flight data which the Company may install in the future. Prior to the installation of such other systems or the implementation of further developments or refinements of the systems referred to in the previous paragraphs of this Letter of Agreement, the Company will, with adequate advance notice, confer with the Association as to the Company's plans and intentions respecting the matter and take into consideration in formulating its future course of action the points of view put forth by the association. IN WITNESS WHEREOF, the parties hereto have signed this Letter of Agreement this 20th day of July 1977. FOR TRANS WORLD AIRLINES, INC. /s/ J. C. Hilly WITNESS: /s/ Bruce Sollow /s/ Phil Poyner /s/ E. F. O'Reilly FOR THE AIR LINE PILOTS ASSOCIATION, INTERNATIONAL /s/ J. J. O'Donnell WITNESS: /s/ Wayne L. Haggard /s/ H. Neville Fryling /s/ Robert Murphy 189 LETTER VI November 1, 1989 William F. Compton, Chairman TWA MEC Negotiating Committee Air Line Pilots Association 1801 Park 270 Drive Suite 260, Building II St. Louis, Missouri 63146-4011 Dear Mr. Compton: This is to confirm that Trans World Airlines, Inc., and the Air Line Pilots Association have agreed to the establishment of international satellite domiciles for narrowbody and widebody aircraft (hereinafter referred to as international satellites) in accordance with the provision listed below: 1. The purpose of this agreement is to allow TWA to operate flights between international cities in the most efficient and economical manner possible. In addition to the foregoing: A. The Company may operate flights between international satellites in the Caribbean and the United States. B. The Company may operate international satellite flights between an international city and a domestic city which involved an oceanic crossing provided there are no more than four (4) round trips per week. 2. TWA may establish international satellites located in any international city served by TWA, currently or at any time in the future. 3. Lines shall consist of international satellite flights only and shall be published separately in the domicile bid package. The Company shall determine the domicile(s) to be assigned international satellite flying. Lines of time shall be assigned to more than one domicile whenever: A. There is a total of twelve (12) or more international satellite lines for an equipment type and; B. There is more than one international satellite city from which such equipment type is flown and; C. Such equipment type is flown by more than one domicile. A satellite city shall be associated with only one domicile. The Company will not be required to split lines if the result would be less than four (4) lines being associated with a domicile. Examples: A. Total 727 International satellite lines = 15 Satellites = CDG (3 lines) - FRA (9 lines) CDG assigned to STL and FRA assigned to JFK 190 LETTER VI, cont. B. Total 727 International satellite lines = 15 Satellites = CDG (3 lines) - FRA (12 lines) No Split, all lines assigned to JFK or STL C. Total 727 International satellite lines = 15 Satellites = CDG (3 lines) - ATH (3 lines) - FRA (9 lines)CDG and ATH assigned to STL and FRA assigned to JFK The monthly ALV may vary between 65 and 85 hours for each equipment type utilized on the international satellite operations and such ALV may be determined separately and independently of the domestic operation and the remainder of the international operation. Individual lines may be constructed in excess of this ALV in order to provide efficient sequencing if agreed to by the parties. 4. Pilots must be qualified and available for a full month (i.e. no vacation, training other than recurrent, or other lost time) in order to be awarded a satellite line of time. 5. After international satellite lines have been awarded, pilots shall be scheduled for any necessary training. Any illegality or over the end of the month conflict shall be handled in the following manner: A. The pilot shall be permitted two days from the notification of the bid in order to trade himself/herself legal or correct any conflict. B. If the pilot is unable to correct the illegality or conflict via mutual trade, the Company may correct the illegality or conflict by removing flight activity in the old month and balance accordingly. 6. Pilots may be involuntarily assigned to international satellite lines of time in the event of insufficient bidders. In the event satellite line(s) are not bid, involuntary assignment to such line(s) shall come from the domicile having the insufficient bidder(s). Pilots at all domiciles qualified and currently holding a bid on the equipment utilized on the satellite operation shall be afforded the opportunity to submit a standing bid for temporary assignment to the satellite. Such bid preferences shall be honoredin order of seniority, prior to the involuntary assignment as a result of insufficient bids at the domicile. Such assignment will not generate temporary assignment expenses under Section 7 (B)(2). 7. Notwithstanding the provisions of Section 12 (A), reserve staffing shall not be established for this operation. However, should the Company decide to establish reserve protection for this operation, pilots shall be afforded an opportunity to bid such reserve lines in accordance with seniority. 8. Pilots flying the international satellite operation shall be entitled to international rates of pay exclusive of navigation pay. Notwithstanding the foregoing, navigation pay in accordance with Section 4 (D)(6) shall apply to flight segments which require the use of specialized navigation equipment (e.g. INS or Omega) during oceanic operations. 9. First Officers will not be required to possess an equipment rating for this operation as required in Section 31 for international 191 LETTER VI, cont. operations except that Section 31 requirements for a rated first officer shall apply to flights involving an oceanic crossing. 10. Pilots will be provided one positive Class B round trip pass from his/her domicile to the international satellite for purposes of reporting to and returning from his/her assignment. Any pilot who is required to report to his permanent domicile during such period of assignment to an international satellite will be provided positive Class B round trip transportation from the satellite to the permanent domicile. 11. With the exception of the Cairo satellite, hourly expenses as provided in the Agreement will commence at the departure of the pilot's positioning TWA flight to the international satellite provided that flight is scheduled to arrive no sooner than the day before the departure of his/her first scheduled flight. In the event there is no TWA flight scheduled to arrive the day before the pilot's first flight assignment, expenses will commence at the departure of the last TWA flight which will position the pilot in the satellite at least one day prior to his/her first satellite flight. Expenses shall continue until the arrival of the pilot's return TWA flight to his/her domicile, provided such pilot leaves the satellite city within 24 hours of his/her last flight. In Cairo, expenses shall commence 48 hours prior to the pilot's first satellite flight. Expenses shall continue until the arrival of the pilot's return TWA flight to his/her domicile, provided such pilot leaves the satellite city within 24 hours of his/her last flight assignment unless there is no TWA flight departing within the 24- hour period, in which case expenses will continue until the arrival of the first TWA flight departing the satellite. Should the pilot choose to position himself/herself earlier or return to his/her domicile later, the pilot shall be considered to be on his/her own expense. A pilot who so chooses shall have his/her expenses begin 24 hours before his/her first scheduled assignment and end 24 hours after his/her last scheduled assignment. No additional trip expenses shall be paid while flying. A pilot may remain at the satellite on expenses after completing his/her monthly flight assignments only if he/she already holds an international satellite line of time for the next month. 12. Company paid hotel rooms and transportation in accordance with Section 7 (B)(1) shall be provided for each pilot at the satellite city in addition to normal layover hotel rooms as required by flight assignments. 13. Trip and duty hours shall commence and end at the report and release of each pairing at the international satellite except as provided in Paragraph 23 of this letter. 14. On duty limits and minimum rest shall be in accordance with domestic rules, except that flights which include an oceanic crossing shall have on duty and minimum rest calculated in accordance with international rules. International FAR's shall apply to all international satellite operations. The domestic contractual rules of 30 in 7, 8 in 24, at domicile shall not apply to international satellite operations. Diurnals shall be based on local time of the international satellite. A pilot positioning across the Atlantic will not be required to act as an operating crew member thereafter without an intervening rest period of 13:30 scheduled, 11:30 actual; however, in the event the positioning 192 LETTER VI, cont. flight operates late, a pilot may at his/her discretion waive an additional two (2) hours of rest. 15. Any trips open due to illegalities or other reasons shall be protected by the pilots who hold international satellite lines of time. 16. Pilots on domestic lines of time shall not be involuntarily balanced on international satellite flights. However, pilots on domestic lines of time may request balance or use Section 9 processes to acquire international satellite flights, qualifications permitting. Pilots on international satellite lines of time may not use Section 9 processes to acquire domestic flights but may be balanced on domestic flights if no international satellite flights are available. (Such balancing shall not result in the proration of the international satellite pilot's guarantee.) In all other instances, all pilot guarantees will be prorated based on services performed. 17. Normal balancing rules shall apply (i.e., under current monthly guarantee) when balancing a pilot on any international satellite flight. However, an international satellite pilot shall not be involuntarily balanced on a domestic flight between his/her international satellite assigned flights unless his/her projection is more than 12 hours below his/her guarantee. 18. BLIP's or required balance will be awarded three (3) days in advance of the operating flight departure for pilots domiciled at JFK and four (4) days in advance of the operating flight departure for pilots based at other domiciles. 19. All flying shall be paid at the rate of the operation actually flown. 20. Except as provided herein, pilots engaged in the international satellite operation will be afforded the same treatment as all other pilots assigned to the international operation. 21. The system schedule chairman shall provide normal scheduling input as to the sequencing of flights. Additionally, pilots on the international satellite operation shall be allowed to mutually trade flights provided such trades cause no disruption of the operation. 22. In recognition of these new concepts and the possible need for modifications based on operating experience, the Staff Vice- President of Flying may make temporary changes in the international satellite operation when such changes are necessary to continue the efficient operation of flights. In such event, the Staff Vice-President of Flying shall, without delay, consult the Negotiating Committee for the purpose of resolving a mutually approved policy to cover the problems which required the temporary changes. 23. Bid line pilots drafted (not involuntarily assigned pursuant to Paragraph 6 above) to cover international satellite flights shall be provide deadhead transportation between the domicile and the international satellite and shall have expenses, trip credit and duty credit as provided in Section 11 of the working agreement based on domicile report and release times. Further, for purposes of this provision only, the provisions of Section 11 (B)(2)(d) 193 LETTER VI, cont. shall be applicable to duty periods which consist solely of deadhead. Application of this paragraphshall not trigger the rated First Officer requirement contained in Paragraph 9 of this letter. Very truly yours, /s/ J. W. Hoar AGREED AND ACCEPTED - - ----------------------------- /s/ William F. Compton 194 LETTER VII September 14, 1993 Mr. William F. Compton, Chairman TWA Master Executive Council Air Line Pilots Association 3221 McKelvey Road, Suite 200 Bridgeton, Missouri 63044-2551 Dear Bill: This letter shall confirm our mutual understanding regarding the procedures which shall govern interaction between the Professional Standards Committee of the TWA MEC and TWA. Both the Association and the Company recognize and acknowledge their mutual and separate responsibilities to promote and insure the highest standards of professionalism and safety among TWA pilots. Further, it is the mutual goal of the parties that TWA pilots be treated fairly and equitably. The MEC Professional Standards Committee has indicated that its goals are to facilitate resolution of disputes relating to: 1. Conflicts between pilots which affect their professional interactions. 2. Conflict between a pilot and a member of another employee group. 3. Conduct of a pilot that reflects unfavorably upon the profession. The Company acknowledges that in order to be effective, the proceedings of the MEC Professional Standards Committee must be and remain completely confidential. Should a professional standards problem come to the attention of the Company, it may at its sole discretion, refer such dispute to the MEC Professional Standards Committee. Whenever the Company elects to refer a dispute to the MEC Professional Standards Committee, the Committee shall normally have a period of 30 days, or such other period as may be designated by the Company, during which to attempt to resolve the problem. During such 30-day (or other) period, the Company agrees to hold in abeyance any action it may have commenced or contemplate taking unless further information becomes known which would alter the facts as understood by the Company at the time it made its referral. At or before the end of the 30-day (or other) period the MEC Professional Standards Committee shall make a verbal report to appropriate TWA management either that "the problem is resolved" or that the "MEC Professional Standards Committee is unable to be of any further assistance." In the event that successful resolution of a problem is not attained by the Committee within the aforementioned 30-day (or other) period, the Company is then free to take whatever action it deems appropriate and necessary, which is not inconsistent with the terms of the TWA/ALPA Working Agreement, to resolve the problem. In cases where the Company would elect to commence or continue disciplinary proceedings, the delay caused by the 30-day (or other) period will not be raised by the Association as a defense nor will the Company assert any failure of the MEC Professional Standards Committee to arrive at a successful resolution as supporting its position. The company further agrees that no MEC Professional Standards Committee member will be asked or required 195 LETTER VII, cont. by the Company to bear witness in any disciplinary case that has been previously referred to the Committee by the Company. The Company shall, in connection with any case referred by it and if so requested by the MEC Professional Standards Committee, encourage any employee involved in a dispute to work with the Committee to attempt to attain an amicable and equitable resolution to the problem. The existence of this letter and the procedures delineated above shall in no way alter or diminish the Company's authority to insure proficiency and air safety nor shall they abridge or infringe on a pilot's rights under the TWA/ALPA Working Agreement. Very truly yours, /s/ Larry M. Hecker Senior Vice President Flight Operations AGREED AND ACCEPTED: /s/ - - -------------------------- William F. Compton 196 LETTER VIII LETTER OF AGREEMENT BETWEEN TRANS WORLD AIRLINES, INC. AND THE AIR LINE PILOTS IN THE SERVICE OF TRANS WORLD AIRLINES, INC. AS REPRESENTED BY THE AIR LINE PILOTS ASSOCIATION This Letter of Agreement is made and entered into in accordance with the provisions of Title II of the Railway Labor Act, as amended, by and between Trans World Airlines, Inc. (hereinafter referred to as the "Company"), and the Air Line Pilots in the service of Trans World Airlines, Inc., as represented by the Air Line Pilots Association, International (hereinafter referred to as the "Association"). W I T N E S S E T H: -------------------- WHEREAS, the Company and the Pilots desire to supplement their Pilots' Employment Agreement, signed February 12 1957. NOW THEREFORE, it is mutually agreed and understood by and between the parties to this Letter of Agreement that: The Company shall assume all liabilities against pilot personnel resulting from alleged negligence in the manipulation or operation of TWA aircraft by such pilot personnel. This shall not apply to any losses, penalties or forfeitures resulting from action of a government agency; nor shall it apply to any disciplinary action that may be taken by the Company. This Letter of Agreement shall be effective as of date of signing and shall run concurrently with the Basic Pilots' Agreement signed February 12, 1957. IN WITNESS WHEREOF, the parties have signed this Letter of Agreement this 15th day of April, 1957. WITNESS: For TRANS WORLD AIRLINES, INC. WITNESS: For THE AIR LINE PILOTS IN THE SERVICE OF TRANS WORLD AIRLINES, INC. 197 Letter IX LETTER OF AGREEMENT BETWEEN TRANS WORLD AIRLINES, INC. AND THE AIR LINE PILOTS IN THE SERVICE OF TRANS WORLD AIRLINES, INC. AS REPRESENTED BY THE AIR LINE PILOTS ASSOCIATION INTERNATIONAL THIS LETTER OF AGREEMENT is made and entered into in accordance with the provisions of Title II of the Railway Labor Act, as amended, by and between TRANS WORLD AIRLINES, INC., it successors or assigns (hereinafter known as the "Company" or "TWA") and the Air Line Pilots in the service of TRANS WORLD AIRLINES, INC. as represented by the AIR LINE PILOTS ASSOCIATION, INTERNATIONAL (hereinafter known as the "Association" or "ALPA"). WHEREAS, the parties are currently in discussions to develop effective cost savings through changes in the Collective Bargaining Agreement; NOW, THEREFORE, the parties have agreed to certain provisions to safeguard pilot training records as follows: 1. In the event the Company ceases regularly scheduled air line operations, it will use its reasonable best efforts to provide each pilot a copy of his/her current training records file as maintained by the Company pursuant to regulations of the Federal Aviation Administration, and any other applicable laws or regulations, within five (5) business days after written request and authorization submitted by the pilot. Further, the Company shall provide a copy of a pilot's training file to any third party or parties within five (5) business days after written request and authorization submitted by the pilot. In the event of a Chapter 7 or 11 filing under the United States Bankruptcy Code, the Company will at all times use its best efforts to cause these obligations to be performed. 2. This Agreement shall become effective upon execution. FOR TRANS WORLD AIRLINES, INC. /s/ Rex A. Pitts, Staff Vice President TWA Flight Operations FOR THE ASSOCIATION: /s/ Keith A. Bounds, Chairman MEC Negotiating Committee Dated August 29, 1994 198 LETTER X August 28, 1994 Captain Rex A. Pitts Staff Vice President - Flying Trans World Airlines, Inc. JFK International Airport Flight Operations, Building 95 Jamaica, New York 11430 Dear Captain Pitts: This letter shall confirm our agreement that the Company shall no longer be obligated to provide crew meals on flights of less than 2:00 hours scheduled flight time onto which it is not boarding passenger or cabin attendant crew meals. The parties agree that the dollar value of the cost savings associated with this change shall be $ 131,000.00. This Agreement is subject to the negotiation of a new cost saving Collective Bargaining Agreement (CBA) to replace the current CBA, and is subject to TWA MEC and membership ratification. Yours truly, /s/ Keith A. Bounds, Chairman TWA MEC Negotiating Committee KAB:dj FOR TRANS WORLD AIRLINES, INC. /s/ - - ------------------------------------------- R. A. Pitts, Staff Vice President - Flying 199 LETTER XI August 15, 1994 Mr. Martin J. Farber Director - Labor Relations Trans World Airlines, Inc. Building 60, Terminal 4A JFK International Airport Jamaica, New York 11430 Dear Marty: This shall confirm our agreement that the Company shall reimburse a pilot for any FAA/TWA required medical expense he/she may incur which is denied by Aetna because it was not "medically necessary". This agreement shall apply to both the situation where specific medical testing is required by TWA and/or any tests required by the FAA requisite to the issuance of the Airman's Medical. This shall not apply to the cost of those regular six (6) month annual FAA physical examinations which are necessary and required by law to maintain a pilot's license(s). If the above correctly sets forth our agreement, please sign in the space indicated below. Sincerely, /s/ Michael W. Stelzer, Chairman TWA MEC Grievance Committee /s/ - - ------------------------------- Martin J. Farber For the Company Dated August 31, 1994 200 LETTER XII PARTICIPATIVE MANAGEMENT ------------------------ POLICY STATEMENT The Company is committed to a radical redesign of its processes, organization, and culture to deliver the optimal product to the traveling public. The Company believes that employee participation in its long range and strategic planning and day-to-day operational decision making is the foundation of its re-engineering efforts. The free flow of information in an open decision-making process with participation by all parties is the cornerstone of Management's commitment. The Company is committed to a re-engineering of the management structure so as to eliminate unnecessary levels of management focusing decision making authority for all purposes at that level of the organization where the necessary knowledge resides and where implementation takes place. To the extent required, the Company will amend its Management Policies and Procedures Manual to reflect this structure. A. MANAGEMENT/LABOR ADVISORY TASK FORCE ------------------------------------ The Company believes that the recently created Management/Labor Advisory Task Force ("Task Force") should become a permanent part of the corporate structure. Participation on the Task Force by the most senior officials of both the Company and its three largest unions highlights the joint commitment to the re-engineering effort and creates a decision making forum for action. The Task Force will meet at least once a month and will have the authority to create similar committees throughout the Company. These other committees may be department specific, issue specific, or cross departmental and/or operational lines. All such committees would ultimately report to the Task Force. The Task Force will continuously monitor all aspects of the Company including its structure, policies, procedures, long and short term business and financial plans, communications strategies, and any and all other matters involving the Company. The Company will institute procedures to ensure that the recommendations of the Task Force and the committees are promptly acted upon. The Company will pay the flight pay loss and expenses of the ALPA representatives on the Task Force and all such committees and will provide the necessary and appropriate insurance coverage for the performance of the duties of each ALPA representative. The Task Force Committee structure will become a part of the Company's Management Policies and Procedures Manual. B. FILLING OF POSITIONS IN FLIGHT OPERATIONS ----------------------------------------- The Company will amend its Management Policies and Procedures Manual, to the extent required, to provide for the timely posting on flight crew bulletin boards and FIP pages of all open management positions up to and including the director level within the flight operations department, including the position of General Manager - Flying (GMF). When such postings are made, the Company will also inform ALPA and will solicit comments and recommendations from ALPA on candidates for the open position(s). 201 LETTER XII, cont. C. PRODUCTIVITY TASK FORCE ----------------------- The Company will amend its Management Policies and Procedures Manual to provide for the continuation of the Productivity Task Force as in place on the date of this Agreement. The Productivity Task Force will have broad authority to request information and investigate waste and inefficiencies. Recommendations of the Productivity Task Force will be promptly reviewed and acted upon by the Company. D. ACCESS TO INFORMATION --------------------- The Company will provide to the Chairman of the TWA Master Executive Council or his representative, a monthly report setting forth information on the Company. The Company will provide to ALPA's representatives on the Task Force and its related committees and on the Productivity Task Force such information as may be required to carry out their work. To the extent that the nature of such information so requires, the individual ALPA representatives may be required to sign a confidentiality agreement. E. RESOLVING LINES OF AUTHORITY ---------------------------- In the event that there is an overlap or a conflict among two or more management personnel of the Company regarding actions to be taken to address issues raised by members of the Task Force Committees, the Chief Executive Officer or the responsible Senior Vice President of the department(s) will promptly identify in writing to all parties involved the appropriate line of authority to resolve the overlap or conflict. F. PARTICIPATIVE MANAGEMENT EDUCATION ---------------------------------- The Company will provide training, including seminars or other educational opportunities, for the Company's management relating to employee participation. All of the Company's management personnel will be required to attend such training within twelve months. ALPA will require ALPA representatives serving on the Task Force Committees or Productivity Task Force to attend such training on a similar basis. These seminars will be consistent with the Policy Statement and will be reasonably acceptable to ALPA and the Company. ALPA and the Company will pay the respective cost of attendance for their representatives. G. MANAGEMENT CONSULTANT --------------------- By March 31, 1995, the Company will retain a management consulting firm to fully review and analyze the Company's management structure. The members of the Task Force will be entitled to meet regularly with this firm following its retention and to review it results prior to implementation. H. IMPROVING COMMUNICATION ----------------------- The Company will make a good faith effort to improve communication within management and between management and the employees. ALPA and the Company agree to meet and to set goals achieving such improvement, including staff meetings, road shows, newsletters, surveys and financial updates. ALPA will make its expertise and resources reasonably available to assist the Company in improving its communication with employees represented by ALPA. 202 LETTER XII, cont. I. EMPLOYEE INCENTIVE PROGRAMS --------------------------- The Company, through the Task Force, agrees to implement incentive programs which reward employees for suggestions or job performance which increase the efficiency and productivity of the Company. J. ENFORCEMENT ----------- The Company's Management Policies and Procedures Manual will be amended to prohibit taking any disciplinary or discriminatory action against any employee because of such employee's participation on any Task Force, committee or the Productivity Task Force or because of such employee's suggestions regarding or criticism of the Company's management. K. NOT EXCLUSIVE ------------- Sections A - J are not the exclusive means for implementing the Policy Statement and ALPA and the Company will continue to examine and discuss other suggestion and concepts consistent with the Policy Statement. SO AGREED FOR TRANS WORLD AIRLINES, INC.: FOR THE ASSOCIATION: /s/ /s/ - - -------------------------- ----------------------------- Edward Paquette William F. Compton Dated: 8/28/94 Dated: 8/28/94 ------- ------- 203 LETTER XIII LETTER OF AGREEMENT between TRANS WORLD AIRLINES, INC. and THE AIR LINE PILOTS in the service of TRANS WORLD AIRLINES, INC. as represented by THE AIR LINE PILOTS ASSOCIATION INTERNATIONAL THIS LETTER OF AGREEMENT is made and entered into in accordance with the provisions of Title II of the Railway Labor Act, as amended, by and between TRANS WORLD AIRLINES, INC., its successors or assigns ("the Company" or "TWA") and the Air Line Pilots in the service of TWA as represented by the AIR LINE PILOTS ASSOCIATION, INTERNATIONAL ("the Association" or "ALPA"). WHEREAS, the Company and the Association agree as follows: 1. The attached Letter XXVII shall be published with the New Basic Agreement but shall not be construed to create new obligations except with regard to the amendments to paragraph A.3 and C.1 set forth below. Further, nothing herein shall be construed to prejudice any entity or person's claims or defenses relating to Letter XXVII. 2. Section A, paragraph 3 of Letter XXVII is hereby amended to provide that the aggregate annual amount of the Company?s obligation in connection with the payment of legal and financial advisor expenses associated with the administration of the TWA- ALPA ESOP Trust and any such expenses associated with the ESIP will be limited to an amount not to exceed sixty thousand dollars ($60,000) in 1999 and 2000 and limited to an amount not to exceed thirty thousand dollars ($30,000) in calendar years 2001 and 2002. The parties further agree that TWA will not be responsible for any legal and financial advisor expenses rendered to ALPA in connection with any corporate restructuring, corporate business plan or other corporate matters, except as may be mutually agreed in writing after July 11, 1998. The parties agree that any amendments to the ESOP or ESIP or any other Agreements to effectuate the purposes of this paragraph 2 will be agreed to and executed by the Association. 3. The by-law amendments required pursuant to Section C of Letter XXVII have been effectuated and may not be amended prior to September 1, 2000. The Company will present to its Board of Directors a resolution authorizing the extension of the date prior to which the by-law amendments referenced in the preceding sentence may not be amended to September 1, 2002. 204 LETTER XIII, cont. 4. ALPA shall immediately be apprised of and receive a copy of any changes in the corporate governance rights and protections provided by the Company to the IAM. 5. ALPA shall be provided thirty (30) business days to review the changes to IAM's corporate governance rights and protections. If ALPA determines, in its sole discretion, that (a) IAM has received improvements to its corporate governance rights and protections that ALPA does not then enjoy or (b) that any changes to IAM's rights negatively impact ALPA's absolute or relative corporate governance rights and obligations, as set forth in Letter of Agreement XXVII as amended hereby, the parties shall immediately confer and implement any necessary amendments to this Letter of Agreement to ensure that: (a) ALPA receives improvements at least as favorable as those provided to the IAM and/or; (b) ALPA's absolute or relative corporate governance rights and protections are restored to a position at least as favorable as those set forth herein. 6. The Company agrees to secure and make any necessary changes to the Company's by-laws or other governing documents, as necessary and appropriate to effectuate the intent of 4 and 5 above. SO AGREED. For the Company: For the Association: /s/ /s/ - - ---------------------------------- ---------------------------------- Terry Hayes, Director Douglas J. Gabel, Chairman Labor Relations TWA MEC Negotiating Committee /s/ /s/ - - ---------------------------------- ---------------------------------- James F. Martin, J. A. Chronic, Chairman Sr. Vice President Human Resources TWA MEC Dated: July 8, 1998 /s/ ---------------------------------- J. Randolph Babbitt, President Dated: July 8, 1998 205 OLD LETTER XXVII EXHIBIT 1 A. NEW ALPA SECURITIES ------------------- 1. The Company will authorize and issue common and/or preferred stock of the Company (the "New ALPA Securities") to a trust established for the benefit of the employees of the Company represented by ALPA (the "Trust"). The value of the New ALPA Securities relative to the other equity securities of the Company issued as part of the Restructuring shall be determined through negotiations with ALPA based upon the relative value of concessions made by creditors in connection with the Restructuring, and by ALPA in the New ALPA CBA; provided, however, that, following the Restructuring, the total Company equity securities issued to employees will represent not less than twenty-five percent (25%) of the value and voting rights of the outstanding equity securities of the Company on a fully diluted basis; provided further that the New ALPA Securities will represent not less than 23.05962 percent of the value and voting rights of the equity securities of the Company issued to employees in connection with the Restructuring; and provided further that after the Restructuring, on a fully diluted basis, the total of common stock and any preferred stock with ordinary voting rights equivalent to or greater than the common stock (collectively, "Common Securities") issued to employees (including all common stock issued to employees in the Company's Chapter 11 case in 1993 which are not canceled or replaced in the Restructuring) will represent not less than thirty percent (30%) of the total Common Securities of the Company on a fully diluted basis. 2. All terms of the New ALPA Securities, including but not limited to the election of Directors for the Board of Directors, voting rights, redemption provisions, liquidation preferences, dilution protection, covenants, dividend rates, dividend rights and/or conversion provisions shall be reasonably acceptable to ALPA. In the event the New ALPA Securities include preferred stock or a combination of preferred and common stock, this allocation shall be consistent among all of the Company's labor groups and reasonably acceptable to ALPA. 3. The terms of the Trust shall be determined in the discretion of ALPA (subject to the Company's agreement as to provisions affecting the Company as to its costs and liabilities). The trustees of the Trust shall have investment discretion with respect to the New ALPA Securities and shall have the right to vote any New ALPA Securities as determined by the terms of the Trust. The Trust may be a qualified or non-qualified plan as ALPA may determine in its sole discretion. Reasonable costs, subject to such restrictions as agreed to between the Company and ALPA, of organizing and administering the Trust, as provided in the Trust, will be paid by the Company, including but not limited to fiduciary liability insurance, legal costs and taxes. The principal, interest, dividends and proceeds from the sale, repurchase, retirement or redemption of securities received by the Trust shall be allocated and distributed to the beneficiaries as determined by ALPA. 206 B. ALPA BOARD OF DIRECTOR REPRESENTATION ------------------------------------- 1. The New ALPA Securities will include a separate class of stock or one of a series of separate classes of stock (the "Labor Stock") issued to the ALPA, IAM and IFFA (the "Unions"). The Labor Stock, which at the election of each of ALPA, IAM and IFFA may be either privately or publicly held, will be entitled to elect, in the aggregate, no fewer than the greater of (i) four members of TWA's fifteen member board of directors or (ii) 22.5% of the total number of directors (the "Labor Directors"). The Labor Directors shall serve for three year terms and Labor Director vacancies shall be filled as provided in the designation of the Labor Stock and any shareholder voting agreement described in paragraph 2 of this Section. The stock issued to ALPA as part of the Labor Stock will provide that ALPA will be entitled to elect sufficient members of the Company's board of directors ("ALPA Directors") in order to assure that: a. The ALPA Directors comprise at least 6-2/3% of the board. b. The ALPA Directors comprise at least 25% of that part of the board elected by the Unions. In the event that the IAM or IFFA does not elect to participate in the Labor Stock described in this paragraph, this paragraph may be amended provided the rights of ALPA are not materially affected. 2. If each of the Unions is issued the same class of stock, pursuant to paragraph 1 above, the collective bargaining agreements of the Unions shall require the Unions to enter into a shareholder voting agreement providing for the ALPA representation described in paragraph 1. 3. Except as otherwise required in the Company's Restated Certificate of Incorporation or any designation of rights of outstanding stock, the filling of vacancies on the Board of Directors of the Company shall require a vote of 60% of the remaining members of the Board of Directors. 4. In addition to ALPA's rights to Board committee representation under the current bylaws, one of the ALPA Directors shall be entitled to sit as a voting member of any committee, including an existing committee, considering, reviewing or authorizing the merger, consolidation, restructuring or business combination of the Company with, or into, any other entity or the sale, transfer or abandonment of significant Company assets. C. COMPANY BYLAW AMENDMENTS ------------------------ 1. The bylaws will be amended to provide that specified provisions of the bylaws which implement procedures bargained for by ALPA may not be amended, prior to September 1, 2000, without the affirmative vote of the ALPA Director(s). 2. The bylaws will be amended to require that the following actions must be approved by the board which approval cannot be given over the dissenting vote of all Labor Directors plus two other directors: 207 a. any sale, transfer or disposition of, in a single or series of transactions, 20% or more of the Company's assets, except for transactions in the ordinary course of business including aircraft transactions as part of a fleet management plan; b. any merger or consolidation of the Company with or into any other entity; c. any business combination within the meaning of section 203 of the Delaware Business Corporation Act; d. a dissolution or liquidation of the Company; e. any filing of a petition for bankruptcy, reorganization or receivership under any state or federal bankruptcy, reorganization or insolvency law; f. any repurchase, retirement or redemption of the Company's stock, or securities prior to their scheduled maturity or expiration, except for redemptions out of proceeds of any substantially concurrent offering of comparable or junior securities; g. any acquisition of assets not related to the Company's current business as an air carrier in a single or series of related transactions in excess of $50,000,000 adjusted annually by a CPI index; or h. any sale of stock or securities convertible into stock of the Company to any person if (i) at the time of issuance or (ii) assuming conversion of all outstanding convertible securities of the Company, such person or entity would beneficially own 20% or more of the stock of the Company. D. CERTIFICATE OF INCORPORATION AMENDMENTS --------------------------------------- The Restated Certificate of Incorporation of the Company will be amended, as and if necessary or appropriate, to provide for the restrictions described above. The Restated Certificate of Incorporation will be further amended to require an affirmative vote of (i) 3/4 of the outstanding voting stock to amend the bylaws of the Company by shareholder action and (ii) 2/3 of the stock entitled to vote to approve actions described in Section to C.2.b, c, d, f unless approved by 80% of the board of directors. These restrictions will terminate on September 1, 2000. 208 LETTER XIV REGIONAL PILOT BASE AGREEMENT July 7, 1993 Mr. Keith A. Bounds, Chairman TWA MEC Negotiating Committee Air Line Pilots Association 1801 Park 270 Drive Suite 260, Building II St. Louis, Missouri 63146-4011 Dear Mr. Bounds: This is to confirm that Trans World Airlines, Inc. (the "Company") and the Air Line Pilots Association (the "Association") have agreed as indicated hereinafter, and on a test basis, to procedures governing the establishment and operation of a Regional Pilot Base ("Base"). (A) ESTABLISHMENT OF A REGIONAL PILOT BASE 1. A Base shall be a defined geographical area mutually agreed upon between the Company and the Association. (E.g., a West Coast Regional Pilot Base incorporating the State of California.) 2. The Company and the Association shall mutually agree upon one or more airports within a Base (e.g., LAX, SAN, SFO for a West Coast Regional Pilot Base) for which a line(s) of time will be published for each month of the Base assignment period. Such line(s) shall consist of pairings which originate and terminate at a specific Base airport. (E.g., a line of time published for LAX will consist solely of pairings where a pilot will report and be released at LAX.) 3. Letter XIII (Satellites) of the TWA/ALPA Collective Bargaining Agreement ("CBA") shall not apply to any city which is within the boundaries of a Base during the period such Base is in existence. 4. The size of a Base shall be limited to the lesser of the following: a. A total of 50 crews based upon Captain formula bid lines. E.g., 30 MD8 Capt Formula Bid Lines 20 L10 Capt Formula Bid lines. b. Sixty percent (60%) of the projected domicile Captain formula bid lines for an equipment type. That is, the number of Captain Base Vacancies for an equipment type (e.g. 727, MD8, DC9, etc.) which are advertised by the Company for a Base assignment period, may not exceed sixty percent (60%) of the projected Captain formula bid lines for that equipment type at a domicile. E.g., If STL is projected to have 50 Captain formula bid lines for MD8 equipment during a Base assignment period, the maximum MD8/Captain Base Vacancies which could be advertised and awarded at a Base(s) is 30. 209 LETTER XIV - REGIONAL PILOT BASE AGREEMENT, cont. In the event the Company elects to assign an equipment type to a Base(s) which is operated by more than one domicile, the 60% limitation described immediately above shall be applied to the domicile with the least projected Captain formula bid lines for such equipment type. E.g., 727 flying is to be assigned to a Base(s). The 727 is operated by both JFK and STL. If JFK is projected to have forty (40) Captain formula bid lines during the Base(s) assignment period and STL is projected to have eighty (80) Captain formula bid lines during the Base(s) assignment period, then the 60% limitation would apply to JFK resulting in a maximum of twenty-four (24) 727/Captain Base Vacancies for that Base(s) assignment period. c. The Base size limitation calculations specified in (a) and (b) above shall be made immediately prior to the advertising of Base vacancies in accordance with paragraph B(2) below. The calculations shall be based upon the flying projected to remain in effect during the entire next Base assignment period. (B) ASSIGNMENT OF PILOTS TO A BASE 1. Vacancies at a Base will be by status and equipment ("Base Vacancies"). (E.g., L10-F/O or DC9-CAP). Except as provided for in paragraphs B(3) and B(4) below, pilots may only be awarded Base Vacancies in their permanent status. 2. Base Vacancies shall be advertised sixty (60) days shall be awarded in seniority order subject to the following prior to a Base assignment period. 3. Upon establishment of a Base or upon an increase in Base Vacancies as described in B(4) below, the Company shall publish status/equipment vacancies at such Base for the Base assignment period. The Base Vacancies a. A pilot who is restricted: i. From being trained on the equipment for which a Base Vacancy exists pursuant to the provisions of Section 6(D)(3)(a),(c),(d) and (f) or the TWA/OZA Pilot Seniority Integration agreement, or ii. Pursuant to Sections 6(B)(16), 6(B)(17) or 6(D) (9) of the CBA, or who is otherwise ineligible to serve in the status for which a Base Vacancy exists, shall not be awarded such Base Vacancy. b. A pilot awarded a Base Vacancy in accordance with this paragraph shall, if necessary, also be awarded a permanent vacancy, causing a related voluntary transfer (e.g., to JFK or STL) and/or a voluntary change in status (e.g., to Captain, F/O or F/E), in order to effectuate the bid award. 210 LETTER XIV - REGIONAL PILOT BASE AGREEMENT, cont. The permanent transfer and/or change in status will be effective with the Base Vacancy award, or upon completion of necessary training to assume the Base award. A pilot who initiates training due to a Base award may be restricted in accordance with Section 6(E)(1) of the CBA. Paragraphs B(5)(a) and B(5)(b) below do not apply to the awarding of a Base Vacancy under this paragraph 3. 4. After establishment of a Base, whenever the number of Base Vacancies to be advertised for a subsequent Base assignment period exceed the maximum number of Base Vacancies which have been filled for any previous Base assignment period, the additional Base Vacancies (i.e., those greater than the maximum number which have previously existed at the Base) shall be available to be bid in accordance with paragraph B(3) above. These Base Vacancies shall be awarded in seniority order under paragraphs B(3) and B(5). Example: A Base is established with 10 vacancies. For the second Base assignment period a total of 20 vacancies are advertised for the Base. Up to 10 of the 20 Base Vacancies may be awarded, subject to seniority, to pilots under paragraph B(3). For the third Base assignment period, there are 35 Base Vacancies advertised. Up to 15 of the 35 Base Vacancies may be awarded, subject to seniority, to pilots under paragraph B(3). For the fourth Base assignment period, the number of Base Vacancies is reduced to 20. No Base Vacancies would be available to be awarded under paragraph B(3). For the fifth Base assignment period, there are 30 Base Vacancies advertised. No Base Vacancies would be awarded under paragraph B(3) as the maximum of 35 vacancies for that Base has not been exceeded. 5. All Base Vacancies not awarded under paragraphs B(3) and B(4) above, shall be awarded within status from the domicile(s) where the equipment to be flown at the Base is operated provided that: (a) The pilot does not require more than Q02 requalification training on the equipment type associated with the Base Vacancy, and (b) The pilot is not restricted under Section 6(E) (1) to a type of equipment different than the equipment type associated with the Base Vacancy. 6. Pilots will bid for Base Vacancies specified in B(3), B(4) and B(5) above on a separate Regional Pilot Base bid sheet. This bid will remain on file only through the end of the Base assignment period for which it was filed and will reflect a pilot's preference for bidding a Base Vacancy and/or a temporary opening at a Base. (A temporary opening being one which becomes available subsequent to the awarding of bids for a Base assignment period.) A pilot will only be 211 LETTER XIV - REGIONAL PILOT BASE AGREEMENT, cont. allowed to rescind his/her temporary Base opening bid preferences in writing. Such notification must be received by the Company prior to the pilot being notified of an assignment to a temporary opening. 7. Base Vacancies shall be three (3) bid months in duration, or longer by mutual agreement between the Company and the Association (the "Base assignment period"). 8. In the event the number of pilots bidding for Base Vacancies associated with a status and a type of equipment is less than the number of Base Vacancies advertised for that status and equipment, the Company shall not be required to award Base Vacancies in other statuses associated with the same equipment type in excess of the number of Base Vacancies filled by the least bidders. (E.g., the Company advertises ten (10) Base Vacancies in each status for the L10 but there are only eight (8) pilots who bid for the L10-F/O Base Vacancies, the Company would not be required to award more than eight (8) L10-CAP and eight (8) L10-F/E Base Vacancies.) 9. Pilots assigned to a Base who attend training conducted outside the Base shall be considered, for all purposes, as attending training away from domicile. Base pilots who attend training conducted at a location within the Base shall be considered, for all purposes, as attending training at domicile. (E.g., a pilot holding a line of time out of SFO, who is assigned to a PC at LGB, would be considered as attending training at domicile.) 10. A pilot assigned to a Base, who is not awarded a Base Vacancy for the next Base assignment period, shall return to his/her permanent domicile. (This will not be considered a displacement under Section 19 of the CBA.) 11. Pilots at a Base will retain all rights associated with Section 19(D) and (E) of the CBA, except that the application of Section 19(D)(3) will be from a pilot's permanent domicile. Pilots at a base shall not be considered for filling temporary vacancies pursuant to Section 19(F) of the CBA. A pilot holding a Base assignment may bid and be awarded a permanent domicile vacancy in accordance with Section 19 of the CBA. When a pilot assigned to a Base holds a future effective bid which requires training, and such training becomes available, the pilot may, at his/her option, either return to his/her permanent domicile for training or remain at the Base through the end of the Base assignment period. A pilot displaced under Section 19 will remain at a Base for the full Base assignment period, except when such pilot requires training and the last scheduled class commences prior to the end of the Base assignment period. In such case, the pilot will return to his/her permanent domicile prior to commencing training. A pilot being furloughed while assigned to a Base will be returned to his/her permanent domicile effective with the date of his/her furlough. 12. A pilot holding a future effective bid that will commence prior to or during a Base assignment period will not be 212 LETTER XIV - REGIONAL PILOT BASE AGREEMENT, cont. considered for such Base assignment, unless the pilot's future bid complies with paragraphs B(3), B(4) or B(5). A pilot awarded a Base Vacancy which requires training which may subject such pilot to restriction pursuant to Section (6)(E)(1) of CBA, shall have all future effective bids canceled. 13. A pilot assigned to a Base who is no longer qualified to perform the duties of the Base Vacancy which he/she was awarded, shall be returned to his/her permanent domicile. (C) AWARDING OF BIDS 1. The Company shall post bid runs for the equipment to be flown at the Base in accordance with Section 9(A) & (B) of the CBA. 2. The provisions of Section 10(B)(6)(d) of the CBA shall not be utilized by the Company within a Base, except by mutual agreement between the Company and the Association. 3. Bid runs shall be awarded to Base pilots in accordance with Section 9(C)(1) and 9(C)(2) of the CBA. A pilot may be awarded a bid run from any airport ("Bid Award Airport") agreed to pursuant to paragraph A(2) above. 4. A pilot returning to active flying status at a Base after bids have closed shall be handled in accordance with Section 9(C)(4) of the CBA. If such returning pilot causes a temporary opening to be canceled, the pilot awarded the temporary opening shall return to his/her permanent domicile and will be handled under the same provision. 5. Sections 6(D)(5) and 6(E)(2) of the CBA shall not apply to Base pilots. The period of time a pilot is assigned to a Base will not be included for purposes of Section 6(D)(5) to determine eligibility for equipment training or pay protection nor will a pilot receive pay protection pursuant to Section (6)(D)(5) once awarded a Base Vacancy. Pilots shall again become covered by Sections 6(D)(5) and 6(E)(2) upon return to their permanent domicile. An assignment to a Base shall only interrupt a pilot's eligibility for pay protection and accrual for entitlement for training under Section 6(D)(5). 6. In the event coverage is required at a Base for one or more bid periods during a Base assignment period, a temporary opening(s) may be created. Such temporary opening(s) shall be filled in seniority order by status/equipment from those pilots who have indicated a desire for such temporary opening(s) on his/her Regional Pilot Base bid sheet. Paragraph B(5) shall apply in awarding such assignment. The most senior qualified and available (no vacation, lost time, or training greater than Q02) pilot meeting the foregoing criteria and requesting a temporary opening, shall be awarded such temporary opening. A pilot may be assigned to that opening only prior to the first day of a bid month from a domicile where the equipment is flown. A pilot assigned a temporary opening under this 213 LETTER XIV - REGIONAL PILOT BASE AGREEMENT, cont. provision shall not be considered to be assigned to a temporary vacancy under the provision of Section 19(F) of the CBA. 7. The Company may at its option publish or develop relief lines at a Base. Should the Company elect to publish relief line(s), they will be advertised as temporary openings. If sufficient time exists, the Company may, at its option, develop additional relief lines from reserves at the Base in accordance with Section 9(C)(7) of the CBA. 8. Assigned domicile reserve staffing requirements (Section 12(A)(1) of the CBA) shall be based on the combined formula bid lines of the Base and the assigned domicile for each equipment type. The staffing and scheduling of reserves at a Base shall be mutually agreed upon separately for each Base. (D) BALANCING AND PROTECTION OF OPEN TIME 1. All balancing (voluntary or involuntary) shall be accomplished using open Base flights unless there are no open flights within the Base at the time a pilot is balanced or volunteers for balance. 2. A Base pilot with a balance flight (voluntary or involuntary) at an assigned domicile may trade such balance flight for a Base flight which later becomes open, provided that the result of the trade will not reduce the pilot'sprojection below guarantee for time flown within a month. A pilot using this provision will be handled in accordance with the same procedures of the CBA as apply to a category A-1 balance. 3. Regional Base pilots involuntarily balanced by the Company, other than at his/her Bid Award Airport, shall, upon request, receive Class B transportation over the lines of the Company, between any Base airport (as agreed to pursuant to paragraph A(2) above) within his/her region and the originating city of the balance flight. 4. BLIP may be awarded to those pilots assigned to the Regional Base, and will be awarded in seniority order for trip(s) within the Regional Base only. 5. Mutual trade(s) between pilots at a Base will be permitted provided that such trade(s) do not create more than 45 minutes of make-up guarantee for either pilot. 6. Assigned domicile pilots may not BLIP or balance on a Base flight. 7. Base pilots who are non-routine will be handled under the jurisdiction of Operational Planning and in accordance with the away from domicile schedule policy contained in the Flight Operations Policy Manual. (E) GENERAL 1. The Company shall provide Base pilots with mail boxes at their Bid Award Airport and suitable free parking. Base pilots will have access to obtain passes. 214 LETTER XIV - REGIONAL PILOT BASE AGREEMENT, cont. 2. The provisions of Section 13 of the CBA do not apply to movement to and from a Base. 3. All duty limitations, trip credit, duty credit and expenses for flights originating and terminating at a Base airport shall be based on report and release times at such airports. 4. For purposes of Section 8(D) of the CBA, a Base pilot's Bid Award Airport shall be considered the same as if it were the pilot's domicile. The provisions of Section 7(A) (5) of the CBA apply at a Base to the application of Section 8(D) but do not apply to movement between Base airports (those airports agreed upon pursuant to paragraph A(2) above) occasioned by balancing, trading or BLIP. 5. Management flying at a Base will be handled in accordance with Section 5(G) of the CBA. 6. Pilots will be awarded vacation within his/her permanent domicile and in accordance with Section 14 of the CBA. 7. Except as specifically referenced above, this letter does not alter the application of Letters of Agreement XIII and XXII. 8. When a Base pilot is required by the Company to travel to his/her domicile for purposes of attending a meeting or grievance hearing, he/she shall be provided with positive space coach transportation (Class 5) over TWA routes between any Base airport (as agreed to pursuant to paragraph A(2) above) within his/her region and the domicile. This agreement is entered into as a test which shall run for a minimum of six (6) months from the implementation of the first Base assignment period. The test may be terminated by either the Association or the Company at the conclusion of the six (6) month period or at anytime thereafter by providing the other party a minimum of ninety (90) days written notice. Notwithstanding the foregoing, the test may be terminated at any time by mutual agreement between the Association and the Company. If the foregoing correctly reflects our mutual agreement, please sign in the place provided. Very truly yours, /s/ Alan R. English Director, Labor Relations AGREED AND ACCEPTED /s/ Keith A. Bounds WITNESSED BY: /s/ Marlyn Moen, Member Negotiating Committee /s/ Larry Balliet, Member Negotiating Committee cc: L. M. Hecker W. L. Schecter 215 LETTER XV July 6, 1998 Capt. Douglas J. Gabel, Chairman TWA MEC Negotiating Committee Air Line Pilots Association 3221 McKelvey Road Suite 200 Bridgeton, Missouri 63044 Dear Capt. Gabel: With regard to your inquiry referencing TWA's Engineering Watch, please be advised that the logbook will have a placard with a brief description of all items under MCI Engineering Control. Very truly yours, /s/ Terry L. Hayes Director - Labor Relations 216 LETTER XVI - TRANS STATES EXCEPTION LETTER LETTER OF AGREEMENT BETWEEN TRANS WORLD AIRLINES, INC. AND THE AIR LINE PILOTS IN THE SERVICE OF TRANS WORLD AIRLINES, INC. AS REPRESENTED BY THE AIR LINE PILOTS ASSOCIATION INTERNATIONAL THIS LETTER OF AGREEMENT is made and entered into in accordance with the provisions of Title II of the Railway Labor Act, as amended, by and between TRANS WORLD AIRLINES, INC., its successors or assigns (hereinafter "the Company" or "TWA") and the Air Line Pilots in the service of TWA as represented by the AIR LINE PILOTS ASSOCIATION, INTERNATIONAL (hereinafter known as the "Association" or "ALPA"). WHEREAS Section 1(G) of the TWA-ALPA Agreement effective September 1, 1994 ("the Agreement") prohibits TWA from entering into code share agreements with any United States flag carrier that operates aircraft with a maximum seating capacity in excess of 60 seats; and WHEREAS TWA has entered into a code sharing agreement with Trans States Airlines, Inc. ("TSA"), a United States flag carrier; and WHEREAS the Association has recently discovered that TSA has operated three (3) ATR aircraft with a seating capacity in excess of 60 seats from a date prior to the September 1, 1994 amendments to Section 1; and WHEREAS TSA continues to operate the same three (3) ATR aircraft mentioned above; and WHEREAS TSA's continued operation of the same three (3) ATR aircraft mentioned above does not qualify for one of the limited exemptions of Section 1(G)(4) of the Agreement; NOW, THEREFORE TWA and the Association have agreed upon a limited further exemption to the provisions of Section 1(G) of the Agreement as follows: 1. There shall be no violation of the Agreement by the operation by TSA of three ATR aircraft identified by aircraft number N721TE, N722TE, and N723TE. 2. This Letter of Agreement ("Letter") is without prejudice to the Association's rights to strictly enforce any and all of the provisions of Section 1 of the Agreement at any time, except with respect to the limited exemption stated herein. 3. This Letter is effective upon execution and shall be retroactive to September 1, 1994. SO AGREED. For the Company: For the Association: /s/ /s/ Philip Whitcomb William F. Compton, Chairman Staff Vice President TWA Master Executive Council Labor Relations Dated: 9/5/95 Dated: 9/5/95 /s/ J. Randolph Babbitt, President Dated: 9/5/95 217 LETTER XVII LETTER OF AGREEMENT between TRANS WORLD AIRLINES, INC. and THE AIR LINE PILOTS in the service of TRANS WORLD AIRLINES, INC. as represented by THE AIR LINE PILOTS ASSOCIATION INTERNATIONAL THIS LETTER OF AGREEMENT is made and entered into in accordance with the provisions of Title II of the Railway Labor Act, as amended, as of September 1, 1998, by and between TRANS WORLD AIRLINES, INC., its successors or assigns (hereinafter known as the "Company" or "TWA") and the Air Line Pilots in the service of TWA as represented by the AIR LINE PILOTS ASSOCIATION, INTERNATIONAL (hereinafter known as the "Association" or "ALPA"). WHEREAS, the Company and ALPA negotiated a Term Sheet (the "Term Sheet") as part of the July 11, 1998 Tentative Agreement ("the New Basic Agreement") which has been ratified by both ALPA and the Company; and WHEREAS the Term Sheet states the Company agrees to pay ALPA, for the benefit of Air Line Pilots in the service of TWA who are on the seniority list as of the date the New Basic Agreement is executed and who are actively employed (not on any type of leave status) during the calendar quarter preceding a Payment Date (as defined below), either a cash bonus of two million seven hundred fifty thousand ($2,750,000) dollars or two hundred fifty thousand (250,000) shares of Common Stock of the Company for four (4) consecutive calendar quarters beginning in the second quarter of 1999. NOW THEREFORE it is hereby agreed as follows: 1. General A. Payments or distributions made in accordance with this Letter of Agreement shall not be deemed to be wages for purposes of benefits, DAP, supplemental or any other contributions or benefits the Company is obligated to pay or provide to Air Line Pilots in the service of TWA. All appropriate amendments shall be made as necessary to applicable plans concerning such payments or distributions. B. Payments or distributions shall be made in arrears in four consecutive quarterly payments with the first such payment or distribution to be made in the second calendar quarter, 1999 as provided herein. 218 LETTER XVII, cont. C. On an applicable Payment Date (as described below) the Company may, in its sole discretion, satisfy the obligation described herein by either (1) issuing, in the aggregate, two hundred fifty thousand (250,000) shares of Common Stock of the Company or (2) paying an amount equal to two million seven hundred fifty thousand ($2,750,000) dollars less applicable withholding and payroll taxes to Eligible Pilots as directed by ALPA, provided that in the event the Company elects to issue stock, no fractional shares will be distributed. D. "Eligible Pilots" shall be pilots who are on the TWA Pilots System Seniority List on September 1, 1998 and who are actively employed (not on any type of leave status) during the calendar quarter immediately preceding an applicable Payment Date. It shall also include pilots who retire or voluntarily resign during the calendar quarter immediately preceding an applicable Payment Date; provided that any pilots who retire or voluntarily resign during any quarter must have actively worked at least one (1) day during such quarter. 2. Distribution A. Within fifteen (15) business days following the end of each calendar quarter in 1999, the Company will notify the Association of the form of payment (cash or Common Stock) the Company will use. B. Common Stock Option (1) Common Stock issued pursuant to this agreement shall be valued at the fair market value on the date of distribution and shall be subject to all applicable withholding and taxes at statutory rates. (2) Common Stock issued pursuant to this agreement shall be registered on Form S-8 or any comparable form and listed on the American Stock Exchange (or such other exchange on which the Company's Common Stock is registered on such Payment Date). (3) Within thirty (30) calendar days following receipt of the Company's notice in paragraph 2.A. above that the Company will issue its Common Stock, ALPA shall, in its sole discretion, direct the distribution of the two hundred fifty thousand (250,000) shares of Common Stock among the Eligible Pilots. Such distribution list shall include the name, address, social security number and number of shares for each Eligible Pilot and shall be provided to the Company on either magnetic or electronic media. The Company shall have the right to review such distribution for purposes of compliance with this Letter of Agreement. No fractional shares will be distributed and all such share amounts shall be rounded to the nearest whole share. (4) The Company shall use its best efforts to distribute the shares of Common Stock to the Eligible Pilots 219 LETTER XVII, cont. within thirty (30) calendar days following receipt of the Association's distribution list in paragraph 2.B.(3) above (the "Stock Payment Date"). In the event such Stock Payment Date falls on a weekend or holiday, the distributions shall be made on the next business day. C. Cash Option (1) Cash payments made pursuant to this agreement shall be subject to applicable withholding and taxes at statutory rates. (2) Within thirty (30) calendar days following receipt of the Company's notice in paragraph 2.A. above that the Company will make cash payments, ALPA shall, in its sole discretion, direct the distribution of the two million seven hundred fifty thousand dollars ($2,750,000) among the Eligible Pilots. Such distribution list shall include the name, address, social security number and payment amount for each Eligible Pilot and shall be provided to the Company on either magnetic or electronic media. The Company shall have the right to review such distribution for purposes of compliance with this Letter of Agreement. (3) The Company shall make payment to the Eligible Pilots within thirty (30) calendar days following receipt of the Association's distribution list in paragraph 2.C.(2) above (the "Cash Payment Date"). In the event such Cash Payment Date falls on a weekend or holiday, payment shall be made on the next business day. 3. This Letter of Agreement is effective September 1, 1998 and shall expire on the later of May 1, 2000 or sixty (60) days after the date all distributions under paragraph 2 have been made. This Letter of Agreement shall not be subject to the status quo provisions of the Railway Labor Act. SO AGREED. For the Company: For the Association: /s/ /s/ - - ----------------------------------- ---------------------------------- Terry L. Hayes, Director Douglas J. Gabel, Chairman Labor Relations TWA MEC Negotiating Committee /s/ /s/ - - ----------------------------------- ---------------------------------- Philip B. Whitcomb J. A. Chronic, Chairman Vice President TWA MEC Labor Relations /s/ ---------------------------------- J. Randolph Babbitt, President Dated: September 1, 1998 220 LETTER XVIII LETTER OF AGREEMENT between TRANS WORLD AIRLINES, INC. and THE AIR LINE PILOTS in the service of TRANS WORLD AIRLINES, INC. as represented by THE AIR LINE PILOTS ASSOCIATION INTERNATIONAL THIS LETTER OF AGREEMENT is made and entered into in accordance with the provisions of Title II of the Railway Labor Act, as amended, by and between TRANS WORLD AIRLINES, INC., its successors or assigns ("the Company" or "TWA") and the Air Line Pilots in the service of TWA as represented by the AIR LINE PILOTS ASSOCIATION, INTERNATIONAL ("the Association" or "ALPA"). WHEREAS, the Company and the Association have agreed that this Letter of Agreement shall replace and supersede Letter XI of the 1994 Basic Agreement, signed by Renee E. Kamm. THEREFORE, IT IS AGREED AS FOLLOWS: With regard to the application of Section 20 of the Agreement, the Company and the Association agree that active pilots on the TWA Pilot Seniority List as of March 15, 1985, shall not be furloughed except where said furlough is occasioned by a reduction in the Company's annualized level of block hours of flying below 469,000 hours, or by any of the reasons enumerated in Section 20(D)(6) of said Agreement. Very truly yours, /s/ Terry L. Hayes Director, Labor Relations AGREED AND ACCEPTED /s/ - - ------------------------------------- By: Douglas J.Gabel - Chairman TWA MEC Negotiating Committee Dated: July 11, 1998 221 LETTER XIX LETTER OF AGREEMENT between TRANS WORLD AIRLINES, INC. and THE AIR LINE PILOTS in the service of TRANS WORLD AIRLINES, INC. as represented by THE AIR LINE PILOTS ASSOCIATION INTERNATIONAL THIS LETTER OF AGREEMENT is made and entered into in accordance with the provisions of Title II of the Railway Labor Act, as amended, by and between TRANS WORLD AIRLINES, INC., its successors or assigns ("the Company" or "TWA") and the Air Line Pilots in the service of TWA as represented by the AIR LINE PILOTS ASSOCIATION, INTERNATIONAL ("the Association" or "ALPA"). WHEREAS ALPA and TWA have reached agreement on the terms of a New Basic Agreement, and WHEREAS TWA plans to retire its entire B727 fleet within the next several years; and WHEREAS the B727 is the only TWA equipment type which requires Flight Engineers; and WHEREAS there are currently TWA pilots who can only be employed as B727 Flight Engineers by reason of regulatory requirement or contractual restriction; and WHEREAS TWA and ALPA have reached agreement as to the proper procedures to be employed in the event that TWA no longer maintains the Flight Engineer status. NOW THEREFORE it is hereby agreed as follows: 1. In the event that the Company determines that there is an excess of Flight Engineers the Company shall issue a displacement bulletin in accordance with Section 19 of the New Basic Agreement. All excess B727 Flight Engineers who meet regulatory requirements for Captain or First Officer flying, and are not contractually restricted from such status, shall be displaced into First Officer vacancies. All excess B727 Flight Engineers who do not meet regulatory requirements for Captain or First Officer flying or who are contractually restricted from such status shall be displaced into a no-bid status. 2. A pilot displaced into a no-bid status pursuant to paragraph 1. above shall be notified by the Company within three (3) business days of the following options: A. Retirement. 222 LETTER XIX, cont. B. Unpaid personal leave of absence on a month by month basis for up to five (5) years. C. Application for any open TWA position pursuant to Section 18(D)(6) of the New Basic Agreement. (TWA shall not be obligated to offer employment to any such applicant). D. Voluntary resignation. In the absence of an affirmative election, such pilot shall be deemed to have elected an upaid personal leave of absence (b. above). 3. The following shall apply when a pilot chooses the paragraph 2.B. option above: A. Each such pilot who maintains a Standing Bid shall be notified by certified mail of any bid award to which his/her seniority entitles him/her, subject to regulatory requirements and contractual restrictions, if any. If the pilot does not accept and report for such position within thirty (30) days of his/her receipt, the pilot shall be deemed to have voluntarily resigned. B. During the period of such leave of absence, such pilots' Group Benefit and Pass/Reduced Fare transportation entitlement, if any, shall be the same as for any other pilot on personal leave pursuant to Section 18(A) of the New Basic Agreement. C. Pilots on leave shall have access to the grievance procedure pursuant to Section 21(B) of the New Basic Agreement to enforce the provisions of this Letter of Agreement. 4. The provisions of paragraphs 1, 2 and 3 of this Letter of Agreement shall not apply in the event that TWA places into revenue service an equipment type other than the B727, prior to the retirement of all TWA B727 aircraft, which requires a Flight Engineer. 5. Upon execution and ratification of the New Basic Agreement, this Letter of Agreement shall run in full force and effect concurrently with the New Basic Agreement. SO AGREED. For the Company: For the Association: /s/ /s/ - - ---------------------------------- ------------------------------ Terry Hayes, Director Douglas J. Gabel, Chairman Labor Relations TWA MEC Negotiating Committee /s/ /s/ - - ---------------------------------- ------------------------------ James F. Martin, J. A. Chronic, Chairman Sr. Vice President Human Resources TWA MEC /s/ ------------------------------ J. Randolph Babbitt, Dated: July 11, 1998 President 223 LETTER XX LETTER OF AGREEMENT between TRANS WORLD AIRLINES, INC. and THE AIR LINE PILOTS in the service of TRANS WORLD AIRLINES, INC. as represented by THE AIR LINE PILOTS ASSOCIATION INTERNATIONAL THIS LETTER OF AGREEMENT is made and entered into in accordance with the provisions of Title II of the Railway Labor Act, as amended, by and between TRANS WORLD AIRLINES, INC., its successors or assigns (hereinafter known as the "Company" or "TWA") and the Air Line Pilots in the service of TWA as represented by the AIR LINE PILOTS ASSOCIATION, INTERNATIONAL (hereinafter known as the "Association" or "ALPA"). WHEREAS the Company and the Association have negotiated a Letter of Agreement covering the Company's Training Center Seniority List Check Airmen/Simulator Instructors (the "INS LOA") to run concurrently with the Basic Agreement effective September 1, 1998. NOW, THEREFORE it is hereby agreed as follows: 1. General A. This Letter of Agreement ("the INS LOA") shall apply to pilots under the TWA-ALPA Agreement effective September 1, 1998 ("Basic Agreement") who are currently assigned to serve as TWA's Training Center Seniority List Check Airmen/Simulator Instructors ("INS pilots") or who become INS pilots. B. Pilots interested in selection as an INS pilot must be willing to commit to twenty-four (24) months in the service of the training department. Pilots interested in becoming an INS pilot must present a resume, including a memo of application supporting their qualifications, to the Managing Director-Flight Operations Training who will select the INS pilot instructors. C. The INS pilot job description includes such duties and assignments as required by the Managing Director-Flight Operations Training including simulator flight instruction for Captains, First Officers, Flight Engineers and new-hire pilots involving initial, transition, upgrade, proficiency and/or requalification training, differences training, check airmen simulator training, fill-in crew member for simulator training, and certification checks. Additionally, INS pilots may at his/her option be assigned such duties as: ground school classroom instruction, 224 LETTER XX, cont. contract training, aircraft test flights and temporary/special assignments. D. Applicability of the Basic Agreement and Letters of Agreement (1) All provisions of Section 1 apply to INS pilots. Other provisions of the Basic Agreement shall only apply to INS pilots as expressly set forth in this INS Letter of Agreement. (2) Letters of Agreement (LOA) to the Basic Agreement apply to INS pilots equally as "pilots", according to the terms of each LOA. When the term status, domicile, equipment or category is used in an LOA, it shall apply to an individual INS pilot according to his/her category bid award. (3) An INS pilot is a "pilot" for all purposes under Sections 2, 3, 17(B), 23, 24 and 27 of the Basic Agreement. Section 2(S) applies to Captain INS pilots (as defined herein) as "Captains". (4) Each INS pilot shall retain his/her category bid award under the Basic Agreement when assigned to a TWA Training Center however, INS pilots shall not be counted in a category for purposes of Sections 10(B)(7) and 12(A)(1) of the Basic Agreement. An INS pilot's category bid award shall be subject at all times to Sections 19 and 31(I), 31(J), 31(K), 31(P), and 31(R) of the Basic Agreement. An INS pilot shall be allowed to bid and qualify in another category in accordance with seniority and in conjunction with system bid messages. An INS pilot who is awarded another category bid award and chooses to remain an INS pilot shall have his/her category bid vacancy re-awarded, but shall retain all rights to the qualification training in seniority order and to the category bid award. In instances when such qualification is delayed by the Company, then such pilot shall be deemed to have attained such qualification for pay purposes under the Basic Agreement and will not be returned to service until qualified to fulfill his/her category bid award. (5) An INS pilot shall be considered a non-bid run holder for purposes of obtaining additional flying and OFR under Section 9 of the Agreement. (6) Sections 21 and 22 apply to the interpretation and enforcement of this INS LOA. Section 21(A) applies in the instance of discipline or discharge from the Company of an INS pilot. When an INS pilot is removed from service under Section 21(A), he/she shall continue to receive the applicable guarantee under this INS LOA for the remainder of the bid month. For any subsequent period the INS pilot is withheld from service, the Company may apply either the applicable INS guarantee provision or the pay provisions of Section 21(A). 225 LETTER XX, cont. (7) An INS pilot may be returned by the Company to his/her category bid award under the Basic Agreement for any reason. Such action shall not be considered as discipline and will not be subject to Sections 21(A) or 21(B) of the Basic Agreement. The INS pilot shall be advised by the fifth (5th) of the previous month of such return in order to exercise his/her monthly bid prerogatives pursuant to Section 9(B) of the Basic Agreement. An INS pilot may elect to return to his/her category bid award under the Basic Agreement after fulfilling his/her twenty-four (24) month commitment. In such cases the INS pilot shall give at least one (1) month's notice. (8) A pilot who may be utilized as an INS shall be notified by the fifth (5th) of the previous month of his/her INS status. (9) An INS pilot is a "regularly assigned pilot" for purposes of Section 25 of the Basic Agreement and is covered by Section 26 of the Basic Agreement. (10) INS pilots are "employees" within the meaning of Letter XIII of the Basic Agreement. E. An INS pilot who fails to qualify or maintain qualification as an INS pilot shall be returned to his/her category bid award under the Basic Agreement. 2. Definitions A. "Aircrew Program Designee" or "APD" means an INS pilot designated by the Federal Aviation Administration to perform airman certification checks. B. "Equipment type" or "equipment" means one of the equipment types defined by Section 31(X) and 31(FF) of the Basic Agreement. C. Flight Training Device ("FTD") means a non-motion simulator e.g., Flight Management System Trainer ("FMST"), Cockpit Procedures Trainer ("CPT") and Computer-based Training ("CBT"). D. "Instructor Classification" or "INS Classification" means the INS pilot's instruction equipment type, instructor status and training center domicile. For example, SKT/767/CAP INS pilot (is a Captain INS pilot instructing on the B757/B767/A321 at the St. Louis Training Center). E. "Instructor Daily Rate" or "INS Daily Rate" is five hours (5:00). F. Instructor status (1) A "Captain INS pilot" for compensation purposes and as otherwise stated herein means an INS pilot who is qualified and holds or is qualified and has held the status of Captain under the Basic Agreement. 226 LETTER XX, cont. (2) A "First Officer INS pilot" for compensation purposes and as otherwise stated herein means as INS pilot who is qualified and holds or is qualified and has held the status of First Officer under the Basic Agreement. (3) A "Flight Engineer INS pilot" for compensation purposes and as otherwise stated herein means an INS pilot who has completed initial operating experience as a Flight Engineer and holds at least the status of Flight Engineer under the Basic Agreement. G. "Monthly Guarantee" is the minimum number of hours to be paid to INS pilots for each month or part of a month of service, except when the INS pilot has vacation. H. "Override" means an additional percentage of compensation over and above the total monthly pay hours earned, not including pay hours earned through additional flying and OFR. I. "Section 4 pay rate(s)" means the composite hourly pay rate for INS pilots calculated at the longevity then prevailing pursuant to Section 4(A) and 4(B)(2) of the Basic Agreement by status as follows: Instructor Status Section 4 Status ----------------- ---------------- Captain INS pilot Captain First Officer INS pilot First Officer Flight Engineer INS pilot Flight Engineer J. "Training Center Domicile" means the Training Centers (e.g. in St. Louis, including Flight Safety International, (SKT) and JFK International Airport (JFT)). K. The following terms shall have the same meaning under the INS LOA as under the Basic Agreement: "Additional Flying" "Bid Month" or "month" "Captain" "Category", "Category Award" or "Category Bid Award" "Domestic" "First Officer" or "F/O" "Fixed Daily Rate" ("FDR") "Flight Engineer" or "F/E" "International" "Longevity" "Narrowbody" "OFR" (formerly Enhanced Trip Option) "Pilot" "Seniority" "Status" "Trip Add System" (TAS) "Volunteer Fly List" ("VFL") 3. Compensation for Base and Extra Workdays A. The INS pilot shall receive a minimum monthly guarantee equal to eighty-five hours (85:00). 227 LETTER XX, cont. B. INSs shall be paid the appropriate Section 4 composite pay, subject to paragraph (C)(1) or (D) below. C. Longevity Years Six and Beyond (1) The INS pilot instructing in a Captain, First Officer or Flight Engineer INS category shall receive Section 4 pay rates commensurate with his/her instructor status and the equipment that he/she is instructing on at the equipment rates then applicable under Section 4 of the Basic Agreement for the equipment type of instruction (as set forth below), plus a pay override of eight percent (8%). Instructor Status Section 4 Pay Rate ----------------- ------------------ B747 Capt. Small Widebody Capt. B747 F/O Small Widebody F/O B747 F/E Narrowbody F/E L10 Capt. Small Widebody Capt. L10 F/O Small Widebody F/O L10 F/E Narrowbody F/E B757/B767/A321 Capt. Small Widebody Capt B757/B767/A321 F/O Small Widebody F/O Narrowbody Capt. Narrowbody Capt. Narrowbody F/O Narrowbody F/O B727 F/E Narrowbody F/E (2) INS Flight Engineer with First Officer Qualification The INS Flight Engineer pilot who is in pay longevity years six (6) and beyond, and holds a First Officer qualification on a TWA aircraft, shall receive First Officer hourly pay rates commensurate with his/her pay longevity on the equipment that he/she possesses a First Officer qualification plus a pay override of eight percent (8%). D. Longevity Years 1-5 (1) The INS pilot who is in pay longevity years one (1) through five (5), inclusive, shall be paid at sixth (6th) year pay longevity rates on the equipment he/she is instructing on plus a pay override of eight percent (8%). (2) First Officer Qualification The INS pilot who is in pay longevity years one (1) through five (5), inclusive, and holds a First Officer qualification on a TWA aircraft, shall receive sixth (6th) year First Officer hourly pay on the equipment that he/she possesses a First Officer qualification plus a pay override of eight percent (8%). 228 LETTER XX, cont. E. An INS pilot shall be compensated for extra work days at the INS daily rate. Such compensation shall be above the monthly guarantee. 4. INS Pilot Work Schedule A. INS pilots will be assigned to an Instructor Classification and will be provided with a full monthly schedule by the twenty-fifth (25th) day of the month prior to the bid month. INS classification monthly assignments will be posted and promptly supplied to the System Schedule Committee. The base work days for an INS pilot shall be sixteen (16) total days in the month less duty free periods, which shall in no case be fewer than fourteen (14) twenty-four hours (24:00) duty free periods at their domicile/satellite. The base work days for an INS pilot designated as APD shall be fifteen (15) total days in the month less duty free periods, which shall in no case be fewer than fifteen (15) twenty- four hours (24:00) duty free periods at their domicile/satellite. Additionally, one (1) of the base work days of the INS pilot and the APD shall be used for a proficiency trip in accordance with paragraph 4(F)(2). B. The Company will staff sufficient INS pilots to cover all known Training Center requirements within the normal allotment of work days under 4(A) above. C. If a pilot accepts assignment as an INS pilot at any time other than the beginning of a bid month or is otherwise unavailable for work as an INS pilot for a full month, the INS pilot's work days will be prorated based on the number of days available for scheduling. D. An INS pilot work day shall consist of one (1) of the following: (1) A simulator session not greater in duration than as identified in Section 6(A)(3)(e) of the Basic Agreement, exclusive of briefing and debriefing sessions not to exceed a total of two hour and thirty minutes (2:30). (2) Two (2) Flight Training Device(s) (FTD) periods each consisting of a one hour (1:00) briefing and two hours (2:00) FTD period separated by a fifteen minute (:15) break. (3) A day an INS pilot is assigned to a special assignment. (4) A day scheduled for a standards/instructor meetings(s). (5) A day in training to become or maintain currency as an INS pilot (e.g., initial, CQT, ground school, simulator, or appendix H flying) or training to fulfill a category bid award pursuant to paragraph 1.D.(4) of this INS LOA. 229 LETTER XX, cont. (6) A day of temporary assignment duty including travel to or from temporary assignment. (7) Classroom instruction not to exceed six hours (6:00). (8) Test flight(s) of aircraft. The maximum duty time for all such flights within one duty period shall not exceed thirteen hours (13:00) continuous duty without crew consent. (9) Three (3) oral exams or two (2) ratings performed by an APD. (10) With the INS pilot's concurrence, any combination of the above listed activities combined in a single work day so as not to exceed eight hours (8:00). (11) A day scheduled for an annual or Continuing Qualification Training line evaluation check and/or international navigation check. (12) A day when the only required activity is scheduled travel to or from a temporary assignment. E. Additional Schedule Rules (1) If an INS pilot is scheduled for a work day as defined in paragraph 4.D. above, and such activity is canceled or interrupted after the work day commences, the INS pilot may be reassigned in accordance with paragraph 4.D.(10) above. (2) Sets of work days will be separated by twenty-four hour (24:00) duty free periods. (3) INS pilots will submit their requests for duty free periods, extra work days and other special days off for the following month by the twelfth (12th) day of the current month. Once duty free periods have been awarded, any change to such duty-free periods will require the consent of the INS pilot. INS pilot work schedules will be available in CAMS. An INS pilot may designate as inviolate ("golden") one block of consecutive duty-free twenty-four hour (24:00) periods, not to exceed six (6) periods. (4) An INS pilot shall not be scheduled for more than five (5) consecutive work days. When an INS pilot is scheduled for five (5) work days in a row, he/she shall not be scheduled for an aircraft test flight on the fifth day. (5) An INS pilot shall not be scheduled for more than nine (9) work days if there is only one (1) intervening duty-free period between sets of work days. (6) It is the INS pilot's responsibility to okay his/her daily schedule with the Training Center Scheduling Department. If the schedule is subsequently changed it is the responsibility of the Training Center Scheduling Department to notify the INS pilot of the change. 230 LETTER XX, cont. (7) An INS pilot may indicate, along with the request for duty-free periods as set forth in paragraph E.(3), his/her availability for extra work day(s) during any block of duty-free periods or during any scheduled vacation period. (a) All extra work day(s) assignments shall be offered in seniority order within an Instructor classification except when the Company determines that student needs dictate otherwise. (b) An INS pilot awarded an extra work day will be compensated at the instructor daily rate and shall be paid above the INS guarantee. (c) An INS pilot scheduled for such extra work day(s) will be paid for the extra work day(s) regardless if actually utilized. (d) After the INS pilot work schedules are published, if the need arises for an extra work day(s), an INS pilot who has indicated his/her availability will be offered such extra work day(s) in seniority order. If the requirement for extra work day(s) still exists thereafter, such extra work day(s) will be offered to qualified INS pilot(s) in seniority order. F. Miscellaneous (1) Temporary/Special Assignments (a) The Company may offer INS pilots temporary assignments or duty away from his/her assigned training center domicile. For such assignments, INS pilot lodging facilities shall be at existing facilities for domestic lodging in accordance with Section 7(A)(3) of the Basic Agreement or, where no lodging facility has been selected or the proximity of the existing lodging facility is such that utilizing existing facilities would hamper efficient completion of the temporary assignment, then the hotel selected shall be comparable in quality and comfort to the hotel selected in conformance with Section 7 of the Basic Agreement. International lodging facilities shall be in accordance with Section 7(B) of the Basic Agreement. (b) The Company shall provide round-trip class B transportation to and from such temporary assignments. In addition, an INS pilot who accepts a temporary assignment duty shall receive round trip ACM-13 privileges from and to the temporary assignment location during his/her duty free period within the temporary assignment. The Company shall provide the INS pilot one (1) travel day before or after such temporary 231 LETTER XX, cont. assignment. If the location and/or work schedule of the temporary assignment prevents the INS pilot from both traveling to the assignment on the first day of scheduled instruction and returning on the last day of scheduled instruction, the INS pilot shall be entitled to two (2) travel days for that single temporary assignment. (c) A single INS pilot temporary assignment shall consist of no more than (including days off within the assignment but excluding travel days): (i) One (1) standard training program or curriculum (i.e. initial, recurrent, requalification, transition, upgrade, or differences training) with one (1) set of students (although instructors may switch students for final checkrides), not to exceed eleven (11) consecutive calendar days; except that, if loft training is required as part of the training program, the temporary assignment shall not exceed fifteen (15) consecutive calendar days. (ii) If the temporary assignment is composed of checkrides/rating rides only, the temporary assignment shall not exceed eleven (11) consecutive calendar days. (d) The Company may offer an INS pilot a special assignment to operate an aircraft test flight. The INS pilot may decline the test flight assignment for personal reasons. Such flights will comply with all applicable Federal Air Regulations. If necessary, Class B transportation will be provided to and from the test flight activity in accordance with Section (3) of the Basic Agreement. (2) INS pilots are required to fly a minimum of one (1) trip every ninety (90) days ("proficiency trip") on the equipment on which he/she is instructing to maintain his/her qualifications and in compliance with FAR 121, Appendix H. The INS pilot who is instructing in a category that is different from his/her line category shall utilize the provisions of Section 5(E) of the Agreement to acquire such proficiency trip. An INS pilot may utilize a trip departing any domicile to accomplish such proficiency trip including during the INS pilot's vacation period. If necessary Class B transportation will be provided. In accordance with paragraph 4.A. above, an INS pilot and the APD will utilize one of his/her work days for such proficiency trip. A proficiency trip flown during the pilot's vacation period will not be considered a work day and will not be paid above the INS guarantee. 232 LETTER XX, cont. Additionally, all such flying under this paragraph F.(2) shall not be considered additional flying or OFR unless it is flown in the INS pilot's category bid award and is assigned in accordance with additional flying or OFR under the Basic Agreement. 5. Additional Flying/OFR A. An INS pilot may access open time only in accordance with the provisions of Section 9(F), (H) and (J) of the Basic Agreement within his/her category bid award. Such additional/OFR flying shall only be flown during his/her scheduled days off or vacation. B. Additional flying and OFR will be paid at the hourly rate of pay commensurate with the INS pilot's category bid award and shall be paid above INS guarantee. INS pilot override and/or longevity increase in paragraph 3.C. and D. above shall not be applied to such flying. Except as provided in this Letter of Agreement, all provisions of the Basic Agreement that pertain to a category bid pilot shall apply to an INS pilot when the INS pilot is flying an additional flying or OFR trip. C. No INS pilot shall be required to perform additional flying. Sections 9(F)(4) and 9(K)(6)of the Basic Agreement shall apply equally to INS pilots as other pilots. D. An INS pilot may acquire an OFR trip(s). However an INS pilot may not offer a trip through OFR. A selected trip must not conflict with any existing assignments and is subject to Section 11 of the Basic Agreement. 6. Expenses A. Expenses for additional flying and OFR shall be in accordance with Section 7(A) and 7(B) of the Basic Agreement. B. When assigned to other temporary duty or assignment away from the INS pilot's Training Center domicile, INS pilots shall receive reasonable and actual expenses. 7. Seniority and Leaves of Absence A. INS pilots shall continue to accrue seniority and longevity under the Basic Agreement. B. Leaves of absence for INS pilots are permitted only after the INS pilot returns to service under the Basic Agreement and pursuant to Section 18 of the Basic Agreement. C. The furlough of any pilot(s), including an INS pilot(s) shall be pursuant to Section 20 of the Basic Agreement. An INS pilot returning to service under the Basic Agreement from a Training Center domicile shall not be considered furloughed from such Training Center domicile. 233 LETTER XX, cont. 8. Vacation and Urgent Personal Business A. Pay and credit for an INS pilot on vacation shall be at the fixed daily rate. B. Vacation eligibility and entitlement shall be in accordance with Section 14(A) and 14(B) respectively of the Basic Agreement. C. Vacation Bidding INS pilots shall be covered by sections 14(D), 14(E), 14(F), 14(G), 14(H) and 14(I) of the Basic Agreement except for such purposes, the following shall apply: (1) The term "INS classification" replaces "category". (2) The date "September 30 of the current year" replaces "January 1 of the year the vacation is to be taken". (3) The term "Training Center domicile" replaces "domicile". (4) The term "Managing Director-Flight Operations Training" replaces "Regional Chief Pilot". (5) The term "instructor status" replaces "status". D. An INS pilot may offer to sell back his/her vacation to the Company pursuant to Section 14(I) of the Basic Agreement except that the INS pilot shall be paid at the fixed daily rate. E. The Urgent Personal Business provisions defined in Section 2 of the Basic Agreement shall be available to INS pilots except that compensation for such day(s) shall be at the fixed daily rate. 9. Sick Leave Sick leave shall be paid, and the INS pilot's Section 15 Sick Leave bank shall be charged, at the instructor daily rate when the INS pilot is unable to report for an INS pilot work day as a result of actual sickness or injury. 10. Agreement Precedence The INS LOA represents the exclusive pay and work rules applicable to INS pilots and take precedence over any prior existing letters, policy statements, memoranda, other writings or unwritten practices. 11. This INS LOA is subject to MEC/membership ratification/rejection ("ratification"). 234 LETTER XX, cont. 12. Duration Upon ratification, this INS LOA shall be effective on September 1, 1998 and shall thereafter run in full force and effect concurrently with the Basic Agreement. SO AGREED. For the Company: For the Association: /s/ /s/ - - ------------------------------ ------------------------------ Terry L. Hayes, Director Douglas J. Gabel, Chairman Labor Relations TWA MEC Negotiating Committee /s/ /s/ - - ------------------------------ ------------------------------ Philip B. Whitcomb J. A. Chronic, Chairman Vice President TWA MEC Labor Relations /s/ ------------------------------ J. Randolph Babbitt, President Dated: July 7, 1998 235 LETTER XXI LETTER OF AGREEMENT between TRANS WORLD AIRLINES, INC. and THE AIR LINE PILOTS in the service of TRANS WORLD AIRLINES, INC. as represented by THE AIR LINE PILOTS ASSOCIATION INTERNATIONAL THIS LETTER OF AGREEMENT is made and entered into in accordance with the provisions of Title II of the Railway Labor Act, as amended, by and between TRANS WORLD AIRLINES, INC., its successors or assigns (hereinafter known as the "Company" or "TWA") and the Air Line Pilots in the service of TWA as represented by the AIR LINE PILOTS ASSOCIATION, INTERNATIONAL (hereinafter known as the "Association" or "ALPA"). WHEREAS the Company and the Association have negotiated a Letter of Agreement covering the Company's Line Instructor Pilots and Line Standards Pilots (the "LIP/LSP LOA") to run concurrently with the Basic Agreement effective September 1, 1998; NOW THEREFORE the Company and the Association hereby agree as follows: 1. Line Instructor Pilots ("LIP") and Line Standards Pilots ("LSP") are "pilots" covered by the TWA-ALPA Agreement effective September 1, 1998 (herein "Basic Agreement"). The Basic Agreement shall apply to the LIP and LSP except as specifically provided herein. 2. This LIP-LSP LOA supersedes and replaces all previous agreements relating to TWA's Line Check Airmen. 3. LIPs and LSPs, except as provided herein, shall perform line checks, evaluations and operating experience only in his/her category bid award. Additionally, LIPs and LSPs who hold Captain bid awards under the Basic Agreement may line check, evaluate and perform operating experience with First Officers and First Officer trainees. WHEREAS the Company and the Association have agreed upon pay and work rules for TWA Line Check Airmen/Instructors; NOW, THEREFORE it is hereby agreed that the following provisions shall apply to LIPs: 1. Compensation for Base and Extra Workdays A. The LIP shall receive a minimum monthly guarantee equal to eighty-five hours (85:00)in his/her category, plus a pay override of eight percent (8%). 236 LETTER XXI, cont. B. LIPs shall be paid the appropriate Section 4 composite pay, including international override if applicable, and subject to paragraph (1)(C) below. C. Longevity Years 1-5 (1) The LIP who is in pay longevity years one (1) through five (5), inclusive, shall be paid at sixth (6th) year pay longevity rates on the equipment he/she is instructing on plus a pay override of eight percent (8%). (2) First Officer Qualification The LIP who is in pay longevity years one (1) through five (5), inclusive, and holds a First Officer qualification on a TWA aircraft, shall receive sixth (6th) year First Officer composite pay on the equipment that he/she possesses a First Officer qualification plus a pay override of eight percent (8%). D. When the LIP is required to occupy the ACM seat while line checking or evaluating a pilot(s)/flight engineer(s), the LIP shall receive full pay and credit for all flight activity. E. Any non-flying activities performed by a LIP on a day in addition to the base work hours as provided in paragraph (3)(A) below shall be considered an extra work day and paid above guarantee at five hours (5:00) per day in accordance with paragraph (1)(B) above. F. Any flying activities performed by a LIP while performing operating experience and/or line checking or evaluating a pilot/flight engineer in addition to the base work hours as provided in paragraph (3)(A) below shall be paid above guarantee in accordance with paragraph (1)(B) above. G. Pilots in training to become a LIP shall receive five hours (5:00) pay and credit per day for each day of non-flying activities commensurate with his/her pay longevity for his/her current category bid award. Such activity shall not be subject to the eight percent (8%) override. 2. First Officer Bidding and Qualifications for LIP Flight Engineers. A LIP Flight Engineer shall be allowed to qualify as a First Officer on a TWA aircraft in accordance with seniority and in conjunction with system bid messages. A LIP Flight Engineer who is awarded a First Officer category bid award, and chooses to remain a LIP Flight Engineer, shall have his/her First Officer category bid award re-awarded, but shall retain all rights to the First Officer training in seniority order and the bid award. In instances when such qualification(s) is delayed by the Company, then such pilot shall be deemed to have attained First Officer qualification for pay purposes in paragraph (1)(B) or (1)(C) above, whichever is greater. 237 LETTER XXI, cont. 3. LIP Work Schedule A. The work month of a LIP shall equal his/her initial bid run projection. With the approval of the Regional Chief Pilot, the LIP may exceed the average line value (ALV) for his/her category when performing operating experience and/or line checking and evaluating activities. B. Except as provided in paragraph (4)(A) below and notwithstanding Section 9(D) of the Basic Agreement, if a LIP monthly projection falls below his/her category guarantee, he/she may be required to perform LIP duties up to the base credit hours of his/her initial bid run projection. C. A LIP work day may include attending a required Standards Meeting. Such activity will be compensated at five hours (5:00) pay and credit. 4. Additional Schedule Rules A. The LIP may be restricted from using BLIP and/or offering a trip into open time (OFR) when a pilot/flight engineer is scheduled to receive operating experience with the LIP or to be line checked or evaluated by the LIP. When the LIP trip offered into OFR is dropped, the projected pay and credit, and the minimum guarantee of the offering pilot will be reduced by the amount of the pay and credit hours of the dropped trip. The LIP shall not be subject to balance as a result of such dropped trip. B. With the approval of the Regional Chief Pilot, a LIP may remain "on LIP status" for a period of six (6) months without interruption. 5. Additional/OFR Flying A. The LIP may access OFR and additional flying through the Trip Add System (TAS) and/or the Volunteer Fly List (VFL) in accordance with Section 9 of the Basic Agreement. B. Additional flying, through TAS and/or VFL, and trips obtained through OFR shall offset the eighty-five hour (85:00) guarantee. The LIP will receive the eight percent (8%) pay override above the eighty-five (85) hour guarantee only when the following events occur: (1) The LIP is performing operating experience and/or line checking or evaluating a pilot/flight engineer; and (2) The LIP has performed actual services equivalent to eighty-five (85) hours. 6. The LIP shall be considered a "bid run pilot" for all other purposes under the Basic Agreement and shall be considered a "regularly assigned pilot" for purposes of Section 25 of the Basic Agreement. 238 LETTER XXI, cont. WHEREAS the Company and the Association have agreed upon pay and work rules for TWA Line Standards Pilots; NOW, THEREFORE it is hereby agreed that the following provisions shall apply to LSPs: 1. Compensation for Base and Extra Workdays A. The LSP shall receive a minimum monthly guarantee equal to eighty-five hours (85:00) in his/her category, plus eight percent (8%) pay override. B. LSPs shall be paid the appropriate Section 4 composite pay, including international override if applicable, and subject to paragraph (1)(C) below. C. Longevity Years 1-5 (1) The LSP who is in pay longevity years one (1) through five (5), inclusive, shall be paid at sixth (6th) year pay longevity rates on the equipment he/she is instructing on plus a pay override of eight percent (8%). (2) First Officer Qualification The LSP who is in pay longevity years one (1) through five (5), inclusive, and holds a First Officer qualification on a TWA aircraft, shall receive sixth (6th) year First Officer composite pay on the equipment that he/she possesses a First Officer qualification plus a pay override of eight percent (8%). D. Any non-flying activities performed by a LSP on a day in addition to the base work hours as provided in paragraph (3)(A) below shall be an extra work day and paid above guarantee at five hours (5:00) per day in accordance with paragraph (1)(B) above. E. Any flying activities performed by a LSP while performing operating experience and/or line checking or evaluating a pilot/flight engineer in addition to the base work hours as provided in paragraph (3)(A) below shall be paid above guarantee in accordance with paragraph (1)(B) above. F. Pilots in training to become a LSP shall receive five hours (5:00) pay and credit per day commensurate with his/her pay longevity for his/her current category bid award. Such activity shall not be subject to the eight percent (8%) override. G. When the LSP is required to occupy an ACM seat while line checking or evaluating a pilot/flight engineer, the LSP shall receive full pay and credit for all flight activity. H. The activities in paragraph(s) (4)(A) and (5) below shall not be restricted by the base month and shall be paid above the LSP guarantee. 239 LETTER XXI, cont. 2. First Officer Bidding and Qualifications for LSP Flight Engineers. A LSP Flight Engineer shall be allowed to qualify as a First Officer on a TWA aircraft in accordance with seniority and in conjunction with system bid messages. A LSP Flight Engineer who is awarded a First Officer category bid award, and chooses to remain a LSP Flight Engineer, shall have his/her First Officer category bid award re-awarded, but shall retain all rights to the First Officer training in seniority order and the bid award. In instances when such qualification is delayed by the Company, then such pilot shall be deemed to have attained First Officer qualification for pay purposes in paragraph (1)(B) above. 3. LSP Work Schedule A. The work month of the LSP shall equal ALV plus or minus five hours (5:00). With the approval of the Regional Chief Pilot, the LSP may exceed ALV when performing operating experience and/or line checking activities. B. A LSP work day may include attending a required Standards Meeting. Such activity will be compensated at five hours (5:00) pay and credit. 4. Additional Schedule Rules A. The LSP may, with the approval of the Regional Chief Pilot or the Assistant Regional Chief Pilot, utilize the provisions of Section 5(E)(1) of the Basic Agreement. B. The LSP will be restricted from using BLIP. C. The LSP may access additional flying and OFR in accordance with Section 9 of the Agreement. D. With the approval of the Regional Chief Pilot, a LSP may remain "on LSP status" for a period of six (6) months without interruption. 5. Additional Compensation Rules Additional flying and OFR shall offset the eighty-five hour (85:00) guarantee. The LSP will receive the eight percent (8%) pay override above the eighty-five hour (85:00) guarantee only when the following events occur: A. The LSP is performing operating experience and/or line checking or evaluating a pilot/flight engineer; and B. The LSP has performed actual services equivalent to eighty- five hours (85:00). 6. Sick Leave The definition of "instructor daily rate" of the Training Center Check Airmen/Simulator Instructors Letter of Agreement shall apply to this provision. Sick leave shall be paid, and the LSP Section 15 Sick Leave bank shall be charged, at the instructor daily rate not to exceed eighty-five hours (85:00) when the LSP is unable to 240 LETTER XXI, cont. report for a LSP work day as a result of actual sickness or injury. 7. A LSP shall be considered a "non-bid run pilot" and not a "bid run pilot" for all purposes under the Agreement. Additionally, LSP shall be considered a "regularly assigned pilot" for purposes of Section 25 of the Agreement. Ratification and Duration 1. This LIP/LSP Letter of Agreement is subject to MEC and/or membership ratification/rejection ("ratification"). 2. Upon ratification, this LIP/LSP Letter of Agreement shall be effective September 1, 1998 and shall thereafter run in full force and effect concurrently with the Basic Agreement. SO AGREED. For the Company: For the Association: /s/ /s/ - - ------------------------------- -------------------------------- Terry L. Hayes, Director Douglas J. Gabel, Chairman Labor Relations TWA MEC Negotiating Committee /s/ /s/ - - ------------------------------- -------------------------------- Philip B. Whitcomb J. A. Chronic, Chairman Vice President TWA MEC Labor Relations /s/ -------------------------------- J. Randolph Babbitt, President Dated: July 7, 1998 241 LETTER XXII LETTER OF AGREEMENT between TRANS WORLD AIRLINES, INC. and THE AIR LINE PILOTS in the service of TRANS WORLD AIRLINES, INC. as represented by THE AIR LINE PILOTS ASSOCIATION INTERNATIONAL THIS LETTER OF AGREEMENT is made and entered into in accordance with the provisions of Title II of the Railway Labor Act, as amended, by and between TRANS WORLD AIRLINES, INC., its successors or assigns (hereinafter known as the "Company" or "TWA") and the Air Line Pilots in the service of TWA as represented by the AIR LINE PILOTS ASSOCIATION, INTERNATIONAL (hereinafter known as the "Association" or "ALPA"). WHEREAS the Company and the Association have negotiated a Letter of Agreement covering the Company's Training Center Seniority List Check Airmen/Simulator Instructors (the "INS LOA"). NOW, THEREFORE it is hereby agreed as follows: A. General 1. Upon ratification of the new CBA, the Company may employ not more than twenty (20) non-seniority list simulator instructors. Effective one (1) day prior to the amendable date of the new CBA, the Company may employ a total of thirty (30) non-seniority list simulator instructors. 2. Non-seniority list simulator instructors shall not perform any flight duty as a crew member and shall not train pilots in Company aircraft. 3. Non-seniority list simulator instructors must be trained by and for TWA. However, non-seniority list simulator instructors will not line check or evaluate TWA pilots. 4. All non-seniority list simulator instructors, including former TWA pilots, shall be deemed management employees and shall not be subject to the provisions of the Basic Agreement or the INS LOA. 5. In the event TWA furloughs one or more pilots from the System Seniority List, non-seniority list instructors shall be restricted from simulator instruction for the duration of the furlough. 242 LETTER XXII, cont. B. Qualifications 1. Non-seniority list simulator instructors must possess the minimum requirements set forth by the Federal Air Regulations and the Company. 2. Non-seniority list simulator instructors must be rated or rateable on the equipment to be utilized. C. Former TWA employees who possess the requisite qualifications shall have a preferential opportunity for an interview over non- TWA applicants. D. The Company shall not employ an outside contract training Company/organization. E. Upon execution, this Letter of Agreement shall run in full force and effect concurrently with the Basic Agreement effective September 1, 1998. SO AGREED. For the Company: For the Association: /s/ /s/ - - ---------------------------------- ------------------------------- Terry Hayes, Director Douglas J. Gabel, Chairman Labor Relations TWA MEC Negotiating Committee /s/ /s/ - - ---------------------------------- ------------------------------- James F. Martin, J. A. Chronic, Chairman Sr. Vice President Human Resources TWA MEC /s/ ------------------------------- J. Randolph Babbitt, President Dated: July 6, 1998 243 LETTER XXIII LETTER OF AGREEMENT between TRANS WORLD AIRLINES, INC. and THE AIR LINE PILOTS in the service of TRANS WORLD AIRLINES, INC. as represented by THE AIR LINE PILOTS ASSOCIATION INTERNATIONAL THIS LETTER OF AGREEMENT is made and entered into in accordance with the provision of Title II of the Railway Labor Act, as amended, by and between TRANS WORLD AIRLINES, INC., its successors or assigns (hereinafter known as the "Company" or "TWA") and the Air Line Pilots in the service of TWA as represented by the AIR LINE PILOTS ASSOCIATION, INTERNATIONAL (hereinafter known as the "Association" or "ALPA"). WHEREAS TWA, ALPA, IAM (International Association of Machinists), IFFA (Independent Federation of Flight Attendants), and TWU (Transport Workers Union of America) have agreed upon certain changes to the TWA free and reduced rate transportation policy as a resolution of a TWA-IAM System Board of Adjustment arbitration; NOW THEREFORE it is hereby agreed as follows: 1. The terms of the attached TWA Policy (herein "TWA Policy") are hereby incorporated as an amendment to the TWA-ALPA Agreement effective September 1, 1994 (herein "the Agreement"). 2. Upon the implementation of the TWA Policy, which will become effective on September 1, 1996, the Letter of Agreement dated August 31, 1994 (Exhibit #64) relating to TWA free and reduced rate transportation shall be null and void and without continued force or effect. 3. This Letter of Agreement is effective upon execution and shall remain in full force and effect concurrently with the Agreement. SO AGREED: For the Company: For the Association: /s/ /s/ - - ----------------------------- ---------------------------------- Philip B. Whitcomb, D.R. Jacobs Staff Vice President Chairman Labor Relations TWA MEC /s/ ---------------------------------- J. Randolph Babbitt, Dated: May 21, 1996 President 244 LETTER XXIII(A) TWA FREE AND REDUCED RATE TRANSPORTATION POLICY All rules and regulations governing the administration of free and reduced rate transportation including those cited in this section, continue in full force and effect. They will be strictly enforced and adhered to, and violators may be subject to revocation of pass privileges or immediate dismissal. 1. Vacation Pass Policy -------------------- A) Increase allotment from one (1) to four (4) Vacation Passes per calendar year for active employees and eligible family members provided the employee has completed one full year of service prior to January 1st and has earned not less than one-half (1/2) of the full year vacation allotment commensurate for his/her job classification and seniority. Employees with less than this requirement will continue to receive one (1) Vacation Pass per calendar year for employee and eligible family members. The yearly allotment of Vacation Passes must be exhausted within that calendar year. B) Applicable coach and first class service charges will be assessed for all Vacation Passes. Employees with more than fifteen (15) years of service do not pay coach charges. C) Vacation Passes will NOT be valid for reissue unless employee has earned only one (1) vacation pass in the calendar year. In this instance, only totally unused passes may be reissued. D) Refunds are allowed on totally unused round-trip or one-way coupons including a totally unused one-way coupon. No refund will be made on charges of partially used passes when the coach charge for sector used equals that of the charge paid. E) Request for Vacation Pass(es) shall include all eligible family members for efficiency in administrative handling. F) All other rules and regulations regarding Vacation Passes shall remain unchanged. 2. Commuter Passes --------------- A) Active employees with less than fifteen (15) years of service may request Class 7 service charge trip passes to be used for travel from the employee's home (nearest airport served by TWA) to employees domicile (for flight crew employees) or work station (for ground employees) for reporting to/from work ONLY. 245 B) CLASS 7 SERVICE CHARGE TRIP PASSES WILL ONLY BE ISSUED BY THE EMPLOYEE'S REGULAR PASS ISSUING OFFICE UPON REQUEST AND WILL REQUIRE TEN (10) BUSINESS DAYS FOR PROCESSING. PASSES WILL BE ISSUED ON FORM 800 ONLY. PAYROLL DEDUCTION FORM 807 MAY NOT BE USED. C) Once the form 800 has been issued, city pair routings may not be changed. D) The employee's home will be defined as the address reflected on official Company records (Form A-74). E) Applicable coach charges will be collected by the Pass Issuing Office. Employees may elect to payroll deduct coach charges using Form 800, or by using a personal check. First Class charges my be paid only by payroll deduction using Form T-4229. F) Family members are not eligible for class 7 service charge trip passes. 3. ACM/XCAP Authority - Active Eligible Employees ---------------------------------------------- A) Current procedures for travel pursuant to the ACM/XCAP authority will continue for the actual cockpit or cabin crew seat(s) as governed by the Flight Operations Policy Manual and In-Flight Services Manual. B) Active eligible employees are defined as active pilots, flight attendants, and flight dispatch officers in the service of Trans World Airlines, Inc. C) Alternatively, active eligible employees may elect to list as "XCREW" using the current PARS standby listing procedures. Only active eligible employees qualify for this type of travel - this does not extend to eligible family members. Active eligible employees traveling as "XCREWs" will be boarded last after all other standby passengers including EEE and OALs. D) Active eligible employees who list and verify as "XCREW" are not permitted to list using any other standby code. In addition, those active eligible employees who sign-up for the ACM/XCAP seat(s) in accordance with 3(A) above, will not be eligible to list for the XCREW classification. E) Boarding of active eligible employees within the XCREW classification will be based solely on Company seniority. No other boarding priority will apply to employees in this classification. F) Employees of other airlines will not be eligible to participate in this program. G) Active eligible employees traveling under XCREW will be boarded in coach class only. First Class travel is not permitted under any circumstances. H) XCREW travel is service charge free in coach class and active eligible employees will be required to complete form 0-3322 prior to boarding aircraft. 246 LETTER XXIV LETTER OF AGREEMENT between TRANS WORLD AIRLINES, INC. and THE AIR LINE PILOTS in the service of TRANS WORLD AIRLINES, INC. as represented by THE AIR LINE PILOTS ASSOCIATION INTERNATIONAL THIS LETTER OF AGREEMENT is made and entered into in accordance with the provisions of Title II of the Railway Labor Act, as amended, by and between TRANS WORLD AIRLINES, INC., its successors or assigns (herein the "Company" or "TWA") and the Air Line Pilots in the service of TWA as represented by the AIR LINE PILOTS ASSOCIATION, INTERNATIONAL (herein the "Association" or "ALPA"). WHEREAS the Company and the Association have agreed to certain amendments to Sections 1-31 and the Letters of Agreement to the Basic Agreement effective September 1, 1994 (said new agreements are referred to herein alternatively as "the Basic Agreement effective September 1, 1998" or "the New Basic Agreement"); and WHEREAS the Company and the Association have agreed to certain amendments to the Training Center Check Airmen and Simulator Instructors Letter of Agreement (herein "the INS LOA"); and WHEREAS the Company and the Association have agreed to certain amendments to the Letter of Agreement covering the Company's Line Instructor Pilots and Line Standards Pilots (herein "the LIP/LSP LOA"); and WHEREAS all amended provisions and new agreements ("tentative agreements") are attached hereto; and WHEREAS the Company and the Association have agreed to certain provisions regarding the implementation of the above mentioned agreements; and WHEREAS the above mentioned agreements are subject to the Association's ratification procedures; NOW THEREFORE the parties hereby agree as follows: Ratification ------------ 1. The Basic Agreement effective September 1, 1998, the INS LOA, the LIP/LSP LOA and paragraphs 2-11 of this Letter of Agreement are together subject to ratification/rejection by the TWA Master Executive Council and/or the TWA ALPA membership (herein "ratification", if approved). In the event that these tentative agreements are rejected by ALPA, each party reserves its rights to withdraw and/or amend the 247 LETTER XXIV, cont. proposals tentatively agreed to and attached to this Letter of Agreement. Preferential Bidding -------------------- 2. Sections 9, 10, 11, 12 and 28 of the New Basic Agreement shall permanently replace such respective provisions of Exhibit 2 to the Permanent Implementation Letter of Agreement (herein "the PI LOA"). All other provisions of the PI LOA shall remain in full force and effect concurrently with the New Basic Agreement. Workrule Implementation ----------------------- 3. Pilots restricted from bid awards by the terms of Section 6(D), 6(E) and 6(G) of the Basic Agreement effective September 1, 1994 (herein "the 1994 Basic Agreement") shall continue to be governed by the terms of such provisions after the date of ratification of the New Basic Agreement. The restrictions of Section 6(C) and 19(K) of the New Basic Agreement shall be applied prospectively. New Narrowbody Aircraft ----------------------- 4. Section 4(D)(7) of the 1994 Basic Agreement shall be deemed to have been satisfied with regard to the introduction of the A319/320/321 and B737 equipment types. 5. Upon introduction, the A319/A320/A321 and all models of the B737 shall be considered separate equipment types for purposes of permanent vacancy and monthly bidding under Sections 19 and 9, respectively, of the New Basic Agreement. Letters of Agreement and Publication of the New Basic Agreement --------------------------------------------------------------- 6. The Letter of Agreement of December 18, 1985 between J. W. Hoar for TWA and Captain Angelo Marchione for ALPA (Letter X) and Letter XIV to the 1994 Basic Agreement shall be of no further force or effect after August 31, 1998. 7. Letter IV to the 1994 Basic Agreement shall be of no further force or effect after August 31, 1998. 8. The following agreements published with the 1994 Basic Agreement shall be of no further force or effect after August 31, 1998: Letter V (International Relief Officer) Letter VIII (Domestic Satellite Agreement) Letter XII (Flex Cap/Furlough Protection Letter) Letter XV (Triple EEE Program) Letter XVI (Passes for Furloughed Pilots) Letter XVIII (B727 Simulator Use Letter) Letter XXIII (B747 IRO Crew Rest Letter) Letter XXIV (B767 Crew Rest Letter) Letter XXV (Agreement in Principle, dated August 31, 1994) Progression Agreement 757 Cabin Door Training Pay Relief Line Reserve Inversals 248 LETTER XXIV 9. The INS LOA, the LIP/LSP LOA, the Letter of Agreement of May 26, 1996 relating to the TWA Free and Reduced Rate Transportation Policy, the Amended Letter XI, the Amended Letter XXVII and the other remaining Letters (not mentioned by paragraphs 7., 8., and 9. above) to the 1994 Basic Agreement shall be published with the New Basic Agreement. Other new letters and Letters of Agreement may also be published by mutual agreement pursuant to paragraph 10. below. 10. The parties shall meet within thirty (30) days after ratification to make final preparations for publication of the New Basic Agreement. 11. Upon ratification, this Letter of Agreement shall run in full force and effect concurrently with the New Basic Agreement. SO AGREED. For the Company: For the Association: /s/ /s/ - - ----------------------------- ---------------------------------- Terry L. Hayes, Director Douglas J. Gabel, Chairman Labor Relations TWA MEC Negotiating Committee /s/ /s/ - - ----------------------------- ---------------------------------- Philip B. Whitcomb J. A. Chronic, Chairman Vice President TWA MEC Labor Relations /s/ ---------------------------------- J. Randolph Babbitt, President Dated July 11, 1998 249 [LOGO] MEMORANDUM AIR LINE PILOTS ASSOCIATION TWA PILOTS' MASTER EXECUTIVE COUNCIL - - ----------------------------------------------------------------------- DATE: September 1, 1998 TO: ALL TWA PILOTS FROM: REPRESENTATION DEPARTMENT SUBJECT: Availability of other Letters of Agreement and Certain MEC Resolutions - - ----------------------------------------------------------------------- There have been occasions in the past when pilots have questioned if all the "Letters of Agreement" are printed with the Collective Bargaining Agreement. With this new Agreement, we have selected the Letters of Agreement which we believe are relevant and useful for pilots to have available on a day to day basis. There are, however, several hundred Letters of Agreement on file at the TWA MEC office dating back to the 1950's. Some have only limited application or have been superceded by subsequent agreements. It has been our practice that any and all Letters of Agreement are available to pilots for review at the offices of the TWA MEC. Also, the MEC Resolution(s) governing the distribution of stock and/or cash payments pursuant to Letter XVII is available for review. You may obtain them by writing and requesting the specific document(s) you need. Please address your correspondence to: TWA MEC REPRESENTATION OFFICE 500 NORTHWEST PLAZA - SUITE 1200 ST. ANN, MO 63074-2226 TEL: 314-770-8500 FAX: 314-770-8597 250 TWA PILOTS' COLLECTIVE BARGAINING AGREEMENT INDEX A Section Page ------- ---- Accident Insurance 24(G) 165 Acute Care Drug Plan 24(A)(8) 160 Accrual, Sick Leave 15(A)(B) 103 ACM, Domestic 3(C) 16 International 3(D) 16 ACM Dress Code 3(E) 17 Active Pay Status, defined 31(A) 175 Activity Conflicts 9(F)(5) 60 Additional flying, defined 31(B) 175 Affiliate, defined 1(H)(4) 11 Agency Shop, Appeals 25(D) 167 Delinquency 25(B) 166 Agreement, Copies 2(E) 12 Basic, defined 31(D) 175 Dates and Duration 30 174 Precedence 29 173 Airborne Integrated Data System (AIDS) LOA V 188 Airport Office 2(T) 15 ALPA Business 2(O) 14 ALPA Flight Pay Loss Make-Up 9(F)(2)(c) 58 ALPA Securities LOA XIII 206 Alternate Month Job Sharing Program 18(G) 116 Ambassador Club 2(S) 15 Annual Manpower Planning Message 19(A)(8) 120 Annual Seniority Realignment Bid 19(D)(1) 122 Appeal to System Board 21(C) 141 Assignment, 19(C) 121 Guarantee 5(A) 25 Reserve officer 19(I) 131 Temporary 19(F) 129 ATR Aircraft LOA XVI 217 Automated Report 9(E)(2)(e) 55 Average Line Value, defined 31(C) 175 Averting vacancies and displacements 19(H) 131 Awarding of Permanent Vacancies 19(D) 122 B B-727 Flight Engineer LOA XIX 222 Balance Avoidance 9(D)(3) 54 Balancing, 9(D) 52 Class A, B, M 9(D) 52 Green, Yellow, and Red Time 9(H) 61 Involuntary and Voluntary 9(D) 52 Bank, Positive/Negative 10(F) 74 Beard, Prohibited 2(N) 14 Benched Pilots 6(A)(4) 30 Bid Package, 9(B) 46 Monthly Awards 9(C) 48 Bid Run Pilot, defined 31(F) 175 Bids Monthly Awards 9(C) 48 Bids Permanent 19 120 Age Fifty Bypass Option 19(D)(3)(a) 123 Age Forty-five Bypass Option 19(D)(3)(b) 124 251 Contingent Pilots 19(D)(4) 124 Equipment/Category 19(A) 120 Failure to 19(D)(2)(e) 123 FAX 19(B) 121 Future Effective 19(E) 128 Probationary Pilot 17(C)(2) 110 Requirements 19(D)(2) 122 Return from Leaves, Training or Temp Assignments 17(A)(10) 109 Status Change 19(A) 120 Time Limits 19(C) 121 Vacancies 19(D) 122 Bid Line Improvement Process, (BLIP) 9(E) 54 Close Hours 9(E)(2)(b) 55 Begin/End of Month 9(E)(2)(h) 55 Flights over Holidays 9(E)(2)(j) 56 Inputting Requests 9(E)(2) 54 MUG restriction 9(E)(2)(k) 56 Reserve Availability 9(E)(3) 56 Bid Run Preparation 9(A) 45 Bi-monthly Grievance Conference 21(C)(9) 142 Block Seating 1(G) 7 Block to Block, defined 31(G) 175 Board of Director Representation LOA XIII 204 Bypass, Recall 20(C) 135 C Calendar Month, defined 31(H) 175 Call Out Pay 5(G) 26 Captain, defined 31(I) 176 Familiarization 6(B)(1) 32 Line Initial/Upgrade Training 6(B) 32 Carrier Fragmentation 1(D)(3) 4 Cash Bonus LOA XVII 218 Cash Option LOA XVII 220 Category Award, defined 31(K) 176 Category, defined 31(J) 176 Bidding for Vacancies 19(D) 122 Change when on Sick/UPB/AWP/MIL 4(F)(8) 24 Cause 21(A)(1) 139 Class B Travel 8(E) 43 Classes for Balancing, 9(D) 52 Class "A" 9(D)(1)(a) 52 Class "B" 9(D)(1)(c) 53 Class "M" 9(D)(1)(b) 52 Class 3 Passes 3(I) 17 Class 5 Passes 3(J),(K) 18 Charter Flights 28 172 Charts and Manuals 2(B) 12 Code-Sharing/Block Seat Protection 1(G) 7 Combined Domiciles 10(A) 65 Common Stock Option LOA XVII 219 Commuter Carriers Flying TWA routes 1(G) 7 Commuter Passes LOA XXIII 245 Company Physical, Examinations 16 105 Medical Leave 18(B) 112 Compensation 4 19 252 Composite Pay 4(A)(1) 19 Composite Pay Tables Appendix Contact: for Balancing 9(D)(1) 52 for BLIP notification 9(E)(2)(n) 56 for Reserve Pilots 12(B) 88 for Trip Add System (TAS) 9(F)(2)(b) 57 Contingent Pilots 19(D)(4) 124 Currency of Experience 19(D)(4)(i) 127 Dual Status Coverage LAX 19(D)(4)(g) 126 Dual Status Coverage SFO 19(D)(4)(g) 126 Number of 19(D)(4)(d) 125 Reserve Rules 19(D)(4)(g) 126 Special Characteristics and Limitations 19(D)(4)(d) 125 Continuing Qualification Training Pay (CQT) 4(D)(4) 23 Control, defined 1(H)(2) 10 Co-Terminals Expenses 7(A)(5) 40 List 8(C) 43 Times 8(D) 43 Credited Flight Time 11(A)(7) 78 Crew Calls, International 7(E)(3) 42 Crew Administration Management System (CAMS) 2(R) 15 Crew Meals 16(B) 106 Flights of Less than 2:00 Hrs LOA X 199 Segments 9(B)(1) 46 Crew Rest Areas 2(G) 13 Crew Seats B-767 11(D)(7) 87 D Daily Minimum Flight Time Credit 11(B) 80 Day, Training 19(K)(10)(a) 134 Days Off, Reserves 12(D) 91 Duty Free Periods 12(D) 91 Golden Days 12(D)(5) 92 Deadhead, 8(A) 43 Across the Atlantic and Pacific 11(D)(4) 87 Completion of Trip 8(E) 43 Pay and Credit 8(A) 43 Time 8(A) 43 To Domicile 8(E) 43 Home for commuters 8(E) 43 Death in Family (DIF) 15(I) 104 Declining a Bid 19(D)(5) 127 Definitions 31 175 Delayed Departure 9(K)(3) 63 Dental Benefits Plan 24(A) 158 Derogatory Information 2(K) 13 Designator Code 1(B)(1) 1 Direct Electronic Deposit 2(F) 12 Directed Account Plan (DAP) 23(C) 156 Disability, Insurance 24(B) 161 Discharge/Discipline 21(A) 139 Cause 21(A)(1) 139 Hearing 21(A)(3) 139 Holding a Pilot Out of Service 21(A)(6) 140 253 Investigation 21(A) 139 LEC Officer 21(A)(1) 139 Materials Relied Upon by Company 21(A)(4) 139 Precise Charges 21(A)(4) 139 Request for Hearing 21(A)(1) 139 Regional Chief Pilot 21(A)(4) 139 Discrimination 2(J) 13 Displacement, 19(G) 130 Bulletins 19(C)(3) 121 Bulletins not Posted 5(B) 25 Replacement Option (DRO) 19(G)(8) 131 Notice of 19(C) 121 of F/O by Student Captain 9(C)(4)&(9) 50 of Pilots 19(G) 130 Prerogatives 19(G)(3) 131 Preferences 19(G)(2) 130 Distribution of Open Time 9(H) 61 Diurnal, Ground Time Limitations 11(C) 82 Hourly Limitations 11(C)(3) 82 Doctor's Certificate 15(H) 104 Domestic Operations, defined 31(L) 176 Domicile, Combined 10(A)(2) 65 Schedule Committee 10(C)(1)(a) 70 Training Expenses 7(C) 42 Draft, defined 31(M) 176 Premium Pay 5(K)(2) 27 Trip Protection 9(G)(2) 60 Dues Deductions 26 169 Duty, Aloft defined 31(N) 176 During Rest 11(C)(4) 84 Period Break 11(C) 82 Period International 11(D) 84 Period Limitations 11(C)&(D) 82 Duty Rigs, Domestic 11(B)(2)&(3) 79 International 11(B)(2)&(3) 79 Charters 28(B) 172 E Emergency 11(B)(3)(d) 81 Employee Assistance Program 16(D) 106 Employment Conditions 1(A)(1) 1 Engineering Watch LOA XV 216 Equalization Additional Flying 9(F)(4) 60 Defined 31(O) 176 Equipment Ranking 19(D)(2)(d) 123 Equipment Bidding Restrictions 19(K) 132 Substitution 10(D) 73 Estimated Reserve Count 10(B)(7)(e) 69 Excess Employee Benefit Plan 23(E) 157 Expenses 800 number phone fees 7(E)(3) 42 Moving 13 94 Training in Domicile 7(C) 42 Training Away from Domicile 7(D) 42 Reimbursements 7(E) 42 Extended Charter 28(C) 172 254 Extra Section 5(D) 25 F FAA Physical Examinations LOA XI 200 Factory Conducted Training 1(B)(2) 1 Failure to Bid 9(C)(2) 50 to Maintain Current Standing Bid 19(B)(1) 121 to Maintain Qualifications 6(C)(5) 37 to Qualify Initial/Upgrade Training 6(C)(2) 35 to Qualify 6(C) 34 to Qualify, Requalification 6(C)(4) 37 to Qualify, Transition/Differences 6(C)(3) 36 Familiarization, Student Captain 6(B)(1) 32 Family and Medical Leave Act 18(A)(4) 112 FAR 121.438(b) Experience 9(C)(10) 52 Ferry Flights 5(I) 26 File, Personnel 2(K) 13 Fines 2(C) 12 Fixed Daily Rate (FDR), defined 31(Q) 177 First Officer, defined 31(P) 176 Bid Lines Withheld for Training 9(C)(9) 52 Displaced by Student Captain 9(C)(4) 50 Flight Assignments, Reserve 12(C) 90 Flight Engineer, defined 31(R) 177 Flight, Local in Nature 11(B)(3)(d) 81 Flight Pay Loss Allocation 2(O) 14 Flight Time, Credit Minimum 11(B) 79 Duty Time Ratio 11(B)(2) 79 Limitations 11(C) 82 Limits, Monthly ALV 11(A)(5) 78 Limits, FAR 11(C)(5) 84 Flight Time Record/Earnings Statement 2(F)(2) 13 401(k) Plan 23(D) 157 Furlough, Employment Protection 20 135 Notice 20(B) 135 Insurance 20(H) 138 Pass and Reduced Rate Travel 20(G) 138 Pay 20(D) 137 Personal Leave 18(A)(3) 111 Recall Bypass Option 20(C)(2) 136 Replacement Option 20(C)(3) 136 Sick Leave Bank 15(L) 104 Strikes or Other Work Stopages 20(C)(1) 135 Withdrawing Retirement Benefits 20(F) 138 Future Effective Bids 19(E) 128 G Golden Days Off for Bid Run Pilots 10(C)(1)(f) 71 for Reserve Pilots 12(D)(5) 92 Black-out Periods 12(D)(5) 92 Grievance, Appeals 21(C) 141 Discussion 21(B)(2) 140 Filings 21(C) 141 Group of Pilots 21(B)(1) 140 Hearing 21(A) 139 255 Procedures 21 139 Regional Chief Pilot 21(A)(2) 140 Statement of Facts 21(B)(2) 140 Witnesses 21 139 Guarantee, defined 31(S) 177 Guarantees 4(C) 21 Guarantee Proration Status Change 4(C)(4) 22 H Hearing, Initial 21 139 Hostage, Captive, Missing, Benefits 27 171 Hotel Accommodations, Domestic 7(A) 39 International 7(B) 41 Transportation, To or From 7(A) 39 Hours of Labor 1(A)(1) 1 Hours of Service 11 78 I IAM's Corporate Governance LOA XIII 205 I.D. 90 Tickets 3(L) 18 Ice Check, MD8/DC9 2(P) 14 Industrial Injury 15(K) 104 Initial Operating Experience (IOE) 6(B) 32 Pay 4(D)(3) 22 Insufficient Bidders 19(D)(3) 123 Insurance, 24 158 Accident Insurance 24(G) 165 Acute Care Drug Plan 24(A)(8) 160 Claim is Denied Procedure 24(H) 165 CRAF Operation LOA I 182 Dental Plan 24(A)(6) 158 Furloughed Pilots 20(H)(1) 138 Furlough Continuance 20(H)(2) 138 Group Medical/Dental Benefit Plan 24(A)(6) 158 Job Sharing Program 18(G)(7) 119 Life Insurance 24(B) 161 Retiree Medical Benefits 24(A)(13) 161 Survivor Continuance 24(C) 162 Instructor Pilots LOA XX 224 International Expenses 7(B) 41 Operations, defined 31(T) 177 Pairings 10(A)(2) 65 Internment, Benefits 27 171 Inviolate Days 10(C) 71 J Job Sharing Program 18(G) 116 Awarding 18(G)(3) 117 Bulletins and Updated Revisions 18(G)(7) 119 Jury Duty 5(F) 26 Just Cause 2(W) 15 256 K L Last Trip Requirements, Limitations 10(C) 72 Layover, Hotels 7 39 Rest Areas 2(G) 13 Leaves of Absence, 18 111 Cancellation 18(A)(3)(h) 112 Family and Medical Leave Act 18(A)(4) 112 Personal 18(A) 111 Maternity 18(E) 114 Medical 18(B) 112 Military 18(C) 113 Paternity 18(F) 115 Returning from Leave 17(A)(10) 109 Letters of Agreement, Availability of MEMO 250 Life Insurance, Additional 24(E) 163 Line Familiarization 6(B) 32 Line Instructor Pilots (LIP) LOA XXII 236 Line Standard Pilots (LSP) LOA XXII 236 Long Call 12(B)(3)(b) 89 M Management, Employees LOA XXII 242 Flying 5(E) 25 Pay Assignments 5(E)(1) 25 Pool Time 5(E)(2) 25 Management/Labor Advisory Task Force LOA XII 201 Managing Director/Crew Resources 10(B)(5) 68 Maternity Leave 18(E) 114 Medical Benefit Plan 24(A) 158 Medical Certificate Class Required 16(A)(4) 106 Examinations 16(A) 105 Future Aircraft Which Requires Higher Standards LOA III 186 Leave 18(B) 112 Limitations 18(B)(2) 113 Loss of, Displacement Options 19(A)(3) 120 Required Exam, FAA Reimbursement 16(A)(3) 106 Medicare Supplemental Insurance 24(D) 163 Merger Partner 1(D)(1) 2 Merger, Pay Increases 4(F)(5) 24 Mile defined 31(U) 177 Mileage 13(A)(2) 94 Military Leave of Absence 18(C) 113 Minimum, Flight Time Credit 11(B)(1) 79 Guarantees 4(C) 21 Pay, Single Duty Period 11(B)(2) 82 Rest - Domestic 11(C) 84 Rest - International 11(D) 25 Miscellaneous Pay Rules 5 25 Mock Bid, defined 31(V) 178 Guarantee 4(F)(6) 24 257 Monthly Flight Time, defined 31(W) 178 Moving Expenses 13 94 Multiple Pass System 9(E)(2)(e) 55 Mutual Flight Trades 9(I) 62 N Narrowbody, defined 31(X) 178 National Mediation Board 1(A)(2) 1 Negligence Liability LOA VIII 197 New Equipment into Operation 4(F)(4) 24 No Flying for Entire Bid Period 4(F)(6) 24 Non-Bid Run Pilots 9(F)(1)(b) 57 Non-Revenue Flying 1(B)(1) 1 Non-Seniority List Instructors LOA XXII 242 Notification of Displacement 19(C) 121 of Training Assignment 6(A)(2) 28 of Furlough 20(B) 135 of Recall 20(C) 135 O Offering a Trip (OFR) 9(J) 62 Offering a Trip, defined 31(Y) 178 Okaying Flight Assignments 9(E)(2)(n) 56 On-Duty Limitations 11(C) 82 One-for-4 11(B)(3)(b) 81 One-for-3:45 11(B)(3)(b) 81 One-for-3:30 11(B)(3)(b) 81 One-for-2 11(B)(2)(d) 80 One-for-1:45 11(B)(2)(d) 80 Open Time, Reserve Assignments 12(C) 90 Classifications, defined 9(D) 52 Green, Yellow, Red Time 9(H) 61 Operation Preferences 10(A)(2) 65 Option Time 9(K)(5) 63 Options, Bid Cancellation 19(E)(3) 128 Outside Aviation Employement 11(A)(1) 78 P Pairing Restoration 10(E) 74 Parent, defined 1(H)(3) 10 Passes for Medical and Surviving Spouse 3(A) 16 Parking Allowance 2(H) 13 Areas 2(H) 13 Paternity Leave 18(F) 115 Pay, General 4 19 Bi-monthly Advances 2(F)(2) 12 Assignments 5(E) 25 Paychecks 2(F) 12 in Case of Merger 4(F)(5) 24 Positive/Negative Bank Transactions 10(F) 74 258 Percentile Bids 19(D)(2)(b) 122 Permanent Transfer, defined 31(Z) 178 Permanent Vacancies, 19(D) 122 Filling of 19(C) 121 Posting of 19(C) 121 Prerogatives when Displaced 19(G) 130 Personal Business, Time Off (UPB) 2(V) 15 Personal Default Bid 9(B)(3) 47 Personal Leave of Absence 18(A) 111 Personnel File Examination 2(K) 13 Physical Standards 16 105 Pilot Alternate Month Job Sharing Program 18(G) 116 Pilot, defined 31(AA) 178 Pilot Records Improvement Act 2(K) 13 Pilot Training Board ALPA/TWA 6(D) 37 Pilot Transfer Rights in Asset Sales 1(D)(2) 3 Physical, Company 16(A) 105 Pool Time 5(E)(2) 25 Positive/Negative Bank 10(F) 74 Pre-Scheduled Activities 9(B)(10) 48 Preferential Bidding System 9 45 Line Construction Parameters 10(B)(1)(d) 67 Monitoring Bid Award 10(B)(6) 68 Permanent Implementation LOA XXIV 248 Program Upgrades 10(B)(1)(d) 67 Software Improvements 10(B)(1)(d) 67 System Hardware 10(B)(1)(d) 67 Templates 10(B)(1)(d) 67 Pregnancy 18(E) 114 Premium Pay 5(K) 26 Preparation of Bid Runs 9(A) 45 Professional Standards Committee LOA VII 195 Proficiency Check 6(A)(3)(h) 30 Proration of Guarantee 4(C) 21 Q Qualify, Failure to 6(C) 34 R Railway Labor Act 1(A) 1 Railway Labor Act Rights 2 12 Re-protected 10(A)(2)(g) 66 Recall Bypass Option 20(C)(2) 136 Recognition and Scope 1 1 Regional Jets 1(G) 7 Reporting Pay 5(G) 26 Representation Department 21(B) 140 Resignation 2(W) 15 Requalification Training 6(C)(4) 37 Rescheduled, defined 31(BB) 178 Reserve, Assignments 12(C) 90 Blocks of Reserve Day Availability 12(A) 88 Bid Requirements 10(B)(9) 70 Combined Operations 10(A)(2) 65 Contact, Telephone 12(B) 88 259 Duty Free Periods 12(D) 91 First In, First Out 12(C)(1)(b) 90 Golden Days Off 12(D)(5) 92 Guarantee Option (RGO) 12(E) 93 Long Call 12(B)(3)(b) 89 Rest requirements 11(C)(3) 82 Rest after call-out 12(F)(1) 93 Short Call 12(B)(3)(a) 88 Trading of Reserve Days Off 12(D)(3) 92 Reserve Officer, defined 31(CC) 178 Assignments 19(I) 131 Reserve Removed from Flight, by RRO 12(C)(3) 91 Reserve Replacement Option (RRO) 9(D)(2)(d) 53 Reserve Schedule, defined 31(DD) 178 Rest, After Training 6(A)(3)(c)(ii) 29 Reserve Rest 12(F)(1) 93 Rest Areas 2(G) 13 Restrictions on Bidding 19(K) 133 Retiree Insurance 24(A)(13) 161 Retirement Plan (A Plan) 23(A) 148 Return to Duty after Bid Awards 9(E)(2)(c) 55 Revenue Flying 1(B)(1) 1 Rolling Twelve Months 9(K)(6) 64 Roster of Earnings 2(I) 13 S Satellite Scheduling 10(G) 75 Schedule Change and/or Substitution of Flight 9(C)(6) 50 Schedule Committee 10(B) 66 Schedule over Actual Pay 11(B)(1)(a) 79 Scheduled for Duty Aloft, defined 31(EE) 178 Scheduling of Pilots 10 65 Scheduling Policies 9 45 Scope 1(B) 1 Seniority 17 108 Accrual 17(A) 108 Seniority Adjustment (3%) 19(D)(1)(b) 122 Service Charges, Collective Bargaining 26 169 Services Performed 5(A) 25 Shared Code-Sharing Jet Aircraft 1(G)(10) 10 Short Call 12(B)(3)(a) 88 Sick Leave, Accrual 15(C) 103 Death in Family (DIF) 15(I) 104 Limitations 15(B) 103 Make-Up 15(J) 104 Pay, FDR 15(F) 103 Pay, Trips Missed 15(E) 103 Simulator Instructors LOA XX 224 Simulator Proficiency Checks 6(A)(3)(d) 29 Single Duty Period Minimum 11(B)(2) 79 Single Trip Assignment 19(F)(4) 130 Small Widebody, defined 31(FF) 178 Special Interest Flights 28(C) 172 Standing Bids 19(B)(1) 121 Cancellation of 19(A)(7) 120 State Income Taxes 2(U) 15 Status Change, Voluntary 5(C) 25 260 Status, defined 31(GG) 178 Student Captain Line Familiarization 6(B)(1)(a) 32 Student Captain/First Officer Pay 4(D)(2) 22 Substitution of Flights 9(C)(6) 51 Sufficiently Qualified, defined 19(I)(1)(c) 132 Supplemental Bid Runs 9(C)(8) 51 Supplemental Life Insurance 24(E) 163 Surface Transportation, Deadheading 8(B) 43 Survivors Insurance 24(C) 162 System Board of Adjustment 22 143 Appointments 22(F) 144 Decisions 22(M) 146 Free Positive Space Transportation 22(Q) 147 3-Member Board 22(C)(3) 143 4-Member Board 22(C)(2) 143 5-Member Board 22(C)(1) 143 Jurisdiction 22(G) 145 Members 22(D) 144 Time Limits 22(J) 146 System Default Bid 9(B)(1)(q) 46 System Schedule Committee 10(B) 66 System Seniority List 17(B) 109 Protests 17(B)(2)&(3) 109 T Target, defined 31(HH) 179 Target/High Bid Run Exception 10(B)(7)(b) 69 Temporary Assignment Guarantee 5(A) 25 Temporary Duty Expenses 7(A)(4) 40 Temporary Vacancies 19(F) 129 Thirty in Seven (30 in 7) 11(C)(5) 84 Time to Bid 9(B) 46 Trades, Mutual 9(I) 62 Trading of Flights 9(I) 62 Trading of Reserve Days Off 12(D)(6) 93 Training Board, Pilot ALPA/TWA 6(D) 37 Training Expenses, In Domicile 7(C) 42 Out of Domicile 7(D) 42 Training, and Qualifications 6 28 Advanced Qualification Program (AQP) 6(A)(10) 32 Benched (WPT) 6(A)(4) 30 Checking 6(A)(1) 28 Class B Passes 3(F) 17 Continuing Qualifications 6(A)(3)(b) 29 Daily Training/Scheduling (Rest) 6(A)(3) 29 Declining 6(A)(2)(b) 28 Domicile 6(A)(2)(f) 28 Failure to Complete Course of 6(C) 34 Fair and Adequate Opportunity 6(C)(1)(a) 34 FRASCA 6(A)(9) 32 Initial/Upgrade 6(B) 32 Interruption 6(A)(5) 31 Passes 3(F) 17 Pay 4(D) 22 Progress Line Check 6(B)(1)(b) 33 Records 2(R) 15 Regulatory Qualifications 6(A)(1)(c) 28 261 Regulatory Requirements 6(A)(1)(c) 28 Requalification/Failure 6(C)(4) 37 Seniority Order 6(A)(1)(b) 28 Standards Evaluation Form 6(A)(3)(g) 30 Supplemental Instrument Procedures 6(A)(9) 32 Withdrawal from Training 6(A)(6) 31 Withholding F/O Line for Training 9(C)(9) 52 Transfer Rights in Asset Sales 1(D)(2) 3 Transportation, 3 16 Surface Deadhead 8(B) 43 Travel Time, Pay 5(L) 27 Triggering Event 1(D)(3)(a) 4 Trip Add System (TAS) 9(F)(2) 57 Trip and Training Expenses 7 39 Trip Hour Credit 11(B) 79 Trip Okay 9(E)(2)(n) 56 TWA-ALPA ESOP Trust LOA XIII 204 U Uniform Changes 2(D) 12 Uniform Services Employment and Re-Employment Rights Act 18(C) 113 Urgent Personal Business (UPB) 2(V) 15 V Vacancies and Displacements, 19 120 Bulletins 19(C) 121 Vacated Trips 9(E)(3) 56 Vacations, 14 96 Awarding of by Category 14(D) 99 Bids 14(F) 101 Deferred 14(E)(5)(b) 100 Deferred, Premium Pay 5(K) 27 Entitlement 14(B) 96 Movement of Primary/Secondary Awards 14(E) 100 Pass Policy LOA XXIII 245 Pay 4(E) 23 Split Vacation Period 14(E)(5)(c) 101 Vacation Additional Flying 9(F) 57 Vacation Buy-Back 14(I) 102 Voicemail 9(B)(2) 47 Voluntary Balance 9(C)(1)(c) 53 Voluntary Change of Status 5(C) 25 Voluntary Dues and Service Charge Ded. 26 169 Volunteer Fly List 9(F)(3) 59 W Wages 1(A)(1) 1 Weekend Drills, Military 18(C)(3) 113 Weekly Flight Time Limitations 11(C)(5) 84 Written Orders to Pilots 2(L) 14 XYZ 262 COMPOSITE PAY HOURLY RATES
EFFEC- TIVE STATUS DATE YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 YEAR 11 YEAR 12 YEAR 13 YEAR 14 YEAR 15 ==================================================================================================================================== CAP 9/1/98 SWB 94.80 95.62 106.56 107.48 108.59 109.84 110.75 111.14 112.42 112.70 112.97 114.71 115.64 116.58 NB 88.41 89.23 99.55 100.49 101.57 102.81 103.73 104.49 105.47 105.79 106.11 107.84 108.78 109.73 3/2/99 SWB 97.59 98.43 109.69 110.65 111.78 113.08 114.01 114.41 115.73 116.01 116.30 118.08 119.04 120.01 NB 91.13 91.97 102.61 103.58 104.68 105.96 106.92 107.70 108.71 109.03 109.37 111.15 112.12 113.10 9/1/99 SWB 101.90 102.78 114.54 115.53 116.72 118.07 119.05 119.47 120.84 121.14 121.43 123.30 124.30 125.31 NB 94.68 95.55 106.61 107.62 108.77 110.10 111.09 111.90 112.95 113.29 113.63 115.48 116.49 117.51 9/1/00 SWB 110.29 111.24 123.97 125.05 126.33 127.79 128.85 129.31 130.79 131.11 131.43 133.45 134.53 135.63 NB 100.77 101.69 113.46 114.53 115.75 117.17 118.22 119.09 120.21 120.56 120.94 122.90 123.97 125.06 9/1/01 SWB 120.67 121.71 135.63 136.81 138.22 139.82 140.98 141.47 143.09 143.45 143.80 146.01 147.19 148.39 NB 108.79 109.79 122.50 123.66 124.97 126.50 127.64 128.57 129.78 130.17 130.57 132.69 133.85 135.02 8/1/02 SWB 132.90 134.04 149.38 150.68 152.23 153.99 155.26 155.81 157.60 157.99 158.37 160.81 162.11 163.43 NB 117.07 118.15 131.82 133.07 134.49 136.13 137.36 138.36 139.66 140.08 140.51 142.79 144.04 145.30 SWB = Small Widebody NB = Narrowbody
263 COMPOSITE PAY HOURLY RATES
EFFEC- TIVE STATUS DATE YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 YEAR 11 YEAR 12 YEAR 13 YEAR 14 YEAR 15 ==================================================================================================================================== F/O 9/1/98 SWB 47.40 57.37 65.00 66.64 68.41 70.30 71.99 73.91 75.32 76.07 76.82 78.23 78.98 79.74 NB 44.21 53.54 60.73 62.30 63.99 65.80 67.42 69.49 70.66 71.41 72.15 73.55 74.30 75.06 3/2/99 SWB 48.80 59.06 66.91 68.60 70.42 72.37 74.11 76.08 77.54 78.31 79.08 80.53 81.30 82.09 NB 45.57 55.18 62.59 64.22 65.95 67.81 69.50 71.62 72.84 73.60 74.37 75.80 76.58 77.36 9/1/99 SWB 50.95 61.67 69.87 71.63 73.53 75.56 77.38 79.45 80.96 81.77 82.57 84.09 84.90 85.71 NB 47.34 57.33 65.03 66.72 68.53 70.46 72.21 74.41 75.68 76.47 77.27 78.76 79.56 80.38 9/1/00 SWB 55.15 66.74 75.62 77.53 79.59 81.79 83.75 85.99 87.63 88.50 89.37 91.01 91.88 92.77 NB 50.39 61.01 69.21 71.01 72.92 74.99 76.84 79.19 80.54 81.38 82.24 83.82 84.67 85.54 9/1/01 SWB 60.34 73.03 82.73 84.82 87.08 89.48 91.64 94.08 95.87 96.83 97.78 99.58 100.53 101.50 NB 54.40 65.87 74.73 76.67 78.73 80.96 82.97 85.50 86.95 87.86 88.79 90.49 91.42 92.35 8/1/02 SWB 66.45 80.42 91.12 93.42 95.90 98.55 100.92 103.61 105.59 106.64 107.69 109.67 110.72 111.79 NB 58.54 70.89 80.41 82.50 84.73 87.12 89.28 92.01 93.57 94.55 95.55 97.38 98.38 99.39 SWB = Small Widebody NB = Narrowbody
264 COMPOSITE PAY HOURLY RATES
EFFEC- TIVE STATUS DATE YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 YEAR 11 YEAR 12 YEAR 13 YEAR 14 YEAR 15 ==================================================================================================================================== F/E 9/1/98 NB 44.21 53.54 59.73 60.29 60.94 61.69 62.24 62.69 63.28 63.47 63.67 64.70 65.27 65.84 3/2/99 NB 45.57 55.18 61.57 62.15 62.81 63.58 64.15 64.62 65.23 65.42 65.62 66.69 67.27 67.86 9/1/99 NB 47.34 57.33 63.97 64.57 65.26 66.06 66.65 67.14 67.77 67.97 68.18 69.29 69.89 70.51 9/1/00 NB 50.39 61.01 68.08 68.72 69.45 70.30 70.93 71.45 72.13 72.34 72.56 73.74 74.38 75.04 9/1/01 NB 54.40 65.87 73.50 74.20 74.98 75.90 76.58 77.14 77.87 78.10 78.34 79.61 80.31 81.01 8/1/02 NB 58.54 70.89 79.09 79.84 80.69 81.68 82.42 83.02 83.80 84.05 84.31 85.67 86.42 87.18 NB = Narrowbody
265 EX-10.45 4 AGREEMENT Exhibit 10.45 TABLE OF CONTENTS - - ------------------------------------------------------------------------- Section Title Page 1 Recognition and Scope 1 2 Definitions 3 3 Compensation 4 4 Hours of Work, Holiday and Vacations 6 5 Qualification Flights 9 6 Expenses 10 7 Sick Leave 11 8 Probationary Period 13 9 Leave of Absence 14 10 Seniority 16 11 Filling of Vacancies 18 12 Furlough pay 21 13 Job Security and Severance 23 14 Investigation and Discipline 25 15 System Board of Adjustment 27 16 General 30 17 Union Security 36 18 Duration of Agreement 41 Letters of Agreement 1 - 19 42 Participative Management 77 ========================================================================= AGREEMENT between TRANS WORLD AIRLINES, INC. and FLIGHT DISPATCH OFFICERS AND ASSISTANT FLIGHT DISPATCH OFFICERS in the employ of TRANS WORLD AIRLINES, INC. as represented by TRANSPORT WORKERS UNION OF AMERICA, AFL-CIO This Agreement is made and entered into in accordance with the provisions of Title II of the Railway Labor Act, as amended by and between TRANS WORLD AIRLINES, INC., hereinafter known as the "Company", and the FLIGHT DISPATCH OFFICERS AND ASSISTANT FLIGHT DISPATCH OFFICERS in the service of TRANS WORLD AIRLINES, INC., who are represented by the TRANSPORT WORKERS UNION OF AMERICA, AFL-CIO, hereinafter known as the "Union". SECTION 1 RECOGNITION AND SCOPE (A) Recognition The Union is recognized by the Company, in accordance with Certification Case R-3653 by the National Mediation Board dated February 7, 1964, as sole and exclusive bargaining agent with respect to rates of pay, rules and working conditions of Flight Dispatch Officers In the employ of the Company working within the United States and its territorial possessions, and those who may be temporarily transferred by the Company to foreign stations. (B) Scope (1) Flight Dispatch Officers are TWA employees who hold a currently effective FAA Aircraft Dispatcher Certificate. Flight Dispatch Officers plan for the safe and efficient operation of each TWA flight. Each Flight Dispatch Officer is directly responsible for the operation of a number of flights assigned to his/her control. Each individual flight is issued a Dispatch Release by the controlling Flight Dispatch Officer. The Dispatch Release specifies conditions under which a flight is required to operate such as fuel required, alternate airports, and any aircraft restriction. Before a Dispatch Release is issued, the Flight Dispatch Officer must determine the suitability of weather, traffic and field conditions, airways, facilities and any other factor that could affect the flight. After a flight departs, the Flight Dispatch Officer must monitor its, progress and, together with the Captain, "manage" the flight until arrival at destination. ========================================================================= 3/1/99 Page 1 (2) In the performance of the above, the Flight Dispatch Officer will give full consideration to economic factors and operating cost and release the flight in the most economical profile that insures a safe and reliable operation. (3) It is understood and agreed that this Agreement covers the performance of the Dispatch function as described above and the furnishing of the Dispatch facility by the Company. The provisions of this Agreement shall be binding upon any successor or merged company or companies, or any successor in the control of the Company, unless and until changed in accordance with the provisions of the Railway Labor Act. In the event of a proposed change in the method of performance of the Dispatch function or facility, the Union and the Company will meet to negotiate proper provisions for the protection of the position and seniority of employees covered herein. (C) In the event of any sale of routes that would result in a layoff of Flight Dispatch Officers, provided this Agreement is in effect, the Company will use good faith reasonable efforts to obtain employment for such Flight Dispatch Officers with the acquiring airline and, to the extent practicable, reflecting TWA seniority. ========================================================================= 3/1/99 Page 2 SECTION 2 DEFINITIONS (A) The term "Flight Dispatch Officer," as used herein shall mean an employee who holds a currently effective Aircraft Dispatcher's Certificate issued by the Federal Aviation Administration, Department of Transportation, United States of America, and who is regularly assigned by the Company to be in charge of , and while on duty to be responsible for, the conduct of dispatch operations in his/her area, as described by the Federal Aviation Regulations and the Company's Flight Operations Policy Manual, as they may be hereafter amended with regard to the safety and efficiency of flight operations. (B) The term "Assistant Flight Dispatch Officer," as used herein, shall mean an employee who holds a currently effective Aircraft Dispatcher's Certificate issued by the Federal Aviation Administration, Department of Transportation, United States of America, who is assigned by the Company as an Assistant, and who works under the immediate supervision of a Flight Dispatch Officer while on duty. All Assistant Flight Dispatch Officers shall be required to obtain an Aircraft Dispatcher's Certificate within sixty (60) days after meeting the minimum experience requirements for certification set forth in the Federal Aviation Regulations. In case the above is not complied with, the subject employee may be released without regard to seniority. (C) The term "Relief Flight Dispatch Officer," as used herein, shall mean a Flight Dispatch Officer who holds a permanent position at the domicile and who is required at his/her domicile to work other than the normal work schedule on a pre-planned basis in order to provide qualified relief for Flight Dispatch Officers for vacation, qualification trips and training, and any other abnormality as agreed to by the union on a non-precedent setting case by case basis. The Company will maintain a Relief Flight Dispatch Officer at locations where it is expedient to do so. The position shall be subject to annual local bidding procedures. (D) The term "temporary vacancy," as used herein, shall mean a Flight Dispatch Officer vacancy that is expected to last for less than six (6) months. All other vacancies shall be considered permanent except as provided in Section 11(A)(3). (E) The term "special assignment," as used herein, shall mean the assignment of Flight Dispatch Officer to duties in lieu of regular Flight Dispatch Officer activities, but such assignment must be directly related to the dispatch function. (F) Wherever the term "Flight Dispatch Officer" appears in this Agreement, the provisions of the paragraph in which it appears shall apply to Flight Dispatch Officers, Relief Flight Officers, and Assistant Flight Dispatch Officers, unless otherwise stated. (G) The term "work cycle," as used herein, shall mean the basic rotation of work days and regular days off established for the annual work period, prior to overlay of such factors as vacations, qualification flights, training, relief schedules, etc. (H) The term "work schedule'" as used herein, shall mean the specific assignment of individual employees by calendar months to a work cycle adjusted for such factors as vacations, qualification, training relief schedules, etc. ========================================================================= 3/1/99 Page 3 SECTION 3 COMPENSATION (A) Except as otherwise provided herein, hourly rates of pay under the TWA-TWU Agreement shall remain, for the entire term of this agreement as shown as follows: FLIGHT DISPATCH OFFICER
Effective 3/01/99 3/01/01 3/01/03 1st Year $ 2,612 $ 2,708 $ 2,824 2nd Year $ 2,866 $ 2,979 $ 3,105 3rd Year $ 3,180 $ 3,207 $ 3,344 4th Year $ 3,439 $ 3,614 $ 3,768 5th Year $ 3,641 $ 3,825 $ 3,988 6th Year $ 3,838 $ 4,032 $ 4,203 7th Year $ 4,039 $ 4,244 $ 4,424 8th Year $ 4,732 $ 4,986 $ 5,199 9th Year $ 4,886 $ 5,102 $ 5,318 10th Year $ 5,015 $ 5,241 $ 5,462 11th Year $ 5,074 $ 5,308 $ 5,532 12th Year $ 5,153 $ 5,399 $ 5,627
The formula to be used in calculating the hourly rate of pay for a Flight Dispatch Officer is: Monthly Salary/162.0 (Monthly Salary divided by the annualized average number of work hours per month). All overtime pay will be based on the hourly rate of pay. ASSISTANT FLIGHT DISPATCH OFFICERS An employee who is an Assistant Flight Dispatch Officer shall be paid in accordance with his/her seniority at the rate of 74% of the above Flight Dispatch Officer pay scale. (B) LICENSE PREMIUM Effective March 1, 1999, Dispatcher Officers who hold an FAA Aircraft Dispatcher's License shall be paid monthly license premiums in accordance with the following schedule: MARCH 1, 1999 $ 75.00 MARCH 1, 2000 $ 100.00 MARCH 1, 2002 $ 150.00 (C) Whenever an employee who has previously held the position of Flight Dispatch Officer is given training at Company request preparatory for upgrading, he/she shall receive his/her Flight Dispatch Officer's compensation for the training period involved. Any changes in licensing, training or qualification requirements by local, State, Federal or Company regulations will obligate the Company to provide any training or qualification to effected employees covered under this Agreement. In any such case the Company shall provide reasonable actual expenses, if applicable, ========================================================================= 3/1/99 Page 4 and employees shall not be scheduled for such training or qualification in excess of normal utilization on their work cycle. (D) Employees hereunder who are based Alaska or outside the continental United States shall receive, in addition to other compensation provided for herein, Cost of Living Differential, Overseas Service Increment, and Educational Allowance as set out in the Company's manuals. Employees thereunder shall not receive less foreign service benefits than other ground personnel at the station. ========================================================================= 3/1/99 Page 5 SECTION 4 HOURS OF WORK, HOLIDAY AND VACATIONS (A) The basic work cycle and schedule for all employees covered under this Agreement shall be six (6) days of work, three (3) days off, six (6) days of work, three (3) days off: six (6) days of work: three (3) days off, with the following exceptions: (1) Those employees holding bids or assignments as Relief Flight Dispatch Officers, or on temporary assignment, shall be scheduled as closely as possible to the 6-3 6-3 6-3 pattern, but may be scheduled otherwise if there exists no other alternate due to staffing requirements, provided that no relief or temporary Flight Dispatch Officer shall be scheduled for more than six (6) days of work without an intervening day off and that no shift is scheduled with less than a prior rest period of at least ten (10) hours. (2) No Relief or Temporary Flight Dispatch Officer shall be scheduled more than twenty-two (22) out of thirty (30) calendar days. The work cycle shall be determined at least sixty (60) days in advance of each calendar year to allow for Relief and vacation bidding. A specific work schedule of one calendar year to be made between local Union Representatives and Management shall be posted at least fifteen (15) days in advance of each calendar month provided, however, that the latter portion of the calendar year is for informational purposes only. It is understood that a work schedule containing any change in a Flight Dispatch Officer day(s) off from what would occur under the annual work cycle will not incur any obligation by the Company under Section 4(B), provided it is posted as described above. The starting time of work shifts is recognized as a consideration of the work schedule and will be governed by the needs of the services at each location provided, however, that no shift shall either commence or end between the hours of 0100 and 0500. Flight Dispatch Officers and Assistant Flight Dispatch Officers will be credited with one-half (1/2) hour shift overlap for each shift worked. Notwithstanding the above, it is understood that the Flight Dispatchers work schedule and days off may be changed during a given month to permit attendance at training courses, operational meetings or to provide technical assistance, provided that such changes are made with at least fourteen (14) days notice, and will not reduce the overall number of days off in a given month unless overtime is paid for any reduction in days off. (B) It is Understood that no overtime shall be compensated for except when a Flight Dispatch Officer is called to duty by the Company on his scheduled days off or as set forth in paragraph (C) of this Section. Overtime shall be compensated as follows and settlement shall be made on a monthly basis: (1) When an employee works on one of his/her scheduled days off, he/she shall be compensated at the rate of one and one-half (1-1/2) times the straight time rate for such days. (2) When an employee has already worked one (1) of the days of his/her scheduled days off and is called to duty and works during his/her next consecutive scheduled day(s) off, ========================================================================= 3/1/99 Page 6 he/she shall be compensated at the rate of two (2) times the straight time rate for such days(s). (C) The Company may at it's option fill all or part of any open shift with supervisory personnel or choose to leave any shift(s) uncovered and distribute the workload, before filling all or part of such open shift(s) by using overtime, regardless of the reason such shift was open and regardless of the start time of such shift. (D) Flight Dispatch Officers attending Company meetings, court or legal proceedings, or required training held at a time other than their regularly assigned work period shall receive overtime compensation for such attendance at the straight time rate, but not less than the equivalent of four (4) hours at straight time rates. This provision will not apply when such attendance is in lieu of any assigned work period. (E) For employees based in the United States, the following holidays shall be recognized as holidays for employees covered by this Agreement: New Year's Day, Washington's Birthday, Good Friday, Memorial Day, Independence Day, Floating Holiday, Labor Day, Thanksgiving Day, Christmas Day, and the Employee's Birthday. If Federal Law designates a date other than the calendar date of one of the above listed holidays for observance of the holiday, the date designated by law shall be considered the holiday. (1) In the event an Employee's Birthday falls on February 29, March 1 shall be observed. If an Employee's Birthday falls on another of the holidays specified above, his/her next following work day shall be considered the holiday. (2) An employee required to work on any of the holidays enumerated in this paragraph shall be compensated at the rate of double time and one-half of his / her normal rate of pay. In lieu of receiving compensation at the rate of double time and one-half, the employee may elect to receive an additional day off at his/her regular straight time rate. This election must be made at the time vacations are bid. This election shall be limited to five (5) holidays per calendar year. (3) If any of the above holidays falls on an employee's first regularly scheduled day off, the immediately preceding work day, if actually worked, shall be considered as the holiday and the employee shall be compensated for such day at the rate of double time. If any of the above holidays fall on an employee's second or third regularly scheduled day off, the immediately succeeding work day, if actually worked shall be considered as the holiday and the employee shall be compensated for such day at the rate of double time. (4) If any of the above holidays occur during an employee's vacation, sick leave, or other excused absence, the employee shall be compensated for the holiday at his/her regular straight time rate, and such day shall not be deducted from his/her vacation or sick leave allowance. (5) An employee who is scheduled to work on a holiday and who fails to report for work where such absence is not excused, shall receive no pay for such holiday. (F) Benefits for employees hereunder regarding transportation and expenses shall be as set forth in the Company's Management Policy and Procedure Manual, except where such benefits are specifically covered by the terms of the Agreement. Excused absences will be granted in accordance with the Policy as found on pages 10.76.01 dated July 1, 1998 and 10.76.02 dated October 3, 1994, in the Company's Management Policy and Procedure Manual, except where such benefits are specifically covered by the terms of this Agreement. ========================================================================= 3/1/99 Page 7 (G) Vacations (1) Employees hereunder shall become entitled to and receive vacation allowances in accordance with the following:
Number of Less 5 yrs 10 yrs 17 yrs 25 yrs 30 yrs. months than thru thru thru thru thru worked 5 yrs 9 yrs 16 yrs 24 yrs 29 yrs over 1 1 2 2 3 4 5 2 2 3 4 5 6 7 3 3 4 6 7 8 10 4 4 6 8 10 12 14 5 4 6 8 10 12 16 6 5 8 10 13 16 20 7 6 9 12 15 18 22 8 7 11 14 18 22 26 9 8 12 16 20 24 29 10 9 14 18 23 28 33 11 9 14 18 23 28 33 12 10 15 20 25 30 35
(2) At the time vacations are bid, employees may defer five (5) days of his/her vacation entitlement to be utilized as single vacation days ("DAT"). Such days must be utilized within the calendar year. Requests to utilize DAT days must be made fifteen (15) days in advance of the required publication/posting date of the monthly work schedule. DAT awards will be subject to operational requirements. ========================================================================= 3/1/99 Page 8 SECTION 5 QUALIFICATION FLIGHTS (A) Flight Dispatch Officers shall complete all qualification/ familiarization flights, as may be required by Federal Aviation and Company Regulations. Flight Dispatcher Officers shall be compensated at his/her regular straight time rate for only one (1) day if such flight(s) is scheduled by the Company on his/her day(s) off. Flight Dispatch Officers required to complete such qualification/familiarization flights that includes an ocean crossing shall be compensated at his/her regular straight time rate for up to two (2) days if such flight(s) is scheduled by the Company on his/her days off. (B) During the first five (5) years of employment as a Flight Dispatch Officer such Flight Dispatch Officer may be required to take up to three (3) qualification/familiarization trips each year. Such qualification/familiarization flights shall be taken over a portion of the TWA domestic/international route system as selected by the Director-Flight Dispatch. Flight Dispatch Officers shall be compensated for such qualification/familiarization flights in accordance with paragraph (A) above. (C) These trips will afford the Flight Dispatch Officer an opportunity to become familiar with TWA's route system and airports as well as obtain cockpit exposure to enhance his/her overall operating knowledge and performance. (D) The Company will pay reasonable and customary expenses for hotels and meals where required for all Company-authorized qualification/familiarization trips. (E) After completing qualification/familiarization flights, Flight Dispatch Officers shall have a reasonable rest period before reporting for duty. ========================================================================= 3/1/99 Page 9 SECTION 6 EXPENSES (A) Employees hereunder who are required to travel or who are transferred at the Company's request will be allowed expenses in accordance with Company policy. (B) Employees hereunder transferring as a result of the exercise of seniority will be allowed expenses in accordance with Company policy governing transfer under such condition, except that such employees will pay their own expenses which are incurred within the continental United States. However, successful bidders at newly established or re-established domiciles and employees transferring from closed domiciles will be considered as transferred at Company request. (C) Regardless of the above, Flight Dispatch officers transferring through the operation of Section 13, or assigned under the provisions of Section 11, shall be allowed expenses in accordance with Section 6(A) above. (D) Flight Dispatch Officers displacing under the provisions of Section 11(F) shall be allowed expenses in accordance with Section 6(A) above. (E) On any transfer involving a geographical change in location, employees hereunder and their immediate families will be furnished transportation in accordance with Company regulations. (F) U.S. domiciled employees hereunder who are assigned to a relief or temporary assignment at another U.S. station will receive actual reasonable expenses. The Company will furnish upon request, and without charge to vacation pass allotment, to the members of such employee's immediate family, transportation in accordance with Company policy for one round trip from domicile to temporary location during the period of the assignment, whenever such assignment is expected to, or actually does, exceed thirty (30) days. ========================================================================= 3/1/99 Page 10 SECTION 7 SICK LEAVESICK LEAVE (A) (1) Employees hereunder will be granted pay during sick leave in accordance with the policy is found on Pages 10.74.01 and 10.74.02 dated October 1, 1998 and 10.74.03 dated April 6, 1993, in the Company's Management Policy and Procedure Manual subject to Sections 9(B),(D),(F), and (G) of this Agreement. Where such Company regulations are inconsistent with any of the following provisions of the Section, the provisions herein shall govern. Sick leave allowance will accrue at the rate of one and one-sixth (1-1/6) work days for each month of compensated service and may accumulate to a maximum of one hundred twenty (120) days. (2) A Flight Dispatch Officer eligible for sick leave pursuant to Section 7(A)(1) above and who is paid sick leave allowance for an extended sickness shall, upon his/her return to duty, have any sick leave allowance for which he/she was paid due to such extended sickness restored at the rate of five (5) work days for each month of compensated service after his/her return to duty. For the purposes of this Section 7(A)(2) only, an "extended sickness" is a period of absence from duty due to sickness or injury, for which sick leave is payable, of thirty (30) or more consecutive calendar days commencing with the first day for which sick leave is paid. (B) When it is necessary for an employee who has completed six (6) months of continuous service to be absent form work because of occupational injury, he/she may be granted sick leave with pay for such absence to the extent that he/she has sick leave allowance accrued at time of sickness. In the event he receives Workmen's Compensation because of such absence, any sick leave pay due for such absence will be deducted by the amount of such Workmen's Compensation received. In such an event, when he/she returns to work, he/she shall have his/her sick leave credit used in connection with such injury restored to the extent that the amount of the compensation offsets the amount of the sick leave pay granted. (C) (1) A Flight Dispatch Officer eligible for sick leave under this Agreement shall be entitled to four (4) work days off per calendar year on account of death in his/her immediate family. Days off under this paragraph shall be deducted from a Flight Dispatch Officer's sick leave credit for the calendar year in which such day is taken. When more than one (1) death occurs during the same calendar year, an employee may not draw upon his/her benefits for the succeeding year or years, but may draw upon up to four (4) days of his/her vacation in the current year. In the event an employee has already taken his/her vacation in the current year, such days shall be deducted from the employee's vacation to be taken in the following year. (2) A Flight Dispatch Officer shall also be entitled to three (3) work days per calendar year on account of serious illness in his/her immediate family, such days to be deducted from the employee's vacation for that year. In the event an employee has already taken his/her vacation, such days shall be deducted from the employee's vacation to be taken in the following year. (3) Immediate family is defined as spouse, child, parent, parent-in-law, foster parent, grandparent, grandchild, brother, sister, brother-in-law, sister-in-law, or ward. (D) Any Flight Dispatch Officer who becomes sick or injured as a result of having been outside the United States on Company business, due to causes related to his/her occupation or to living and ========================================================================= 3/1/99 Page 11 health conditions peculiar to the countries in which he/she performed services, shall have his/her necessary hospital, medical, and doctor expenses paid by the Company. If the sickness or injury necessitates treatment or convalescence in the United States, such Flight Dispatch Officer shall be returned by the Company to the United States. This provision shall apply to recurrences of the same sickness or injury so long as the Flight Dispatch Officer shall remain an employee of the Company. For the purpose of this provision, final determination of whether or not the sickness or injury is due to causes related to the countries in which he/she performed services and whether or not the sickness or injury necessitates treatment or convalescence in the United States, shall be made by the Company's Medical Section. (E) The Company shall provide to each employee hereunder an accounting of his/her accrued sick leave within thirty (30) days of the date of this contract. ========================================================================= 3/1/99 Page 12 SECTION 8 PROBATIONARY PERIOD (A) An Assistant Flight Dispatch Officer or a Flight Dispatch Officer who has not served as an Assistant Flight Dispatch Officer, will be regarded as a probationary employee for the first twelve (12) months after entering the position. In the event an employee serves in both positions during the first twelve (12) months, the total probationary period shall not exceed twelve (12) months for such combined services. Nothing in this Agreement shall be construed to prevent the Company from releasing, furloughing, or re-employing or refusing to re-employ an employee covered by this Agreement during the probationary period, regardless of his/her position on the seniority list, and the Company shall have the right to discharge, discipline or lay off any such employee during the probationary period without cause and without a hearing. Time-off duty for reasons of sickness, leave of absence, excused absence, furlough, or discipline will not be credited toward a probationary period. (B) If an employee is appointed to a Flight Dispatch Officer's position after completion of the twelve (12) month probationary period, he/she will be subject to a qualification period of twelve (12) months after entering the position. Prior to completion of such qualification period, the Union may provide the Company with its recommendations concerning such employee's qualifications, which will be considered by the Company. Determination of the employee's qualifications will remain with the Company. Section 14 of this Agreement shall apply to employees covered by this paragraph. ========================================================================= 3/1/99 Page 13 SECTION 9 LEAVE OF ABSENCE (A) When requirements of the service will permit, an employee hereunder may be granted a leave of absence for a period not in excess of ninety (90) days. When such leaves of absence are granted, the employee shall retain and shall continue to accrue seniority during such ninety (90) day period. Such leave or leaves of absence may by extended upon such terms and conditions as the Company may prescribe in special circumstances and when approved in writing by the Company, provided that seniority shall not accrue during such extended leaves. (B) After an employee hereunder has used all of his/her sick leave credit under Section 7, subject to the conditions of Section 7(C), he/she may be placed on a leave of absence, effective the last day of his/her sick leave, and as long as the Company carries him on such leave, he/she shall continue to accrue seniority to a maximum of five (5) years. At the expiration of the five (5) year continuous period, the employee may be terminated if he/she has not returned to work. Return to duty shall be as set out in (G) hereunder and shall be subject to the condition that all governmental certificates or licenses required for the position are currently valid. An employee on sick leave or medical leave of absence may be periodically required to submit to a physical examination during such leave and prior to return to duty. In the case of leaves under this Section occasioned by pregnancy, an employee will be granted a maternity leave of absence upon proper application accompanied by a physician's statement that she is unable to perform her work because of her pregnancy. Such maternity leaves shall include a recovery period of six (6) weeks (42 calendar days) for a normal delivery. If such maternity leave of absence exceeds 42 days beyond delivery date, the employee must furnish a physician's statement that such extension is necessary. (C) Military leaves of absence for service in the armed forces of the United States shall be handled at the inception and termination as to seniority and right to reinstatement in accordance with applicable law. Return to duty after such leave of absence shall be subject to a reasonable qualifying period not to exceed six (6) months. (D) An employee on leave of absence shall not engage in military) granted hereunder will be taken with the condition that the governmental certificates or licenses required for the position will be maintained current; otherwise, seniority will accrue only to date that the certificates or licenses expire. (E) Leaves of absence (other than injury, illness, or military) granted hereunder will be taken with the condition that the governmental certificates or licenses required for the position will be maintained current; otherwise, seniority will accrue only to date that the certificates or licenses expire. (F) All leaves of absence shall be without pay, and during leaves, credit for length of service will not be given for any purpose except seniority list, as set out in (A) and (B) of this Section. (G) Immediately after the expiration of a leave of absence (other than a military leave), an employee hereunder will return to work as set out below. Failure to do so will be reason for termination of employment. (1) If the position has not been permanently filled by the Company, the returning employee will return to such position. (See Section 11 (A)(3).) (2) If the position has been permanently filled by the Company: (a) Such employee shall bid on any existing vacancy. ========================================================================= 3/1/99 Page 14 (b) If unable to get a position under (a), he/she may elect to displace as set forth in Section 11(F) if this agreement. (H) Immediately after the expiration of a military leave of absence, an employee hereunder will return to the domicile he/she had at the time the leave started, seniority permitting. If seniority does not permit, he/she shall displace as set out in Section 11 (F) of this Agreement. (I) An employee hereunder will be granted a leave of absence to a maximum of three (3) years for full-time employment with the Union. One (1) employee covered by this Agreement may be on such a leave of absence at one time. Request for such leave must be in writing by such employee thirty (30) days prior to the desired beginning of such leave. During such leave, he/she shall retain and accrue seniority and pay longevity credit. Such leaves may be renewed or extended by mutual agreement between the Company and the Union. At the conclusion of the leave, the employee shall return to his former status and domicile, seniority permitting. ========================================================================= 3/1/99 Page 15 SECTION 10 SENIORITY (A) Seniority shall govern all employees hereunder in case of promotion and demotion, their retention in case of reduction of force, their assignment or reassignment due to expansion or reduction in force, and choice of vacancies, provided that the employee's qualifications are sufficient. In the event a senior Flight Dispatch Officer is not considered sufficiently qualified by the Company, the Company shall furnish to the Flight Dispatch Officer, upon application within (10) days, written reasons therefor. Any requirements for initial, differences, or recurrent training as required by the FAR's or Company regulations shall not apply to "qualifications" as used in this paragraph. This Section shall apply unless otherwise excepted by some other provision in this Agreement. (B) All employees having seniority under this Agreement shall be shown on the seniority list and where two or more employees have the same seniority their respective places on the seniority list shall be determined by total length of service with the Company and if that is not determinative, listing shall be by age, the eldest listed first. (C) Seniority shall begin to accrue from the date of appointment to a position covered by this agreement. Seniority shall continue to accrue only for the period that the employee is on pay status with the Company or a position directly associated with the dispatching function, except as provided in Sections 9,11, and 13. (D) The Seniority List shall be issued by the Company, shall be arranged in numerical order of seniority, and shall be known as the Trans World Airlines, Inc., Flight Dispatch Officers and Assistant Flight Dispatch Officers Seniority List. (E) A copy of the Seniority List shall be posted by the Company at each location where Flight Dispatch Officers or Assistant Flight Dispatch Officers are based. Posting shall be made on January 1 and July 1 of each year. Each employee hereunder shall have a period of thirty (30) days after the posting of the Seniority List in which to advise the Company in writing of any inaccuracies occurring since the last posting which affect his seniority. No protest will be considered after such thirty (30) day period, and the list shall thereafter, for all purposes, be considered final. For any employee who is on an excused absence, leave of absence, sick leave, vacation, or furlough, the thirty (30) day period shall commence on the date the Company sends a copy of the list by registered mail to his last known address or the date he/she returns to duty, whichever is earlier. The Company will investigate all reported inaccuracies and make such adjustments as may be in order. Any adjustment or failure to make an adjustment, with which an employee may be dissatisfied, may be handled as a grievance under Section 14 hereof. (F) Any employee named in the Seniority List, once having established a seniority ranking thereunder, shall not lose that ranking except as provided for in this Agreement. (G) When an employee covered by this Agreement is transferred to another position with the Company and such new position is directly associated with the dispatching function, he/she shall retain and continue to accrue seniority hereunder. As pertains to this Agreement, the following positions (to include the position under any other job title as long as the function is essentially the same), and any others that may be mutually agreed upon, shall be considered as being directly associated with the dispatching function: Managing Director - Flight Operations, Director -Flight Dispatch and Area Manager - Flight Dispatch. ========================================================================= 3/1/99 Page 16 (H) When an employee covered by this Agreement is or has been transferred to another position with the Company which is not directly associated with the dispatching function, he/she shall cease accruing seniority and shall be placed on the inactive seniority list for a period of time equal to his/her accrued seniority as of date of transfer except as provided in Section 13. At the end of this time he shall be removed from the inactive list and forfeit all seniority accrued. In event of reassignment as a Flight Dispatch Officer or Assistant Flight Dispatch Officer or to a position directly associated with the dispatching function, while still on the inactive list, seniority shall commence to reaccrue from date of such assignment, provided that at the time of such assignment he/she possesses a valid FAA Dispatcher's Certificate. (I) An employee named in the Seniority List who resigns from the service of the Company or is discharged for cause, or is on furlough status for over five (5) years, shall forfeit all seniority accrued. If an employee who has been laid off due to reduction in force is offered the opportunity to return to the service of the Company on a temporary basis, he/she shall have the prerogative to accept or reject the offer without forfeiting his/her accrued seniority with the Company. However, if he/she is recalled to work on a full-time basis in the classification he/she held prior to going on furlough and does not accept the offer within seven (7) days after he receives it or does not return to work within thirty (30) days after receipt, the Company may consider him/her as having resigned from the service. (J) Regardless of anything contained elsewhere in this Agreement to the contrary, an employee who does not already have accrued seniority under this Agreement, will not receive credit or seniority for any purpose, except for Company service and pay purposes, for any continuous period of assignment as a temporary Assistant Flight Dispatch Officer which is contemplated at time assignment is made to be for six (6) months or less. In the event such an assignment should exceed six (6) months, seniority will accrue from the first date on such assignment. (K) If a Flight Dispatch Officer having seniority hereunder is appointed as a supervisor to a position directly associated with the dispatching function, as outlined in paragraph (G) above, he/she may at any time thereafter exercise his/her seniority to return to Flight Dispatch Officer status by displacing the least senior Flight Dispatch Officer or as set forth in Section 11(F) of this Agreement. ========================================================================= 3/1/99 Page 17 SECTION 11 FILLING OF VACANCIES (A) (1) When a Flight Dispatch Officer vacancy or Assistant Flight Dispatcher Officer vacancy occurs which is expected to last more than six (6) months, it shall be filled as follows: (a) Through bidding by an active employee qualified as a Flight Dispatch Officer covered by this Agreement including the Managing Director - Flight Operations, Director - Flight Dispatch and Area Managers - Flight Dispatch or, (b) In the absence of sufficient bids pursuant to (a) above, the Company will assign the senior qualified Assistant Dispatch Officer or, (c) In the event all vacancies are not filled pursuant to (a) and (b) above, any remaining vacancies shall be subject to bid by all other persons whose names appear on the seniority list. (d) Vacancies in the Assistant Flight Dispatch Officer category which are expected to last six (6) months or more shall be filled first by bids from Assistant Flight Dispatch Officers covered by this Agreement. If insufficient bids are received to fill all such vacancies, bids will be accepted from employees on a Company-wide basis. (2) The most senior person bidding under paragraphs (a) and (c) shall be assigned to the vacancy when it is the opinion of the Company that he/she is deemed adequately qualified. The foregoing provisions are subject to Section 11 (D), (H) and (K). (3) A temporary position anticipated to last six (6) months or less shall be designated as a permanent vacancy if it actually exceeds six (6) months and it will be bid as a permanent vacancy; except that if after a temporary position has been activated, it is expected that it will exist for over six (6) months, the Company and the Section Chairman of the Union may mutually agree to extend it as a temporary position rather than bidding it as a permanent vacancy. The foregoing not withstanding, vacancies created by illness of the employee shall be considered temporary for a period of two (2) years. (B) Permanent vacancies will be announced within thirty (30) days after they are determined and shall be advertised by the Company by posting notices at all stations where Flight Dispatch Officers are based at least ten (10) days prior to a deadline date after which bids will not be considered. Within seven (7) days after bids are closed, all Flight Dispatch Officers will be notified of the results by bulletins posted at stations where bids were advertised. (C) Successful bidders for a vacancy requiring change of domicile shall be allowed a reasonable time for familiarization and route qualification. (D) Any employee holding seniority hereunder who wishes to transfer to a position covered by this Agreement from a position not directly associated with the dispatching function must bid on any existing vacancy (subject to Section 10 (K)). (E) When employees are to be displaced, furloughed, laid off, placed "off duty without pay status," or released from the Company for any reason of curtailment of personnel, such reduction in force shall be in inverse order of seniority among the classification, Flight Dispatch Officers or Assistant Flight Dispatch Officers, subject to Section 13 of this Agreement. Each employee hereunder who ========================================================================= 3/1/99 Page 18 is to be furloughed shall be given fourteen (14) days prior notice of such furlough; except that this notice requirement shall not apply where the furlough is occasioned by Acts of God, circumstances over which the Company has no control, or strikes or other work stoppages. Copies of furlough notices to Flight Dispatch Officers under this paragraph will also be provided to Assistant Flight Dispatch Officers. In the event that part or all of the employees covered under this Agreement are laid off due to Acts of God, circumstances over which the Company has no control, strikes or other work stoppages, all employees so affected will receive layoff pay and return-to- duty pay according to the percentage of the respective pay periods, regardless of days worked, scheduled days off or other work cycle consideration. The dates of shutdown or layoff will determine the proportion of normal pay where such dates fall within the pertinent pay period. Conversely, the date of startup or commencement of return to normal operations will determine the proportion of normal pay for the pertinent period. In conformance with the fourteen (14) days notice of furlough stated above, such notices to affected Flight Dispatch Officers or Assistant Flight Dispatch Officers with further publication to all junior employees who may be affected shall constitute the required notice to all those directly and possibly indirectly affected. (F) When a Flight Dispatch Officer is furloughed or displaced at his/her station, he will be assigned to fill a vacancy for which there is no successful bidder. In case there is no such vacancy, he will be permitted to displace the least senior employee in his classification on the system who is then employed in a permanent position covered by this Agreement, or, if unable to do the because of his seniority ranking, he may displace the least senior Assistant Flight Dispatcher Officer at the furloughed or displaced employee's location or the least senior Assistant Flight Dispatch Officer in the United States. In case he elects to displace as above because there is no vacancy, he will be given a period of time not less than ten (10) days after notification of his displacement in which to so notify the Company. Provisions of Section 10 relating to return from furlough shall apply. In the event more than one (1) Flight Dispatch Officer is furloughed or displaced at the same time, and they elect to displace as above because there are no vacancies, displacement rights shall be exercised in order of seniority. An employee on furlough shall retain and accrue seniority for a maximum of five (5) years. The provision (F) shall not apply in any case where the Company does not require the services of employee for a temporary period because of an Acts of God, circumstances over which the Company has no control, or strikes or other work stoppages. The temporary period shall not exceed fourteen (14) days unless an extension thereof is mutually agreed by the Company and the Union. (G) If an employee is assigned to fill a temporary vacancy or special assignment, he/she shall be permitted to return to his/her former domicile at termination of such temporary vacancy or special assignment, and if unable to do so because of insufficient seniority, he/she shall exercise his/her rights as set out under (F) above. Temporary vacancies will be filled by appointment by the Company of a person deemed qualified. When such temporary assignments are made, the applicable expense provisions in Section 6 shall apply for the entire period. (H) Nothing contained in this Agreement shall be construed to prevent the Company from placing the least senior qualified employee hereunder on special assignment. (I) When an employee is transferred to a new domicile, either by bidding or displacing, he/she will be advised as to the expected date of his/her release form his/her then current domicile for the purpose of making the physical move to his/her new domicile. In any event the Company will do all possible to effect such release within three (3) months of the effective transfer date. ========================================================================= 3/1/99 Page 19 (J) Flight Dispatch Officers bidding on an advertised vacancy may withdraw their bid at any time prior to the date the bids close. Withdrawals must be made by telegram or cable addressed to the Company official signing the bid bulletin and such with withdrawals must be received prior to the time and date the bids close. Once a successful bidder is determined, he must accept the bid unless excused from doing so where the Company determines that there is proof of extraordinary hardship. (K) If a displacing Flight Dispatch Officer leaves the coverage of this Agreement, or elects to remain at his/her domicile only as provided for in (L) below, prior to the displaced Flight Dispatch Officer's physically departing from the domicile from which he/she has just been displaced, the latter shall be given (10) days in which to elect by telegram either to accept the displacement or remain in his/her position the same as if the displacing Flight Dispatch Officer had not elected to displace. If no election is made within such ten (10) day period, it will be assumed that the Flight Dispatch Officer has elected to remain in his position. (L) If a Flight Dispatch Officer previously declared excess at his/her domicile has not physically departed from the domicile, and such excess is retracted by the Company for any reason, the excess Flight Dispatch Officer shall be given ten (10) days in which to elect by telegram to either accept his/her displacement or remain in his position the same as if no excess existed. (M) Prior to permanent transfer involving geographical change in location, reasonable time off shall be allowed for the purpose of adjusting personal affairs in connection with such transfer. (N) It is agreed that Flight Dispatch Officers within the New York domicile may be assigned to either domestic or international duties, or both, in accordance with the Company's requirements. (O) Supervisory Flight Dispatch personnel may perform the flight dispatching function for the purpose of maintaining closer familiarization. A Flight Dispatch Officer shall not incur a loss of pay as a result of this procedure. (P) The Company will furnish at least six (6) months advance notice of any consolidation or relocation of the Dispatch function to any employee hereunder who may thereby be affected. ========================================================================= 3/1/99 Page 20 SECTION 12 FURLOUGH PAY (A) An employee hereunder who is furloughed shall receive furlough pay as provided in paragraph (C) of this Section, subject to the limitations and conditions set forth herein. Normally, the allowance will commence at time of layoff; however, it will be deferred for four (4) months when (a) the layoff is due to seasonal schedule reduction, (b) the layoff is non-seasonal but in the Company's judgment such layoff will be under four (4) months duration. Recall for a period of less the forty-five (45) days shall not break the duration of the four (4) month layoff. (B) An employee will not be eligible for or receive furlough pay if any or the following conditions exists: (1) He/she has not completed at least two (2) years with the Company on pay status. (2) He/she remains in the employ of the Company in any position. (3) He/she fails to exercise his seniority which would enable him/her to remain in the employ of the Company, except where such exercise of seniority would require moving to a new location or require him/her to displace into a lower classification under this Agreement. (4) He/she has been furloughed as a result of an Act of God, a war emergency, revocation of the Company's operation certificate or certificates, or grounding of a substantial number of Company aircraft for safety reasons. (5) He/she is dismissed for cause, resigns, or retires. (6) There is a temporary cessation of work because of a strike or picketing. (7) There is a temporary cessation of work because of circumstances beyond the Company's control. (8) The furlough is anticipated to be and actually lasts less than four (4) months. (C) The amount of furlough pay due under this section shall be based on the length of actual straight time compensated service with the Company under this Agreement, and shall be computed on the basis of the employee's regular straight time rate at time of furlough. An employee shall accrue furlough pay credits at the rate of two (2) weeks of credit for each full year of compensated service to a maximum accrual of sixteen (16) weeks of credit. In the event of a reduction in force, a furlough may be bid and, if bid, shall be awarded to the senior Flight Dispatch Officer so bidding. Any senior Flight Dispatch Officer thus furloughed shall be entitled to furlough benefits appropriate to his seniority in accordance with this Section 12 (C). (D) Furlough pay shall commence in accordance with paragraph (A) above and payments for the amount due shall be at regular pay periods and continue until all furlough pay credit is used; except that in no event shall any furlough pay be due after effective date of recall by the Company to any job in the classification from which the employee was furloughed or voluntary return to a lower classification under this Agreement or to a position not covered by this Agreement. (E) The furlough allowance provided herein shall be in addition to any or all other benefits provided under this Agreement, except those provided in Section 13, which are exclusive of this Section. ========================================================================= 3/1/99 Page 21 SECTION 13 JOB SECURITY AND SEVERANCE (A) (1) Except in an instance specifically provided for to the contrary in this Agreement or any Letters of Agreement executed concurrently therewith, the Company reserves the exclusive right to determine the staffing requirements of domiciles. (2) An employee affected by a reduction in force or abolishment of positions as a result of an excess of personnel in the system, will be handled in accordance with the provisions of this Section. (B) In the event a domicile has surplus Flight Dispatch Officers or is closed and vacancies exist or are created in another domicile, such vacancies shall be subject to seniority bidding in the following order: (1) Active Flight Dispatch Officers covered by this Agreement including the Director - Flight Dispatch and Area Managers - Flight Dispatch; (2) Any such vacancies still remaining open will be filled by the assignment of Flight Dispatch Officers from the domicile having the excess, in inverse order of seniority; (3) In the event all the vacancies are not filled pursuant to (1) and (2) above, the Company will assign in order of seniority qualified Assistant Flight Dispatch Officers; (4) In the event all the vacancies are not filled pursuant to (1), (2) and (3) above, any remaining vacancies shall be subject to bid by all the other persons whose names appear on the seniority list. (C) After the application of (B) above, any remaining excess dispatch personnel shall be entitled to a severance allowance in accordance with the following provision: (1) Acceptance of such severance allowance shall constitute a termination of the employer-employee relationship. (2) The severance allowance hereunder shall be in the amount: Years of Compensated Service Under This Agreement Severance 5 Years 5 Months Pay 6 Years 6 Months Pay 7 Years 7 Months Pay 8 Years 8 Months Pay 9 Years 9 Months Pay 10 Years 10 Months Pay 11 Years 12 Months Pay 12 Years or More 14 Months Pay (3) Severance shall be at the employee's rate of pay effective the date he/she is declared excess. ========================================================================= 3/1/99 Page 22 (4) Excess personnel shall have the option of placing their severance benefits up for bid. In the event that more than one (1) severance allowance is involved, bids for such severance will be awarded on a strict seniority basis. However, a successful bidder for a severance allowance originally due another shall not receive, as his/her severance allowance, an amount greater than that to which the originally excess employee was entitled. (5) Severance allowance shall be payable in bi-weekly installments. (D) In the event that an excess Flight Dispatch Officer or Assistant Flight Dispatch Officer, otherwise entitled to a severance allowance in (C) above, desires to remain in the employ of the Company, the Company will provide him/her with alternate employment in a job outside the coverage of this Agreement, making a best effort to provide a job and a location as suitable as possible, The following rules shall apply to persons accepting such alternate employment. (1) They shall be carried on the active seniority list and continue to accrue seniority. (2) The rate of pay in the alternate employment shall not be less than the employee's most recent base rate as a Flight Dispatch Officer. (3) Alternate employment shall be guaranteed by the Company for a period of five years. (4) The acceptance of alternate employment shall not preclude a person receiving a severance allowance should he later decide to leave such employment and resign from the Company; however, in such case, the severance allowance to which he/she would originally have been entitled under (C) above, will be reduced on a straight line basis over the period of guaranteed employment. (5) An employee accepting alternate employment will be subject to discharge for cause; however, his failure to perform to a desired degree of proficiency shall not constitute just cause for such action. (E) The benefits afforded by this Section shall not apply to an employee who: (1) retires; (2) resigns; (3) is discharged for cause (such employee shall have access to Section 14), or (4) is laid off in a temporary force reduction occasioned by an Act of God, fire, strike, grounding of a substantial number of the Company's aircraft, work stoppages by employees of the Company and other conditions over which the Company has no control; (5) elects to accept benefits pursuant to Section 12 of this Agreement. ========================================================================= 3/1/99 Page 23 SECTION 14 INVESTIGATION AND DISCIPLINE (A) Investigation and Hearing (1) An employee or group of employees who believe that any provision of this Agreement affecting them has not been properly applied or against whom the Company has preferred charges or taken disciplinary action, may submit a request for an investigation and hearing to the Managing Director - Flight Operations. (2) Such a request must be filed within thirty (30) days of the date that the grievant has knowledge, actual or constructive, of the facts upon which the grievance is based, provided that prior to the filing of a grievance the employee must either in person or through his designated representative discuss the matter with his/her immediate supervisor or his/her designated representative. The requirement of discussing the matter with supervision prior to filing a grievance does not apply in cases of discipline or discharge. (3) At the direction of the Managing Director - Flight Operations an investigation and hearing as provided in paragraph (A)(1) above shall be held with in ten (10) days after receipt of a request. The grievant may request the hearing officer to render a written decision without holding a formal hearing. A formal hearing may nevertheless be conducted if, in the opinion of the hearing officer, such procedure is warranted. (4) Within ten (10) days after the close of such investigation and hearing, the hearing officer shall announce his/her decision in writing and shall furnish the grievant and his duly accredited representative with a copy thereof. (B) Appeal (1) If the decision of the hearing officer is not acceptable to the employee, the grievance and the decision thereon may be appealed to the System Board of Adjustment in accordance with the provisions of Section 15, provided that appeal must be submitted within thirty (30) days after receipt of the decision. (2) If, as a result of any hearing or appeal therefrom as provided herein, an employee is exonerated, such employee shall, if he/she has been held out of service, be reinstalled without loss of seniority and shall be paid for such time lost in an amount which the employee would have ordinarily earned had he/she been continued in service during such period less any amounts received by way of unemployment compensation or outside earnings. (C) General (1) An employee hereunder, who has satisfactorily completed his/her probationary period, shall not be disciplined or discharged without notification in writing stating the precise charge or charges upon which the action is based nor will an employee be discharged without a hearing between the employee, his designated Union representative, and a designated hearing officer. Suspension from the service of the Company pending a hearing, which shall be prompt, shall not be deemed a violation of this rule. This provision shall not affect the employee's right to a timely use of the grievance procedures as outlined above. (2) The procedure provided herein shall not be extended to probationary employees during their probationary period with the Company as an employee hereunder. ========================================================================= 3/1/99 Page 24 (3) If any decision made by the Company under the provisions of this section is not appealed in the manner and within the time limits prescribed herein for such appeals, the decision of the Company shall become final and binding. (4) All hearings and investigations will be conducted during regular day shift working hours insofar as possible and grieving employees and/or their representative shall not suffer loss of pay while attending such hearings and investigations. (5) Subject to space being available, witnesses and representatives who are employees of the Company shall receive free transportation over the lines of the Company from the point of duty to the point of hearing and return. ========================================================================= 3/1/99 Page 25 SECTION 15 SYSTEM BOARD OF ADJUSTMENT (A) In compliance with Section 204, Title II, of the Railway Labor Act, as amended, there is hereby established a System Board of Adjustment for the purpose of adjusting and deciding disputes which may arise under the terms of this Agreement and which are properly submitted to it. (B) The Board shall consist of two (2) members, one (1) of whom shall be selected by the Union and one (1) by the Company, and such appointees shall be known as "Adjustment Board Members." (C) The two (2) members shall serve for one year from the date of their appointment or until their successors have been duly appointed. Vacancies in the membership of the Board shall be filed in the same manner as is provided herein for the selection and appointment of the original members of the Board. (D) The Board shall have jurisdiction over disputes between the Company and any employee or group of employees covered by this Agreement, growing out of the interpretation or application of any of the terms of such Agreement. The jurisdiction of the Board shall not extent to proposed changes in hours of employment, rates of compensation, or working conditions covered by existing agreements between the parties hereto. (E) The Board shall consider any dispute properly submitted to it by the President of Local 540 or by the Vice President - Flight Operations of the Company when such dispute has not been previously settled in accordance with the terms provided for in this Agreement. (F) Appointments of members of the Board shall be made by the respective parties within thirty (30) days from the date of the signing of this Agreement, and said appointees shall meet within forty-five (45) days from the date of the signing of this Agreement to organize and shall select a Chairman and a Vice- Chairman. The term of office of Chairman and Vice-Chairman shall be one (1) year. Thereafter, the Board shall designate one of its members to act as Chairman and one to act as Vice-Chairman for one (1) year terms. Each officer so selected shall serve for one (1) year or until his successor has been duly selected. The office of Chairman shall be filled and held alternately by a Union member and a Company member of the Board. When a Union is Chairman, a Company member shall be Vice Chairman, and vice-versa. The Chairman or in his absence the Vice-Chairman, shall preside at meetings of the Board and at hearings and shall have a vote in connection with all actions taken by the Board. After the organization meeting referred to herein, the Board shall thereafter meet at TWA Headquarters (unless a different place of meeting is agreed upon by the Board) during the first week in August and the first week in February of each year, provided that at such times there are cases filed with the Board for consideration, and shall continue in session until all matters before it have been considered, unless otherwise mutually agreed upon. (G) All disputes properly referred to the Board for consideration shall be addressed to the Chairman. Five (5) copies of each petition, including all papers and exhibits in connection therewith, shall be forwarded to the Chairman, who shall promptly transmit one (1) copy thereof to the other member of the Board, and a copy to the Vice President - Labor Relations and one copy to the Director - Flight Dispatch. Each case submitted shall show: 1. Question or questions at issue. 2. Statement of facts. 3. Position of employee or employees. 4. Position of Company. When possible, joint submission should be made, but if the parties are unable to agree upon a joint submission, then either party may submit the dispute and its position to the Board. No matter shall ========================================================================= 3/1/99 Page 26 be considered by the Board which has not first been handled in accordance with Section 14 of this Agreement. When a dispute is submitted by one party only, such party shall at the time the petition is sent to the Chairman, send a copy of such petition to the other party by registered mail, return receipt requested, The date of posting shall be the significant date for purposes of the thirty (30) day period provided in Section 14 (B) or this Agreement. (H) Upon receipt of notice of the submission of a dispute, the Chairman shall set a date for hearing, which shall be at the time of the next regular meeting of the Board, or, if one (1) member of the Board considers the matter of sufficient urgency and importance, then at such earlier date and at such place as the Chairman and Vice - Chairman shall agree upon, but not more than fifteen (15) days after such request for meeting is made by one (1) of said members, and the Chairman shall give the necessary notices of such meeting in writing to the other Board member and to the parties to the dispute. Anything to the contrary herein notwithstanding, presentation of a grievance to the two (2) man System Board of Adjustment may be waived, provided both members of the Board mutually agree. In such event, it shall be assumed for the purposes of this Section that the two (2) man System Board deadlocked in the issue presented as of the date the submission of the dispute is received by the Board. All other provisions of this Section shall apply to such dispute. (I) Employees covered by this Agreement may be represented at Board hearings by such person or persons as they may choose and designate, and the Company may be represented by such person or persons as it may choose and designate. Evidence may be presented either orally or in writing or both. On request of individual members of the Board, the Board may, by a majority vote, or shall, at the request of either the Union representatives or the Company representatives thereon, summon any witnesses who are employed by the Company and who may be deemed necessary by the parties to the dispute or by either party, or by the Board itself, or by either group of representatives constituting the Board. The number of witnesses summoned at any one time shall not be greater than the number which can be spared from the operation without interference with the services of the Company. (J) A majority vote of all members of the Board shall be competent to make a decision. (K) Decisions of the Board in all cases properly referable to it shall be final and binding upon the parties hereto. (L) In the event of a deadlock in the case of any dispute properly before it, it shall be the duty of the Board to endeavor to agree, within ten (10) days from the date of such deadlock, upon a procedure for breaking such deadlock. A majority vote of all members of the Board shall be competent to reach such agreement, and the action of the Board operating under such procedure shall be final and binding upon the parties hereto. If after the expiration of the said ten (10) days, the deadlock is not broken or such case is not otherwise disposed of, either party may notify the other in writing that the services of a referee are desired. Within ten (10) days after such notification, the members of the Board will select a referee within forty-eight (48) hours, or failing to agree upon such referee, he shall be appointed by the National Mediation Board. Within thirty (30) days after the selection of the referee as provided above, the Board and the referee shall consider and review the prior record in the case, and may call such additional witnesses and receive such additional evidence as the Board may deem necessary. Either party may make written request to the Board for the privilege of presenting additional witnesses or ========================================================================= 3/1/99 Page 27 documentary evidence, and the Board, with the referee, may, in their discretion, permit such presentations. The decision of the Board shall be rendered within ten (10) days after the close of the hearing, and majority vote of the members of the Board, including the referee, shall be necessary to reach such decision, which shall be final and binding upon the parties hereto. The Board and the referee shall have jurisdiction only over disputes growing out of the interpretation and application of the terms of this Agreement, and shall have no power to add or to subtract form the terms of this Agreement. The expenses and reasonable compensation of the referee selected as provided herein shall be borne equally by the parties hereto. The time limits specified in this paragraph (L) may be extended by mutual agreement of the parties to this Agreement. (M) Nothing herein shall be construed to limit, restrict, or abridge the rights or privileges accorded either to the employees or to the employer, or to their duly accredited representatives, under the provisions of the Railway Labor Act, as amended, and the failure to decide a dispute under the procedures established herein shall not, therefore, serve to foreclose any subsequent rights which such law may afford or which may be established by the National Mediation Board by orders issued under such law with respect to disputes which are not decided under the procedures established herein. (N) The Board shall maintain a complete record of all matters submitted to it for its consideration and of all findings and decisions made by it. (O) Each of the parties hereto will assume the compensation, travel expense, and other expenses of the Board members selected by it. (P) Each of the parties hereto will assume the compensation, travel expense, and other expenses of the witnesses called or summoned by it. So far as space is available, witnesses who are employees of the Company shall receive free transportation over the lines of the Company from the point of duty or assignment to the point at which they must appear as witnesses and return, to the extent permitted by law. (Q) The Chairman and the Vice-Chairman, acting jointly, shall have the authority to incur such other expenses as, in their judgment, may be deemed necessary for the proper conduct of the business of the Board, and such expense shall be borne one-half by each of the parties hereto. Board members who are employees of the Company shall be granted necessary leaves of absence for the performance of their duties as Board members. So far as space is available, Board members who are Company employees shall be furnished free transportation over the lines of the Company for the purpose of attending meetings of the Board, to the extent permitted by law. It is understood and agreed that each and every Board member shall be free to discharge his/her duties in an independent manner, without fear that his/her individual relations with the Company or with the employees may be affected in any manner by any action taken by him/her in good faith in his/her capacity as a Board member. ========================================================================= 3/1/99 Page 28 SECTION 16 GENERAL (A) The Company shall provide each Flight Dispatch Officer with a bound, printed copy of this Agreement. (B) All orders to and requests from a Flight Dispatch Officer or Assistant Flight Dispatch Officer involving transfers, promotions, demotions, layoff, re-employment, leaves of absence, or anything affecting his/her pay or status, shall be in writing. (C) No work stoppages, strikes or slow-downs shall be engaged in by employees or engaged in or authorized by the Union, and there shall be no lockouts by the Company until the procedures for setting disputes involving employees covered by this Agreement as provided by the Railway Labor Act have been exhausted. (D) All matters not covered by this Agreement shall remain exclusively and without limitation within the prerogatives of management. (E) Should any part hereof or any provisions herein contained be rendered invalid by reason of any existing or subsequently enacted legislation or act of any authorized agency of government or by any decree of a court of competent jurisdiction, such invalidation of such part or portion of this Agreement shall not invalidate the remaining portions thereof, and they shall remain in full force and effect. Upon the request of either party hereto, subsequent to any such invalidation, invalidated portions of this Agreement shall thereupon be renegotiated, and when agreed upon, shall be inserted in lieu of the invalidated portions. (F) A designated Union member who is an employee of the Company shall be permitted to attend any formal investigation of a TWA aircraft incident in which a Flight Dispatch Officer might be involved. It shall be understood that the Company will not assume any direct or indirect expense obligation related to such attendance, except where attendance is specifically requested by the Company or required by the FAA or CAB. (G) The Group Medical and Dental Benefit Plan administered by the Company authorized third party administrator, as described in the "A World of Benefits From TWA Universal Benefit Plan" Summary Plan Description dated September, 1997, shall be amended as follows: (1) The In-Network deductible under the Medical Plan shall be $200 per family. (2) Covered Expenses under the Medical Plan shall include in- hospital expenses incurred for newborn children. (3) Preventive Health Care Benefits In-Network, after a $10 office visit co-payment, the Medical Plan shall pay for routine exams, including Pap smears and mammograms, not to exceed the following: Six (6) visits, including immunizations, up to 1 year of age; Three (3) visits per calendar year, including immunizations, from ages 1 to 2 years; Two (2) visits per calendar year, including immunizations, from ages 2 to 6 years; One (1) visit per calendar year age 6 and older. Out-of-Network, the Medical Plan shall pay fifty percent (50%) of expenses for routine exams, including Pap smears and mammograms, after the annual deductible has been satisfied, not to exceed the above schedule. ========================================================================= 3/1/99 Page 29 (4) Home Health Care Benefits In-Network, the Medical Plan shall pay ninety percent (90%) of expenses for up to sixty (60) home health care visits per calendar year, after $50 of the $200 deductible has been satisfied. Out-of-Network, the Medical Plan shall pay seventy percent (70%) of expenses for up to sixty (60) home health care visits per calendar year, after the full deductible has been satisfied. (5) Hospice Care Benefits The Medical Plan shall pay eighty percent (80%) of hospice care expenses, incurred in a hospice care facility or at home, after the $200 annual deductible has been satisfied, up to a maximum benefit of $10,000 per individual. (6) Dental Plan Benefits The Group Dental Plan effective May 1, 1999 includes a Preferred Provider Organization (PPO) which provides three (3) levels of comprehensive benefits based upon whether the service is obtained through the PPO network (In-Network), outside the PPO network (Out-of-Network), or through a voluntarily elected Dental Health Maintenance Organization (DHMO). Employees who live in areas where no PPO network is available are paid in accordance with the In- Network benefits. In-Network shall be defined as at least two (2) general practitioners within a ten (10) mile radius. Features of the Group Dental Plan are as follows: IN-NETWORK (PPO) - - ------------------------------------------------------------------------------------------------------------------
DENTAL SERVICE BENEFITS PAYABLE DEDUCTIBLE MAXIMUM -------------- ---------------- ---------- ------- - - ------------------------------------------------------------------------------------------------------------------ (Class I (Preventive) 100% of network fees None $3000 per calendar year per (Oral Exams) member inclusive of (X-rays) Class I, II, III - - ------------------------------------------------------------------------------------------------------------------ Class II 90% of network fees $100 per calendar year $3000 per calendar year per (Minor Restorative) per member inclusive of member inclusive of (Periodontal) (Fillings) Class II and III Class I, II, III (Root Canals) - - ------------------------------------------------------------------------------------------------------------------ Class III 60% of network fees $100 per calendar year $3000 per calendar year per (Major Restorative) per member inclusive of member inclusive of (Crowns) Class II and III Class I, II, III (Bridges) (Dentures) - - ------------------------------------------------------------------------------------------------------------------ Class IV (Orthodontics) 50% of network fees $100 per member for life $1500 per member for life - - ------------------------------------------------------------------------------------------------------------------ OUT-OF-NETWORK (PPO) - - ------------------------------------------------------------------------------------------------------------------ DENTAL SERVICE BENEFITS PAYABLE DEDUCTIBLE MAXIMUM -------------- ---------------- ---------- ------- - - ------------------------------------------------------------------------------------------------------------------ Class I (Preventive) 90% of reasonable and None $3000 per calendar year per (Oral Exams) (X-rays) customary charges member inclusive of Class I, II, III - - ------------------------------------------------------------------------------------------------------------------ Class II 75% of reasonable and $100 per calendar year $3000 per calendar year per (Minor Restorative) customary charges per member inclusive of member inclusive of (Periodontal) (Fillings) Class II Class I, II, III (Root Canals) - - ------------------------------------------------------------------------------------------------------------------ Class III 50% of reasonable and $100 per calendar year $3000 per calendar year per (Major Restorative) customary charges per member inclusive of member inclusive of (Crowns) (Bridges) Class III Class I, II, III (Dentures) - - ------------------------------------------------------------------------------------------------------------------ Class IV (Orthodontics) 50% of reasonable and $200 per member for life $1500 per member customary charges for life - - ------------------------------------------------------------------------------------------------------------------ ========================================================================= 3/1/99 Page 30 DENTAL HMO - - ------------------------------------------------------------------------------------------------------------------ DENTAL SERVICE BENEFITS PAYABLE DEDUCTIBLE MAXIMUM -------------- ---------------- ---------- ------- - - ------------------------------------------------------------------------------------------------------------------ Class I 100% of network fees None None - - ------------------------------------------------------------------------------------------------------------------ Class II 90% of network fees None None - - ------------------------------------------------------------------------------------------------------------------ Class III 80% of network fees None None - - ------------------------------------------------------------------------------------------------------------------ Class IV 60% of network fees None None - - ------------------------------------------------------------------------------------------------------------------ Classes for DHMO same as for PPO
(7) The "Reasonable and Customary" schedule applied by a Company authorized third party administrator to covered non-negotiated medical expenses and to covered dental expenses shall be based on the ninety-fifth percentile (95%)of the current database. (8) Acute Care Prescription Drug Program There shall be no deductible. (9) Medical Plan Prescription Drug Benefits The Plan will cover prescription drug expenses for drugs administered in a hospital facility. Such expenses shall be paid in accordance with the in-network and out-of-network Plan benefits applicable to hospital charges. Employees living outside an INTEQ pharmacy area will be permitted, by exception through Employee Benefits, to submit their drug charges through the Medical Plan. Additionally, in the event the employee must fill a prescription outside the INTEQ pharmacy area, the employee by exception through Employee Benefits will be permitted to submit their drug charges through the Medical Plan. The Plan will pay eighty percent (80%) of drug charges, after the two hundred dollar ($200.00) annual family deductible has been satisfied, for such authorized prescriptions filled outside an INTEQ pharmacy area. ========================================================================= 3/1/99 Page 31 (10) Chiropractic Care Benefits Chiropractic benefits will be paid at eighty percent (80%) of reasonable and customary, subject to no deductible, limited to twenty (20) visits per member per year. These visits are not subject to medical necessity. (11) Continuing Medical / Dental Insurance In the event of an active employee's death, the Company's Group Medical and Dental Insurance coverage will be continued by the Company for a period not to exceed twenty-four (24) calendar months following the employee's death to the surviving spouse as long as he/she does not remarry, and to qualified surviving children who continue to meet the group insurance definition of eligible dependent. (12) Retiree Group Medical/Dental/Prescription Drug Coverage Effective on the signing of this Basic Agreement, any flight dispatch officers and assistant flight dispatch officers retirees will be subject to all negotiated changes affecting active flight dispatch officers and assistant flight dispatch officers. (13) Right of Reimbursement If a loss or injury is sustained by an employee or a covered family member and if such loss or injury is caused by the act or omission of a third party, health care benefits provided under the Plan will be paid only on the condition that the employee or family member (or his/her legally authorized representative if the Plan member is legally incapable) shall agree in writing: To pay the insurer or Plan Sponsor to the extent of such benefits provided, upon collection of damages with respect to such Plan member whether by action at law, settlement, or otherwise. (H) An employee covered by this Agreement who is required to travel on Company business or is engaged in a flight as an additional crew member shall be covered by a standard aviation accident insurance policy in accordance with the policy as found on pages 10.30.02 dated January 2, 1997 at subsection D(2) in the Company's Management Policy and Procedure Manual, with a death benefit of $50,000. (I) The Company shall provide and make available at each station where Flight Dispatch Officers are based a bulletin board for the Union's use. The material posted on such bulletin board shall be limited to official Union business. (J) (1) Employees covered by this Agreement will be granted the same transportation privileges on the Company's system as may be established by Company regulations for all comparable personnel. Free and reduced fare transportation as established by Company policy on the date of signing of this Agreement will not be substantially changed or discontinued during the term of this Agreement without first advising the Union of the reason therefor and affording the Union an opportunity to confer with the Company. (2) A Class 3 positive pass or its equivalent shall be granted to the Section Chairman for use on Union business, subject to applicable Federal regulations. (3) Employees severed under the terms of this Agreement who desire to seek employment elsewhere will, upon application, be granted on one occasion, free one-way non-positive air transportation on the Company's planes to any point on the system within the continental limits of the United States, to the extent permitted by law. (4) Employees who at the time of retirement are covered by this Agreement shall receive pass privileges in accordance with the policy and regulations specified in the Company's Man- ========================================================================= 3/1/99 Page 32 agement Policy and Procedure Manual on pages 13.07.07 and 13.07.08 dated February 3, 1997 and 13.07.09 dated September 1, 1997, Federal law permitting. (K) In accordance with applicable law, there shall be no discrimination against employees covered by this Agreement because of race, color, creed, national origin, religion, sex, age, handicap or disability, or veteran status (including Vietnam era veteran and special disabled veteran status). (L) At the completion of one (1) year of service a Flight Dispatch Officer shall have a percentage of his/her gross wages paid by the Company into the Trust Plan for Flight Dispatch Officers and Meteorologists of Trans World Airlines, Inc. (sometimes known as the "B Plan") in accordance with the following schedule: Years of Service Percentage Paid By Company Year 2 2% Year 3 3% Year 4 3% Year 5 and thereafter 5% Plan participants shall be afforded the option of contributing a further fixed amount of his/her gross wages not in excess of ten (10) percent for such gross wages. The "B Plan" is and shall be as described in the Plan Document for that plan. (M) The Retirement Plan for Flight Dispatch Officers and Meteorologists of Trans World Airlines, Inc. (sometimes known as the "A Plan") is and shall be frozen in accordance with the Settlement Agreement dated January 5, 1993 among Trans World Airlines, Inc., the Official Unsecured Creditors' Committee of Trans World Airlines, Inc., the Pension Benefit Guaranty Corporation, the International Association of Machinists and Aerospace Workers, the Independent Federation of Flight Attendants, the Air Line Pilots Association, International, the Transport Workers Union of America, Carl C. Icahn, the Icahn Entities and Pitchin Corp., and the Icahn Sponsor. (N) The Section Chairman or any other elected union officer performing official TWA business shall be granted time off from work to a maximum of 96 hours per calendar year. (O) Effective January 1, 2000, each employee shall have the option to have his/her paycheck electronically deposited in a designated financial institution. If the employee elects the electronic direct deposit option, his/her paycheck stub will be available at the Flight Dispatch Office. (P) A TWA Flight Dispatch Officer or Assistant Flight Dispatch Officer exercising his/her ACM privilege must personally list himself/herself electronically via a CAMS entry at the airport of departure if earlier than one (1) hour prior to the scheduled departure time of the flight. Within one (1) hour of the scheduled departure time of the flight, a TWA Flight Dispatch Officer or Assistant Flight Dispatch Officer may list either electronically via a CAMS entry at the airport of departure or on the appropriate ACM sign-in sheet at the departure gate. However, the TWA Flight Dispatch Officer or Assistant Flight Dispatch Officer using electronic sign-in shall have priority. ========================================================================= 3/1/99 Page 33 SECTION 17 UNION SECURITY (A) Each employee now or hereafter employed in any classification covered by this Agreement shall, as a condition of continued employment in such work, within sixty (60) days following the beginning of such employment or the effective date of this Section, whichever is later, become a member of, and thereafter maintain membership in good standing (as herein defined) in the Union, except as provided otherwise herein. Such condition shall not apply with respect to any employee to whom such membership is not available upon the same terms and conditions as are generally applicable to any other member of his/her classification, or with respect to any employee to whom membership is denied or terminated for any reason other than the failure of the employee to tender he dues uniformly required of other members of his/her classification as a condition of acquiring or retaining membership. The condition of payment shall be met if the amount due is tendered to the Treasurer of the Union in person or is mailed to him/her within the prescribed time limits. For the purpose of this Section, "membership in good standing in the Union" shall consist of the payment by the employee, not later than the last day of the second following calendar month, of dues for each calendar month, initiation fees and assessments (not including fines and penalties), which are uniformly required of is/her classification as a condition of acquiring or retaining membership. The employee may have his/her monthly membership dues deducted from his/her earnings as provided in paragraph (N) of this Section, or he/she may pay his/her membership dues directly to the Union. Initiation fees must be paid directly to the Union. (B) Any employee who has not held membership in good standing with the Union at any time on or after the date of signing of this Agreement, and who was in the employ of the Company previous to such date shall not be required, as a condition of continued employment, to become a member of the Union as set out in (A) above. However, any such employee who, subsequent to the effective date of this Section and during the term of this Agreement, joins the Union, must thereafter maintain his/her membership in the Union as provided in (A) above. (C) Notwithstanding any other provisions contained in this Agreement, if any person is transferred or promoted to a position in which he/she is not covered by this Agreement, the provisions of (A) above shall be inoperative as to such employee. This paragraph (C) shall not apply to an employee who is transferred or promoted on a "Temporary" or "Acting" basis. (D) When any person holding seniority under this Agreement returns to a position covered by this Agreement from lay-off, leave of absence, military leave, or a position in which he/she was not covered by this Agreement, the appropriate provisions of this Section shall, at time of return, apply in the same manner as if he/she had been actively employed in such position on the effective date of this Section. (E) When an employee becomes delinquent by not meeting the requirements of (A) above for "membership in good standing in the Union," the following procedure shall be observed. (1) The Treasurer of the Union shall notify the employee by registered letter, return receipt requested, copy to the Company's Vice President - Labor Relations, that the employee is delinquent in the payment of dues as specified herein and accordingly is subject to discharge as an employee of the Company. Such letter shall also notify the employee that he/she make the required payments within fifteen (15) calendar days of the date of mailing of the notice or be subject to discharge under the terms of this Agreement. If the notice above is not ========================================================================= 3/1/99 Page 34 received by the employee or is delayed in reaching such employee as the result of the employee's failure to keep both the Company and the Union informed as to his correct mailing address, no extension in the time limit specified in the original notice is required. (2) Upon the expiration of the fifteen (15) day period following the mailing of the notice in subsection (1) above, if the employee still remains delinquent the Treasurer of the Union may certify in writing to the Company's Vice President - Labor Relations that the employee has failed to make the required payment within the fifteen (15) day grace period and is, therefore, to be discharged. (3) Within fifteen (15) days after receipt by the Company of the Union's certified notice in subsection (2) above that the employee is to be discharged, the Company shall discharge the employee from its services for his failure to pay or to tender dues as required under this Section. (F) If the employee discharged or to be discharged under this Section contends that he/she is not properly subject to discharge under the terms of this Section he/she may protest such action to the Trans World Airlines Flight Dispatch Officer's System Board of Adjustment provided that such protest in writing is mailed to the Board within (10) days after the date the employee is notified of such action. This protest shall be submitted in duplicate to the Chairman of the System Board of Adjustment, with one copy to be mailed in Care of the Vice President - Labor Relations, TWA at such address as he/she may from time to time designate, and the other copy to be mailed in care of the Treasurer of the Union. The letter to the Chairman of the Board and both copies shall be sent by registered mail, return receipt requested. In the event no protest is so filed within the above time limits, the action will be considered as proper and will be final and binding upon all parties concerned. Within ten (10) days of receipt of such a protest, the System Board of Adjustment will meet and consider the dispute. A representative of the Company, a representative of the Union, and the employee affected will be allowed to present to the Board all evidence and argument pertinent to the issue. Prior to the expiration of the work day following such Board meeting, the Board will issue either a majority decision or a notice of deadlock. If a majority decision is issued, it will be final and binding upon all parties concerned. If a deadlock is reached, and if at the time of the deadlock the Board cannot agree upon a neutral to sit with the Board to decide the dispute, the Board will immediately request the National Mediation Board to appoint a neutral, and the Board will meet with him/her at the earliest opportunity and decide the dispute. At the meeting the Board, sitting with a neutral, a representative of the Company, a representative of the Union, and the employee affected will be allowed to present to the Board all evidence and arguments pertinent to the issue. A majority decision of the Board, including the neutral, will be issued within five (5) days after such meeting and will be final and binding upon all parties concerned. The expenses and reasonable compensation of the neutral selected as provided herein shall be borne equally by the parties to this Agreement. The provisions of Section 14 shall not apply to disputes arising under this Section, and the provisions of this Agreement establishing a System Board of Adjustment shall apply to such disputes except as they are superseded by the above provisions relating to procedure for handling disputes. The effective date of an employee's discharge under this Section will be held in abeyance during the time that a dispute is unsettled as to whether or not the individual is properly employed under the provisions of the Section. If a decision is made that the employee should be discharged, the discharge shall be effected the day following the issuance of the decision. In the event a reduction in force occurs during such time as an employee's status is being protested under the provisions of this Section, such employees will considered as having seniority under this Agreement for purposes of effecting the reduction. (G) Time limits specified in this Section may be extended in individual cases only, and then only by written agreement between the Company and the Union. ========================================================================= 3/1/99 Page 35 (H) An employee discharged under the provisions of this Section shall be deemed to have been "discharged for just cause" within the meaning of the terms of this Agreement. (I) All letters and notices provided for by this Section shall be sent by registered mail, return receipt requested. Such letters and notices or copies sent to the Union shall be addressed to the Treasurer of the Union at such address as he/she may from time to time designate. Such letters and notices or copies sent to the Company shall be addressed to the Company's Vice President - Labor Relations at such address as he/she may from time to time designate. (J) Nothing in this Section shall require the Company to terminate the employment of any employee until the services of a qualified replacement are available except that the provisions of this paragraph will not permit the Company to retain an employee in its employment in excess of ninety (90) calendar days from the date of the Union's notice given pursuant to the paragraph (E), subsection (3) of this Section. (K) When an employee is discharged or resigns, he/she will be considered as a new employee for purposes of the Section if he/she returns, at a later date, to pay status under this Agreement. (L) Both the Union and the Company, or either of them, shall have the right at any time, to notify individual employees directly of any provisions of this Agreement. (M) When new employees are hired or transferred into classifications covered by this Agreement the Company will furnish monthly to the Union the names, classification, point of employment and payroll register number of such new employees. The Company will furnish to the Union the names, present and previous classification, point of employment and payroll register number of all employees who may transfer out of classifications covered by this Agreement; in addition, the Company will furnish to the Union the names, location, payroll register number and status of employees covered by this Agreement who terminate their payroll status for any reason, such listing will be furnished monthly. DUES CHECK - OFF (N) During the life of this Agreement the Company will deduct from the pay of each member of the Union and remit to the Union monthly membership dues uniformly levied in accordance with the Railway Labor Act, as amended, and the constitution and bylaws of the Union, provided such member of the Union voluntarily executes the agreed form, which is hereinafter included in this Agreement to be known as "check-off form," which shall be prepared and furnished by the Union. The Company will not be required to deduct monthly membership dues from the pay of employees covered by this Agreement unless (1) the Company has received a check-off form and has not received a notice of revocation thereof, and (2) the dues for the employee conform to the applicable dues for employees of the classification at his/her point of the system. ASSIGNMENT AND AUTHORIZATION FOR CHECK-OFF UNION DUES TO TRANS WORLD AIRLINES, INC. I, , hereby assign to the Transport Workers Union of America, AFL-CIO, Union dues from any wages earned or to be earned by me as your employee and authorize and direct you to deduct the sum of $ each month, which are the monthly membership dues (or such monthly membership dues as may hereinafter be established by the Union as dues for employees in my present or future classification under the Agreement upon notification to the Company by the Treasurer of the Union) from one pay check per month and to remit same to the Treasurer of the Union. This assignment and authorization may be revoked by ========================================================================= 3/1/99 Page 36 me in writing after the expiration of one (1) year from this date, or upon the termination date of the applicable collective bargaining agreement between Trans World Airlines, Inc., and the Union in effect at the time this is signed, whichever occurs sooner. This authorization and direction is made subject to the provisions of the Railway Labor Act, as amended, and in accordance with existing Agreement between the Union and the Company. Employee Register No. Job Classification Department Location Date Signature of Employee Street Address City and State (O) When a member of the Union properly executes such check-off form, the Treasurer of the Union shall forward the original signed copy to the Manager - Payroll, Kansas City Administrative Center, Kansas City, Missouri, 64195. A check-off form must be completed in a legible manner or it will be returned to the Treasurer of the Union for correction. Any notice of revocation as provided for in this Section or the Railway Labor Act, as amended, must be in writing, signed by the employee and two copies delivered by registered or certified mail, addressed to the Treasurer of the Union. Dues deductions will be continued until one (1) copy of such notice of revocation is received by the Manager - Payroll, Kansas City Administrative Center, Kansas City, Missouri 64195, from the Treasurer of the Union. Check-off forms and notices received by the Manager - Payroll will be stamp-dated on the date received and will constitute notice to the Company on the date received and not when mailed. (P) When a check-off form, as specified herein, is received by the Manager - Payroll fifteen (15) days or more before the issuing date of the first bi-weekly paycheck of the month, deductions will commence with such paycheck and continue thereafter until revoked or canceled as provided in this Section. The Company will remit to the Union a check in payment of all dues collected as soon after the pay day on which deductions were made, as practicable and within thirty (30) days. The Company remittance of Union membership dues to the office of the Treasurer of the Union will be accompanied by two (2) copies of a list for each location which includes (1) names, (2) employee register numbers, (3) location numbers, and (4) individual amounts deducted. (Q) An employee who has executed a check-off form and who has been (1) transferred or promoted to a job not covered by this Agreement, (excluding transfers or promotions on a "Temporary" or "Acting" basis), (2) who has taken a leave of absence without pay, (3) who quits or resigns from the Company, (4) who is laid off, or is (5) otherwise terminated from the employ of the Company, shall be deemed to have automatically revoked his/her assignment as of the date of such action and if he/she (1) transfers back or returns to a job covered by this Agreement, (2) returns from leave of absence, (3) is rehired, (4) is recalled or (5) re-employed, further deductions of Union dues will be made only upon execution and receipt of another check-off form. (R) Collection of initiation fees, as well as any back dues owed at the time of starting deductions for an employee, collection of dues missed because the employee's earnings were not sufficient to cover the payment of dues for a particular pay period, and collection of dues missed because of accidental errors in the accounting procedure, will be the responsibility of the Union and will not be the subject of payroll deduction. It will be the Union's responsibility to verify apparent errors with the individual Union member before the representative contacts the Company's Manager - Payroll. ========================================================================= 3/1/99 Page 37 (S) Deductions of membership dues shall be made from one (1) paycheck each month provided there is a balance in the paycheck sufficient to cover the amount after all other deductions authorized by the employee or required by law have been justified. In the event of termination of employment, there shall be no obligation of the Company to collect dues until all such other deductions (including money claims of the Company and the Credit Union) have been made, and such obligation to collect dues shall not extend beyond the pay period which the employee's last day of work occurs. (T) This Section shall be in force only so long as the Union continues as the recognized representative of the employees under this Agreement. (U) The Union shall indemnify and save the Company harmless against all forms of liability that shall arise out of or by reason of action taken by the Company, which action was requested by the Union under the provisions of this Section. It is agreed that the Company will promptly notify the Union of all claims of liability made against the Company pursuant to such actions taken by the Company and the Company will make every reasonable effort to defend itself against such liability. (V) As used herein, the word "Union" means Local 540, and "Treasurer of the Union" means Treasurer of Local 540 where applicable. ========================================================================= 3/1/99 Page 38 SECTION 18 DURATION OF AGREEMENT This Agreement, made pursuant to direct negotiations, shall supersede and take precedence over all Agreements, Supplemental Agreements, Amendments, Letters of Understanding and similar related documents executed between the Company and the Union prior to the signing of this Agreement, with the exception that the various Letters of Agreement and Understanding reprinted herein shall continue in full force and effect. This Agreement shall become effective on March 1, 1999 and shall remain in full force and effect through December 31, 2003, and thereafter from shall be subject to change as provided by Section 6 of the Railway Labor Act, as amended. TRANS WORLD AIRLINES, INC. By: _______________________________ THE TRANSPORT WORKERS UNION OF AMERICA, AFL-CIO By: _______________________________ Michael Bakalo International Vice President Director-Air Transport Division Local 540, Transport Workers Union of America, AFL-CIO By: _______________________________ Paul Supko President ========================================================================= 3/1/99 Page 39 LETTER OF AGREEMENT NO. 1 The Flight Dispatch Officers and Assistant Flight Dispatch Officers, Transport Workers Union of America, AFL-CIO, and Trans World Airlines, Inc., hereby agree: 1. That Flight Dispatch Officer and Assistant Flight Dispatch Officer personnel will continue to perform those functions which normally fall within their classification with regards to flights which are solely military in nature and their cargo composed entirely of military commodities or personnel where the carriage of the traffic on such flights is certified by the United States Department of Defense as in accordance with the national interest even though Flight Dispatch Officer and Assistant Flight Dispatch Officer personnel withdraw from commercial service because of unresolved labor disputes of any type, including disputes arising out of negotiations for a new contract. 2. That pay and other benefits for Flight Dispatch Officer and Assistant Flight Dispatch Officer personnel assigned to perform their duties in connection with such military flights, pursuant to paragraph 1, hereof, will: (a) for any period prior to the opening date of the contract between the parties be governed by the then existing contract unless modified by agreement of the parties, and (b) after the opening date of the contract be governed by either the contract that existed at or prior to the said labor dispute or the contract negotiated as a settlement of such dispute, whichever is more beneficial to the Flight Dispatch Officer and Assistant Flight Dispatch Officer personnel. 3. That this is consistent with the long standing policy and performance of the Flight Dispatch Officer and Assistant Flight Dispatch Officer personnel of the Transport Workers Union of America, AFL-CIO. 4. In the event any Flight Dispatch Officer or Assistant Flight Dispatch Officer is assigned to perform duties in connection with a military flight pursuant to the terms of paragraph 1 hereof, the Flight Dispatch Officers and Assistant Flight Dispatch Officers, Transport Workers Union of America, AFL-CIO, will be given a certification by the Vice President - Industrial Relations or his/her designed that such flight will be exclusively for military purposes. 5. That to the extent necessary to effectuate its purpose, this understanding constitutes an amendment and modification of the collective bargaining agreement between the parties hereto and, notwithstanding any other provisions of the said collective bargaining agreement, this agreement shall continue indefinitely but may be revoked by either of the parties hereto upon two (2) years prior notice. However, if after the certification provided in paragraphs 1 and 4 the Company should willfully combine military and non-military traffic during the period of any strike, the Union will terminate this supplemental agreement forthwith. Proof of such violation shall be established by the collective bargaining agreement, but such procedure shall be accelerated to provide for a hearing and final decision within twenty-four (24) hours after the grievance is submitted. Should it be impossible to ========================================================================= 3/1/99 Page 40 achieve a final decision within such twenty-four (24) hour period, such period shall be extended to the extent necessary. Signed this 21st day of July, 1970. For TRANS WORLD AIRLINES, INC. /s/David J. Crombie Vice President - Industrial Relations WITNESS: /s/ J.C. Hilly /s/ T.R. Poole For FLIGHT DISPATCH OFFICERS and ASSISTANT FLIGHT DISPATCH OFFICERS in the service of TRANS WORLD AIRLINES, Inc., as represented by the TRANSPORT WORKERS UNION OF AMERICA, AFL-CIO. /s/ James F. Horst International Executive Vice President WITNESS: /s/ Patrick J. McGahan /s/ Howard J. Swift ========================================================================= 3/1/99 Page 41 LETTER OF AGREEMENT NO. 2 Between TRANS WORLD AIRLINES, INC. and FLIGHT DISPATCH OFFICERS AND ASSISTANT FLIGHT DISPATCH OFFICERS in the employ of TRANS WORLD AIRLINES, INC. as represented by TRANSPORT WORKERS UNION OF AMERICA, AFL-CIO THIS LETTER OF AGREEMENT is make and entered into in accordance with the provisions of Title II of the Railway Labor Act, as amended, by and between Trans World Airlines, Inc., hereinafter known as the "Company" and the Flight Dispatch Officers and Assistant Flight Dispatch Officers in the employ of Trans World Airlines, Inc., as represented by the Transport Workers Union of America, AFL-CIO, hereinafter known as the "Union." NOW THEREFORE, it is mutually agreed and understood by the between the parties to this Letter Agreement that: 1. The Company may assign any Flight Dispatch Officer (not Assistant Flight Dispatch Officer) listed on the active TWA-TWU Seniority List, except those listed under 10(G) of the current Agreement, to the management position of Manager - Passenger Services, without regard to Flight Dispatch Officer seniority, and still utilize his services in flight dispatching functions as necessary. No Flight Dispatch Officer shall be required to accept such and assignment. Such an shall be made at the sole discretion of the Company. It is understood that the assignments shall be limited to the locations outside of the continental United States. It is understood that in the event the dispatching function subsequently is totally eliminated at a station, and the individual is offered, and accepts the opportunity to remain as a Manager - Passenger Services, the provisions of the Letter of Agreement shall no longer apply to the individual or the position so long as the dispatching function is not required. 2. Assignments made under paragraph 1 above shall be subject to the following conditions: (a) Expenses and employee benefits will be in accordance with MP&P provisions as applied to the position of Manager - Passenger Services but shall be no less than those specified in the effective TWA-TWU Agreement. (b) A Flight Dispatch Officer so assigned shall retain and continue to accrue seniority as in Section 10(G) of the effective TWA-TWU Agreement. (c) An employee so assigned shall have the displacement rights listed in Section 10(K) of the effective TWA- TWU Agreement, except that the one (1) year limitation therein shall be waived in the event his assignment is terminated by the Company. For purposes of applying this paragraph, is shall be understood that "last previous domicile" shall mean the last location where he held a permanent position as a Flight Dispatch Officer prior to his initial appointment under this Letter of Agreement. ========================================================================= 3/1/99 Page 42 (d) An employee while so assigned shall not be subject to seniority displacement or furlough under the terms of the effective TWA-TWU Agreement, unless he becomes the least senior man on the system. In the latter event, his/her displacement shall be effected as follows: The Company shall determine if an assignment under this Letter of Agreement is still desired. If such assignment is desired, the replacement shall be effected through assignment of an employee under the provisions of this Letter of Agreement. (e) An employee so assigned shall come under the terms of Section 11(A) and of the effective TWA-TWU Agreement. (f) An employee while so assigned shall come under the terms of the effective TWA-TWU Agreement only to the extent specifically stated herein. 3. An assignment made under paragraph 1 above of any employee holding a bid at the location of the assignment shall not result in the creation of a vacancy unless the Company determines that additional Flight Dispatch covering is required in which event the terms of the Agreement shall apply. 4. An assignment made under paragraph 1 above shall not result in the displacement of a Flight Dispatch Officer holding a bid at the location of such assignment. 5. Vacation and other relief for this assignment may be provided by another Flight Dispatch Officer in accordance with relief arrangements as appropriate to the location. This Letter of Agreement shall become effective as of date of signing and shall remain in full force and effect concurrently with the basic agreement between the Company and the Union, signed July 21, 1970. IN WITNESS WHEREOF, the parties have signed this Letter of Agreement this 21st day of July l, 1970. For TRANS WORLD AIRLINES, INC. /s/ David J. Crombie Vice President - Industrial Relations WITNESS: /s/ J.C. Hilly /s/ T.R. Poole For TRANSPORT WORKERS UNION OF AMERICA, AFL-CIO /s/ James F. Horst International Executive Vice President WITNESS: /s/ Howard J. Swift ========================================================================= 3/1/99 Page 43 LETTER OF AGREEMENT NO. 3 TRANS WORLD AIRLINES, INC. July 21, 1970 Mr. Howard J. Swift 200 Lexington Avenue, Apt, 5A Oyster Bay, New York 11771 Dear Mr. Swift: This will record our understanding and agreement concerning the interpretation of Section 10(H) of the Basic Working Agreement signed July 21, 1970. In the event a Flight Dispatch Officer covered by the Working Agreement is accepted for assignment with an associated airline (e.g., Ethiopian and Saudi Arabian Airlines) he/she must at the time he/she accepts such employment elect one of the following: (a) Accept the re-employment rights granted by the Management Policy and Procedure Manual to TWA employees assigned to associated airlines in effect at the date of his election. (b) Or in lieu thereof to be covered by Section 10(H) of the Working Agreement and be placed on the inactive seniority list according to the conditions of such paragraph. Such election is to be irrevocable and in writing and made at the time that he/she is accepted for such assignment. In the event an employee elects to be covered by paragraph (b) above, it hereby is mutually understood and agreed that as to such employees only, Section 10, paragraph (H) of the Agreement shall be interpreted to cover employees accepting assignment with associated airlines whether or not such assignment is directly associated with the dispatch function. It is further understood and agreed that the provisions of this letter shall become effective as of the date of its signing and shall apply only to those employees accepting such assignment subsequent to the said date of signing. So that we may have a record of our mutual agreement, if you concur with the above, would you please sign below and return the original to my office. Very truly yours, /s/ W.E. Malarkey W.E. Malarkey Staff Vice President - Labor Relations AGREED AND ACCEPTED: /s/ Howard J. Swift Section Chairman ========================================================================= 3/1/99 Page 44 LETTER OF AGREEMENT NO. 4 Mr. Eugene F. Downey President, Local 540 Transport Workers Union 142 Mineola Avenue Roslyn Heights, New York 11577 Dear Mr. Downey: This will confirm our understanding during the recently concluded negotiations regarding the application of Section 13 to those employees of the FDO seniority list as of this date who are not entitled to a severance allowance and further who, as a result, are not eligible for alternate employment. The Company agrees to extend, on a exception basis, the provisions of Section 13 to the below-named individuals: T.M. Amato K.F. Finn J. Delany T.P. Monegan P.J. Emmert J.F. Venturi F.G. Ferry A.M. Weatherby The severance allowance applicable to these individuals will be one (1) month's pay for each year of completed service under the Agreement until they have individually attained eligibility for severance allowance under the provisions of Section 13(C)(2). If this is in accord with our understanding, please sign in the space provided. Very truly yours, /s/ J.C. Hilly AGREED AND ACCEPTED: /s/ Eugene F. Downey ========================================================================= 3/1/99 Page 45 LETTER OF AGREEMENT NO. 5 September 23, 1977 Mr. E.M. Mitchell Air Transport Division Director International Vice President Transport Workers Union of America 1980 Broadway New York, New York 10023 RE: Flight Dispatch Officers and Meteorologists Dear Mr. Mitchell: This will confirm our understanding reached during negotiations to amend the Group Insurance Plan for the subject employees. Specifically, the Plan will be a amended so as to provide the same benefits and benefit levels as for ground Management Employees of TWA as set forth in the Group Insurance Plan Booklet for Management Employees and as improved from time to time. Further, the Pension Supplement provision of the Long Term Disability which was specifically excluded under the Amendment dated December 8, 1975 and my letter dated May 13, 1976 to Mr. E.F. Downey is hereby included in such Disability Plan. However, the Pension Supplement will be effective only for those employees who go on LTD on or after October 1, 1977. This sick leave allowance, although mentioned in the Group Insurance Plan Booklet for Management Employees, is not considered to be an insured benefit. The sick leave allowance for Dispatch Officers and Meteorologists is governed by the provisions of the appropriate working agreements as amended. Except as otherwise provided herein as it relates to the Pension Supplement, the benefits in this Letter of Agreement became effective January 1, 1976 with the exception of the Long Term Disability which became effective on December 3, 1975. This letter shall cancel and supersede my letter of May 13, 1976 to Mr. E.F. Downey. If this accords with our understanding, please sign in the space provided. Very truly yours, /s/ J.C. Hilly J.C. Hilly Vice President Labor Relations AGREED AND ACCEPTED /s/ E.M. Mitchell E.M. Mitchell ========================================================================= 3/1/99 Page 46 LETTER OF AGREEMENT NO. 6 October 10, 1994 Mr. Paul Supko President, Local 540 Transport Workers Union 2033 Deer Park Avenue Deer Park, New York 11279 Dear Mr. Supko: This letter supersedes the Letter of Agreement on the same subject dated February 21, 1984. This shall confirm our understanding regarding the application of Letter of Agreement No. 5 and Section 4 (F) of the Flight Dispatch Officers Agreement. Specifically, the Group Insurance Plan for Flight Dispatch Officers shall be amended so as to provide the same benefits and benefit levels as are provided for Ground Management Employees of TWA, as may be improved or reduced by the Company. Sincerely, William L. Schecter Vice President, Labor Relations AGREED AND ACCEPTED: Paul Supko ========================================================================= 3/1/99 Page 47 LETTER OF AGREEMENT NO. 7 September 1, 1992 Mr. Paul Supko, President Local 540 Transport Workers Union of America 2033 Deer Park Avenue Deer Park, New York 11729 Dear Mr. Supko: This shall confirm our agreement that Flight Dispatch Officers subject to random testing as required by the Department of Transportation or other governmental agency shall, to the extent practical, be scheduled for such testing on Company time. To the extent this is not practical, they shall receive one (1) hour of straight time pay as compensation for such testing. If the foregoing correctly reflects your understanding of our agreement, please sign where indicated below. Very truly yours, Alan R. English Director, Labor Relations AGREED AND ACCEPTED: ______________________________ By: Paul Supko ========================================================================= 3/1/99 Page 48 LETTER OF AGREEMENT NO. 8 September 1, 1992 Mr. Paul Supko, President Local 540 Transport Workers Union of America 2033 Deer Park Avenue Deer Park, New York 11729 Dear Mr. Supko: This shall confirm our agreement that a Flight Dispatch Officer may elect to take his/her Birthday Holiday on any day within the same calendar year, provided that; 1) the Flight Dispatch Officer notifies management and the person(s) preparing the monthly work schedule in advance of the date the work schedule for the month during which the Flight Dispatch Officer wishes to take his/her Birthday Holiday schedule is required to be posted and, 2) that there is sufficient Relief Dispatcher time available to cover the requested day. If the foregoing correctly reflects your understanding of our agreement, please sign where indicated below. Very truly yours, Alan R. English Director, Labor Relations AGREED AND ACCEPTED: ______________________________ By: Paul Supko ========================================================================= 3/1/99 Page 49 LETTER OF AGREEMENT NO. 9 September 1, 1992 Mr. Paul Supko, President Local 540 Transport Workers Union of America 2033 Deer Park Avenue Deer Park, New York 11729 Dear Mr. Supko: This letter supersedes the Letter of Agreement on the same subject dated November 16, 1990. Trans World Airlines, Inc. (TWA, The Company)and the Transport Workers Union of America (TWU) hereby agree to amend the TWA/TWU contract to provide for a recall bypass option, as described below, for Flight Dispatch Officers and Assistant Flight Dispatch Officers on furlough status. Whenever the term "Flight Dispatch Officer" is used hereunder, it is understood to mean Flight Dispatch Officer or Assistant Flight Dispatch Officer. 1. Flight Dispatch Officers on furlough status may file a recall bypass option. This option may be updated at any time prior to the announcement of recall to the Flight Dispatch Officer. 2. Whenever a recall is announced, furloughed Flight Dispatch Officers falling within the recall number, who do not have a recall bypass option on file, will not be eligible for bypass. 3. Furloughed Flight Dispatch Officers falling within the recall number, who have a recall bypass option on file, will not be offered recall but will be passed over and the next most senior Flight Dispatch Officer, without a recall bypass option on file, shall be offered recall. 4. Flight Dispatch Officers, who withdraw their recall bypass option, shall be offered a recall during the next recall on the basis of their seniority. 5. The Company shall not, under any circumstances, be required to recall any Flight Dispatch Officers, when a recall is not required, regardless of the seniority of the Flight Dispatch Officer involved. 6. All recall bypass options shall terminate as soon as the Company offers recall to the last furloughed Flight Dispatch Officer, i.e. the most junior Flight Dispatch Officer on furlough status. 7. Upon termination of all recall bypass options as described in 6 above, Flight Dispatch Officers on furlough status previously having a recall bypass, shall be recalled, as required, in inverse seniority order. 8. Any Flight Dispatch Officer utilizing a recall bypass option shall be subject to all provisions of the TWA/TWU contract applicable to Flight Dispatch Officers on furlough status including, but not limited to, the provisions contained within Section 10(I) concerning the forfeiture of accrued seniority, if a Flight Dispatch Officer remains on furlough status over five (5) years. 9. Any Flight Dispatch Officer returning from recall bypass will return to the cycle that has been vacated until the next dispatch bid. ========================================================================= 3/1/99 Page 50 If the above correctly sets forth our agreement, please execute both copies of this letter and return one fully executed copy to the undersigned. Very truly yours, Alan R. English Director, Labor Relations AGREED AND ACCEPTED: ___________________________ By: Paul Supko ========================================================================= 3/1/99 Page 51 LETTER OF AGREEMENT NO. 10 September 26, 1994 Mr. William L. Schecter Vice President Labor Relations Trans World Airlines, Inc. John F. Kennedy International Airport Terminal A Jamaica, New York 11430 RE: FLIGHT DISPATCH OFFICERS SENIORITY Dear Mr. Schecter: This shall confirm our understanding that the following section was overlooked by both the Union and Company during the Contract Negotiations in 1992. During the TWA/Ozark merger in 1986, a Memorandum of Understanding was signed amending Section 10(C) of the contract. Accordingly, Section 10(C) of the TWA-TWU Agreement shall be amended to read as follows: Seniority shall begin to accrue from the date of appointment to a position covered by this Agreement. Seniority shall continue to accrue only for the period that the employee is on pay status with the Company or a position directly associated with the dispatching function, except as provided in Sections 9, 11, and 13. This letter shall cancel and supersede Section 10 (C) as printed in the contract signed September 1, 1992. Sincerely, Paul Supko President TWU Local 540 AGREED AND ACCEPTED By: Mr. William L. Schecter Vice President, Labor Relations ========================================================================= 3/1/99 Page 52 LETTER OF AGREEMENT NO. 11 October 10, 1994 Mr. Paul Supko, President Local 540 Transport Workers Union of America 2033 Deer Park Avenue Deer Park, New York 11729 Dear Mr. Supko: After TWA shall have "staffed according to the needs of the service", there shall be a reduction in TWA's overtime cost. Such reduction shall be accomplished through the modification of local agreements, to provide that overtime will be utilized only on an "as needed" basis. Very truly yours, William L. Schecter Vice President, Labor Relations AGREED AND ACCEPTED By: Paul Supko ========================================================================= 3/1/99 Page 53 LETTER OF AGREEMENT NO. 12 October 10, 1994 Mr. William L. Schecter Vice President Labor Relations Trans World Airlines, Inc. John F. Kennedy International Airport Terminal A Jamaica, New York 11430 Dear Mr. Schecter: This letter shall confirm our agreement that all letters of discipline shall become void two years following their date of issuance, unless mutual agreement is reached to remove any such letter from a Flight Dispatch Officer's file at an earlier date. If the foregoing accurately states the terms of our agreement, please sign this letter where indicated. Sincerely, Paul Supko President TWU Local 540 AGREED AND ACCEPTED By: Mr. William L. Schecter Vice President, Labor Relations ========================================================================= 3/1/99 Page 54 LETTER OF AGREEMENT NO. 13 October 11, 1994 Mr. William L. Schecter Vice President Labor Relations Trans World Airlines, Inc. John F. Kennedy International Airport Terminal A Jamaica, New York 11430 Dear Mr. Schecter: This letter shall confirm our agreement that the Company shall enter into reciprocal agreements with other airlines, by which the Flight Dispatch Officers of such other airlines, will be afforded ACM 17 authority on TWA contingent upon such other airlines granting ACM authority to TWA's Flight Dispatch Officers on comparable terms and conditions. If the foregoing accurately states the terms of our agreement, please sign this letter where indicated. Sincerely, Paul Supko President TWU Local 540 AGREED AND ACCEPTED By: Mr. William L. Schecter Vice President, Labor Relations ========================================================================= 3/1/99 Page 55 LETTER OF AGREEMENT NO. 14 October 6, 1994 Mr. Paul Supko, President Local 540 Transport Workers Union of America 2033 Deer Park Avenue Deer Park, New York 11729 Re: ESOP Stock Dear Mr. Supko: This letter will confirm our agreement concerning the allocation of additional shares of TWA stock to participants of the Trans World Airlines, Inc. Employee Stock Ownership Plan who are represented by the Transport Workers Union. The allocation of the 1,255,343 shares of stock in the ESOP was performed on the basis of the relative value of each participant's pay concession during the first year (approximately September 1, 1992 through approximately August 31, 1993) of the three-year concession period under the Agreements in Principle with the unions. Because the pay concession of TWU-represented employees was only 8% of earnings during the applicable period while the pay concession of other participants in the ESOP was 15%, it is agreed that the accounts of TWU- represented employees will be credited with the number of additional shares necessary to bring them to parity with the other participants. Such additional shares will be allocated following September 1, 1995 from stock then available in the ESOP based on forfeitures which will have occurred since the original allocation. Such additional allocation shall occur prior to any other allocation of forfeited shares. If the foregoing accurately states the terms of our agreement, please sign this letter where indicated. Very truly yours, William L. Schecter Agreed and accepted: ___________________________ Paul Supko ========================================================================= 3/1/99 Page 56 LETTER OF AGREEMENT NO. 15 between TRANS WORLD AIRLINES, INC. and FLIGHT DISPATCH OFFICERS AND ASSISTANT FLIGHT DISPATCH OFFICERS in the service of TRANS WORLD AIRLINES, INC. as represented by TRANSPORT WORKERS UNION OF AMERICA, AFL-CIO CHECK DISPATCH OFFICER This will confirm our agreement concerning the Check Dispatch Officer position(s). 1. The Company shall maintain sole discretion in determining the requirement for and assignment of Check Dispatch Officer(s), including but not limited to the duration of such requirement and assignment. 2. The Check Dispatch Officer position(s) shall be a covered position(s) under the TWA-TWU Collective Bargaining Agreement, signed March 1, 1999 ("CBA"). 3. A bid shall be posted to notify all Flight Dispatch Officers of such position(s). 4. Although all Flight Dispatch Officers shall be eligible to bid for the Check Dispatch Officer position(s), assignment shall be made at the sole discretion of the Company, without regard to Flight Dispatch seniority and other provisions of the CBA. 5. In addition to regular Flight Dispatch Officer duties, the Check Dispatch Officer(s) shall perform duties related to the evaluation of Flight Dispatch Officers and Assistant Flight Dispatch Officers. 6. Each month a Check Dispatch Officer shall receive an override of one hundred dollars ($100.00) in addition to his/her regular rate of pay. 7. This Letter of Agreement shall become effective as of the date of signing and shall remain in full force and effect concurrently with the CBA, and is subject to Section 6 of the Railway Labor Act. If the foregoing correctly reflects your understanding of our agreement, please sign where indicated below. AGREED AND ACCEPTED: /s/ /s/ _________________________________ ____________________________ By: Michael Bakalo Terry L. Hayes Vice President International Director, Labor Relations Transport Workers Union ========================================================================= 3/1/99 Page 57 LETTER OF AGREEMENT NO. 16 between TRANS WORLD AIRLINES, INC. and FLIGHT DISPATCH OFFICERS AND ASSISTANT FLIGHT DISPATCH OFFICERS in the service of TRANS WORLD AIRLINES, INC. as represented by TRANSPORT WORKERS UNION OF AMERICA, AFL-CIO TMU / DISPATCH COORDINATOR This will confirm our agreement concerning the TMU / Dispatch Coordinator position(s). 1. The Company shall maintain sole discretion in determining the requirement for and assignment of TMU / Dispatch Coordinator(s), including but not limited to the duration of such requirement and assignment. 2. The TMU / Dispatch Coordinator position shall be a covered position under the TWA-TWU Collective Bargaining Agreement, effective March 1, 1999 ("CBA"). 3. A bid shall be posted to notify all Flight Dispatch Officers of the TMU / Dispatch Coordinator position(s). 4. Although all Flight Dispatch Officers shall be eligible to bid for the TMU / Dispatch Coordinator position(s), assignment shall be made at the sole discretion of the Company, without regard to Flight Dispatch seniority and other provisions of the CBA. 5. If a Flight Dispatch Officer is selected for the TMU / Dispatch Coordinator position(s), he/she shall retain and continue to accrue seniority in accordance with Section 10(G) of the CBA. 6. The TMU / Dispatch Coordinator shall perform duties related to the dispatch function, including but not limited to establishing procedures and monitoring the operation as directed by the Company and in accordance with the Flight Operations Policy Manual (FOPM), Chapter 8, Section I, paragraph C. 6. Each month the TMU / Dispatch Coordinator shall receive an override of one hundred dollars ($100.00) in addition to his/her regular rate of pay. 7. This Letter of Agreement shall become effective as of the date of signing and shall remain in full force and effect concurrently with the CBA, and is subject to Section 6 of the Railway Labor Act. If the foregoing correctly reflects your understanding of our agreement, please sign where indicated below. AGREED AND ACCEPTED: /s/ /s/ _________________________________ ____________________________ By: Michael Bakalo Terry L. Hayes Vice President International Director, Labor Relations Transport Workers Union ========================================================================= 3/1/99 Page 58 LETTER OF AGREEMENT NO. 17 between TRANS WORLD AIRLINES, INC. and FLIGHT DISPATCH OFFICERS AND ASSISTANT FLIGHT DISPATCH OFFICERS in the service of TRANS WORLD AIRLINES, INC. as represented by TRANSPORT WORKERS UNION OF AMERICA, AFL-CIO TRAINING DISPATCH OFFICER This will confirm our agreement concerning the Training Dispatch Officer position(s). 1. The Company shall maintain sole discretion in determining the requirement for and assignment of Training Dispatch Officer(s), including but not limited to the duration of such requirement and assignment. 2. The Company shall maintain sole discretion in determining whether the Training Dispatch Officer position is a management position or a covered position under the TWA-TWU Collective Bargaining Agreement, effective March 1, 1999 ("CBA"). 3. A bid shall be posted to notify all Flight Dispatch Officers of the Training Dispatch Officer position(s). 4. Although all Flight Dispatch Officers shall be eligible to bid for the Training Dispatch Officer position(s), assignment shall be made at the sole discretion of the Company, without regard to Flight Dispatch seniority and other provisions of the CBA. 5. If a Flight Dispatch Officer is selected for the Training Dispatch Officer position(s), he/she shall retain and continue to accrue seniority in accordance with Section 10(G) of the CBA. 6. The Training Dispatch Officer shall perform duties related to the training of Flight Dispatch Officers and Assistant Flight Dispatch Officers as directed by the Company. 7. Each month the Training Dispatch Officer shall receive an override of one hundred twenty-five dollars ($125.00) in addition to his/her regular rate of pay. 8. This Letter of Agreement shall become effective as of the date of signing and shall remain in full force and effect concurrently with the CBA, and is subject to Section 6 of the Railway Labor Act. If the foregoing correctly reflects your understanding of our agreement, please sign where indicated below. AGREED AND ACCEPTED: /s/ /s/ ____________________________ _________________________________ By: Michael Bakalo Terry L. Hayes Vice President International Director, Labor Relations Transport Workers Union ========================================================================= 3/1/99 Page 59 LETTER OF AGREEMENT NO. 18 TRANS WORLD AIRLINES, INC. RELOCATION BENEFITS FOR FLIGHT DISPATCH OFFICERS AND ASSISTANT FLIGHT DISPATCH OFFICERS IN CONNECTION WITH THE GEOGRAPHIC RELOCATION OF THE STL FLIGHT DISPATCH OFFICE Effective March 1, 1999 ========================================================================= 3/1/99 Page 60 TRANS WORLD AIRLINES, INC. GEOGRAPHIC RELOCATION OF THE FLIGHT DISPATCH OFFICE TABLE OF CONTENTS ----------------- Eligibility and Approval 1 Arranging for the Move 2 Authorization to Receive Relocation Benefits: Letter of Commitment 2 Expense Reimbursements/Payments 3 Lump-Sum Relocation Allowance 3 Passes 3 Home Purchase Closing Cost Reimbursement 4 Home Rental Brokers' Fees Reimbursement 5 Lease Cancellation Reimbursement 5 Shipment of Household Goods 5 Home Sale Assistance 6 Duplicate Carrying Costs 7 Home Management Assistance In Lieu of Home Sale Assistance 7 Automobile Shipment 7 Mileage Allowance 8 Income Tax Reporting 8 Appendix "A" Letter of Commitment ========================================================================= 3/1/99 Page 61 TRANS WORLD AIRLINES, INC. GEOGRAPHIC RELOCATION OF THE FLIGHT DISPATCH OFFICE THIS POLICY APPLIES TO RELOCATION WITHIN THE UNITED STATES, ---------------------------------------------------------- The provisions of this policy will expire twelve (12) months following the actual geographic relocation of the entire STL Flight Dispatch Office or twelve (12) months following the actual geographic relocation of the individual transferee to the new location, whichever is earlier. ELIGIBILITY AND APPROVAL - - ------------------------ When authorized by appropriate levels of management, the provisions of this policy are available to Flight Dispatch Officers and Assistant Flight Dispatch Officers whose job location is being geographically relocated more than 75 miles distant from STL International Airport. The provisions of this Relocation Package shall only apply to Flight Dispatch Officers and Assistant Flight Dispatch Officers; 1. who are permanent residents of the St. Louis Metro area as the official notification by the Company to the Union of its intent to relocate the Flight Dispatch Office; AND 2. who have elected to relocate his/her primary household from its present location to within 75 miles of the new Flight Dispatch Office location. Flight Dispatch Officers and Assistant Flight Dispatch Officers who elect furlough in lieu of relocation will not be entitled to the provisions of this Relocation Package. The provisions of this Flight Dispatch Officer and Assistant Flight Dispatch Officer relocation policy are designed to help offset some of the out-of-pocket expenses associated with the geographic relocation of the transferee's principal residence. Transferees are eligible for these provisions for twelve months from the date of job transfer, unless ----------------------------------------------- otherwise indicated in the following material. Relocation benefits will not be extended beyond 12 months from the effective date of the employee's job transfer. For purposes of this policy, "transfer" refers to the geographic change of the Flight Dispatch Officer's or the Assistant Flight Dispatch Officer's STL Flight Dispatch Office job location; "relocation" refers to the transferee's personal move to the new Flight Dispatch Office location. Transferees are urged to review the attached benefits carefully to be fully informed of actual covered expenses. If further assistance or clarification is required, please contact TWA's relocation staff in Kansas City as follows: TWA FLIGHT DISPATCH OFFICER AND ASSISTANT FLIGHT DISPATCH OFFICER RELOCATION POLICY ..... PAGE 1 ========================================================================= 3/1/99 Page 62 TWA RELOCATION STAFF CONTACTS ----------------------------- Telephone: 816-464-6412 Teletype: MKCICTW FAX: 816-464-6162 Dispatch Address: Director - Compensation Level 5, KCAC U.S. Mail Address: Director - Compensation Trans World Airlines, Inc. P.O. Box 20007 11500 Ambassador Drive Kansas City, Missouri 64195 ARRANGING FOR THE MOVE - - ---------------------- The employee and his/her supervisor will arrange the administrative details of the employee's relocation. The cost of the move will be charged to the employee's Cost Center at the New Location. AUTHORIZATION TO RECEIVE RELOCATION BENEFITS: LETTER OF COMMITMENT - - ------------------------------------------------------------------ A Letter of Commitment signed by the employee, the authorizing departmental officer (Corporate officer, organizational level "C" or higher) and the Director Labor Relations is required to permit a transferring employee to receive benefits covered by this policy. The Letter of Commitment provides that TWA may recover all or a percentage of relocation expenses in the event the employee decides voluntarily to leave TWA or voluntarily remove himself/herself from the Flight Dispatch Officer or the Assistant Flight Dispatch Officer position within eighteen months of his/her relocation. A sample Letter of Commitment is included at the end of this package. The Letter of Commitment must be fully completed, signed and approved. It may then be forwarded to the Director - Compensation, Level 5, KCAC. NONE OF THE PROVISIONS OF THE RELOCATION POLICY MAY BE USED, AND NO EXPENSES CAN BE APPROVED, UNLESS A PROPERLY APPROVED LETTER OF COMMITMENT HAS BEEN FILED WITH THE DIRECTOR - COMPENSATION. TWA FLIGHT DISPATCH OFFICER AND ASSISTANT FLIGHT DISPATCH OFFICER RELOCATION POLICY ..... PAGE 2 ========================================================================= 3/1/99 Page 63 EXPENSE REIMBURSEMENTS / PAYMENTS - - --------------------------------- Employees for whom an approved Letter of Commitment is on file may report covered relocation expenses on Form G-118 Expense Report. Except for lump sum allowances, substantiating receipts are required. Each expense report must be approved/signed by the supervisor(s) in accordance with limits of authority contained in Section 01.34 of the MP&P manual. Completed, approved expense reports should be sent for final approval to TWA's Director - Compensation, Level 5, KCAC, MKC. Expenses are to be charged to the employee's cost center, new location, and MANAGEMENT ACCOUNT 575. Final approval for expenses associated with the relocation of Flight Dispatch Officers and Assistant Flight Dispatch Officers lie with the Compensation Section of the Employee Relations Department. The Director - Compensation will send all approved expense reports to Accounts Payable for payment. LUMP-SUM RELOCATION ALLOWANCE - - ----------------------------- Employee -------- Each transferring employee will be provided with a lump-sum allowance of $2,500. This allowance is designed to help defray the costs of any temporary living and incidental expenses associated with the job transfer and residence relocation. Transferees do not have to account for this money, and it may be ------ used for any purpose. However, no additional payments or ------------------------- reimbursements will be provided for hotels, meals, car rental, ------------------------------- telephone calls, taxis, or other relocation expenses except as specifically covered in other sections of this policy. Transferees may apply for their lump-sum relocation allowance by completing Form G-118 Expense Report and having it approved within normal limits of authority. The approved expense report is to be processed as described earlier under "Expense Reimbursements/Payments." Spouse ------ An additional lump-sum allowance of $250 will be provided to help defray the costs of home finding at the new location by the transferee's spouse. This allowance may be obtained in the same manner as described above for the employee's lump-sum allowance, and may in fact be added to Form G-118 Expense Report covering the employee's allowance. PASSES - - ------ The transferee and spouse may each receive up to three (3) Class 6 service-charge-free round-trip passes to locate housing at the new job location. In addition, the transferee, spouse and eligible dependents may each receive a one-way Class 6 service-charge-free pass to establish residence at the new location. Trips are subject to the approval of the transferee's immediate supervisor, and passes should be issued by the transferee's local pass issuing office. TWA FLIGHT DISPATCH OFFICER AND ASSISTANT FLIGHT DISPATCH OFFICER RELOCATION POLICY ..... PAGE 3 ========================================================================= 3/1/99 Page 64 HOME PURCHASE CLOSING COST REIMBURSEMENT - - ---------------------------------------- Transferees who owned and occupied a home in their former location, and who choose to purchase a home within a 75-mile radius of their new job location, will be reimbursed for specific necessary expenses, in amounts that are customary for the area, that are incurred in connection with the purchase of a home. The maximum total amount that will be reimbursed under this provision is 5% of the purchase price of the home but not more than $15,000. Items that are eligible for reimbursement are: Attorney's fees. Document stamps. Document preparation fees. Recording and transfer fees. Sale discount points and/or loan origination fees(s) up to 3% of amount of mortgage. Title search and title insurance. Appraisal. Credit Report. Property survey (up to 5 acres). Radon inspection. Mechanical inspection. Flood letter, where required. The following list covers some of the items that are specifically EXCLUDED from reimbursement: EXCLUDED: Taxes. EXCLUDED: Insurance. EXCLUDED: Interest.. EXCLUDED: Loan application fee(s). EXCLUDED: Underwriting Fee. EXCLUDED: Notary fees. EXCLUDED: Escrow fees; tax service fees. EXCLUDED: Federal Express, express mail or delivery fees. EXCLUDED: Power of Attorney fee or charges. EXCLUDED: Utilities. EXCLUDED: Inspections other than mechanical and radon inspections. EXCLUDED: Property survey in excess of one home. EXCLUDED: Property survey in excess of 5 acres. EXCLUDED: Expenses associated with second or subsequent mortgage loans. EXCLUDED: Expenses associated with non-conventional financing. EXCLUDED: Expenses associated with purchase of commercial property. EXCLUDED: Expenses associated with purchase of income property. Exclusion of certain expenses from reimbursement is not intended as a judgment of those expenses. Rather, the reimbursement policy simply reflects TWA's intent to assist employees with some of the most common types of costs incurred in a typical relocation. TWA FLIGHT DISPATCH OFFICER AND ASSISTANT FLIGHT DISPATCH OFFICER RELOCATION POLICY ..... PAGE 4 ========================================================================= 3/1/99 Page 65 Employees may receive advance payment of their estimated reimbursable home purchase closing costs by submitting an appropriately approved Form A-70 Requisition for Check or Cash no earlier than ten days prior to the closing date. The payment may be made locally. To avoid salary deduction, Form G-118 Expense Report, accompanied by a copy of the HUD statement and any other necessary documentation and receipts, must be submitted immediately following the home closing. The completed and approved expense report should be processed as described earlier under "Expense Reimbursements/Payments." HOME RENTAL BROKERS' FEES REIMBURSEMENT - - --------------------------------------- For transferees who rent rather than buy a primary residence within a 75-mile radius of their new job location, TWA will reimburse the actual fees charged by the real estate broker up to the standard amount for such fees in the area. The transferee may apply for reimbursement by processing Form G-118 Expense Report as described earlier under "Expense Reimbursements/Payments." LEASE CANCELLATION REIMBURSEMENT - - -------------------------------- Transferees whose current primary residence is a rental dwelling may not be able to cancel their lease without financial penalty. In such cases, TWA will reimburse lease settlement charges up to three months' rent. Supporting receipts and documentation must accompany the expense report. The transferee may apply for reimbursement by processing Form G-118 Expense Report as described earlier under "Expense Reimbursements/Payments." SHIPMENT OF HOUSEHOLD GOODS - - --------------------------- Although transferees are offered van line service, those who choose to move their own households rather than use the van line selected by TWA will be reimbursed for the cost of van or truck rental, fuel and tolls. No reimbursement will be made for costs of labor, insurance, packing or enroute expenses. For those transferees who choose to use van line service, TWA will arrange for and cover the cost of shipment of up to 15,000 pounds of personal household goods and personal belongings, including charges for packing and unpacking, shipping, insurance and, if necessary, up to 30 days' storage. The van line will require payment in cash, money order, or certified check for any charges not authorized by TWA, such as excess weight or storage charges beyond 30 days. Arrangements will be handled by TWA's Materials Management section at MCI, telephone 816-891-4167, longline code MCIFDTW. Materials Management will select a moving company. The moving company selected by Materials Management will contact the transferee to arrange for a meeting in the home, at which time they will estimate the weight of the shipment and establish move date(s). Transferees may initiate their household goods shipment by direct entry from a PARS terminal into the DRS (Direct Reference System) as follows: GM/MNT/MHS/59/18 .... lst page GM/MNT/MHS/59/32 .... 2nd page TWA FLIGHT DISPATCH OFFICER AND ASSISTANT FLIGHT DISPATCH OFFICER RELOCATION POLICY ..... PAGE 5 ========================================================================= 3/1/99 Page 66 All blanks must be filled in, including transferee's full name and payroll register number, and the teletype code of the approving authority (organizational level "C" or higher) who approved the transferee's Letter of Commitment. NOTE: - - ----- * Transporting and care of pets is the employee's responsibility. * Even though van lines do their best to meet both pickup and delivery dates, they will not always pick up the goods on the requested date, particularly during their peak season. The employee should allow some time for delay with regard to the date the property must be vacated. * TWA will authorize normal appliance service at origin only. (Normal appliance service includes preparation for shipment of water bed, clothes washer and dryer, and automatic ice- maker in refrigerator.) * TWA does not pay for the disassembly, reassembly, or setting up of outdoor items such as playhouses, slides, swing set, collapsible swimming pools, etc. Neither does TWA pay for indoor items such as hobby equipment, home workshops, photographic darkrooms, radio shacks, etc. Further instructions and precautions for effecting a household shipment are attached as Appendix A. HOME SALE ASSISTANCE - - -------------------- To assist the transferee with the cost of selling his/her primary residence at the former location, after the sale closing, TWA will reimburse for the following reasonable and actual closing costs not to exceed 10% of the sale price of the home, to a maximum of $50,000: * Sales commission or broker's fee paid to authorized real estate agency. NOTE: As an alternative to reimbursement of sales commission or broker's fee paid to an authorized real estate agency, the transferee who chooses to sell his/her home without using the services of a Realtor will be given a lump sum allowance in an amount equal to 5% of the sale price of the home. * Seller's attorney's fees. * Mortgage prepayment penalty. In addition, TWA will reimburse up to $2,000 for incentives provided at the discretion of the seller to encourage home sale (e.g., bonus to selling agent, home owner's warranty for the buyer, participation in buyer's closing costs, home improvement). The transferee may apply for this reimbursement by processing Form G-118 Expense Report as described earlier under "Expense Reimbursements/Payments." Supporting receipts and documentation, -------------------------------------- including the standard HUD statement, must accompany the expense ---------------------------------------------------------------- report. ------ TWA FLIGHT DISPATCH OFFICER AND ASSISTANT FLIGHT DISPATCH OFFICER RELOCATION POLICY ..... PAGE 6 ========================================================================= 3/1/99 Page 67 DUPLICATE CARRYING COSTS - - ------------------------ Transferees who are actively attempting to sell their home through a Realtor may be reimbursed for the following expenses, as applicable, of maintaining the lesser of either their former or new residence to a maximum of $1,000 per month for the first three (3) months following job transfer, to a maximum of $750 per month for the next three (3) months, and to a maximum of $500 per month for the next six (6) months following job transfer: * First mortgage interest (not principal). * Real estate taxes. * Hazard/homeowners insurance on property. * Utilities. * Rent. Carrying cost reimbursement will not begin until the transferee has purchased or leased (on a long term basis) residence property at the new location. Reimbursement may be obtained by submitting Form G-118 Expense Report with appropriate documentation for both former and new residences including receipts, copy of agreement with listing broker, and a lease or closing statement on the new residence. The approved expense report may be processed as described earlier under "Expense Reimbursements/Payments." HOME MANAGEMENT ASSISTANCE IN LIEU OF HOME SALE ASSISTANCE - - ---------------------------------------------------------- Transferees who own their primary residence in their current location and who plan to move their primary residence to their new location but choose not to sell their current home may elect home management assistance in lieu of home sale assistance. Compensation will be three annual payments of $1,500 each. To obtain payment, an expense report containing departmental approval within normal limits of authority must be submitted annually to TWA's Director - Compensation, Level 5, KCAC. The second annual payment request may be submitted on the first anniversary of the first payment, and the third annual payment request may be submitted on the second anniversary of the first payment. Documentation supporting continued ownership (e.g., current tax receipt) must be submitted with the expense report. AUTOMOBILE EXPENSES - - ------------------- One automobile may be shipped or driven to the new location at TWA's expense, as described below. No shipment or expense allowance is provided for a second car. Automobile Shipment ------------------- On moves exceeding 1,200 miles, the transferee may arrange to have his/her car shipped via a TWA over-the-road truck on a space available basis. Delivery normally occurs within two to three weeks. To arrange car shipment, the new supervisor must send a teletype message to MCIFDTW (Materials Management at MCI, telephone 816-891-4167) giving the following information: TWA FLIGHT DISPATCH OFFICER AND ASSISTANT FLIGHT DISPATCH OFFICER RELOCATION POLICY ..... PAGE 7 ========================================================================= 3/1/99 Page 68 * Employee's name, payroll number, current address, and office and residence telephone numbers (including area codes). * Location and address to which the employee is transferring. * Year, make, color and license plate number of car to be shipped. * EXACT DATE when car will be at the TWA facility for shipment. Mileage Allowance ----------------- On moves under 1,200 miles or if the transferee elects to drive the car instead of shipping, mileage allowance reimbursement shall be at the rate of $.20 per mile for the most direct AAA mileage route between the transferee's former and new job cities. Form G-118 Expense Report may be processed as described earlier under "Expense Reimbursements/Payments." The AAA mileage should be indicated under item #30 on the Expense Report. INCOME TAX REPORTING - - -------------------- Under Federal, State and some local income tax laws, certain relocation allowances and expense reimbursements received by transferring employees are considered earned income and must be reported to taxing authorities by TWA. Amounts paid to or for a transferee for these items will be reported on Form W-2 or other tax form as required. Transferees are encouraged to contact their own tax consultants since some expenses in these categories may be deductible from income for tax purposes. Transferees are encouraged to retain receipts for expenses they may incur in connection with their relocation to assure they are able to take maximum advantage of any allowable deductibles. Transferees may also wish to obtain and review IRS publication 521 which describes Federal tax law applicable to relocation expenses. TWA FLIGHT DISPATCH OFFICER AND ASSISTANT FLIGHT DISPATCH OFFICER RELOCATION POLICY ..... PAGE 8 ========================================================================= 3/1/99 Page 69 APPENDIX A ---------- Shipment of Household Goods --------------------------- Instructions and Precautions ---------------------------- 1. VAN LINES --------- The Interstate Commerce Commission requires van lines to provide each customer with a pamphlet entitled "Summary of Information for Shippers of Household Goods" which explains the customer's responsibilities and the van line's liabilities. The pamphlet should be carefully read before the move. A customer's failure to ---- comply with responsibilities and duties outlined therein could jeopardize his/her rights to recover damages resulting from mishandling by the carrier. 2. INSURANCE --------- The household shipment is released to the van line at $.60 per pound per article. TWA will not pay for any additional insurance shown on the bill of lading. TWA insurance automatically supplements the van line's insurance up to $50,000. The van line will insure the entire shipment, to the described limit, with the following exceptions: a. Accounts, bills, deeds, evidence of debt. currency, letters of credit, passports, railroad or other tickets, money, notes, securities, bullion, precious stones, philatelic or numismatic property. (Note that TWA does not insure shipment of these items.) b. Automobiles, motorcycles, boats over 16 feet in length, animals. (Note that TWA neither pays for shipment of nor insures shipment of these items.) You may, at your own expense, insure the items described in a. and b. above under a separate 'marine floater' type of policy. 3. PACKING AND LOADING ------------------- Van lines charge separately for the packing of containers, the packing of the goods at origination, and the unpacking of the goods at destination. TWA will pay these charges. Transferees may, however, wish to unpack their own goods. To prevent overcharging, the quantity and size of containers unpacked by the customer must be indicated on the van line bill of lading. The van driver uses an inventory sheet to list each piece of furniture, each appliance and each container by type and size in cubic feet. Overseeing of the inventory sheet may be the most ------------------------------------------------- important precaution of the entire move. The driver will usually --------------------------------------- enter code letters indicating the condition of the furniture and appliances; i.e., marred, scratched, gouged, rubbed, cracked, soiled, torn, etc. The customer must challenge any false or exaggerated description. If the driver will not change it, the customer must note his/her protest on the inventory sheet. The customer must also assure that the quantity of containers packed matches the quantity listed on the inventory sheet. All copies of the inventory sheet should be signed by the customer and the driver. APPENDIX A .................................... PAGE 1 ========================================================================= 3/1/99 Page 70 APPENDIX A ---------- Shipment of Household Goods --------------------------- Instructions and Precautions ---------------------------- The customer must tell the van line representative the date delivery is desired at destination, and make sure the date is --------------------- inserted on the bill of lading. If the goods cannot be delivered ------------------------------ by the date specified, the van line is required to notify the customer, so the customer must advise the representative of his/her local contact. If extra expenses are incurred because of late delivery, retain receipts and forward them to the van line destination agent. Standard reimbursement is reasonable lodging and 50% of meal expenses. The customer should carry any valuables personally. Appraisals should be made of any antique furniture, paintings, or oriental rugs going into the van. The shipper will need this appraisal as evidence if a claim is filed. 4. UNPACKING AND UNLOADING ----------------------- One person should count the containers coming off the van, and another should check furniture and other items for damage. If the customer unpacks any or all of the goods, write on the bill of lading the quantity and size of the containers to be unpacked, with the notation "SUBJECT TO FURTHER INSPECTION FOR CONCEALED LOSS OR DAMAGE." If damage is found during the unpacking process, leave the damaged item in the container and contact the van line representative immediately. 5. LOSS AND DAMAGE --------------- The customer should not sign the inventory sheet or bill of lading until any loss or damage has been noted or the notation "SUBJECT TO FURTHER INSPECTION FOR CONCEALED LOSS OR DAMAGE" has been written on the bill of lading. The customer's failure to describe loss or damage on the inventory sheet or bill of lading could relieve the van line of liability for loss or damage subsequently discovered. 6. CLAIMS AND CARRIER LIABILITY ---------------------------- The customer must file any claim for loss or damage in writing with the van line within nine months after delivery. Van line tariffs typically require that the carrier be immediately notified of all claims for concealed and/or external damage and be given reasonable opportunity to inspect alleged external damage or concealed damage in original package. Further, typically the carrier's liability shall not exceed the cost of repairing or replacing the property lost or damaged with materials of like kind and quality not exceeding the actual cash value of the property at the time and place of loss, with due allowance for depreciation or deterioration howsoever caused; and the carrier shall not be liable for loss or damage occurring after the property has been delivered to or receipted for by the consignee or shipper, or the authorized agent of either. APPENDIX A ...................................... PAGE 2 ========================================================================= 3/1/99 Page 71 LETTER OF COMMITMENT -------------------- To: Director - Compensation Trans World Airlines, Inc. P.O. Box 20007 Kansas City, Missouri 64195 Subject: Relocation Commitment --------------------- This will confirm that I am a transferee from the STL Flight Dispatch Office to the ______________________________________________________ and that I am eligible for relocation provisions as specified in the TWA Flight Dispatch Officer and Assistant Flight Dispatch Officer Relocation Policy. I understand that all costs incurred by TWA in connection with my relocation are reimbursable to TWA if I voluntarily leave TWA's employ or if I voluntarily remove myself from the Flight Dispatch Officer or the Assistant Flight Dispatch Officer position less than eighteen (18) months from the date of my job transfer. If I voluntarily leave TWA's employ or a TWA Flight Dispatch Officer or the Assistant Flight Dispatch Officer position within that eighteen month period, I will repay TWA for the costs of my relocation as follows: Proportion of Months of service completed at new location relocation costs prior to voluntary termination or to be repaid to voluntary demotion TWA ------------------------------------------- ----------------- Less than three months 100% Three or four months 83% Five or six months 72% Seven or eight months 61% Nine or ten months 50% Eleven or twelve months 39% Thirteen or fourteen months 27% Fifteen or sixteen months 16% Seventeen or less than eighteen months 5% LETTER OF COMMITMENT.................................... PAGE 1 (Continued) ========================================================================= 3/1/99 Page 72 TWA is authorized to withhold part or all of any amounts which may be due to TWA, as described above, from any salary, expense or other payments that may otherwise be due to me upon my voluntary separation from TWA or my voluntary removal from the Flight Dispatch Officer or the Assistant Flight Dispatch Officer position. Name:____________________________________ Current Primary Residence (Please print) (Former Location): Signature:_______________________ ______________________________ (No. and Street) Title:___________________________ Transfer Effective:______________ ______________________________ (City and County) Payroll Register Number:_________ New Location: ______________________________ (State and Zip Code) Immediate Supervisor's Name:___________________ Department Head Approval: _______________________________________________ Corporate Officer (Level C) or higher Print Name _______________________________________________ Signature _______________________________________________ Title Approved: _______________________________________________ Director Labor Relations ========================================================================= 3/1/99 Page 73 LETTER OF AGREEMENT NO. 19 between TRANS WORLD AIRLINES, INC. and FLIGHT DISPATCH OFFICERS AND ASSISTANT FLIGHT DISPATCH OFFICERS in the service of TRANS WORLD AIRLINES, INC. as represented by TRANSPORT WORKERS UNION OF AMERICA, AFL-CIO PREPARATION OF WORK SCHEDULES This will confirm our agreement concerning the preparation of work schedules. The preparation of Flight Dispatch Officer work schedules and vacation bid awards shall be handled by Flight Dispatch Officer Bargaining Unit personnel. Such work shall be accomplished on Company time. Policies and procedures pertaining to the work schedules, staffing levels, vacation bids and awards remain the sole prerogative of management. The work schedule and vacation bids as developed by the Bargaining Unit personnel shall be presented to management for approval at least three (3) days in advance of the required publication/posting date. If the foregoing correctly reflects your understanding of agreement, please sign where indicated below. AGREED AND ACCEPTED: /s/ /s/ ____________________________ _________________________________ By: Michael Bakalo Terry L. Hayes Vice President International Director, Labor Relations Transport Workers Union ========================================================================= 3/1/99 Page 74 PARTICIPATIVE MANAGEMENT ------------------------ The Company is committed to a radical redesign of its processes, organization, and culture to deliver the optimal product to the traveling public. The Company believes that employee participation in its long range and strategic planning and day-to-day operational decision making is the foundation of its re-engineering efforts. The free flow of information in an open decision-making process with participation by all parties is the cornerstone of Management's commitment. The Company is committed to a re-engineering of the management structure so as to eliminate unnecessary levels of management focusing decision making authority for all purposes at that level of the organization where the necessary knowledge resides and where implementation takes place. To the extent required, the Company will amend its Management Policies and Procedures Manual to reflect this structure. A. FILLING OF POSITIONS IN FLIGHT OPERATIONS The Company will amend its Management Policies and Procedures Manual, to the extent required, to provide for the timely posting on office bulletin boards of all open positions up to and including the Director level within Flight Dispatch, including the General Manager-Flight Operations. When such postings are made, the Company will also inform the TWU and will solicit comments and recommendations from the TWU on candidates for the open position(s). B. PRODUCTIVITY TASK FORCE The Company will amend its Management Policies and Procedures Manual to provide for the continuation of the Productivity Task Force as in place on the date of this Agreement. The Productivity Task Force will have broad authority to request information and investigate waste and inefficiencies. Recommendations of the Productivity Task Force will be promptly reviewed and acted upon by the Company. C. PARTICIPATIVE MANAGEMENT EDUCATION The Company will provide training, including seminars or other educational opportunities, for the Company's management relating to employee participation. All of the Company's management personnel will be required to attend such training within twelve months. TWU will require TWU representatives serving on the Task Force Committees or Productivity Task Force to attend such training on a similar basis. These seminars will be consistent with the Policy Statement and will be reasonably acceptable to the TWU and the Company. TWU and the Company will pay the respective cost of attendance for their representatives. D. MANAGEMENT CONSULTANT By March 31, 1995, the Company will retain a management consulting firm to fully review and analyze the Company's management structure. The members of the Task Force will be entitled to meet regularly with this firm following its retention and to review its results prior to implementation. ========================================================================= 3/1/99 Page 75 E. EMPLOYEE INCENTIVE PROGRAMS The Company, through the Task Force, agrees to implement incentive programs which reward employees for suggestions or job performance which increase the efficiency and productivity of the Company. F. ENFORCEMENT The Company's Management Policies and Procedures Manual will be amended to prohibit taking any disciplinary or discriminatory action against any employee because of such employee's participation on any Task Force, Committee or the Productivity Task Force or because of such employee's suggestions regarding or criticism of the Company's management. ========================================================================= 3/1/99 Page 76 EX-10.46 5 TABLE OF CONTENTS ARTICLE PAGE - - ------- ---- I Purpose of Agreement 2 II Scope of Agreement 2 III Status of Agreement 3 IV Union Security 3 V License and Exams 4 VI Safety and Training 6 VII Equipment 8 VIII Personal Time Off / Sick Leave Reporting 9 IX Leave of Absence 9 X Vacations 12 XI Holidays 15 XII Funeral Leave 17 XIII Free Transportation 17 XIV Work Stoppage, Strikes, Picketing and Lockouts 17 XV Representation and Grievance Procedure 17 XVI Board of Adjustment 20 XVII Discipline and Discharge 23 XVIII Seniority 24 XIX Jury Duty 27 XX Savings Clause 27 XXI Health & Welfare Benefits 27 XXII Pensions 28 XXIII Paid-for Time 29 XXIV Duration 30 Schedule A - Wages 31 Letter of Agreement 32 Health and Welfare and Pension Rates 34 THIS AGREEMENT Is made and entered into this day of 1998 in accordance with accordance the provisions of Title II of the Railway Labor Act, as amended by "Company," and the INTERNATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WAREHOUSEMEN AND HELPERS OF AMERICA LOCAL NO. 41, hereinafter referred to as the "Union," and representing all employees of the Company employed as over-the-road truck drivers and hostlers as certified by the National Mediation Board on December 13, 1951. ARTICLE I Purpose Of Agreement (a) The purpose of this Agreement is, in the mutual interest of the company and the employees, to provide for the operation of the services of the company under methods which will further, to the fullest extent possible, the safety of air transportation, the efficiency of operation, and the continuation of employment under reasonable working conditions. It is recognized by this Agreement to be the duty of the Company and the employees to cooperate fully, both individually and collectively, for these purposes. (b) No employee covered by this Agreement will be interfered with, restrained, coerced, or discriminated against by the Company, its officers or agents, because of membership in or lawful activity on behalf of the Union, nor shall either the Company, its Officers, or agents, or the Union, its officers, or agents, discriminate against any employee or member on account of race, color, creed, national origin, sex, religion, handicap, age, or disability. This paragraph (b) reaffirms the long standing mutual practice of both of the parties to this Agreement. (c) It is understood that wherever in this Agreement employees or jobs are referred to in the masculine gender, it shall be recognized as referring to both male and female employees. ARTICLE II Scope (a) All work the Company performs that is generally recognized as over-the-road truck driving shall be within the jurisdiction of the international Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, and is covered by this Agreement. 2 (b) This Agreement shall not apply to any over-the-road truck driving operation to be performed, wholly or in part, outside the Continental United States. (c) Employees covered by this Agreement shall be governed by all reasonable rules, regulations, and orders previously or hereafter issued by the Company which are not in conflict with the terms and conditions of this Agreement and which have been made available to the affected employees prior to becoming effective. Nothing in these rules and regulations and/or this Agreement shall be construed to limit or deny to any employee herein covered an rights or privileges to which he may be entitled under the provisions of the Railway Labor Act, as amended, or to deny him recourse to any action he might have pursuant to any other applicable Federal statute. ARTICLE III Status of Agreement This Agreement constitutes the total agreement between the Company and the Union affecting the class and craft of employees covered herein. The Union specifically recognizes and agrees that no past, current or future practice shall be construed or argued to in any way bind the Company or restrict any of its rights under this Agreement. This Agreement expressly supersedes any prior collective bargaining agreements, amendments, Agreements in Principal, and letters of agreement between the Company and the Union. ARTICLE IV Union Security (a) The Employer recognizes and acknowledges that the Union is the exclusive representative of all employees in the classification of work covered by this Agreement for the purposes of the Railway Labor Act, as amended, as certified by the National Mediation Board on December 13, 1951. (b) All present employees who are members of the Union on the effective date of this Agreement shall remain members of the Union in good standing as a condition of employment. All present employees who are not members of the Union and all employees who are hired hereafter shall become and remain members in good standing of the Union as a condition of employment on or after the 31st day following the beginning of their employment or on and after the 31st day following the effective date of this Agreement, whichever is the later. 3 (c) When the Employer needs additional men, it shall notify and give the Union equal opportunity with all other sources to provide suitable applicants, but the Employer shall not be required to hire those referred by the Union. ARTICLE V Licenses and Examination (a) All employees shall be required to comply with all applicable federal and state licensing and examination requirements. (b) In the event an employee receives a traffic citation for a moving violation which would contribute to a suspension or revocation, or suffers a suspension or revocation of his right to drive the Employer's equipment for any reason, he must promptly notify the Company in writing. Failure to so notify the Company will subject the employee to disciplinary action up to and including discharge. If such license suspension or revocation comes as a result of the employee complying with the Company's instruction which results in a succession of size and weight penalties, or because he complied with the Company's instruction to drive Company equipment which is in violation of D.O.T. regulations relating to equipment, or because the Company's equipment did not have either a speedometer or a tachometer in proper working order, and if the employee has notified the Company of the citation for such violation as above mentioned, the Company shall provide employment for such suspension for the entire period thereof. (c) It shall be the Company's right to determine the physical and mental requirements of any job covered by this Agreement. Further, the Company shall have the right to determine whether an individual employee's physical and mental conditions meet the physical and mental requirement of is job. Employees entering the service of the Company shall be required to undergo a physical examination. All regular and probationary employees shall be required to undergo annual physical examinations. However, if the Company determines such is necessary, an employee may be required to undergo more frequent physical or mental examinations to determine whether the employee continues to be qualified to perform his job. (1) The costs incurred for such examinations shall be borne by the Company. (2) The Company shall notify each employee by letter dated on or about the employees birthday that the employee is required to undergo an annual D.O.T. physical examination and shall further inform the employees as to the identity and location of the medical examiner. It shall be the employee's responsibility to make the necessary appointment and to undergo such physical within fourteen days following his birthday. (a) The employee shall not be required or permitted to schedule such physical examination during his working hours. 4 (b) The Company shall pay the employee, at this regular hourly rate, only for time spent at the place of examination in excess of two hours. (3) At any time the Company suspects that an employee may not be physically or mentally qualified to perform his job or that an employee jeopardizes the safety of the Company's operations, the employee may be required to undergo a physical or mental examination to determine his fitness for duty. (a) Such examination shall be scheduled by the Company and shall take place within two working days from the time that the decision is made by the Company to require such an examination, and the employee shall be promptly notified of the time and location of the examination. (b) The employee shall be paid at his regular hourly rate for all time incurred at the place of the examination. (c) If, as a result of the Company's having required the employee to undergo such an examination, the employee is held out of service and after such examination the Company determines that the employee was physically and mentally capable of performing his duties and did not jeopardize the safety of the Company's operations at the time he was held out, the Company shall be responsible for any wages the employee would have earned during the period in which he was held out of service. (4) If the Company's doctor's findings as to the employee's physical or mental condition are contested by the employee's doctor, then the dispute as to the employee's physical or mental condition and fitness for duty shall be submitted for resolution to an impartial third party medical doctor. The decision of the impartial third party doctor as to the employee's physical and/or mental condition and fitness for duty shall be final. The Company shall then determine, based upon the findings of the impartial third party doctor, whether the employee meets the requirements of his job. If it is determined at this time or subsequently through the grievance procedure that the Company has improperly held the employee out of service, the employee shall be entitled to back wages for such period as he was not permitted to work and was physically and mentally able to do so. 5 (5) The physical or mental examinations referred to above shall take place in the Kansas City Metropolitan Area unless the Company and the employee agree otherwise ARTICLE VI Safety and Training (a) The Company agrees to maintain safe, sanitary and healthful conditions and to provide proper first aid and safety equipment on all trucks. (1) No employee will be required to engage in any activity involving known dangerous conditions of work or danger to person or property or in violation of any applicable statute or court order, or in knowing violation of a government regulation relating to safety of person or equipment. The term "dangerous conditions of work" shall not relate to the type of cargo which is hauled or handled. (2) Employees shall not be required to operate any equipment on the public streets or highways that is not in a safe operating condition, including but not limited to equipment which is acknowledged to be overweight or which is not equipped with the safety appliances prescribed by law, except as is provided in paragraph (b) below. (a) It shall not be a violation of this Agreement if an employee refuses to operate equipment he reasonably believes to be in an unsafe operating condition or not properly equipped with the safety appliances condition unless such refusal is later determined to have been unjustified. (b) All equipment which is refused because it is believed to be in an unsafe prescribed by law shall be appropriately tagged so that it cannot be used by any other driver on the public streets or highways, but for transfer to the local maintenance station, until the reason for the refusal has been corrected or the refusal has been determined to be unwarranted. 6 (b) All employees are required to abide by all safety requirements imposed by the Company and the Company's equipment leasing agent. Further, all employees are require to comply with all applicable federal, state and local statutes, ordinances and regulations affecting the operation of motor vehicles, safety and health. (1) Any employee directed by the Company to perform his job in a manner which would violate this paragraph shall not be subject to discipline for complying with such directive. (2) Employee are required to utilize the seat belts and safety harnesses provided at all times while their vehicle is in motion. (c) Any employee involved in an incident or accident which results in damage to the Company equipment or other property shall immediately, where possible, report to a dispatcher or supervisor on duty at the home terminal and also where applicable to the local supervisor on duty upon the employees arrival at the next Company station. (1) When directed by the Company, the employee shall complete all forms provided by the Company regarding the incident or accident and shall provide all information known to the employee that may be requested. (2) Employees shall be responsible for the completion of any accident, injury or damage report required of driver of a motor vehicle by any state or local authority as a result of an incident or accident involving Company vehicles or equipment and further shall be responsible for informing the Company that such a report was required and completed. Where possible the employee shall request a copy of such report be mailed to the Company. (3) Where an employee has been involved in an incident or accident resulting in damage to persons or property, he shall at that time make all reasonable attempts to ascertain as much information regarding such incident or accident as possible as directed by the work rules and policies of the Company. (d) Drivers shall immediately following the end of a trip complete a vehicle condition report as provided by the Company. A copy of such report shall be given to the Company, and a copy shall remain in the vehicle for inspection by the next driver operating such unit. 7 (e) Each employee shall complete training regarding the operation of the Company's equipment as may be required by the Company or the Company's equipment leasing agent, prior to the operation by that employee of such equipment. Refusal by an employee to complete either first-time training or recurrent training regarding the operation of the Company's equipment as he may from time to time be directed to undergo shall result in that employee being suspended from duty until such time as he has successfully completed such training. ARTICLE VII Equipment (a) The Company shall provide equipment in compliance with the current U.S. D.O.T. Federal Motor Carrier Safety Regulations. (1) All equipment shall be marked for height. (2) No employee shall be required to drive a tractor designed with the cab under the trailer. (3) The suspension system and shock absorbers of the vehicle shall be provided and maintained as recommended by the manufacturer of the equipment. (4) Any violation of the above, including maintenance of existing equipment shall not be cause for refusal of that equipment unless the refusal is based upon an equipment defect directly and reasonably related to safety. (b) In the event of equipment failure which either renders the vehicle inoperable or jeopardizes the continued safety of the operation, the driver shall immediately notify the dispatcher or supervisor on duty at the home terminal, and further shall immediately notify the Company's equipment leasing agent of such equipment failure, who each shall instruct the employees as to the procedures to be followed with regard to the cargo being hauled and the repair of the equipment. (c) The mechanical failure of the heating or air conditioning equipment shall not be the basis for an employees refusal to continue a trip. In the event of a mechanical failure of the heating or air conditioning equipment, the driver shall notify the Company and the Company's equipment leasing agent of such failure. It shall be the Company's right to determine whether the trip is to continue. This determination is to be made based upon economic considerations, existing climatic conditions, driver comfort and safety of the continued operation of the equipment. The foregoing provision shall not abrogate the employee's rights under Article VI(a)(2)(a) of the Agreement. 8 ARTICLE VIII Personal Time Off / Sick Leave Reporting (a) Employees shall be granted five (5) personal days off without pay to be taken each contract year. Employees hired during any contract year will receive 1 day of personal time off without pay for each 3 months of service and thereafter granted 5 days in any subsequent contract year. All requests for personal time off must be submitted with a minimum of twelve (12) hours advance notice and must be approved by the Company. No carryover of personal time off to a subsequent contract year will be permitted. (b) It is the responsibility of any employee who is unable to work because of sickness or injury to immediately report such inability to work and the reason therefore to the dispatcher or supervisor on duty at the home station, and further to continue to apprise the Company of his condition and any changes which might affect his return to work. (c) The employees covered by this Agreement, and the Union, recognize an obligation to be truthful and honest and to prevent unnecessary absences and other abuses of sick leave. ARTICLE IX Leaves of Absence (a) An employee hereunder shall, upon proper written application and approval from both the Company and the union, be granted a leave of absence in writing for a period not in excess of ninety (90) days. (1) An employee granted a leave of absence shall retain and continue to accrue seniority. (2) Leaves of absence may be extended for additional ninety (90) day periods upon further written application to and permission from both the Company and the Union, except as provided below. (3) Notwithstanding the ninety (go) day limitation stated above, Where special circumstances dictate that such is reasonable and necessary, a leave of absence may be extended for longer periods. It shall be the employee's responsibility to request extensions, where required, of his leave of absence in writing to the Company and the Union. (4) An employee returning from an authorized leave of absence, other than a medical leave of absence, must give notice of return in writing to the Company and to the Union at least ten days prior to his anticipated date of return. (5) All employees returning from an authorized leave of absence shall be placed on the board until such time as the next bid occurs. 9 (6) Personal leaves of absence for reasons other than as set forth in paragraphs (b), (c), and (d) below shall be granted only when the requirements of service permit. (b) All employees requesting a medical leave of absence due to personal illness or injury, or industrial injury, shall make application for such upon forms to be provided by the Company. This application must be accompanied by a physician's statement regarding the employee's condition, and shall be submitted as soon as is practically possible after the need for such medical leave of absence arises. (1) In no case shall a medical leave of absence be extended to exceed three (3) years. (2) Twenty-five (25) days prior to the expiration of a medical leave of absence or any extension of such leave, the Company will send a written notice to the employee advising him that he must give notice of intent to return per paragraph (a)(4) above or request an extension of such leave per paragraph (a)(3) above. (3) Any employee requesting to return to work from a medical leave of absence or who is requesting a medical leave of absence or an extension of a medical leave of absence may be required to provide a physicians report setting forth a complete and detailed statement as to the employees physical or mental condition, including a diagnosis and prognosis of such condition. (a) The Company shall have the right to determine whether the employee's physical or mental condition meets the requirements of his job. (b) The Company may require such an employee to undergo an independent medical examination by a qualified physician selected by the company. (c) In the event the employees doctor and the Company's doctor disagree as to the employees physical or mental condition, then the dispute as to the employees physical or mental condition shall be submitted to an impartial third party medical doctor in accordance with the provisions of Article V(c)(4). (d) An employee' who is denied a medical leave of absence by the Company and either fails within seven (7) days to, in writing, request a third party doctor's examination pursuant to Article V(c)(4), or who is denied a third party doctor's examination due to a lack of a dispute regarding his physical or mental condition, or who is examined by the third party doctor pursuant to Article V(C)(4) and based upon that doctor's findings as to the employee's physical or mental condition is determined by the Company to be able to perform his job duties, and who then refuses to report to work shall be terminated. (c) Employees accepting full-time employment with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America or its Local No. 41, as an officer, a financial secretary or business agent shall be granted an indefinite leave of 10 absence by the Company for the period so employed as long as this Union remains the exclusive bargaining agency of the employees covered by this Agreement. (d) An employee elected to a state or national public office in which the duties of that office require a leave of absence from the employment of the Company shall be granted such a leave of absence for the term of that elective office, but not to exceed the duration of this Agreement. (e) Nothing herein shall impair any rights that an employee may have under federal statute or regulation arising as a result of his employment with the Company having been voluntarily or involuntarily interrupted by active military duty, by reserve training activities, or by reporting for examinations to determine his fitness for military service. An employee on a leave of absence from the Company due to a military obligation shall be required to make application for return to work within ninety (90) days following his discharge or release from such military obligation or shall forfeit all seniority rights and his name will be stricken from the seniority roster. In case of temporary or partial disability which makes it impossible for the employee to return to work within ninety (90) days after his discharge or release from military duty, special arrangements will be made by the Company and the Union for a proper extension of time. (f) Excepting as provided in paragraphs (c), (d), and (e) above, an employee while on leave of absence engaging in gainful employment either for himself or another without prior written permission from both the Company and the Union shall forfeit his seniority rights and his name will be stricken from the seniority roster. 11 ARTICLE X Vacation (a) Employees shall be eligible for annual paid vacations in accordance with the number of days of vacation leave earned and accrued in the prior calendar year as set forth below:
Months of Active Service Prior Years Of Active Service to January 1 Completed Prior to January 1 ------------ ---------------------------- Less 20 and Than 2 2-10 10-15 15-20 Over ------ ---- ----- ----- ---- 1 0 1 1 2 2 2 1 2 3 4 5 3 1 3 4 6 7 4 2 4 6 8 10 5 2 5 7 10 12 6 3 6 9 12 15 7 3 7 10 14 17 8 4 8 12 16 20 9 4 9 13 18 22 10 5 10 15 20 25 11 5 11 16 22 27 12 6 12 18 24 30
12 For Those Employees Hired After April 1, 1998 ---------------------------------------------
Months of Active Service Prior Years of Active Service to January 1 Completed Prior to January 1 ------------ ---------------------------- Less 16 and Than 2 2-10 10-15 Over ------ ---- ----- ---- 1 0 1 2 2 2 0 2 3 4 3 1 3 4 6 4 1 4 6 8 5 2 4 6 8 6 2 5 8 10 7 3 6 9 12 8 3 7 11 14 9 4 8 12 16 10 4 9 14 18 11 5 9 14 18 12 5 10 15 20
(1) Active service shall not include the time that an employee is laid off from the service of the Company or on a leave of absence excluding a military leave. (2) An employee who has been in the active service of the Company for fifteen (15) days in a month shall, for the purposes of accruing vacation leave, be considered to have worked in the service of the Company for the entire month. (3) An employee must have completed at least sick (6) months of active service with the Company before he will be eligible to use vacation days earned and accrued from the prior year. (4) An employee recalled from layoff or returning from a leave of absence will accrue vacation leave from the date of return to service in accordance with paragraph (a) above, which vacation leave may be taken in the next calendar year. (5) Notwithstanding anything to the contrary above, an employee who works less than sixty percent (60%) of the total working days in a calendar year shall neither earn nor accrue vacation leave days in that year. (6) Vacation leave is not cumulative and must be taken during the calendar year following the calendar year in which the vacation leave was earned or it is forfeited unless an employee has received a written request from the Company to forego his vacation during that year. 13 (b) For the purposes of this article, six (6) days accrued vacation leave shall constitute one (1) week's vacation. On or before November 1, a list or calendar indicating the periods open for vacation bidding and the number of employees who will be allowed to bid and take each such period shall be posted on the drivers' bulletin board in Kansas City. (1) Vacation selection shall be by seniority. (2) The November 1 posting will advise employees that they will be contacted for vacation selection between November 5 and November 20. Employees must be prepared to make their vacation selection when contacted. Reasonable provisions shall be made by the Company to secure the selections of employees who will be absent or on vacation from November 1 to November 20. Vacation selection lists shall be posted by December 10. (3) The vacation week for which an employee shall be off the board shall be seven (7) days, and the employee's accrued vacation leave bank shall be reduced by six (6) days for this vacation period. (a) Employees shall select their vacation period in seven (7) day continuous blocks, providing the employee has a minimum of six (6) days accrued vacation leave. An employee with less than six (6) days accrued vacation leave shall take all such vacation days in one consecutive block. (b) An employee who does not elect to make a vacation selection which exhausts his accrued vacation leave bank will be allowed to utilize the remainder of his accrued vacation leave days by seniority as the needs of service permit, throughout the calendar year. Such vacation leave shall be utilized in six (6) or more consecutive day blocks, unless the employee has less than six (6) days accrued vacation leave which shall be taken in one consecutive block. (c) Vacation pay shall be computed by dividing the employee's earning for the prior calendar year by fifty- two (52) to determine compensation for one week's (six (6) days) vacation pay. Vacation pay for less than a one week (six (6) day) period shall be computed by dividing the employee's one-week vacation pay by six (6) to determine the employee's daily vacation rate of pay and multiplying by the number of vacation days to be taken. (1) In the case of an employee who has been out of work because of proven illness or injury resulting in inability to work for a cumulative period of time of twenty-eight (28) days or more, such employee's one week vacation pay shall be calculated by dividing the employee's annual earnings for the prior calendar year by fifty-two (52), less the number of weeks of proven illness as outlined herein. However, periods of injury or illness of less than seven (7) days duration shall not count towards the twenty-eight (28) days threshold set forth above. (2) An employee, upon giving reasonable notice of not less than two weeks to the Company shall be given his vacation pay prior to commencing his vacation. 14 (3) An employee with fifteen (15) years or more active service with the Company prior to January 1 shall have the option of receiving vacation leave compensation and working in lieu of taking his fourth and/or fifth (where applicable) week(s) of vacation leave. An employee who so elects to receive vacation leave compensation and work in lieu of taking his fourth and/or fifth week(s) of vacation must, in order to receive such compensation, notify the Company in writing at least two (2) weeks in advance of the regular payday on which he wants to receive the vacation leave pay that he has made such an election, provided, however, that in no case shall an employee who elects to receive vacation leave compensation in lieu of taking his fourth an/or fifth week(s) of vacation be paid such compensation prior to the time at which he is paid for his first vacation selection. The employee's accrued vacation leave shall be reduced by the number of vacation leave days for which the employee receives compensation. (4) In case of the death of an employee, any vacation pay allowance due him shall be paid to the executor or administrator of his estate, or his legal heir. (5) An employee who is discharged, resigns or is laid off, shall be paid for the unused vacation leave accrued and due him based upon the number of months worked in the preceding year, in accordance with paragraph (a) above. (6) With regard to the vacation leave accrued for those months worked in the current calendar year, an employee who is separated, including layoff, from the service of the Company, shall be paid for such vacation leave accrued unless he is discharged or resigns without giving at least two (2) calendar weeks written notice to the Company. (d) For those employees hired after April 1, 1998, the number six (6) is changed to five (5) wherever it appears in paragraphs (b) and (c) in this Article. ARTICLE XI Holidays (a) Employees eligible for holiday pay shall observe the following holidays regardless of the day of the week on which such holiday falls: New Year's Day, Memorial Day, Fourth of July, Labor Day, Thanksgiving Day, Christmas, the Employee's Birthday, and a personal holiday. Employees hired after April 1, 1998 will not be eligible for the personal holiday. (1) Holiday pay shall consist of eight (8) hours pay at the straight time rate of pay. (2) Employees required to work on a holiday shall, in addition to any monies the employee may earn on such holiday, be paid twelve (12) hours pay at the straight time rate of pay. (b) (1) In order to qualify for holiday pay, an employee must, if requested, work the day immediately preceding and immediately following the holiday unless the 15 employee has exhausted his available hours of work or is unable to work on account of proven illness, or such absence is mutually agreed to by the employee and the Company prior to the holiday. (2) An employee who has not completed his probationary period is not eligible for holiday pay for holidays falling within such probationary period. (3) If a holiday falls within an employee's regularly scheduled vacation period he shall receive pay for such holiday in addition to his vacation pay. An employee shall not be eligible to work a holiday falling within his vacation period. (4) Employees are entitled to holiday pay if the holiday falls within the first thirty (30) days of absence due to illness or non-occupational injury, or within the first six (6) months of absence due to occupational injury, or during periods of permissible absence for union business. (5) An employee shall not be eligible for holiday pay for any holiday unless he is on the active payroll on the day in which the holiday falls. (c) In the event an employee's birthday falls on February 29th, the employee shall observe March 1st as his birthday holiday. If an employees birthday falls on another of the holiday specified in paragraph (a) above, the next following day shall be considered as such other holiday for that employee. (d) The date of an employee's personal holiday will be established by the employee submitting a written request to the dispatcher at least seven (7) days prior to the date the employee desires to designate as his personal holiday. (1) In the event two or more employees properly request the same date to be designated as their personal holiday, the employee(s) with the most seniority will be granted the day as their personal holiday as the needs of service permit. (2) On the day granted as the employee's personal holiday, he shall be taken off the board unless the needs of service require the employee to work that day. (3) If the employee is subsequently required to work on the day that he requested and was granted as his personal holiday, the employee shall have the option to take holiday pay as provided in paragraph (a)(2) above in addition to the monies he earns for working that day, or he may choose to postpone his personal holiday to another day. (4) The employee must take his personal holiday in the current calendar year, or it is waived. 16 ARTICLE XXX Funeral Leave In the event of a death in an employees family (father, mother, wife, husband, brother, sister, son or daughter), the employee shall be entitled to eight (a) hours pay at the straight time rate of pay for up to three (3) days to attend the funeral. ARTICLE XIII Free Transportation Employees covered by this Agreement will be afforded free and reduced fare transportation as established by Company policy and stated in the Company's Management Policy and Procedure Manual, which from time to time may be amended by the company at its discretion. ARTICLE XIII Work Stoppage, Strikes, Picketing and Lockouts The Company will not lock out any employee covered hereby and the union will not authorize or take part in any work stoppage, or picketing of Company premises during the life of this Agreement until the procedures for settling disputes involving employees covered by this Agreement and as provided by the Railway Labor Act have been exhausted. The company reserves the right to discipline, including discharge any employee taking part or involved in any violation of this provision of the Agreement. ARTICLE XV (a) Representation (1) the Company recognizes the right of the Union to designate stewards and alternates form the Company's seniority list. The authority of the stewards and alternates so designated shall be limited to and shall not exceed the following duties and activities: (a) The investigation and presentation of complaints, disputes and grievances below the Step 2 level in accordance with the provisions of this Agreement; (b) The transmission of such messages and information which shall originate with and are authorized by the local Union or its officers, provided such messages and information. (1) have been reduced to writing; or, 17 (2) if not reduced to waiting are of a routine nature and do not involve work stoppages, slowdowns, refusal to handle good, or any other interference with the employer's business. (c) Settling grievances or disputes not involving changes in policy or the intent and purposes of this agreement. (2) The steward, or alternate when acting in the place of the steward, shall be allowed reasonable access and availability to all work areas and documents not of a confidential nature reasonably necessary to investigate, process and present complaints, disputes and grievances and in conducting his business shall do so in a proper, efficient and expedient manner. In so doing he will contact appropriate management personnel. (3) The Union will be further represented by the local Union's designated Business Agent for dealing with regional or general officials of the Company. The Business Agent shall, after first notifying the Company official in charge, be permitted to enter the facilities of the Company for the purpose of representing employees covered by this Agreement. The Union shall, at all times, keep the Company advised through written notice of any change of authorized representative. (b) Procedure The Company and the Union will make every effort to keep to a minimum the actual time spent in disposing of grievances, disputes and complaints. The procedure for presentation and adjustment of disputes, complaints, or grievances that may arise between the Company and the Union with reference to interpretation or application of any provision of this Agreement shall be: (1) Step 1 Any employee having a complaint or grievance in connection with the terms of employment, application of this Agreement, or working condition, will first discuss the matter with his immediate supervisor. If unable to secure satisfactory adjustment in this manner, the employee may present his complaint or grievance in writing to the steward who in turn will, if in his opinion the complaint is justified, present the written grievance to the Company's designated representative. Subject to operational requirement, a hearing, where necessary, shall be convened for the purpose of rendering a decision in the matter. A decision in writing shall be rendered not later than seven (7) days following the Company's receipt of the written grievance. (2) Step 2 (a) If the decision in Step 1 is not satisfactory, the union's Business Agent may refer the matter to the Company's designated Staff Vice President , or his designee. The notice of intent to appeal the matter to Step 2 must be made in writing within fourteen (14) days after the Step 1 decision. 18 Within forty-five (45) days after the Step 2 appeal date, the Staff Vice President or his designee will meet with the Union's Business Agent and endeavor to reach a settlement of the issues involved in the matter appealed. If unable to resolve the issues, the Company shall issue a written decision setting forth its position on the issue(s). In no event is such written decision to be issued later than seven (7) days. (b) If the decision in Step 2 is not satisfactory to the Union, the matter may be referred by the Union's Business Agent to the Board of Adjustment. (c) Individual grievances must be filed promptly after the cause giving rise to the grievance is evident, and no individual grievance will be valid if not filed within thirty (30) days of the date the employee knew or could reasonably be expected to have known of the grievance. (d) It is understood that either or both the local Union President or his authorized representative and the Director of Labor Relations, Ground or his authorized representative may intervene and participate in the handling of a grievance or dispute at any level of the grievance procedure. (e) Notwithstanding anything to the contrary above, the parties may by mutual agreement extend the time limits set forth herein. The Company and the Union will make every effort to keep to a minimum the actual time spent in disposing of grievances,, disputes and complaints. The procedure for presentation an adjustment of disputes, complaints, or grievances that may arise between the company and the Union with reference to interpretation or application of any provision of this Agreement shall be: ARTICLE XVI Board Of Adjustment (a) In compliance with Section 204, Title II, Of the Railway Labor Act, as amended, there is hereby established a System Board of Adjustment for the purpose of adjusting and deciding disputes or grievances which may arise under the terms of this Agreement and which are properly submitted to it after exhausting the procedures for settling disputes, as set forth under Article XV. Such Board shall be known as the Trans World Airlines, Inc. Over-the-Road Truck Drivers Board of Adjustment. 19 (1) The Board of Adjustment shall consist of three (3) members: one (1) appointed by the Company; one (1) appointed by the Union; and a neutral arbitrator to be appointed by the National Mediation Board at the joint request of the parties. The Company and the Union shall keep each other apprised of their respective current appointees to the Board. (2) There shall be a Secretary to the Board who shall be responsible for the administration of the Board of Adjustment, including but not limited to written notices to the Board members and to the parties to the dispute in connection with the scheduling of Board matters, and communications with the National Mediation Board regarding the appointment of neutral arbitrators. The appointment of the individual to act as Secretary to the Board shall alternate January 1st of each year between the Company and the Union with the Union appointing such individual in even years and the Company appointing such individual in odd years. (a) The neutral arbitrator shall be designated as chairman of the Board of Adjustment and shall preside at meetings and hearings of the Board. It shall be the responsibility of the Chairman to guide the Parties in the Presentation of testimony, exhibits, and arguments at hearings to the end that a fair, prompt and orderly hearing of the dispute is afforded. (b) If either party objects to the neutral arbitrator appointed by the National Mediation Board, then the Secretary shall request that the National Mediation Board submit a list of five (5) arbitrators. The parties shall, commencing in alternate turns from case to case alternately strike a name from the list and the remaining name shall be the neutral arbitrator for the case. The compensation, travel expenses and other expenses of the neutral arbitrator in carrying out his duties as chairman shall be borne equally by the company and the Union. (b) The Board shall have Jurisdiction over disputes between any employee covered by this Agreement and the Company growing out of grievances, interpretation or application of any of the terms of this Agreement and the discipline or discharge of employees who have completed their probationary period. The jurisdiction of the Board shall not extend to proposed changes in hours of employment, basic rates of compensation, or working conditions covered by this Agreement or any amendment hereto. (1) The Board shall consider any dispute properly submitted to it by the President of the Union or his authorized representative, or by the Company's designated Staff Vice President or his authorized representative, when such dispute has not been previously settled in accordance with the terms provided for in this Agreement, provided that the Notice of Dispute is filed with the Company and the Union members of the Board, with copy to the Company or Union as may be appropriate, within forty-five (45) days after the decision in the last step of the grievance procedure. The date of the Notice shall determine the order for considering cases, excepting discharge, unless the parties mutually agree otherwise. 20 (2) Unless the Company and the Union agree upon a combination of cases to be presented to an arbitrator, each case presented to the Board shall be treated as a separate case, except those grievances involving more than one (1) employee or incident concerning an alleged violation with similar facts and circumstances shall be treated as one case. (c) The Board shall meet in Kansas City, Missouri, unless a different place of meeting is agreed upon by the Company and the Union. In the event either of the parties is of the opinion that a Board of Adjustment hearing should be held at a site other than Kansas City, such party will notify the other party and if both parties agree, the Board hearing will be conducted at the site agreed upon. Should the parties fail so to agree, then the party desiring the change of site shall put the determination of the site to the arbitrator selected to hear the case, setting forth that party's reasons, in writing, for requesting the change with a copy to the other party who will be afforded an opportunity to oppose such change, setting forth his reasons in writing. The arbitrator's decision as to such site shall be final. (d) Procedure (1) The Notice of Dispute referred to the Board shall be addressed in writing by the grieving party to the Company member and the Union member jointly and shall include: (a) The question or questions at issue (b) Statement of facts (c) Position of appealing party (d) Position of other party A copy of a Notice of Dispute shall be served upon the other party and the Secretary to the Board. (2) Unless otherwise agreed, within fourteen (14) days following receipt of a Notice of Dispute, the Secretary to the Board shall in writing, accompanied by a copy of the Notice of Dispute, request that the National Mediation Board appoint a neutral arbitrator to sit with the Board as Chairman to hear and resolve the dispute, and shall advise the parties when such appointment has been made. A copy of the Notice of Dispute shall be forwarded by the Secretary to the Board to the Neutral Referee who has been appointed to serve in the matter. All subsequent documents filed with the Board shall be addressed and sent to all three members, with copy to the other party or parties. (3) The Secretary to the Board shall confer with the parties and Board members to set a mutually convenient date for the hearing- The Company and Union shall make every effort to schedule cases as soon as possible following notification that a neutral arbitrator has been appointed to hear a particular grievance. 21 (4) The hearing shall consist of the presentation of oral testimony and exhibits with the Party having the burden of proof presenting its evidence first, and each party having the opportunity to rebut the other's evidence. The parties shall have the option of presenting closing oral arguments, written briefs, including reply briefs, or both. However, if neither party nor the chairman desire a hearing, such hearing shall be waived. (a) Employees covered by this Agreement shall be represented at the Board of Adjustment by the Union Business Agent. The Company shall be represented at the Board. of Adjustment by the designee of the appropriate Staff Vice President for Materials Management. Each shall have the authority to settle grievances prior to the rendering of a decision by the Board of Adjustment and such settlement shall be binding on all parties. (b) Immediately following the conclusion of the presentation of all evidence and oral arguments, the Board shall convene in Executive Session, unless it mutually agrees otherwise. The neutral arbitrator shall within fourteen (14) days thereafter, or fourteen (14) days following the receipt of all written briefs in the matter, whichever is later, issue a draft written award to the Board members. If either Board member requests that a further Executive Session be held, such shall take place at the earliest convenient time. Such Executive Session may occur by telephone conference. After the conclusion of this Executive Session, if held, or if within fourteen (14) days following receipt of the neutral arbitrator draft award, neither the Company nor Union Board member requests an Executive Session to discuss the draft award, (excepting changes mutually agreeable to the parties of a minor nature) the neutral arbitrator shall reissue his draft award as a final award representing the majority decision of the Board. The decision of the majority of the Board in all cases properly referred to it shall be final and binding upon the parties. (5) Each of the parties will assume the compensation, travel expense and other expenses of the Board member selected by it and the witnesses called or summoned by it. Witnesses who are employees of the Company shall receive positive free transportation over the lines of the Company from the point of assignment to the point at which they must appear as witnesses and return, to the extent permitted by law. (6) The company and the Union members, acting jointly, shall have the authority to incur such other expenses as in their judgment may be deemed necessary for the proper conduct of the business of the Board, and such expenses shall be borne one-half by each of the parties hereto. Board members who are employees of the Company shall be granted necessary leave of absence for the performance of their duties as Board members. Board members and the Union Business Agent shall be furnished positive free transportation over the lines of the Company for the purpose of attending meetings of the Board, to the extent permitted by law. (7) It is understood and agreed that each and every Board member shall be free to discharge his duty in an independent manner, without fear that his individual 22 relations with the Company or with the Union may be affected in any manner by any action taken by him in good faith in his capacity as a Board member. (e) The time limits set forth in this Article may be extended by mutual agreement of the Company and the Union. (f) Nothing herein shall be construed to limit, restrict, or abridge the rights or privileges accorded either to the employees or to the Company or to their duly accredited representatives, under the provisions of the Railway Labor Act, as amended. ARTICLE XVII Discipline and Discharge (a) The Union recognizes the right of the Company and its supervisors to manage and supervise the work force of employees, individually or collectively in the normal course of work. In assessing discipline, the Company will consider the gravity of the offense, seniority and the work record of the employee involved. (b) In meetings for the purpose of investigation of any matter which may eventuate in the application of discipline or discharge, an employee will be entitled to Union representation, if he so desires. (c) No employee who has been in the service of the Company ninety (90) days or more shall be discharged without having first been afforded the opportunity of a hearing in the presence of a duly authorized Union representative before a designated representative of the Company other than the one bringing the complaint against the employee. (1) An employee who has been charged with an offense which may result in his discharge shall be notified in writing, with a copy to his union representative, of the precise charge or charges preferred against him, together with the date, time and location of the discharge hearing. When an employee has been suspended pending the discharge hearing, the Company shall notify such employee and/or his Union representative in writing as to the foregoing within three (3) days from the date of his suspension. The discharge hearing shall take place no later than seven (7) days following the date of the aforestated notification, unless the parties agree otherwise. (2) Prior to the discharge hearing, the employee and his Union representative shall be given a reasonable opportunity to secure the presence of necessary witnesses. 23 (3) The discharge hearing officer shall write and mail his decision regarding the employees discharge or lesser discipline no later than five (5) days after the close of the discharge hearing. (4) If the decision of the discharge hearing officer is not satisfactory, then appeal may be made in accordance with the procedures described in Article XV(b)(2). Step 2. ------ (d) If an employee is suspended while away from his home terminal, he shall be provided transportation to return to his home terminal. (e) The company will not discriminate against any witness called to testify or who otherwise offers evidence at any hearing or investigation under this Article. ARTICLE XVIII Seniority (a) Seniority rights for employees shall prevail. Seniority shall be defined as the length of time that an employee is in the service of the Company, active or inactive, in a position covered by this Agreement. (b) An individual who has not been in the active employ of the Company in a position covered by this Agreement for more than ninety (90) consecutive days will be considered a probationary employee. There shall be no responsibility on the part of the company or the Union for re-employment of probationary employees if they are laid off or discharged during this period. An employee separated for any reason from the employ of the Company during his ninety (90) day probationary period shall be considered to have accrued no seniority. If he is retained after his probationary period, the employee's name shall be placed on the seniority list as of his date of hire. (c) An employee who leaves the classification of work covered by this Agreement but remains in the employ of the Company in some other capacity shall retain but no longer accrue seniority under this Agreement. In the event such an employee returns to the classification covered by this Agreement he shall displace only the least senior employee, seniority permitting, and shall assume that employee's position until the next bid occurs. Such a displacement shall not in and of itself cause a bid to occur. (d) An employee shall lose his seniority and his name will be removed from the Company seniority roster if: (1) He quits or resigns. 24 (2) He is discharged for just cause. (3) He fails to respond to an offer of recall from the Company, in writing or by telegram, within seven (7) days after the date of the notice offering to re- employ him after a layoff, unless satisfactory reason is given, or if having notified the Company in writing or by telegram that he will accept recall, he does not in fact return to work on the date assigned. (4) He engages in gainful employment while on leave of absence in violation of Article IX(f). (5) He fails to return to work at the end of an authorized leave of absence, unless satisfactory reason is given. (6) While on the Board, he is unavailable for work as required by the dispatch procedures on three occasions within a six month period, unless satisfactory reason is given, provided, however, that should the employee show a satisfactory reason for his unavailability for work, the Company shall not be precluded from disciplining the employee for an attendance deficiency if such exists. (7) He has been on layoff letter from the Company for more than three (3) years. However, any employee who works a total of twenty (20) cumulative days within any twelve (12) month period from his date of layoff shall be entitled to an additional three (3) year layoff period from the last day he works. (8) An employee who loses his seniority pursuant to paragraphs (3), (4), (5), (6), or (7) above will be notified by certified mail, copy to the local Union representative, of the specific paragraph under which such action was taken. The employee may within thirty (30) days from the date of such notice, by certified mail to the appropriate manager for Materials Management, copy to his local Union representative, request a hearing regarding his termination. Such hearing will be held no later than ten (10) days after receipt of the employee's request, and a written decision either sustaining the employee's discharge or reinstating his seniority will be issued within seven (7) days after the close of the hearing, unless the Company and the Union agree to extend these time limits. If the aforementioned decision is not satisfactory, then appeal may be made in accordance with the procedure prescribed in Article XV, Step 2. (e) Reduction and Increase in Working Force (1) All reductions in force shall be effected in the inverse order of seniority, and shall be confirmed in writing. 25 (2) Restoration of forces shall be effected by seniority based upon the current seniority roster. However, if, as a result of an employee's failure to timely respond to a recall notice, as required above, the Company recalls another employee in his place who has less seniority, and the originally recalled employee is not terminated, then the Company shall have no obligation to displace the subsequently recalled employee to the benefit of the first recalled employee. (f) Any employee returning from the military service shall be entitled to full seniority exercise and the employee displaced will be the least senior employee. (g) Seniority lists, corrected on December 1 and June 1, shall be prepared by the Company, and furnished to the Business Agent for the Union, and shall be posted on bulletin boards by January 1 and July 1 each year. Errors of omission and typographical errors will be corrected currently with a copy furnished the Business Agent. (1) All seniority lists shall be open to protest for a period of fifteen (15) days from date of posting, but if the seniority date on a list is not protested within the prescribed time limit after the initial appearance of a name on a list, such date shall stand as correct and official on all subsequent lists. Any employee on leave, on special assignment, in laid-off status, on vacation, or on sick or injured absence at the time of posting shall have a period of fifteen (15) days from the date of his return to service to file a protest. The Company shall thereafter post any revisions in the list, and any adjustment or failure to make an adjustment with which an employee or the Union may be dissatisfied shall be handled as a grievance in accordance with the provisions of Article XV upon request of the party filing the protest or an employee affected by any adjustment made. The filing of the grievance must be made within seven (7) days after the posting of the revisions, and any employee on leave, on special assignment, in a laid-off status, on vacation, or on sick or injured absence at the time of posting such revisions shall have a period of seven (7) days from the date of his return to service to file such grievance. (2) Regardless of other provisions of this Agreement to the contrary, when the Company and the Union mutually agree that a seniority list should be changed to comply with the provisions of this Agreement, or when it has been established through the grievance procedure that a list should be changed, such change will be posted currently. It is understood that any resulting adjustment in the list shall not create any liability to the Company or the Union. ARTICLE XIX Jury Duty An employee unavailable for work as a result of serving as a juror or having been subpoenaed to serve as a trial witness shall receive pay equivalent to that which he would have received had he been available for work, less any fee he received for such service. The employee shall notify the 26 Company as soon as is practicable that he has been called for jury duty or subpoenaed as a trial witness, and the dates thereof, and further shall notify the Company immediately when he has been released from such obligation. ARTICLE XX Savings Clause Should any part or provision of this Agreement be rendered invalid by reason of any existing or subsequently enacted legislation, such invalidation of any part or provision of this Agreement shall not invalidate the remaining portions thereof, and they shall remain in full force and effect. ARTICLE XXI Health and Welfare Benefits Effective April 1, 1998, contributions , as set forth on page 35 must be made to the Central States, Southeast and Southwest Areas Health and Welfare Fund, or other applicable fund, for each week in which a regular employee works or is compensated at least two (2) days or tours of duty in the contribution week. For regular employees who work or are compensated one (1) day or tour of duty in the contribution week, the contribution rate will be $34.00. This provision shall only apply to regular employees covered by this Agreement who have been on the payroll thirty (30) days or more. If an employee is absent because of illness or off-the-job injury and notifies the Employer of such absence, the Employer shall continue to make the required full weekly contributions for a period of four (4) weeks beginning with the first week after contributions for active employment cease. If an employee is injured on the Job, the Employer shall continue to pay the required full weekly contributions until such employee returns to work; however, such contributions shall not be for a period of more than twelve (12) months beginning with the first week after contributions for active employment cease. If an employee is granted a leave of absence, the Employer shall collect from said employee, prior to the leave of absence being effective, sufficient monies to pay the required full weekly contributions into the Health and Welfare Fund during the period of absence. The Employer shall pay the full weekly health and welfare contribution for any active employee on the seniority list who is available for work the entire contribution week. Disputes or questions of interpretation concerning requirement to make contributions on behalf of particular employees or classifications of employees shall be submitted directly to the Conference Joint Area Committee by either the Employer, the Local Union, or the Trustees. In the event of such referral, the Employer shall not be deemed to be delinquent, while the matter is being 27 considered, but if the Conference Joint Area Committee, by majority vote, determines that contributions are required, the Employer shall pay to the Trust Fund the amounts due together with any other charges uniformly applicable to past due contributions. The Conference Joint Area Committee may also determine whether the Employer's claim was bona fide. ARTICLE XXII Pensions Effective April 1, 1998, the Employer shall contribute as set forth on page 35 to the Central States, Southeast and Southwest Areas Pension Fund for each regular employee covered by this Agreement who has been on the payroll thirty (30) days or more. If an employee is absent because of illness or off-the-job injury and notifies the Employer of such absences the Employer shall, beginning with the first week after contributions for active employment cease, continue to make the required contributions for a period of four (4) weeks. If an employee is injured on the job, the Employer shall, beginning with the first week after contributions for active employment cease, continue to pay the required contributions until such employee returns to work; however, such contributions shall not be paid for a period of more than twelve (12) months. If an employee is granted a leave of absence, the Employer shall collect from said employee, prior to the leave of absence being effective, sufficient monies to pay the required contributions into the Pension Fund during the period of absence. The payment of the pension contribution for days available only applies to active employees on the seniority list who are available for work the entire contribution week. Disputes or questions of interpretation concerning the requirement to make contributions on behalf of particular employees or classifications of employees shall be submitted directly to the Conference Joint Area Committee by either the Employer, the Local Union, or the Trustees. in the event of such referral, the Employer shall not be deemed to be delinquent while the matter is being considered, but if the Conference Joint Area Committee, by majority votes determines that contributions are required, the Employer shall pay to the Trust Fund the amounts due together with any other charges uniformly applicable to past due contributions. The Conference Joint Area committee may also determine whether the Employer's claim was bona fide. 28 ARTICLE XXIII Paid-for-Time (a) Drivers can be released at an outside station and lay over one time per trip. After being released, first 12 hours will be without pay, 8 hours with pay, 10 hours without pay, 8 hours with pay, 10 hours without pay. At this point all time will be paid until departure from station. A minimum guarantee of 2 hours will be paid on layovers. (b) Breakdown delays: Drivers on breakdown delay will be paid for the first 8 hours, with the next 16 hours free. All time spent with equipment is to be paid; this is in addition to the first 8 hours paid. (c) Impassable highways and delays due to inclement weather or other Acts of God: First 8 hours will be paid, next 16 hours free. Time spent with equipment will be paid; this is in addition to the first 8 hours paid. (d) Meal allowance on layovers will be $7.50 each time drivers are held beyond the 17 hours of first layover and after the next 10 hours on a subsequent layover. When on layover on Sunday and holidays, there will be a meal allowance of $7.50 every five hours except for the third meal in that 24 hour period, which will be a $9.00 meal allowance. No more than 3 meals will be reimbursed during any 24 hour period. ARTICLE XXIV Duration This agreement shall become effective on the date of signing except as provided herein, and shall continue in full force and effect until April 1, 2003, and thereafter unless written notice of intended change is served in accordance with Section 6, Title 1, of the railway Labor Act, as amended, by either party hereto two (2) months, sixty (60) days, prior to April 1, 2003 and/or any thirty (30) day period after April 1, 2003. Signed this __________________day of __________________________ 1998. FOR TRANS WORLD AIRLINES, INC. FOR INTERNATIONAL BROTHERHOOD OF TEAMSTERS, LOCAL Union #4.1 ______________________________ ______________________________ ______________________________ _______________________________ ______________________________ _______________________________ ______________________________ _______________________________ 29 SCHEDULE "A" - WAGES (Hired Prior to 4/1/98) Mileage and Hourly Rate of Pay
Mileage Rate 10/1/98 1/1/99 4/1/99 4/1/00 4/1/01 4/1/02 Single Man .36 .38 38.5 .39 39.5 .40 Double Man .20 .21 21.5 .22 22.5 .23 Hourly Rate $14.00 -- -- $14.30 $14.55 $14.85 SCHEDULE "B" WAGES (Hired After 4/1/98) Single Man .33 .35 36.5 .37 37.5 .38 Double Man .17 .18 18.5 .19 19.5 .20 Hourly Rate $14.00 -- -- $14.30 $14.55 $14.85 NEW HIRES (Hired After 4/1/98) Single Man .28 -- .29 .30 .31 .32 Double Man .14 -- 14.5 .15 .16 .17 Hourly Rate $11.00 -- $11.15 -- -- -- HOSTLER CLASSIFICATION $14.75 -- -- $15.-- $15.35 $15.65
New hire employees shall be paid at the applicable new hire wage rate for a period of six months of continuous employment with the Company. After completion of this six month period, employees will be paid at the applicable "B" wage rate. After completion of 30 months of employment at the "B" wage rate, employees will be paid at the applicable "A" wage rate. All wage rates are effective October 1, 1998. $800 per employee signing bonus. 30 July 27, 1997 Mr. C. B. "Doc" Conder Business Agent Teamsters Local 41 4501 Van Brunt Extension Kansas City, MO 64130 RE: Single Man Trip - Lodging Dear Mr. Conder: This is to clarify the parties agreement concerning layovers for drivers operating a single-man trip. As committed during our negotiations for a new collective bargaining agreement, in addition to any other expenses that the Company is required to pay, the Company will pay the reasonable and actual costs of lodging for a driver required to incur such an expense. The Company reserves the right to assign the hotel/motel to be utilized, and all affected drivers are required to use their best efforts to obtain the most economical satisfactory lodging when no such assignment has been made. Very truly yours, /s/ James R. Cato James R. Cato Director Labor Relations, Ground Agreed and Accepted /a/ C. B. Conder C. B. Conder August 11, 1987 31 April 1, 1998 Mr. Ron Stephens Business Agent Teamsters Local Union No. 41 6501 Van Brunt Boulevard Kansas City, MO 64130 RE: 1998 TWA-IBT Negotiations Dear Mr. Stephens: This will confirm our agreement reached during the 1998 negotiations regarding to having a Hostler on Duty at all times during the regular work week. It has been agreed that when the Hostler (Bid position) is used as an over-the-road driver during the regular work week a replacement Hostler not required unless the work requirements of the operation require a replacement Hostler. These requirements will be determined by the Company and shall exclude loading of the pm shuttle. Very Truly Yours, Philip Whitcomb VP Labor Relations Agreed and Accepted: ___________________________ Ron Stephens 32 CENTRAL STATES HEALTH AND WELFARE AND PENSION RATES Health and Welfare 4/1/1998 159.70 per week 4/1/1999 159.70 per week 4/1/2000 167.70 per week 4/1/2001 175.70 per week 5/1/2002 applicable rate Pension 4/1/1998 124.00 per week 4/1/1999 136.00 per week 4/1/2000 150.00 per week 4/1/2001 158.00 per week 4/1/2002 160.00 per week 33 EX-10.47 6 PURCHASE AGREEMENT 2-23-98 PURCHASE AGREEMENT BETWEEN MCDONNELL DOUGLAS CORPORATION, A WHOLLY OWNED SUBSIDIARY OF THE BOEING COMPANY AND TRANS WORLD AIRLINES, INC. A00480-B 2-23-98 A00480-B TABLE OF CONTENTS Date of Contract and Contracting Parties 1-1 Article 1 - DEFINITIONS 1-1 Article 2 - SUBJECT MATTER OF SALE 2-1 Article 3 - PRICE 3-1 Article 4 - PAYMENT 4-1 Article 5 - DETAIL SPECIFICATION CHANGES 5-1 Article 6 - DELIVERY 6-1 Article 7 - EXCUSABLE DELAY 7-1 Article 8 - BUYER FURNISHED OR DESIGNATED EQUIPMENT 8-1 Article 9 - TAXES, CUSTOMS, DUTIES AND LICENSES 9-1 Article 10 - FEDERAL AVIATION ADMINISTRATION APPROVAL 10-1 Article 11 - PATENT, TRADEMARK, TRADE SECRET AND COPYRIGHT INDEMNITY 11-1 Article 12 - AIRCRAFT SUPPORT SERVICES AND WARRANTY 12-1 Article 13 - ASSIGNMENT AND TRANSFER 13-1 Article 14 - NOTICES AND REQUESTS 14-1 Article 15 - APPLICABLE LAW, VARIANCES AND WAIVER 15-1 Article 16 - NONDISCLOSURE 16-1 Signature Page 17-1 EXHIBIT A - DETAIL SPECIFICATION EXHIBIT A1 - SPECIFICATION CHANGES NOTICES EXHIBIT B - CERTIFICATE OF TECHNICAL ACCEPTANCE AND DELIVERY EXHIBIT C - AIRCRAFT SUPPORT SERVICES EXHIBIT D - PRICE ADJUSTMENTS FOR FLUCTUATIONS IN THE ECONOMY EXHIBIT E - NEW ENGINE AND NEW PARTS WARRANTY INDEX ii 2-23-98 A00480-B PURCHASE AGREEMENT THIS AGREEMENT NO. A00480-B, dated __________________, is made by and between MCDONNELL DOUGLAS CORPORATION, a wholly owned subsidiary of THE BOEING COMPANY (Seller), having an office in the City of Long Beach, State of California, and TRANS WORLD AIRLINES, INC. (Buyer), having its principal place of business in the City of St. Louis, State of Missouri. In consideration of the mutual covenants herein, Buyer and Seller agree as follows: ARTICLE 1 - DEFINITIONS For all purposes of this Agreement the following terms shall have the following meanings (such definitions to be equally applicable to both singular and plural forms of the terms defined):
TERM MEANING - - ---- ------- AGREEMENT This Purchase Agreement including any agreements made a part of the Purchase Agreement and the Exhibits (each of which is incorporated in this Purchase Agreement by this reference) and amendments hereto. AIRCRAFT One or more of the aircraft purchased hereunder, the quantity and description of which are contained in Article 2. AOG Aircraft On Ground - The highest priority - - - designation to process a requirement for a Spare Part or maintenance action. Indicates that an Aircraft is unable to continue or be returned to revenue service until the appropriate action is taken. ATA Air Transport Association of America. - - - BFE Buyer Furnished Equipment - Equipment identified - - - in the Detail Specification to be furnished by the Buyer to the Seller. CAGE The Commercial and Government Entity - - - CERTIFICATE OF As to any Aircraft, a certificate substantially TECHNICAL in the form of Exhibit B. ACCEPTANCE AND DELIVERY COVERED Any airframe component or landing gear component COMPONENT specified in Exhibit C, Part I, paragraph C.5. DEFINITIONS 1-1 2-23-98 A00480-B TERM MEANING - - ---- ------- DETAIL The document which defines the configuration of SPECIFICATION the Aircraft, consisting of the Detail Specification (Exhibit A hereto) identified in Article 2, as it may be amended from time to time by SCNs. DOCUMENTS Manuals, documents, Programs, data or instructional material provided pursuant to this Agreement or otherwise, in any form or medium. ENGINES Two Pratt and Whitney JT8D turbofan engines. FAA The United States Federal Aviation - - Administration. This term includes the Federal - Aviation Administrator and any successor U.S. Federal authority. FAILURE For purposes of Exhibit C, Part I, paragraph C.1. any breakage of or defect in a Covered Component. FAR The United States Federal Aviation Regulations. - - - FLIGHT CREW A Flight Crew will consist of one Captain and one First Officer. FSCM The Federal Supplier Code for Manufacturers - - - - INITIAL Spare parts ordered for the support of the PROVISIONING initial twelve months of operation after ORDERS delivery of first Aircraft as specified in Part III of Exhibit C. INTEREST The charge for use, including delay in receipt, of money computed (on a quarterly basis) at prime (the per annum rate announced from time to time by Chase Manhattan Bank at its principal office in New York, New York as its prime commercial lending rate) plus one percent, but in no event greater than the rate permitted under California law. INTERFACE Any technical problem in the operation of the PROBLEM Aircraft or any system or assembly thereof due to malfunction or failure of any accessory, equipment, or part, the cause of which after due and reasonable investigation, is not readily identifiable as to its source. POLICY The Service Life Policy set forth in Exhibit C, Part I, paragraph C. PRODUCT An Aircraft structure, system, article, product, accessory, equipment or part whether installed on the Aircraft or purchased or provided as a spare or replacement part if made to Seller's proprietary design. DEFINITIONS 1-2 2-23-98 A00480-B TERM MEANING - - ---- ------- PROGRAM Any computer software or program in any form or media provided by Seller, including whole or partial copies of machine-readable instructions, a collection of machine-readable data, such as a data base, and documentation, descriptions, instructions or listings related to such instructions or data. SCN A Specification Change Notice is the document - - - used to change or modify the Detail Specification. SELLER PART An Aircraft article, product, accessory, equipment or part made to Seller's proprietary design. SELLER'S A plant or facility designated by Seller. FACILITY SELLER'S Manager, Warranty Administration WARRANTY McDonnell Douglas Corporation ADMINISTRATOR 3855 Lakewood Boulevard Long Beach, California 90846-0001 SERVICE Any service related to the subject matter hereof whether provided under this Agreement or otherwise. SPARE PART Seller Part and Vendor Part. VENDOR A manufacturer or supplier of a Vendor Part, service or document. VENDOR PART An Aircraft article, product, accessory, equipment or part not made to Seller's proprietary design. Engines, BFE and BDE are specifically excluded from this definition of Vendor Parts. DEFINITIONS 1-3 2-23-98 A00480-B ARTICLE 2 - SUBJECT MATTER OF SALE A. Seller shall manufacture, sell and deliver to Buyer, and Buyer shall purchase from Seller, under the terms and subject to the conditions set forth in this Agreement, twenty-four (24) MD-83 aircraft conforming to the Detail Specification which consists of DSDS 8000G dated March 31, 1992 as amended by the SCNs set forth in the Exhibit A's hereto and as may be further modified in accordance with the provisions of Article 5. B. During the manufacture of the Aircraft by Seller, Buyer shall be required to provide information concerning the configuration of the Aircraft, including, but not limited to, interior arrangement, special features, and the selection of materials and colors. Seller shall advise Buyer at least 30 days in advance of the dates when such information is required and Buyer shall provide such information by the dates (as they may change from time to time due to production requirements) so specified. In the event Buyer fails to perform in accordance with the dates provided by Seller, Seller shall have the right to determine the configuration of the Aircraft with respect to the information not provided by Buyer. Prior to determining the configuration, Seller shall act in good faith with Buyer to develop a course of action which will permit later designation if practical. C. In the event of any conflict or inconsistency between any provisions of this Agreement (excluding Exhibit A and A1 hereto) and the Detail Specification, the provisions of this Agreement shall apply. SUBJECT MATTER OF SALE 2-1 2-23-98 A00480-B ARTICLE 3 - PRICE A. The Base Price of each respective Aircraft is composed of the Airframe Base Price, plus the Exhibit A's Base Price, plus the Engine Base Price in the amounts set forth below. Aircraft Airframe Exh. A Engine Base No. Base Price Base Price Base Price Price 1-24 $ $ $ $ B. The Base Price of the Aircraft shall be increased or decreased by the amounts specified in any additional SCNs not included in the Base Price and executed in accordance with Article 5 or as otherwise provided in this Agreement. C. If, prior to Aircraft delivery, the Engine manufacturer changes the Engine Base Price or if the Engine escalation formula is modified and results in change over the current escalation formula (as set forth in Exhibit D hereto), the Price shall be adjusted by the amount of the change. D. The Price of the Aircraft shall be the Base Price, first modified or adjusted in accordance with paragraphs B. and C. above, and then adjusted according to the provisions in Exhibit D. Confidential Information omitted and filed separately with the Commission. PRICE 3-1 2-23-98 A00480-B ARTICLE 4 - PAYMENT A. As the basis for determining the amount of progress payments due each Aircraft shall have an Advance Payment Price as follows: DELIVERY MONTH/YEAR ADVANCE PAYMENT PRICE ------------------- --------------------- 5/99 $ 6/99 $ 7/99 $ 8/99 $ 9/99 $ 10/99 $ 11/99 $ 12/99 $ B. The Advance Payment Price of the Aircraft shall be increased or decreased by Seller by the amounts specified by SCNs executed in accordance with Article 5. C. Buyer shall make progress payments for each Aircraft in the amount of thirty-five percent of the Advance Payment Price. As an initial progress payment, Buyer shall pay Seller five percent of the Advance Payment Price of each Aircraft concurrently with the execution of this Agreement less any payment(s) previously paid for the Aircraft. On the first day of each of the following number of full months prior to the scheduled month of delivery, as set forth in Article 6, Buyer shall pay Seller additional progress payments on each Aircraft. These payments shall equal the following indicated percentage of the Advance Payment Price of each Aircraft. Confidential Information omitted and filed separately with the Commission. PAYMENT 4-1 2-23-98 A00480-B MONTHS PRIOR TO PERCENTAGE OF SCHEDULED MONTH OF DELIVERY ADVANCE PAYMENT PRICE --------------------------- --------------------- 24 % 21 % 18 % 15 % 12 % 9 % D. Buyer shall pay Seller the balance of the Price of each Aircraft at the time of its delivery. E. Any sums payable under this Agreement which have not been paid as part of the Price of the Aircraft shall be due and payable within thirty days after Seller's invoice date. F. If Buyer fails to make any of the payments at the times and in the amounts required under this Agreement, Buyer shall pay Seller Interest on the payment from the due date until the payment is received by Seller. This shall be in addition to any other rights or remedies available to Seller. G. All payments shall be made in United States of America currency, in immediately available funds, at a depository in the United States of America to be designated by Seller. Buyer shall comply with applicable monetary and exchange control regulations in order to permit Buyer to make all payments in accordance with this Agreement. Buyer shall provide Seller with a notice of each payment by facsimile on the day funds are transferred indicating the amount of funds transferred, the depository from which the funds are transferred, the depository to which the funds are deposited, and the means of funds transfer. Such notices of payment should be addressed to Seller at facsimile number (562) 593-7682, Attention: Senior Manager - Accounts Receivable or to such other person or such other address as Seller shall designate in writing. H. Buyer shall not by virtue of anything contained in this Agreement (including, without limitation, any partial payments or progress payments or any designation or identification by Seller of particular aircraft as Aircraft) acquire a special property or insurable interest in any Aircraft prior to delivery of and payment for such Aircraft by Buyer. Confidential Information omitted and filed separately with the Commission. PAYMENT 4-2 2-23-98 A00480-B ARTICLE 5 - DETAIL SPECIFICATION CHANGES A. The Detail Specification may be changed by agreement of the parties through mutual execution of an SCN. B. The Detail Specification may be changed by Seller without Buyer's consent to incorporate development changes. Development changes shall be provided at no charge and not (i) increase the Price, (ii) delay delivery, (iii) adversely affect the performance of the Aircraft as set forth in the Detail Specification, (iv) significantly affect maintainability of the Aircraft or (v) change the interchangeability requirements of the Detail Specification. Development changes shall not be made as to items of BFE or BDE. Seller shall notify Buyer of all development changes affecting the Detail Specification by furnishing SCNs. DETAIL SPECIFICATION CHANGES 5-1 2-23-98 A00480-B ARTICLE 6 - DELIVERY A. INSPECTION AND DEMONSTRATION ---------------------------- 1. The manufacture of the Aircraft by Seller and all materials and parts procured by Seller for this purpose may be inspected by Buyer's representatives during normal business hours at Seller's Facility. If access to any part of Seller's Facility where manufacture is in progress or materials or parts are stored is restricted by governmental authorities or regulations, Seller shall be allowed a reasonable time to make the items available for inspection elsewhere. All inspections by Buyer's representative shall be made in accordance with Seller's security policies and in such a way that the manufacturing process is not hindered or delayed. Seller shall furnish, without charge, office space at Seller's Facility for a reasonable number of Buyer's representatives. Buyer shall notify Seller of the number of representatives requiring office space at least thirty days prior to date of arrival. 2. Performance data based on ground and flight tests on one or more of the early aircraft of the type purchased by Buyer shall be the basis for engineering calculations and interpretations to show the Aircraft's compliance with the Detail Specification. The results of such engineering calculations and interpretations shall be made available to Buyer upon request. 3. If flight tests are necessary because of Buyer requested special features incorporated in the Aircraft, Seller may use one or more of the Aircraft for such flight tests and Buyer will accept delivery of such Aircraft without any reduction in the Price on account of resulting wear and tear. Buyer agrees that any delay resulting from such testing shall be considered an Excusable Delay. 4. Seller may, in addition, conduct flight tests on Buyer's Aircraft with Buyer's prior consent, which consent shall not be unreasonably withheld, and Buyer will accept delivery of such Aircraft without any reduction in the Price on account of resulting wear and tear, provided that such flight tests do not cause such Aircraft to be delivered late to Buyer or adversely affect Aircraft performance. 5. Seller shall perform its standard production ground functional and flight test on the Aircraft and the results of such test shall be provided to Buyer. Buyer's representatives do not participate in or observe these flight tests. 6. Buyer's representatives, at any time prior to tender for technical acceptance of an Aircraft (as described in this Article 6), may request correction of parts or materials which (i) are not in accordance with the Detail Specification or Seller's standard engineering and quality manuals or (ii) have material or workmanship which, if the Aircraft were delivered and were within the applicable warranty period, would entitle Buyer to warranty correction under paragraph A. of Part I of Exhibit C. Buyer shall promptly notify Seller after it discovers any such nonconformance. Seller shall correct or replace (unless otherwise agreed between Buyer and Seller) all such parts, materials or workmanship which are promptly brought to its attention and mutually determined to be nonconforming. DELIVERY 6-1 2-23-98 A00480-B B. TECHNICAL ACCEPTANCE -------------------- 1. The Aircraft shall be tendered to Buyer for technical acceptance after it has been assembled, completed and tested by Seller, but no earlier than ten days prior to the first day of the scheduled month of delivery. Seller will use its best reasonable efforts to give Buyer at least 60 days notice of the date on which Seller estimates that the Aircraft will be tendered for technical acceptance and delivery. Seller will use its best reasonable efforts to give Buyer at least 45 days notice of the estimated delivery date of the Aircraft. 2. At Buyer's request, a technical acceptance procedure, including ground functional and flight test, shall be performed on the Aircraft jointly by Buyer and Seller as necessary to show compliance with the Detail Specifications and shall be conducted in accordance with Seller's standard procedures. Up to five representatives of Buyer may participate in this acceptance procedure. Seller shall not be required to provide special instrumentation for this acceptance procedure. Seller shall have complete control of all flights and shall bear all costs and expenses incident thereto. Buyer agrees to complete all inspections and testing authorized or permitted under this paragraph before the end of the fifth business day after Seller has tendered the Aircraft to Buyer. If during the five business day technical acceptance period Buyer determines and Seller agrees that there is noncompliance with the Detail Specification, the five business day period shall be suspended until (i) Seller corrects the noncompliance or (ii) the condition is resolved to the satisfaction of Buyer and Seller. During the suspension period, Buyer shall continue its inspection of areas of the Aircraft unaffected by Seller's efforts to correct the noncompliance. Upon completion of (i) or (ii) above, Buyer shall have the remainder of the period to complete its technical acceptance. Buyer shall technically accept the Aircraft if it meets the requirements of the Detail Specification. 3. Immediately upon completion of the inspection and testing noted above, indicating that the Aircraft meets the requirements of the Detail Specifications, Buyer shall indicate its technical acceptance of an Aircraft by execution of Section A of a Certificate of Technical Acceptance and Delivery for the Aircraft. Technical acceptance of the Aircraft by Buyer shall not impair the warranties set forth in Part I of Exhibit C. 4. In the event Buyer fails to complete its technical acceptance due to the fault of the Buyer within the five business day period, the Aircraft shall be deemed to have been technically accepted by Buyer at the end of the five business day period after tender as if Buyer had expressly indicated its technical acceptance as noted above. C. DELIVERY -------- 1. On the first business day after technical acceptance pursuant to paragraph B.3. or B.4. above, but no earlier than the date of issuance of an FAA Certificate of Airworthiness for the Aircraft, Buyer shall accept delivery of the Aircraft by endorsement of Section B of a Certificate of Technical Acceptance and Delivery DELIVERY 6-2 2-23-98 A00480-B for such Aircraft. Delivery shall be made at an airport in California or Arizona designated by Seller or at an alternate location as mutually agreed in writing. If, at Buyer's request, delivery is made at an alternate location, Buyer shall reimburse Seller for any increased costs incurred by Seller as a result thereof. The scheduled months of delivery of the Aircraft are as follows: SCHEDULED MONTH OF DELIVERY AIRCRAFT QUANTITY --------------------------- ----------------- May 1999 3 June 1999 3 July 1999 3 August 1999 3 September 1999 3 October 1999 3 November 1999 3 December 1999 3 2. If Buyer fails to accept delivery of an Aircraft as required in paragraph C.1. above, Buyer shall reimburse Seller for all losses, costs and expenses (including, without limitation, taxes, Interest and reasonable amounts for transportation, storage, insurance, preservation, preparation and protection) sustained by Seller after such date. Seller's acceptance of such payments shall not constitute a waiver of its rights to pursue its remedies for default or to pursue any other rights it may have at law or otherwise. 3. Upon delivery of and payment for an Aircraft, title to the Aircraft shall pass from Seller to Buyer. Seller shall furnish to Buyer a full warranty bill of sale and other appropriate documents of title as Buyer may reasonably request. D. RISK ALLOCATION --------------- SELLER HEREBY RELEASES AND AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS BUYER, ITS OFFICERS, DIRECTORS, AGENTS AND EMPLOYEES (i) FROM AND AGAINST ALL LIABILITIES, DAMAGES, LOSSES, COSTS AND EXPENSES FOR ALL INJURIES TO AND DEATHS OF PERSONS, EXCEPTING INJURIES TO AND DEATH OF BUYER'S REPRESENTATIVES PARTICIPATING IN ANY SUCH INSPECTIONS, TESTS OR FLIGHTS OF ANY AIRCRAFT PRIOR TO ITS DELIVERY AND (ii) FOR LOSS OF OR DAMAGE TO PROPERTY OF THIRD PARTIES (EXCLUDING EMPLOYEES OF BUYER OR PARTIES CLAIMING THROUGH OR BY REASON OF THE DEATH OF ANY SUCH EMPLOYEE), WHETHER OR NOT CAUSED BY BUYER'S NEGLIGENCE, ARISING OUT OF OR IN CONNECTION WITH ANY AIRCRAFT DURING ANY INSPECTION, TEST OR FLIGHT THEREOF PRIOR TO DELIVERY. BUYER HEREBY RELEASES AND AGREES TO DELIVERY 6-3 2-23-98 A00480-B DEFEND, INDEMNIFY AND HOLD HARMLESS SELLER, ITS AFFILIATES (INCLUDING THE BOEING COMPANY) AND THEIR RESPECTIVE OFFICERS, DIRECTORS, AGENTS, EMPLOYEES AND CONTRACTORS FROM AND AGAINST ALL LIABILITIES, DAMAGES, LOSSES, COSTS AND EXPENSES RESULTING FROM INJURIES TO OR DEATHS OF BUYER'S SAID REPRESENTATIVES PARTICIPATING IN SAID INSPECTIONS, TESTS OR FLIGHTS, WHETHER OR NOT CAUSED BY SELLER'S OR SUCH INDEMNITEE'S NEGLIGENCE. IN THE EVENT ANY CLAIM IS MADE OR SUIT IS BROUGHT AGAINST EITHER PARTY, THE LIABILITY FOR WHICH HAS BEEN ASSUMED HEREIN BY THE OTHER PARTY, THE PARTY AGAINST WHOM CLAIM IS MADE SHALL PROMPTLY NOTIFY THE OTHER PARTY AND THE LATTER SHALL HAVE THE RIGHT TO ASSUME AND CONDUCT THE DEFENSE THEREOF OR TO EFFECT ANY SETTLEMENT WHICH IT, IN ITS OPINION, DEEMS PROPER. DELIVERY 6-4 2-23-98 A00480-B ARTICLE 7 - EXCUSABLE DELAY A. EXCUSABILITY ------------ 1. Seller shall not be held responsible for nor be deemed to be in default of this Agreement because of delays in delivery of an Aircraft, Product or Document or delay in the performance of a Service or any other act to be performed by Seller under this Agreement (in addition to any such delays otherwise permitted herein) due to causes such as an act of God or the public enemy; civil war, insurrection or riot; war; natural disaster, fire, flood, explosion, earthquake or serious accident; epidemic or quarantine restriction; any act of government, government priority, allocation regulation or an order affecting material, labor, equipment, facilities or completed aircraft; strike, labor trouble causing cessation, slowdown or interruption of work; inability after due and timely diligence to seasonably procure material, accessories, equipment or parts or to obtain qualified labor; delay in transportation or, without limitation by enumeration of the foregoing, any other cause beyond the reasonable control of or not occasioned by the fault or negligence of Seller. 2. Seller will use its best reasonable efforts to promptly notify Buyer of any delay or anticipated delay in delivery of an Aircraft. B. LOSS, DESTRUCTION AND DAMAGE ---------------------------- 1. If prior to delivery an Aircraft is lost, destroyed or damaged beyond repair, or damaged to the extent that it can be repaired by replacement parts to a new condition but cannot be delivered in accordance with the delivery schedule set forth in this Agreement, the time reasonably required by Seller to furnish a replacement for such Aircraft or to accomplish repairs to such Aircraft, is deemed an Excusable Delay. 2. If an Aircraft is lost, destroyed or damaged beyond repair, Seller shall promptly notify Buyer. As soon as possible Seller shall notify Buyer of the earliest date that a replacement aircraft can reasonably be delivered, consistent with Seller's other contractual commitments and production capabilities. Unless Buyer notifies Seller within one month after notice of the replacement aircraft delivery date that Buyer desires a replacement aircraft, this Agreement shall be terminated as to any such Aircraft and the rights of the parties shall be determined in accordance with paragraph D. below. If Buyer timely notifies Seller that it wants a replacement aircraft, the parties shall amend this Agreement to establish its scheduled month of delivery. Notwithstanding the foregoing, nothing herein shall obligate Seller to deliver a replacement aircraft if manufacture thereof would require the reactivation of the production line for the model or series of aircraft purchased hereunder. The Base Price of the replacement aircraft shall be the same as that for the lost, destroyed or damaged beyond repair Aircraft, except such Base Price shall be adjusted in accordance with Article 3 hereof. EXCUSABLE DELAY 7-1 2-23-98 A00480-B C. INDEFINITE EXCUSABLE DELAYS --------------------------- 1. If Seller concludes, based on a continual appraisal of the available facts, that the extent of any delay in delivery of any Aircraft by reason of an Excusable Delay will exceed twelve months beyond the scheduled month of delivery, then Seller shall promptly notify Buyer concerning such delay and submit to Buyer a revised scheduled month of delivery. Either party may, by notice to the other party given within one month from receipt by Buyer of such notice from Seller, elect then to terminate this Agreement as to such delayed Aircraft and the rights of the parties shall be determined in accordance with paragraph D. below. 2. If this Agreement is not terminated as to an Aircraft pursuant to paragraph C.1. above, and if during the period of delay Seller concludes, based on its appraisal of the available facts, that the extent of delay in delivery of any Aircraft by reason of an Excusable Delay will exceed six months beyond the revised scheduled month of delivery specified in the notice provided pursuant to paragraph C.1. above, Seller shall promptly notify Buyer concerning such additional delay and submit to Buyer a revised scheduled month of delivery. Either party may, by notice to the other given within one month from receipt by Buyer of such notice from Seller, elect then to terminate this Agreement as to such delayed Aircraft and the rights of the parties shall be determined in accordance with paragraph D. below. D. In the event of termination under paragraphs B. or C. above, Seller shall repay to Buyer, without interest, the amount of the progress payments. Such termination shall discharge all obligations and liabilities of the parties with respect to such Aircraft and all undelivered Products, Services, Documents or other articles or items related to that Aircraft. EXCUSABLE DELAY 7-2 2-23-98 A00480-B ARTICLE 8 - BUYER FURNISHED OR DESIGNATED EQUIPMENT A. BUYER FURNISHED EQUIPMENT ------------------------- 1. Buyer shall furnish the BFE to Seller and Seller shall make appropriate provisions for the installation of and shall install such BFE. Seller shall advise Buyer at least 30 days in advance of the dates (as they may change from time to time due to production requirements) Seller needs BFE and its respective data. Buyer shall meet Seller's required schedule for receipt of such BFE and its respective data. The BFE data shall include a written detailed description of the dimensions and weight of such BFE and information necessary for its proper storage, installation, servicing, maintenance and operation. The BFE data shall not be subsequently revised unless agreed to by Seller and, if revised, Buyer shall be subject to adjustments in Price and delivery. 2. Buyer authorizes Seller to contact and work with Buyer's BFE suppliers for purposes of general engineering coordination, expediting shipments, adjusting schedules, performing quality control and inspection functions, and securing required BFE data. Such efforts by Seller are for the purpose of assisting Buyer and its suppliers in meeting BFE commitments and shall not relieve Buyer from Buyer's obligations set forth in this Article 8. Buyer shall make appropriate arrangements with its suppliers for Seller to contact and work with such suppliers as described above. At Seller's request, Buyer shall provide technical advisors to assist Seller in the installation, calibration, repair or replacement, if defective, of any BFE. 3. Prior to Seller providing any Documents to BFE suppliers, a proprietary information agreement must be in place between Seller and the BFE supplier. B. BUYER DESIGNATED EQUIPMENT -------------------------- 1. Alternatively, upon concurrence by Seller and subject to a handling charge equal to fifteen percent of the price of the BFE, Seller shall purchase on behalf of Buyer items of BFE as BDE. Seller shall, in accordance with its standard procurement practices, use its diligent efforts to obtain BDE at the lowest reasonable cost to Buyer. 2. Without waiving Buyer's BFE data obligations defined in paragraph A. above, Seller shall on behalf of Buyer use its diligent efforts to obtain from the BDE suppliers, by the date required, BFE data to support the BDE. At Seller's request, Buyer shall provide technical advisors to assist Seller in the installation, calibration, repair or replacement, if defective, of any BDE. C. Seller shall have no obligation to include in its provisioning data for Buyer's Aircraft information covering the repair or replacement of BFE or BDE items unless Buyer provides such data to Seller in accordance with Seller's requirements. However, if Seller has such information in its existing provisioning data files and Seller has a right to disclose that information to Buyer, such information will be included in Buyer's Aircraft provisioning data at no additional cost to Buyer. BUYER FURNISHED OR DESIGNATED EQUIPMENT 8-1 2-23-98 A00480-B D. PRICE AND PAYMENT ----------------- 1. Buyer agrees to sell and Seller agrees to purchase each item of BFE concurrently with its delivery to Seller. A reasonable shipset price for the BFE shall be established by Buyer. Buyer and Seller agree that the Price of an Aircraft will be increased by the amount of said shipset price and such amount shall be included on Seller's invoice at time of Aircraft delivery. Seller's payment for the purchase of each shipset of BFE from Buyer shall be made at the time of delivery of the Aircraft in which the BFE is installed. 2. Buyer and Seller agree that the Price of each Aircraft will be increased by the price of the BDE installed thereon plus the handling charge and such amount shall be included on Seller's invoice at time of Aircraft delivery. If Seller purchases any BDE subject to a price escalation or price adjustment feature, the Price of each Aircraft will be changed to reflect such price escalation or price adjustments. E. Buyer warrants that the BFE or BDE shall comply with all applicable FARs and U.S. Food and Drug Administration (FDA) sanitation requirements for installation and use in the Aircraft at the time of delivery. Buyer shall be responsible for supplying any data and adjusting, calibrating, retesting or updating such BFE or BDE and data to the extent necessary to obtain applicable FAA and FDA approval and shall bear the resulting expenses. Without waiving Buyer's obligation, Seller shall, as an accommodation to Buyer, obtain the Certificate of Sanitary Construction on behalf of Buyer. F. Any delay in an act to be performed by Seller caused by Buyer's failure to (i) deliver, or have delivered, BFE, (ii) ensure satisfactory operation of the BFE or BDE, (iii) furnish or obtain applicable BFE data, (iv) perform any adjusting, calibrating, retesting or updating of BFE or BDE or (v) furnish or obtain any FAA or FDA approvals in compliance with the provisions of this Article 8, shall be deemed an Excusable Delay. The Price of the Aircraft shall be increased by the amount of Seller's additional costs attributable to any such delay or failure by Buyer, including without limitation, Interest on the unpaid balance of such Price, storage, taxes, insurance and the costs of out of sequence installations. In such event, Seller shall act in good faith with Buyer to develop a course of action which will facilitate delivery of the affected aircraft at the earliest possible date. However, if Seller and Buyer are unable to so develop a mutually satisfactory course of action, in the event of such a delay and without waiving any other rights and remedies Seller may have, Seller may (i) elect to deliver the Aircraft without the installation of the unapproved, delayed or nonconforming BFE or BDE and Seller shall thereupon be relieved of all obligations to install such BFE or BDE or (ii) purchase the same or substantially equivalent equipment from any other source and install and invoice Buyer for such purchase and equitably adjust the Price of the Aircraft and any other affected provisions of the Agreement to reflect such purchase and associated retesting, adjustment and calibration. G. SUPPORT ------- 1. To properly maintain Seller's production flow and to preserve Seller's delivery commitments, Seller reserves the right, if necessary, due to equipment shortages BUYER FURNISHED OR DESIGNATED EQUIPMENT 8-2 2-23-98 A00480-B or failures, to interchange new items of BFE or BDE acquired from or for Buyer with new items of the same part numbers acquired from or for other customers of Seller, as long as such action does not affect the scheduled month of delivery of Buyer's aircraft. Used BFE acquired from Buyer or from other customers of Seller will not be interchanged. 2. For specific BFE or BDE which will, in Seller's opinion, be critical to Aircraft functional tests and or flights, and whenever other than new equipment is furnished to fulfill BFE requirements, Buyer shall, upon Seller's request, place in Seller's possession additional units of spare BFE to preclude untimely delays which can be caused by the failure of the BFE or BDE. 3. BFE shall be free and clear of all liens, encumbrances, pledges, security interests or rights of others and any used BFE shall be in good operating condition and meet Seller's requirements for installation on the Aircraft. 4. Upon any spare BFE or interchanged BFE being incorporated or installed on an Aircraft, without further act, (i) title to the removed BFE shall vest in Buyer, free and clear of all rights of Seller (ii) title to the installed BFE shall vest in Seller and (iii) the installed BFE shall become subject to the Agreement and be deemed to be part of that Aircraft for all purposes to the same extent as the BFE originally supplied for, incorporated or installed in or on the Aircraft. Prior to incorporation of the spare BFE or interchanged BFE into an Aircraft, title and risk of loss to any spare BFE or interchanged BFE shall remain in Buyer. 5. Any BFE or BDE delivered to Seller and not installed in an Aircraft shall be redelivered to Buyer by Seller at Buyer's expense and in accordance with Buyer's instructions upon or after delivery of the last Aircraft in as good a condition as when delivered to Seller, reasonable wear and tear excepted. H. If either party shall terminate this Agreement as to an Aircraft pursuant to Article 7, Seller shall, within thirty days of the date of the termination notice, advise Buyer of the items of BFE delivered to Seller prior to the date of termination notice, that Seller will continue to purchase and which items of BFE that Seller will return to Buyer. In the event Seller elects to return BFE, then Seller shall ship the BFE to Buyer within thirty days of such election and upon shipment, title to such BFE shall pass to Buyer. At the same time Seller makes its election with regard to BFE delivered to Seller prior to the notice of termination, Seller shall have the right to purchase other items of BFE that Buyer has placed on order and which have not been delivered to Seller. The price paid for BFE by Seller shall be the invoice prices paid by Buyer. BUYER FURNISHED OR DESIGNATED EQUIPMENT 8-3 2-23-98 A00480-B ARTICLE 9 - TAXES, CUSTOMS, AND DUTIES A. TAXES ----- In addition to the purchase price of the Aircraft, Buyer shall pay to Seller (for the purpose of this Article 9, Seller shall also include The Boeing Company or any wholly-owned subsidiary of either The Boeing Company or the McDonnell Douglas Corporation), upon demand, any sales or use taxes required to be paid by Seller as a result of any sale, use (by Buyer after valid tender of delivery), delivery, storage (after valid tender of delivery), or transfer under this Agreement of the Aircraft, Product, BFE, Spare Part, Service, or Document; provided, however, that Buyer shall have no liability for any penalties or interest with respect to any such taxes, or for any tax which may be levied upon any payment to Seller by Buyer for the purpose of paying such tax, arising out of Seller's fault or negligence. If claim is made against Seller for such taxes, Seller shall promptly notify Buyer. If seasonably requested by Buyer in writing, Seller shall, at Buyer's expense, take such action as Buyer may reasonably direct with respect to such asserted liability and shall not pay such tax except under protest, if protest is necessary. If payment is made, Seller shall, at Buyer's expense, take such action as Buyer may reasonably direct to recover such payment and shall, if requested, permit Buyer in Seller's name to file claim or commence an action to recover such payment. Provided that delivery is at an airport in California or Arizona designated by Seller or at an alternate location as mutually agreed in writing, Buyer shall not be liable for any sales or use taxes pursuant to the provisions of this Article 9 for which it has not been invoiced within one (1) year from the date of delivery, storage or transfer of any Aircraft, Product, BFE, Spare Part, Service, or Document to which such sales or use taxes apply. B. CUSTOMS DUTIES -------------- In addition to the purchase price of the Aircraft, Buyer shall pay to Seller on demand the amount of any United States custom duties required to be paid by Seller with respect to the importation of any items of BFE or any other Product of foreign manufacture installed in the Aircraft at Buyer's request. Seller shall use its best efforts to assist Buyer in obtaining a refund of such customs duties upon exportation of the Aircraft from the United States or in securing temporary free importation of such items under bond, to the extent permitted by law. Buyer shall reimburse Seller for any expenses and hold Seller harmless from any penalties incurred by or imposed upon Seller as a result of any action taken under this Article 9.2. C. INDEMNITY --------- The indemnity provided in this Article 9 shall not extend to any taxes imposed or assessed on Seller or any other person as a result of any financing transaction that Seller, or any affiliate of Seller, enters into with respect to the Aircraft, Product, BFE, Service or Document. TAXES, CUSTOMS, AND DUTIES 9-1 2-23-98 A00480-B ARTICLE 10 - FEDERAL AVIATION ADMINISTRATION APPROVAL A. Each Aircraft shall at the time of delivery meet the FAA requirements for airworthiness certification and be so certified under all the conditions set forth in the Detail Specification. It is further understood and agreed that, except as required by the Detail Specification, each Aircraft need not meet FAA requirements for specific operation on Buyer's routes. B. Subject to the provisions of Article 8 hereof, if any change, modification or addition to any Aircraft is required prior to delivery pursuant to any United States law or governmental regulation or interpretation thereof by a United States governmental agency in order to continue the effectiveness of the Type Certificate or meet the FAA requirements for airworthiness certification of the Aircraft as above provided, such change, addition or modification shall be made in the undelivered Aircraft affected. Seller shall bear the cost of complying with FAA airworthiness certification requirements which are required to be incorporated in the Aircraft prior to its delivery. Any delay in delivery of an Aircraft by reason of such change, addition or modification shall be deemed an Excusable Delay and the scheduled month of delivery of such Aircraft shall be adjusted to the extent of such delay. Any such change, addition or modification effective after Aircraft delivery shall be the sole responsibility of Buyer. FEDERAL AVIATION ADMINISTRATION APPROVAL 10-1 2-23-98 A00480-B ARTICLE 11 - PATENT, TRADEMARK, TRADE SECRET AND COPYRIGHT INDEMNITY A. DUTY TO DEFEND -------------- Seller will hold Buyer harmless and indemnify Buyer from any claim, suit or action which may be made or brought against Buyer, its directors, officers, agents, successors or assigns for alleged infringement or misappropriation of any United States patent, trademark, copyright or trade secret, or any foreign patent, arising out of the purchase, possession, use or lease, of a Product (a Claim), provided that: 1. Buyer gives Seller prompt notice (within ten days after service of any such suit or action or 30 days after receipt of any such claim) of any Claim and promptly furnishes to Seller copies of all papers served upon or received by Buyer relating to such Claim; and, 2. Buyer cooperates fully with Seller in the defense, including giving to Seller all data, documents and information within Buyer's possession or knowledge that is material to the defense; and 3. from the time of design of such Product and until infringement claims are resolved, the country in which such Claim is made and the flag country of the applicable Aircraft are parties to the Chicago Convention on International Civil Aviation of December 7, 1944 or the International Convention for the Protection of Industrial Property. B. INDEMNIFICATION --------------- Seller will pay all damages and costs awarded by a court as a result of a Claim, together with all interest accruing after entry of judgment or after the making of any settlement. Except for any damages, costs, expenses and loss of profit resulting from loss of use, Seller will reimburse Buyer for all reasonable expenses incurred by Buyer at Seller's written request or with Seller's written approval as the result of such Claim, provided that Buyer has complied with the conditions of this Article 11 with respect to notice and cooperation. Seller shall have the option at any time to conduct negotiation with the party making the Claim and be entitled to assume, conduct or control the defense of such suit. C. LOSS OF USE ----------- If a Product is found pursuant to paragraph 11.A.1. above, to infringe any patent, trademark or copyright or to misappropriate any trade secret and Buyer is enjoined from using it, Seller will, at its option and at its expense, either: 1. procure for Buyer the right to use it free of any liability for infringement; 2. replace it with a non-infringing substitute which otherwise complies with this Agreement and the applicable order; or PATENT, TRADEMARK, TRADE SECRET AND COPYRIGHT INDEMNITY 11-1 2-23-98 A00480-B 3. alternatively, if C1 and C2 are not feasible, repurchase the infringing Product from Buyer. D. The provisions of this Article 11 (i) applies solely to Seller Parts, (ii) regarding trademarks, copyrights and trade secrets apply to and are solely for the benefit of the first purchaser of the Aircraft (and to the first operator in the event the Aircraft are leased to the first operator) and (iii) are Buyer's sole and exclusive remedy with respect to a Claim. PATENT, TRADEMARK, TRADE SECRET AND COPYRIGHT INDEMNITY 11-2 2-23-98 A00480-B ARTICLE 12 - AIRCRAFT SUPPORT SERVICES AND WARRANTY A. WARRANTY AND SERVICE LIFE POLICY -------------------------------- Seller's Warranty and Service Life Policy are set forth in Exhibit C, Part I. B. TRAINING AND TECHNICAL SERVICES ------------------------------- Seller shall provide training and technical services, including instructional materials, in accordance with Exhibit C, Part II. C. SPARE PARTS ----------- Seller agrees to sell and Buyer agrees to purchase Products in accordance with Exhibit C, Part III. D. DOCUMENTS --------- Seller shall provide Buyer with Documents in accordance with Exhibit C, Part IV. AIRCRAFT SUPPORT SERVICES AND BUYER'S WARRANTY 12-1 2-23-98 A00480-B ARTICLE 13 - ASSIGNMENT AND TRANSFER A. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of both parties. It shall not be assigned in whole or in part by either party without the prior written consent of the other party. It may, however, be assigned without prejudice to the rights of the other party hereto against the assignor, insofar as it relates to any undelivered Aircraft, without such consent, by either party through merger, consolidation or reorganization; provided, however, that the assignee shall, at the time of assignment without such consent, be solvent and have a tangible net worth and a ratio of tangible net worth to total debt and liabilities which are not less than that of the assignor after giving effect to such merger, consolidation or reorganization. B. Buyer hereby agrees that Seller may at any time assign its right to receive money and, without Buyer's further consent, assign this Agreement, in whole or in part, to The Boeing Company or any affiliate of The Boeing Company. The assignment shall contain such assignee's commitment to perform and be responsible for any and all of Seller's obligations under this Agreement. C. Buyer represents that it is purchasing the Aircraft for use and not for resale. However, if Buyer resells, leases or otherwise transfers the Aircraft after delivery, it shall obtain from such purchaser, lessee or transferee an agreement to be bound by and comply with all relevant provisions of this Agreement (including, without limitation, the provisions contained in Exhibit C and this Article 13) and upon obtaining such agreement, a copy of which shall promptly be delivered by Buyer to Seller, Buyer shall have the right to assign to said purchaser, lessee or transferee all the rights conferred upon Buyer under this Agreement (including Exhibit C) with respect to the Aircraft resold, leased or otherwise transferred. D. At Buyer's request and expense, Seller shall take any action reasonably required for the purpose of causing any Aircraft to be subjected, at or after delivery, to an equipment trust, chattel mortgage, conditional sale, lien, assignment, or other arrangement for the financing by Buyer of the purchase of such Aircraft. No such action, however, shall subject Seller to any liability to which it would not otherwise be subject or modify in any respect Seller's contract rights or require Seller to divest itself of title to or possession of such Aircraft until delivery of and payment for such Aircraft has been made as provided in this Agreement. ASSIGNMENT AND TRANSFER 13-1 2-23-98 A00480-B ARTICLE 14 - NOTICES AND REQUESTS A. Except as otherwise expressly provided in this Agreement, all notices and requests required or authorized hereunder shall be given in writing. Notices and requests shall be submitted to the addressee noted below by personal delivery, electronic transmission with confirmation of receipt or any other customary means of communication. The date upon which any such notice or request is received by the addressee shall be deemed to be the effective date of such notice or request. Seller shall be addressed at 3855 Lakewood Boulevard, Long Beach, California 90846-0001, Attention: Contracts Department and Buyer shall be addressed at 515 N. Sixth Street, St. Louis, Mo. 63101, Attention: Vice President and Deputy General Counsel, or to such other person or such other address as the party to receive the notice or request shall designate. NOTICES AND REQUESTS 14-1 2-23-98 A00480-B ARTICLE 15 - APPLICABLE LAW, VARIANCES AND WAIVER A. This Agreement constitutes the final agreement between the parties and supersedes all previous negotiations, representations and agreements between the parties with respect to the subject matter hereof. It is the intent of the parties to establish this document as the complete and exclusive statement of the terms of the final agreement between the parties. This Agreement may be amended only as provided in Article 5 or by an instrument in writing of even or subsequent date, executed by duly authorized representatives of the parties. Any other purported amendment or modification will be null and void. B. THIS AGREEMENT WILL BE INTERPRETED UNDER AND GOVERNED BY THE LAWS OF THE STATE OF WASHINGTON, U.S.A, EXCEPT THAT WASHINGTON'S CHOICE OF LAW RULES SHALL NOT BE INVOKED FOR THE PURPOSE OF APPLYING THE LAW OF ANOTHER JURISDICTION. C. The failure of either party to enforce at any time any of the provisions of this Agreement or to require at any time performance by the other party of any of the provisions of this Agreement shall in no way be construed to be a present or future waiver of such provisions. The express waiver (whether one or more times) by either party of any provision, condition or requirement of this Agreement shall not constitute a waiver of any future obligation to comply with such provision, condition or requirement. APPLICABLE LAW, VARIANCES AND WAIVER 15-1 2-23-98 A00480-B ARTICLE 16 - NONDISCLOSURE A. This Agreement contains information which is confidential and proprietary to Seller and relates to Seller's research, development, trade secrets, products, pricing and business affairs (collectively, Confidential Information). Buyer shall protect the Confidential Information with the same degree of care it exercises to protect the confidentiality of its own confidential and proprietary information and to prevent unauthorized disclosure, use or publication thereof; provided, however, that Buyer may disclose Confidential Information to its lenders and where required by applicable law, the order of any court or governmental agency, or the rules of any applicable securities exchange. Where disclosure of Confidential Information is required pursuant to applicable law and the rules of any applicable securities exchange or pursuant to the direction of any governmental authority, Buyer agrees to notify Seller in writing of any such disclosure Buyer intends to make as far in advance of the date Buyer makes or is required to make the disclosure as is practicable and Buyer shall use its reasonable efforts to obtain assurances that confidential treatment will be accorded to the information required to be disclosed. Except as permitted herein, Buyer shall not disclose the terms of this Agreement to any other party. The obligation to treat information as Confidential Information shall not apply to any information which is publicly available, independently developed by Buyer or obtained rightfully from third parties without a duty to keep confidential. B. Buyer shall not discuss or reveal this Agreement, any proprietary or competitively sensitive information provided in connection with the transactions contemplated by this Agreement, or Confidential Information, in whole or in part, with anyone other than (i) its employees who require knowledge of such terms and conditions in the ordinary course and scope of their employment; and (ii) agents, consultants and advisors (including legal counsel, accountants and management consultants) whose assigned duties reasonably require that such disclosure be made or (iii) as provided in paragraph A. of this Article 16. In the event any disclosure is made to the parties identified in the preceding clause (ii), Buyer further agrees to inform the recipients of the confidential nature of the information and of their obligation to treat such information confidentially pursuant to this Agreement and to attach to the first page of such disclosed materials the following legend: THIS DOCUMENT CONTAINS TRADE SECRETS AND COMMERCIAL, FINANCIAL AND PROPRIETARY INFORMATION WHICH IS PRIVILEGED AND CONFIDENTIAL TO MCDONNELL DOUGLAS CORPORATION AND WHICH MAY NOT BE DISCLOSED TO ANY PERSON, GOVERNMENTAL AGENCY, COMPANY, CORPORATION OR OTHER PARTY EXCEPT AS SUCH DISCLOSURE IS REQUIRED BY LAW. NONDISCLOSURE 16-1 2-23-98 A00480-B SIGNATURE PAGE IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written by their officers or agents thereunto duly authorized. TRANS WORLD AIRLINES, INC. Signature_________________________________ Printed Name______________________________ Title_____________________________________ Witness: Signature_________________________________ Printed Name______________________________ Title_____________________________________ MCDONNELL DOUGLAS CORPORATION, A WHOLLY OWNED SUBSIDIARY OF THE BOEING COMPANY Signature_________________________________ Printed Name______________________________ Title_____________________________________ Witness: Signature_________________________________ Printed Name______________________________ Title_____________________________________ SIGNATURE PAGE 17-1 2-23-98 A00480-B EXHIBIT A - DETAIL SPECIFICATION 2-23-98 A00480-B AIRCRAFT CONFIGURATION relating to MODEL MD-83 AIRCRAFT The Detail Specification is DS8000G dated March 31, 1992 as amended by the SCN's in the Exhibit A's attached hereto, including the effects on Manufacturer's Empty Weight (MEW) and Operating Empty Weight (OEW). The Aircraft Base Price reflects and includes all effects of such SCN's, except such Aircraft Base Price does not include the price effects of any Buyer Furnished Equipment or Seller Purchased Equipment.
Exhibit A-1 -----------
SCN NUMBER AIRCRAFT SCN DATE SCN TITLE NUMBER -------- --------- ------ 7815B FINISH PER SPECIFICATION F-109-1.7 1 AND 04/30/92 (MD-80 BASELINE) SUBSEQUENT 7886A INSTALLATION OF A BUYER 1 AND 02/05/91 FURNISHED TRAFFIC ALERT SUBSEQUENT COLLISION AVOIDANCE SYSTEM COMPUTER AND ANTENNAS UTILIZING EXISTING PARTIAL PROVISIONS 8268B SELECTION OF WINDSHEAR ALERT 1 AND 09/18/96 AND GUIDANCE SYSTEM PROGRAM SUBSEQUENT OPTION 8282 EDITORIAL CHANGE TO DS 8000G TO 1 AND 08/13/92 RELOCATE THE EVM INDICATOR SUBSEQUENT SPACE PROVISIONS FROM THE FIRST OFFICERS INSTRUMENT PANEL TO THE CAPTAIN'S INSTRUMENT PANEL 8283 REVISION TO THE FUEL QUANTITY 1 AND 09/21/92 INDICATING SYSTEM SUBSEQUENT 8299 INSTALLATION OF AN ASSIST STRAP 1 AND 11/18/92 ADJACENT TO THE FORWARD SUBSEQUENT GALLEY SERVICE DOOR 8320 EDITORIAL CHANGES TO DS 8000G 1 AND 09/15/93 SUBSEQUENT 8340 REVISION TO BUYER-FURNISHED 1 AND 06/06/94 ATC TRANSPONDER PART NUMBER SUBSEQUENT 8366 EDITORIAL REVISION TO DS 8000G 1 AND 01/23/95 WEIGHT DATA (CHAPTER 13) SUBSEQUENT 8369 REVISION TO THE DETAIL 1 AND 03/13/95 SPECIFICATION TO PROVIDE SUBSEQUENT UPDATE TO THE BUYER-FURNISHED EQUIPMENT LISTING (DS 8000) 8372 DELETION OF THE LIQUID RAIN 1 AND 04/06/95 REPELLANT SYSTEM (MD-80) SUBSEQUENT 8374 REVISION TO BUYER-FURNISHED 1 AND 04/27/95 FLASHLIGHT PART NUMBER SUBSEQUENT 8383 INSTALLATION OF COMPOSITE VORTILLONS 1 AND 06/21/95 IN LIEU OF THOSE SUBSEQUENT SPECIFIED 8401 INSTALLATION OF AN ADDITIONAL 1 AND 02/19/96 TRUST REVERSER DETENT SUBSEQUENT 8422 INCORPORATION OF FINISH 1 AND 12/12/96 SPECIFICATION F-109-71.2 FOR SUBSEQUENT TRANS WORLD AIRLINES 8436 ELECTRONIC FLIGHT INSTRUMENT 1 AND 08/27/96 SYSTEM (EFIS) SELECTABLE SUBSEQUENT PROGRAM OPTION LISTING
EXHIBIT A-2 -----------
SCN NUMBER AIRCRAFT SCN DATE SCN TITLE NUMBER -------- --------- ------ 609N INSTALLATION OF DRIPLESS DIP 1 AND 04/18/79 STICKS GRADUATED IN POUNDS IN SUBSEQUENT LIEU OF INCHES (6.7 LB/GAL) 1221F INSTALLATION OF SPARE WIRES 1 AND 12/03/80 (CATEGORY I, II AND IV) SUBSEQUENT 1272E REVISION OF ENGINE START AND 1 AND 01/29/83 IGNITION TO PROVIDE A GROUND SUBSEQUENT START SAFETY FEATURE (DUAL 20 JOULE IGNITION) 3285H ADDITION OF POLYURETHANE FINISH 1 AND 08/27/79 TO LOWER FUSELAGE (COLOR TO BE SUBSEQUENT DETERMINED) 4631H REMOVAL OF RADOME EROSION 1 AND 08/13/85 PROTECTION BOOT AND SUBSEQUENT APPLICATION OF EROSION - RESISTANT COATING (CHEMGLAZE M431/M201) 5086A INSTALLATION OF REMOTE ENGINE 1 AND 08/22/79 STARTER CONTROL MECHANISM SUBSEQUENT 5505 INSTALLATION OF A HEATER AT THE 1 AND 02/16/79 POTABLE WATER TANK OVERFLOW SUBSEQUENT DRAIN PORT 6217 INSTALLATION OF WING TIP 1 AND 09/16/82 MOUNTED LOGO LIGHTS UTILIZING SUBSEQUENT EXISTING PARTIAL PROVISIONS 6702 COPPER ELECTRICAL GENERATOR 1 AND 07/12/83 FEEDER CABLES AND APU STARTER SUBSEQUENT CABLE 6742 INSTALLATION OF A FLIGHT 1 AND 09/12/83 COMPARTMENT DOOR KEY SUBSEQUENT 6873E INSTALLATION OF AIR CRUISERS 1 AND 09/14/87 EVACUATION SLIDES QUALIFIED TO SUBSEQUENT TSO C69A WITH AUTOMATIC INFLATION IN LIEU OF MANUAL INFLATION ON CABIN DOORS (MD-80) 6951 INSTALLATION OF SELF- 1 AND 09/20/84 ILLUMINATED TAILCONE SUBSEQUENT EVACUATION SLIDE IN LIEU OF EXISTING SLIDE RETAINING ILLUMINATION EXTERNAL TO SLIDE 7303L INSTALLATION OF A BUYER- 1 AND 11/21/96 FURNISHED COLLINS WEATHER SUBSEQUENT RADAR RECEIVER/TRANSMITTER AND ANTENNA IN LIEU OF THAT SPECIFIED 7317 FILLING CAVITIES OF PASSENGER 1 AND 09/30/87 SEAT TRACKS LOCATED UNDER SUBSEQUENT GALLEYS WITH GREASE FOR CORROSION PROTECTION 7345B INSTALLATION OF BUYER- 1 AND 10/28/94 FURNISHED SOLID STATE FLIGHT SUBSEQUENT COMPARTMENT VOICE RECORDER IN LIEU OF THAT SPECIFIED 8100B APPLICATION OF CROWN METRO 1 AND 02/12/92 EXTERIOR PAINT IN LIEU OF THAT SUBSEQUENT SPECIFIED 8198 INSTALLATION OF AN APU WHICH 1 AND 10/25/91 INCORPORATES SELECTED GARRETT SUBSEQUENT SERVICE BULLETINS IN LIEU OF THAT SPECIFIED 8328 APPLICATION OF AEROGLAZE M1433 1 AND 11/18/93 EROSION RESISTANT COATING ON SUBSEQUENT THE RADOME IN LIEU OF THAT SPECIFIED 8373 INCREASED COVERAGE FOR 1 AND 04/24/95 EXTERIOR GRAY POLYURETHANE SUBSEQUENT FINISH ON WINGS AND HORIZONTAL STABILIZER 8382 INSTALLATION OF BUYER- 1 AND 06/15/95 FURNISHED AMERICAN FLAG DECALS SUBSEQUENT ON THE VERTICAL STABILIZER (TWA) 8398 INSTALLATION OF PARTIAL 1 AND 01/10/96 PROVISIONS FOR DUAL GLOBAL SUBSEQUENT NAVIGATION SYSTEM ANTENNAS 8410 CATEGORY CHANGE FROM BUYER- 1 AND 04/15/97 FURNISHED EQUIPMENT (BFE) TO SUBSEQUENT SELLER-FURNISHED EQUIPMENT (SFE) 8423 INSTALLATION OF A BUYER- 1 AND 10/24/96 FURNISHED COLLINS SERIES 900 SUBSEQUENT DUAL HF SYSTEM UTILIZING EXISTING COMPLETE PROVISIONS 8425 INSTALLATION OF BFE COLLINS 1 AND 07/10/96 SERIES 900 ATC TRANSPONDERS SUBSEQUENT IN LIEU OF THAT SPECIFIED 8426 INSTALLATION OF A BFE DIGITAL 1 AND 07/10/96 FLIGHT DATA ACQUISITION UNIT IN SUBSEQUENT LIEU OF THAT SPECIFIED 8427 INSTALLATION OF BUYER- 1 AND 07/10/96 FURNISHED COLLINS SERIES 900 DME SUBSEQUENT INTERROGATOR UNITS PART NUMBER 822-0329-001, IN LIEU OF THOSE SPECIFIED 8428 INSTALLATION OF A BUYER- 1 AND 07/10/96 FURNISHED ALLIEDSIGNAL SOLID SUBSEQUENT STATE FLIGHT DATA RECORDER, PART NUMBER 980-4700-001, IN LIEU OF THAT SPECIFIED 8429 INSTALLATION OF A BFE 1 AND 11/07/96 ALLIEDSIGNAL ACARS SYSTEM WITH SUBSEQUENT ARINC 740 PRINTER 8430 INSTALLATION OF TWO BFE COLLINS 1 AND 01/10/97 SERIES 900 ADF SYSTEMS IN LIEU OF SUBSEQUENT THAT SPECIFIED 8432 INSTALLATION OF A BFE COLLINS 1 AND 12/03/96 TCAS SYSTEM SUBSEQUENT 8435 INSTALLATION OF A -926 FLIGHT 1 AND 08/19/96 MANAGEMENT COMPUTER IN LIEU SUBSEQUENT OF THAT SPECIFIED
EXHIBIT A-3 -----------
SCN NUMBER AIRCRAFT SCN DATE SCN TITLE NUMBER -------- --------- ------ TW-0142A INSTALLATION OF A 142 1 AND 04/25/97 PASSENGER MIXED CLASS SUBSEQUENT (20 FIRST CLASS AND 122 ECONOMY) INTERIOR ARRANGEMENT 51H INSTALLATION OF LIQUID 1 AND 10/17/80 SOAP DISPENSERS IN SUBSEQUENT LAVATORIES IN LIEU OF BAR SOAP DISPENSERS 5425D INSTALLATION OF A 1 AND 12/04/96 DIAPER CHANGING SHELF SUBSEQUENT IN THE AFT RIGHT LAVATORY 5830D REVISION OF DFGC 1 AND 02/15/91 WIRING TO PROVIDE SUBSEQUENT AUTOLAND WITH ONE RADIO ALTIMETER INOPERATIVE 5913 REMOVAL OF 1 AND 03/31/81 MCDONNELL DOUGLAS SUBSEQUENT CORPORATION LEGENDS AND/OR LOGOS FROM AIRCRAFT EXTERIOR 5986B REVISION OF ALTITUDE 1 AND 06/06/83 ALERT TO ENABLE AURAL SUBSEQUENT WARNING AT 750 FOOT ARMING POINT 6512B ADDITION OF AUTOLAND 1 AND 08/26/80 ROLLOUT GUIDANCE SUBSEQUENT 7301B INSTALLATION OF 1 AND 12/05/96 PARTIAL PROVISIONS FOR SUBSEQUENT THE INSTALLATION OF A SECOND ADVANCED FLIGHT MANAGEMENT COMPUTER 7771Q SELECTION OF BUYER- 1 AND 02/26/97 FURNISHED EQUIPMENT SUBSEQUENT 8386 INSTALLATION OF 1 AND 08/24/95 NUMBER ONE WINDOW SUBSEQUENT PLUGS (LH AND RH) 8393 REVISION TO BUYER- 1 AND 06/27/96 FURNISHED FLIGHT DATA SUBSEQUENT AND VOICE RECORDER SYSTEMS 8408 INSTALLATION OF A 144- 1 AND 05/09/97 PASSENGER MIXED-CLASS SUBSEQUENT INTERIOR ARRANGEMENT 8413 REMOVAL OF THE 1 AND 05/24/96 ADDITIONAL THRUST SUBSEQUENT REVERSER DETENT (DELETES THE EFFECTS OF STANDARD SCN 8401) 8417 REVISION TO THE 1 AND 10/16/96 VSI/RA/TA COLLINS SUBSEQUENT INDICATOR BFE SELECTION 8418 DELETION OF THE RAM 1 AND 06/07/96 AIR INLET ANTI-ICING SUBSEQUENT SYSTEM 8424 INSTALLATION OF A 1 AND 02/18/97 BUYER-FURNISHED VHF SUBSEQUENT COMMUNICATION SYSTEM COLLINS SERIES 900 IN LIEU OF THAT SPECIFIED AND INSTALLATION OF A THIRD VHF 8437 INSTALLATION OF 1 AND 09/24/96 GOODRICH EVACUATION SUBSEQUENT SLIDES WITH AUTOMATIC INFLATION IN LIEU OF AIR CRUISERS SPECIFIED 8438 REVISION OF ELECTRONIC 1 AND 109/01/96 FLIGHT INSTRUMENT SUBSEQUENT SYSTEM PROGRAM WIRING TO PROVIDE AN ADDITIONAL DISPLAY 8442 INSTALLATION OF THREE 1 AND 12/09/96 COLLINS VHF SUBSEQUENT TRANSCEIVERS PART NUMBER 822-1047-002 (WITH 8.33 KHZ SPACING CAPABILITY) IN LIEU OF THAT SPECIFIED 8444 INSTALLATION OF BUYER- 1 AND 05/09/97 FURNISHED PORTABLE SUBSEQUENT HALON FIRE EXTINGUISHERS, FIRST AID KITS AND MEGAPHONES IN LIEU OF THE SELLER-FURNISHED EQUIPMENT SPECIFIED 8445 INSTALLATION OF BFE 1 AND 05/09/97 MAGAZINE RACK AND BFE SUBSEQUENT LIFE VEST POUCH 8448 INSTALLATION OF A 1 AND 03/24/97 SELLER-FURNISHED SUBSEQUENT ALLIEDSIGNAL SOLID STATE FLIGHT DATA RECORDER, PART NUMBER 980-4700-034, IN LIEU OF THAT SPECIFIED 8449 INSTALLATION OF 1 AND 02/12/97 PARTIAL PROVISIONS FOR SUBSEQUENT MULTI-MODE RECEIVERS (MMR) SYSTEM 8454 INSTALLATION OF BUYER- 1 AND 03/13/97 FURNISHED CREW SUBSEQUENT PORTABLE OXYGEN CYLINDER AND CREW OXYGEN MASK IN LIEU OF THE SELLER-FURNISHED EQUIPMENT SPECIFIED 8460 INSTALLATION OF A 1 AND 04/17/97 CLASS DIVIDER WITH SUBSEQUENT OUTBOARD SUPPORT LEGS MOUNTED AT X=PLUS OR MINUS 54.50 IN LIEU OF THAT SPECIFIED 8463 REVISION TO WINDSHEAR 1 AND 05/22/97 ALERT AND GUIDANCE SUBSEQUENT SYSTEM PROGRAM PIN WIRING TO PROVIDE ALTERNATE WINDSHEAR VOICE WARNING 8465 INSTALLATION OF 1 AND 06/25/97 COLLINS DME SUBSEQUENT INTERROGATOR 822-0329-020 IN LIEU OF 822-0329-001
2-23-98 Exhibit B A00480-B EXHIBIT B - CERTIFICATE OF TECHNICAL ACCEPTANCE AND DELIVERY CERTIFICATE OF TECHNICAL ACCEPTANCE AND DELIVERY B-1 2-23-98 Exhibit B A00480-B CERTIFICATE OF TECHNICAL ACCEPTANCE AND DELIVERY Buyer: TRANS WORLD AIRLINES, INC. Seller: MCDONNELL DOUGLAS CORPORATION Purchase Agreement Number: A00480-B, dated ----------------- AIRCRAFT IDENTIFICATION - - ----------------------- Model: Buyer's Aircraft Number: Nationality and Registration Number: Factory Serial Number: Fuselage Number: SECTION A - TECHNICAL ACCEPTANCE -------------------------------- Trans World Airlines, Inc. hereby technically accepts the Aircraft and agrees that the Aircraft has been manufactured in accordance with and conforms to the requirements of Purchase Agreement No. A00480-B, as amended. TRANS WORLD AIRLINES, INC. Signature -------------------------------- Printed Name ----------------------------- Title ------------------------------------ Date ------------------------------------- CERTIFICATE OF TECHNICAL ACCEPTANCE AND DELIVERY B-2 2-23-98 Exhibit B A00480-B CERTIFICATE OF TECHNICAL ACCEPTANCE AND DELIVERY Buyer: TRANS WORLD AIRLINES, INC. Seller: MCDONNELL DOUGLAS CORPORATION Purchase Agreement Number: A00480-B, dated ----------------- AIRCRAFT IDENTIFICATION - - ----------------------- Model: MD-83 Buyer's Aircraft Number: Nationality and Registration Number: Factory Serial Number: Fuselage Number: SECTION B - DELIVERY -------------------- Trans World Airlines, Inc. hereby accepts delivery of the Aircraft at the time and place noted below and hereby waives all remedies as to the condition of the Aircraft, including the remedy of revocation of acceptance, which might otherwise arise by operation of law, excepting only those remedies provided for in Exhibit C, Part I of Purchase Agreement No. A00480-B. Trans World Airlines, Inc. certifies the Aircraft will be used by Trans World Airlines, Inc. as a certified or licensed carrier of persons or property in interstate or foreign commerce. TRANS WORLD AIRLINES, INC. Signature -------------------------------- Printed Name ----------------------------- Title ------------------------------------ Date ------------------------------------- CERTIFICATE OF TECHNICAL ACCEPTANCE AND DELIVERY B-3 2-23-98 A00480-B EXHIBIT C - AIRCRAFT SUPPORT SERVICES 2-23-98 Exhibit C A00480-B TABLE OF CONTENTS PART I - WARRANTY AND SERVICE LIFE POLICY I-1 A. Seller's Warranty I-1 B. Warranties From Other Manufacturers I-4 C. Service Life Policy I-6 D. Normal Usage I-11 E. Duplicate Protection Plan Remedies I-11 F. General I-11 PART II - TRAINING AND SERVICES II-1 A. Flight Training Program II-1 B. Maintenance and Technical Training Program II-3 C. Field Service II-8 D. Factory Service II-8 E. Maintenance Planning Assistance II-9 F. Additional Services II-10 G. Transportation and Per Diem Reimbursement II-10 H. General II-10 PART III - SPARE PARTS III-1 A. Applicability III-1 B. Term III-1 C. Buyer's Orders III-1 D. Communications III-1 E. Status Information III-1 F. Prices III-1 G. Shipment III-2 H. Payment III-2 I. Purchase of Seller's Parts III-3 J. Vendor Parts III-4 K. Provisioning III-4 L. General III-5 PART IV - AIRCRAFT MANUALS AND DOCUMENTS IV-1 A. Documents Provided IV-1 B. ATA Specifications IV-1 C. Shipment IV-1 D. Revision Service IV-1 E. List of Documents IV-2 F. Additional Copies IV-19 G. Limitation On Use of Documents IV-19 H. Warranty IV-19 AIRCRAFT SUPPORT SERVICES INDEX ii 2-23-98 Exhibit C A00480-B PART I - WARRANTY AND SERVICE LIFE POLICY This Part I contains the terms and conditions applicable to the warranty and service life policy. A. SELLER'S WARRANTY ----------------- 1. Coverage. Seller warrants that Products, at the time of -------- delivery by Seller, shall be free from: a. defects in material and workmanship; b. defects caused by Seller's installation of any article not manufactured by Seller in a manner not in accordance with the reasonable instructions of the manufacturer; c. defects arising from failure to conform to the Detail Specification, except as to portions thereof stated to be estimates or approximations or stated to be design objectives; and d. defects inherent in the design, in view of the state of the art as of the date of such design, including defects arising from Seller's selection of materials or process of manufacture. 2. Term. This warranty applies only to defects described in ---- paragraph 1. above which become apparent to Buyer within thirty-six months after delivery of each Product. 3. Repair or Replacement. Seller's liability under this --------------------- warranty for defects described in paragraphs 1.a., 1.b. and 1.c. above is limited, at Seller's election, to the repair or replacement at Seller's expense (with a similar item free from the defect in question) of any defective Product. 4. Correction of Design Defects. Seller's liability under this ---------------------------- warranty for defects described in paragraph 1.d. above is limited to correction at Seller's expense of all such defects. If such design defects become apparent and Buyer gives Seller due and timely notice within the applicable period set forth in paragraphs 11.f. and 11.g. of this Part I A. and Seller is obligated to correct such defect, Seller shall also make such correction in any Product which has not been delivered to Buyer. Seller, however, shall not be responsible nor deemed to be in default on account of any delays in performance caused by any such corrections. Also, rather than accept a delay in delivery, Buyer may elect to accept delivery and subsequently file a claim for a warranty correction as though the defect had become apparent immediately after delivery. 5. Timely Corrections. Seller, or Buyer with the approval of ------------------ Seller, shall make the repairs, replacements or corrections with reasonable care and dispatch in order that the Product involved is not out of service longer than necessary. WARRANTY AND SERVICE LIFE POLICY I-1 2-23-98 Exhibit C A00480-B 6. Seller's Approval. Within two weeks following receipt of ----------------- Buyer's notice of a defect accompanied by Buyer's request for permission to make a repair or correction, Seller shall notify Buyer of its approval or disapproval of the request. If Seller fails to give timely notice, the request shall be deemed approved. Approval under this paragraph shall not constitute a determination as to the existence of a defect, as described in paragraph 1. above. 7. Coverage. For defects described in paragraph 1. above, -------- removal and repair of the defective Product and its reinstallation shall be at Seller's expense. When temporary or interim repairs, replacements and corrections are accomplished by Buyer and not proposed or requested by Seller, Seller's liability to Buyer for removal and repair shall not exceed the cost of furnishing a permanent repair, replacement or correction. 8. Reimbursement. ------------- a. Labor. For defects described in paragraph 1. above, ----- Seller shall establish a reasonable estimate for the labor hours required for removal and reinstallation and, if performed by Buyer, repair or correction of the defective Product and will reimburse Buyer for the estimated hours or for Buyer's actual labor hours, whichever is less. Buyer's warranty labor rate shall be based upon Buyer's direct labor rate per man-hour plus a burden rate of fifty percent, subject to annual review and adjustment as mutually agreed. The amount of Buyer's warranty labor rate shall not exceed the Douglas Products Division's manufacturing direct labor rate plus a burden rate of one-hundred percent. b. Material. Seller shall reimburse Buyer for parts -------- required to effect the repair. The price paid for parts by Seller shall be the invoice prices paid by Buyer. 9. Claims Information. All warranty claims must be submitted ------------------ in writing to Seller's Warranty Administrator at Long Beach, California and shall include the following: a. the identity of the Product involved, including Seller's part number, serial number, CAGE Code, nomenclature and the quantity claimed to be defective; b. the identity of the Aircraft and ATA location from which each Product was removed; c. the date the claimed defect became apparent to Buyer; d. the total flight hours or cycles accrued on each Product at the time the claimed defect became apparent to Buyer; e. description of the claimed defect and circumstances; f. the date any repair or modification was completed; WARRANTY AND SERVICE LIFE POLICY I-2 2-23-98 Exhibit C A00480-B g. an itemized account of any direct labor hours expended in performing the repair or modification; h. an itemized account of any direct materials incorporated in any repair or modification; and i. with respect to any spare parts purchased from Seller, identification by Buyer's purchase order number and date. 10. Audit, Notification and Transportation. All warranty claims -------------------------------------- shall be subject to audit by Seller. Seller shall notify Buyer of Seller's disposition of each claim. If a warranty claim is rejected, Seller will provide an explanation for the rejection including any supporting data/documentation reasonably requested by Buyer. For defects described in paragraph 1. above, Seller shall pay all costs of transportation of the defective Product returned to and from the point on Buyer's airline route closest to Seller's Facility in Long Beach, California. 11. Limitations. Seller shall have no obligation or liability ----------- under this warranty if: a. the Aircraft was not operated or maintained in accordance with the AIRCRAFT MANUALS AND DOCUMENTS furnished Buyer pursuant to Part IV hereof unless Buyer furnishes reasonable evidence that such operation or maintenance was not a cause of the defect; b. the Aircraft was not operated under normal airline use unless Buyer furnishes reasonable evidence that such operation was not a cause of the defect; c. Buyer does not submit reasonable proof to Seller within 2 months after the defect becomes apparent that the defect is due to a matter covered within this warranty. Seller shall use reasonable efforts to approve or disapprove in writing Buyer's warranty claim within 2 months of receipt. d. Buyer does not return the defective Product to Seller's Facility, unless otherwise approved by Seller, within two months following such defect becoming apparent; e. Buyer does not report the defect in writing to Seller's Warranty Administrator and submit reasonable proof to Seller that the defect is due to a matter covered within this warranty within two months after the defect becomes apparent; or f. Buyer does not submit its claim for reimbursement within one year of the defect becoming apparent to Buyer or within a reasonable time period as mutually agreed between Buyer and Seller's Warranty Administrator. 12. Document Warranty. Seller warrants that at the time of ----------------- delivery by Seller all Documents shall be free from errors. Seller's liability under this warranty is limited to replacement of the Document with a similar Document or page thereof free from WARRANTY AND SERVICE LIFE POLICY I-3 2-23-98 Exhibit C A00480-B the error in question at no charge for up to Twenty-Four months after delivery of the Document. B. WARRANTIES FROM OTHER MANUFACTURERS ----------------------------------- 1. Warranties From Other Manufacturers. Seller has made or ----------------------------------- shall make reasonable efforts to obtain favorable warranties enforceable by Buyer from Vendors, with respect to Vendor Parts purchased by Seller and installed in the Aircraft at the time of delivery. Seller shall furnish copies of Vendor commitments to Buyer (see Product Support Supplier Agreements Manual, Exhibit C, Part IV - AIRCRAFT MANUALS AND DOCUMENTS). 2. Vendor Backstop. For those Vendor Parts installed on the --------------- Aircraft or purchased through Seller, in the event of a default by a Vendor in the performance of any material obligation under any applicable warranty obtained by Seller from such Vendor pursuant to paragraph 1. above, or in the event of a disclaimer of responsibility by such Vendor for any defect constituting a breach of such warranty and upon seasonable notice thereof to Seller, Seller will furnish the equivalent warranty terms as those provided by the defaulting Vendor. 3. Seller's Interface Commitment. At Buyer's request to ----------------------------- Seller's Warranty Administrator, Seller shall, without charge, conduct an investigation and analysis of any Interface Problem to determine, if possible, the cause of the Interface Problem and to recommend feasible corrective action. Buyer shall furnish to Seller all data and information in Buyer's possession relevant to the Interface Problem and shall cooperate with Seller in the conduct of its investigation and such tests as may be required. Seller, at the conclusion of its investigation, shall advise Buyer in writing of Seller's opinion as to the cause of the Interface Problem and Seller's recommended corrective action. If Seller determines that the interface problem stems from a Seller part, the cause of the Interface Problem shall be treated as a defect in the design of such part pursuant to Exhibit C, Part I, Paragraph A of the Agreement. Warranty claims submitted by Buyer pursuant to Exhibit C, Part I, Paragraph A of the Agreement shall be processed in accordance with and subject to all of the terms and conditions thereof. If Seller concludes that the cause of the Interface Problem is attributable to a Vendor Part, Seller shall assist Buyer in delineating claims which Buyer may assert against the Vendor, Seller will also take reasonable actions permitted by its contacts with such Vendor, in an effort to obtain a correction of the Interface Problem which is satisfactory to Buyer. If Seller determines that the Interface Problem is in part due to a Seller Part and a Vendor Part, Seller shall at the request of Buyer, attempt to correct the Interface Problem through the cooperative efforts of both Seller and the Vendor. WARRANTY AND SERVICE LIFE POLICY I-4 2-23-98 Exhibit C A00480-B 4. Engine Warranty. Seller has obtained from United --------------- Technologies Corporation, Pratt & Whitney Group, Large Commercial Engines (United) the right to extend to Buyer the provisions of United's sales warranty, attached hereto as Exhibit E. Buyer agrees that the warranty applicable to Engines installed at the time of delivery in the aircraft to be furnished under this Agreement shall be the United sales warranty; provided that Buyer may, by notice given to United prior to delivery of the Aircraft under this Agreement, elect to substitute for such sales warranty any corresponding warranty included either in a General Terms Agreement currently effective between the Buyer and United or in a contract for the sale by United to the Buyer of Engines intended for use in direct support of the Aircraft to be furnished under this Agreement. Buyer agrees that any such warranty shall be deemed to have been provided directly by United to Buyer. Buyer shall look to United and not Seller with respect to any such warranty and Seller has no obligation under such warranty and does not act as guarantor of United's warranty. In consideration of such extension, Buyer hereby releases and discharges United from any and all liabilities and obligations whatsoever arising out of the purchase or use of said installed Engines, except as expressly assumed by United in such warranty. C. SERVICE LIFE POLICY ------------------- The Policy shall apply if fleetwide or repetitive Failures occur in any Covered Component. 1. Term. Should a Failure occur in any Covered Component ---- within one-hundred forty-four months after delivery, Seller shall, at the price provided below and as promptly as practicable, either (i) design and furnish a correction for such failed Covered Component and provide any parts required for such correction (exclusive of standard parts) or (ii) furnish a replacement Covered Component. 2. Price. Any part or Covered Component which Seller is ----- required to furnish under this Policy shall be priced in accordance with the following formula: P = CT -- N where: P = Price to Buyer; C = Seller's then current Seller Part sales price; T = the total time to the nearest month during which the Covered Component has been used; and N = 144 months. WARRANTY AND SERVICE LIFE POLICY I-5 2-23-98 Exhibit C A00480-B 3. Conditions and Limitations. The following general -------------------------- conditions and limitations shall apply to the Policy: a. The transportation cost for the return, if practicable and requested by Seller, of any failed Covered Component necessary for redesigning studies shall be borne by Seller to and from the point on Buyer's airline route closest to Seller's Facility in Long Beach, California. b. Any required disassembly and reassembly of the Aircraft or landing gear, removal of the failed Covered Component and reassembly and installation of the corrected or replacement Covered Component, shall be at Buyer's expense. c. Seller's obligations under the Policy are conditioned upon the submission of reasonable proof to Seller that the Failure is covered by the Policy. d. Buyer must report a Failure in writing to Seller's Warranty Administrator within two months after any Failure becomes evident, whether or not said Failure can reasonably be expected to occur in any other aircraft. Omission to give this required notice shall excuse Seller from all obligations with respect to such Failure. e. The provisions of paragraph 11.a., 11.b. and, 11.c. of paragraph A. of Part I entitled Seller's Warranty, are incorporated by this reference and shall condition Seller's obligations under the Policy with respect to any Covered Component. f. Seller's obligations under the Policy shall not apply to any Aircraft or Covered Component which has not been correctly modified in accordance with Seller's service bulletin specifications or instructions furnished by Seller to Buyer prior to receipt by Seller from Buyer of any notice of an occurrence which constitutes, or which at a later date is shown to constitute, a Failure in a Covered Component unless Buyer furnishes reasonable evidence that such Failure was not caused by Buyer's failure to so modify the Aircraft or Covered Component. g. The Policy shall not apply for a Failure if Seller determines that the Failure may not reasonably be expected to occur on a fleetwide or repetitive basis. 4. Coverage. This Policy is neither a warranty, performance -------- guarantee nor an agreement to modify the Aircraft or Covered Component to conform to new developments in airframe and landing gear design and manufacturing art. Seller's obligation is to make only those corrections to the Covered Components or furnish replacements as provided in the Policy. 5. Covered Components. The following specific airframe ------------------ components and landing gear components are subject to the provisions of the Policy: WARRANTY AND SERVICE LIFE POLICY I-6 2-23-98 Exhibit C A00480-B a. Airframe Components (1) Pylons (a) Front engine mount yoke (b) Spars (including spar caps, webs and stiffeners) (c) Front engine mount to pylon attach fitting (d) Aft engine mount to pylon attach fitting (e) Upper and lower skin and stiffeners between spars (f) Pylon to fuselage attach angles and fittings (2) Wings (a) Front and rear spars (including spar caps, webs and stiffeners) (b) Upper and lower stringers and skin between spars (c) Landing gear bulkhead and landing gear attach fitting (d) Bulkhead at side of fuselage, including trapezoidal panel (e) Flap ribs in the wing (f) Wing to fuselage attach tee (g) Wing flap attach fittings (3) Fuselage Frames, plating, longerons and pressure bulkheads, but excluding all non-load carrying access doors. (4) Empennage (a) Vertical stabilizer spars and skin between spars (b) Aft fuselage vertical stabilizer carry-through structure (c) Horizontal stabilizer spars, integral skin and stringers between spars, and pivot fittings b. Landing Gear Components (1) Main Gear (a) Cylinder (b) Piston/axle (c) Side brace (upper and lower) (d) Fixed side brace (e) Orifice support tube (f) Torque links WARRANTY AND SERVICE LIFE POLICY I-7 2-23-98 Exhibit C A00480-B (2) Nose Gear (a) Housing (b) Piston (c) Axle (d) Orifice support tube (e) Cylinder (f) Torque links (g) Cross tube (h) Drag links (upper and lower) NOTE: The Policy does not cover any bearings, bushings, attaching hardware such as bolts, washers, clamps, brackets, or actuating or latching mechanisms, or gaskets, O-rings, or seals used in or on the Covered Components. D. NORMAL USAGE ------------ Normal wear and tear and the need for regular maintenance shall not constitute a defect or failure pursuant to Part I hereof. E. DUPLICATE PROTECTION PLAN REMEDIES ---------------------------------- It is agreed that Seller shall not be obligated to provide to Buyer any remedy which is a duplicate of any other remedy which has been provided to Buyer under Part I hereof. F. DISCLAIMER AND RELEASE, EXCLUSION OF LIABILITIES ------------------------------------------------ 1. THE WARRANTY AND SERVICE LIFE POLICY PROVIDED IN THIS EXHIBIT C, PART I AND THE OBLIGATIONS AND LIABILITIES OF SELLER UNDER SAID WARRANTY AND SERVICE LIFE POLICY ARE EXCLUSIVE AND IN LIEU OF, AND BUYER HEREBY WAIVES ALL OTHER REMEDIES, WARRANTIES, GUARANTEES OR LIABILITIES, EXPRESS OR IMPLIED, WITH RESPECT TO EACH AIRCRAFT, ARTICLE, PRODUCT, ACCESSORY, EQUIPMENT, SPARE PART, SERVICE, MANUAL, DOCUMENT, DATA,OR OTHER THING DELIVERED UNDER THIS AGREEMENT AND RELATED DOCUMENTS, ARISING BY LAW OR OTHERWISE (INCLUDING, WITHOUT LIMITATION, ANY OBLIGATION OR LIABILITY ARISING FROM NEGLIGENCE OR TORT OR WITH RESPECT TO FITNESS, MERCHANTABILITY, LOSS OF OR DAMAGE TO THE AIRCRAFT. 2. SELLER WILL HAVE NO OBLIGATION OR LIABILITY, WHETHER ARISING IN CONTRACT (INCLUDING WARRANTY), TORT, WHETHER OR NOT ARISING FROM THE NEGLIGENCE OF SELLER, OR OTHERWISE , FOR THE LOSS OF USE, REVENUE OR PROFIT, OR FOR ANY OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES WITH RESPECT TO EACH AIRCRAFT, ARTICLE, PRODUCT, ACCESSORY, EQUIPMENT, SPARE PART, SERVICE, MANUAL, DOCUMENT, DATA OR OTHER THING DELIVERED UNDER THIS AGREEMENT AND RELATED DOCUMENTS. WARRANTY AND SERVICE LIFE POLICY I-8 2-23-98 Exhibit C A00480-B 3. BUYER AND SELLER STATE AND AGREE THAT THIS PART I OF EXHIBIT C, INCLUDING BUT NOT LIMITED TO PARAGRAPH 1. ABOVE, HAS BEEN THE SUBJECT OF DISCUSSION AND NEGOTIATION AND IS FULLY UNDERSTOOD BY THE PARTIES AND THAT THE PRICE OF THE AIRCRAFT AND THE OTHER MUTUAL AGREEMENTS OF THE PARTIES SET FORTH IN THIS AGREEMENT WERE ARRIVED AT IN CONSIDERATION OF THE PROVISIONS CONTAINED IN THIS PARAGRAPH, PARAGRAPH 1. ABOVE AND THE OTHER PROVISIONS OF THIS PART I OF EXHIBIT C. 4. For the purpose of this paragraph F, "Seller" is defined as the Boeing Company, its divisions, subsidiaries, affiliates, the assigns of each, and their respective directors, officers, employees and agents. WARRANTY AND SERVICE LIFE POLICY I-9 2-23-98 Exhibit C A00480-B PART II - TRAINING AND SERVICES This Part II contains the terms and conditions applicable to the training of Buyer's flight and maintenance personnel. The training program shall consist of services and support, presented in the American English language, designed to familiarize, train and assist Buyer's personnel with the introduction of the Aircraft. Unless otherwise stated, the program shall be conducted at Seller's Facility. Any other location or additional training based on Buyer's special requirements will be subject to mutually agreeable terms and conditions including price, schedule, location and scope of training required. A. FLIGHT TRAINING PROGRAM ----------------------- 1. General. Seller reserves the right to rotate instructors ------- every four weeks when training is conducted away from Seller's Facility. Instructor services, when utilized away from Seller's Facility, are counted in full days (eight hours equals one full day) on a portal to portal basis. Buyer's personnel shall be qualified and have experience in Commercial Transport Class (Group II) Turbo Jet Aircraft as defined in FAR Part 121.400. 2. Training Conference. Buyer and Seller shall schedule a ------------------- flight training conference at Seller's Facility no less than twelve months prior to delivery of the first Aircraft. This conference will establish a training plan and schedule including the elements in this paragraph A. and will establish any additional training or special requirements beyond the scope of this paragraph A. The terms and conditions applicable to such additional training or special requirements will be the subject of a separate agreement. 3. Classroom Training. Seller shall conduct the following ------------------ classroom instruction: a. Flight Crew Ground Training Course - Provide customized FAA approved operational courses, up to fifteen days in duration, for six of Buyer's Flight Crews. This course shall consist of classroom instruction supplemented by the use of ground training devices. The course objective is to train Buyer's personnel to be proficient to operate the Aircraft systems and to advance to the flight training phase of paragraph A.4. This course will normally be conducted during the four month period prior to delivery of the first Aircraft. Seller shall furnish to each of Buyer's personnel participating in this course one copy of the Flight Crew Operating Manual (without revision service). b. Flight Crew Ground Training Instructor Course - This course of up to nineteen business days duration, for up to four of Buyer's ground training personnel, consists of the Flight Crew Ground Training Course plus additional in-depth Aircraft Systems information. c. Flight Attendant Course - A familiarization course of up to three days duration shall be conducted for up to twenty of Buyer's flight attendant personnel. This course shall present general information on the Aircraft and detailed information on the operation of the cabin equipment and emergency TRAINING AND SERVICES II-1 2-23-98 Exhibit C A00480-B equipment. Seller shall furnish for each participant in this course one copy of the Flight Attendant Manual (without revision service). Five instructor days plus travel time shall be available to assist Buyer's personnel at Buyer's facility to conduct hands-on training on the first delivered Aircraft. d. Flight Dispatcher Course - A course of up to five days duration shall be conducted for up to ten of Buyer's flight dispatcher personnel. The course consists of classroom instruction covering general aircraft familiarization plus detailed coverage of aircraft performance, flight planning, weight and balance calculation and the Master Minimum Equipment List. Seller shall furnish for each participant in this course one copy of the Flight Crew Operating Manual (without revision service). e. Course Material - If utilized in the course, Seller shall furnish one set of the following materials (without revision service) used to conduct the Flight Crew Ground Training Course, Flight Attendant Course and Flight Dispatcher Course as applicable: (1) 35mm slides (2) Instructional narrative or instruction guides (3) Overhead projection transparencies (4) Video tapes (5) Audio cassette tapes (6) Computer based courseware in the Seller's format (7) Cockpit panel prints (two sets unmounted) f. Customization of Courses - The Flight Crew Ground Training Course, Flight Crew Ground Training Instructor Course, Flight Attendant Course and the Flight Dispatcher Course will be designed to reasonably reflect the configuration of the Aircraft and Seller's standard operating procedures. 4. Flight Crew Flight Training. Seller will train Buyer's --------------------------- Flight Crews with a flight training syllabus which meets the performance standards of the FAA pilot type rating. Any additional training beyond the level established by the syllabus to achieve the desired proficiency will be subject to mutually agreeable terms and conditions. Seller shall provide qualified instructors to conduct the flight training program for a total of one-hundred-thirty calendar days. These days may be utilized in a combination of the following types of flight training support: a. Flight Crew Simulator Training - Seller shall use reasonable efforts to schedule time in a FAA approved flight simulator for the training outlined in Seller's flight training syllabus. Costs of simulator rental shall be borne by Buyer. b. Aircraft Ferry - Upon request, Seller shall provide qualified flight personnel to assist Buyer in ferrying Aircraft to Buyer's main base. TRAINING AND SERVICES II-2 2-23-98 Exhibit C A00480-B c. Flight Crew Aircraft Training - If required, Seller shall conduct a program of aircraft flight training utilizing Buyer's Aircraft at a mutually agreed location commencing with the delivery of the first Aircraft. Seller's responsibility is limited to instructor service only. d. Line Training - Upon request, Seller shall provide flight personnel to assist the Buyer in achieving initial operating experience. Processing of any special licenses permits or other documentation required for the Seller's flight personnel to provide this service shall be the responsibility of the Buyer. 5. Time Limit. Seller's obligation to provide flight training ---------- shall cease twelve months following delivery of the first Aircraft. 6. Revisits. Subject to separate contractual negotiation, -------- operational assistance will be provided on a periodic basis in the form of revisits by Seller's flight operations personnel. 7. Recurrent Flight Crew Training. Subject to separate ------------------------------ contractual negotiation, Seller will provide a FAA approved program of flight crew recurrent training customized in content and frequency to meet the recurrent training requirements of Buyer's flight crews. B. MAINTENANCE AND TECHNICAL TRAINING PROGRAM 1. General. The maintenance training program shall consist of ------- factory and field training, including training aids and materials. 2. Training Conference. Buyer and Seller shall schedule a ------------------- maintenance training conference at Seller's Facility, on a mutually agreed to date, approximately twelve months prior to first Aircraft delivery. This conference will establish a maintenance training plan including the scheduling and content of all elements in this paragraph B. The scope and depth of the individual courses defined in the plan will be based on Seller's standard course syllabi. 3. Seller's Instructor Time. Seller shall provide instructor ------------------------ time, for a combination of factory and field training up to thirty-four man-weeks. 4. Factory Training. The following factory training will be ---------------- furnished at Seller's Facility: a. Executive General Familiarization Course - This course is in general accordance with ATA Specification 104, Level I and is designed for Buyer's management, or other support personnel, who are generally familiar with modern jet aircraft. A brief overview of the airframe, powerplant, electrical and avionic related systems shall be presented. b. General Familiarization Course - This course is in general accordance with ATA Specification 104, Level I and is designed for Buyer's management, or TRAINING AND SERVICES II-3 2-23-98 Exhibit C A00480-B other support personnel, familiar with modern jet aircraft. It includes a brief overview of the airframe, powerplant, electrical and avionic related systems. Additionally, it may provide limited information of technical data, specifications, special tools, test equipment, maintenance practices, safety precautions and procedures peculiar or unique to the Aircraft. c. Ramp and Transit Maintenance Course - This course is in general accordance with ATA Specification 104, Level II and is designed as basic systems training for Buyer's management, planning, technical publications and maintenance personnel who are licensed, certified or otherwise approved, with experience in through-flight activities and servicing practices. In addition to the information contained in the General Familiarization Course, task oriented information will be provided concerning identification and location of systems and components, system operation, control and indication, minor troubleshooting, normal ground handling and systems servicing. d. Airframe and Powerplant Line and Base Maintenance Course - This course is in general accordance with ATA Specification 104, Level III and is designed as advanced systems training for Buyer's line and hangar maintenance personnel, instructors, technical specialists, quality assurance inspectors and engineers. The course material is principally mechanical, with electrical information presented for overall system comprehension. Personnel attending this course must have the knowledge and experience required to hold current licenses under International Civil Aviation Organization (ICAO) standards. Additional task oriented emphasis is placed on detailed system description and operation, in-depth troubleshooting, component identification and location, removal and installation techniques, limited adjustment and rigging and test procedures. e. Electrical and Avionics Line and Base Maintenance Course - This course is designed as advanced systems training for line and hangar maintenance personnel, instructors, technical specialists, quality assurance inspectors and engineers. The course material is principally electrical and avionics, with mechanical information presented for overall system comprehension, and is in general accordance with ATA Specification 104, Level III. Personnel attending this course must have the knowledge and experience required to hold current licenses under International Civil Aviation Organization (ICAO) standards. Additional task oriented emphasis is placed on detailed system description and operation, in-depth troubleshooting, component identification and location, removal and installation techniques, limited adjustment and rigging and test procedures. f. Specialized Courses - Specialized courses are designed as task oriented specialized training for Buyer's base and heavy maintenance personnel, instructors, technical specialists, quality assurance inspectors and engineers, and is in general accordance with ATA Specification 104, Level IV. Buyer's personnel attending these courses, as defined by subject matter, must have considerable field experience. Courses will review pertinent material and TRAINING AND SERVICES II-4 2-23-98 Exhibit C A00480-B present detailed specific instruction on troubleshooting, repair, adjustment, rigging and test procedures. Emphasis is placed on use of maintenance and repair manuals, wiring diagrams, schematics, engineering data and process and material standards, where applicable. Prerequisites for students attending specialized course will be coordinated by the Buyer and Seller's maintenance training personnel. 5. Field Training. Seller shall provide the services of a -------------- field instructor team, consisting of no more than four instructors, at Buyer's designated base(s) of operation. The field instructors will provide assistance as mutually agreed upon to Buyer's maintenance and training personnel, including classroom and on-the-job training, consultation and monitoring assistance, and engine shop Quick Engine Change (QEC) build-up assistance for one engine change. Seller reserves the right to rotate instructors as required. The field training shall not exceed a total of nineteen instructor weeks. The field training weeks available to Buyer shall be a portion of, and not in addition to, Seller's instructor time set forth above. Field training is in general accordance with ATA Specification 104, Levels I through IV. 6. Vendor Training. Seller will use reasonable efforts, if --------------- requested by Buyer, to obtain an agreement with its Vendors to make maintenance training available as required, in general accordance with ATA Specification 104, Level V. 7. Training Aids and Materials. If utilized in the course, --------------------------- Seller shall furnish copies of the following training aids and materials used to conduct Seller's standard training courses which are in general accordance with ATA Specification 104, Levels I through III, to assist Buyer in establishing a maintenance training program at Buyer's training facility. Revision service shall be provided for only those materials described in paragraphs 7.a.(1), 7.a.(2) and 7.b. below. Revision service shall be provided for one year after delivery of the first Aircraft. a. Audio Visual Aids (1) Overhead Projection Transparencies - One each of all appropriate 81/2" x 11" transparencies (in teaching sequence) used in Seller's baseline training courses will be provided. (2) 35mm Slides - One each of the appropriate slides (in teaching sequence) and a reproducible half tone master as used in Seller's baseline training program shall be furnished. (3) Video Tapes - One copy each of all applicable color sound video tapes specially designed, developed and utilized in support of the baseline training courses will be provided. (4) Wall Charts (black line) - One set of all wall charts used in the factory training program will be provided. These charts will depict cockpit and instrument panel configuration and arrangement. TRAINING AND SERVICES II-5 2-23-98 Exhibit C A00480-B b. Student Manuals - Buyer's personnel attending factory training courses shall receive corresponding paper copies of appropriate media with respective narrative. c. Component and Equipment Location List - Buyer's personnel attending Seller's standard courses shall receive one copy of the Component and Equipment Location List. d. Study Guides - up to twenty five copies of the system description and operation section of the Maintenance Manual, or equivalent information, for Buyer's Aircraft will be provided. e. Course Completion Records - Each student attending a Level II or higher course shall be measured to demonstrate competence and if qualified shall be provided a course completion certificate. Seller shall furnish Buyer with appropriate student records. 8. Time Limit. Seller shall not be obligated to provide ---------- maintenance training after twelve months following delivery of the first Aircraft. C. FIELD SERVICE ------------- 1. Seller shall assign one service representative to Buyer's main base of operation or other location as mutually agreed. Such assignment shall commence approximately one month prior to the scheduled delivery of the first Aircraft and shall continue for one year after delivery of the last Aircraft. 2. Buyer shall furnish, at no charge to Seller, suitable office facilities and furnishings, secretarial services, and equipment and conveniently located to Buyer's maintenance facilities for accommodation of such field service representative. D. FACTORY SERVICE --------------- Seller agrees to maintain the capability to respond to Buyer's technical inquiries, to conduct investigations concerning repetitive maintenance problems and the issuance of findings and recommended action. This service shall be provided for as long as ten of the aircraft of the type purchased hereunder remain in regularly scheduled commercial air transport service. Any investigations which Seller deems to be extensive and requires more than routine effort by Seller's personnel shall be the subject of separate contractual negotiations. E. MAINTENANCE PLANNING ASSISTANCE ------------------------------- 1. Maintenance Requirements. Seller shall provide technical ------------------------ assistance for Buyer's use in planning Aircraft maintenance requirements. 2. Maintenance Engineering Data. Seller shall provide ---------------------------- maintenance engineering data as set forth in Part IV of this Exhibit C. TRAINING AND SERVICES II-6 2-23-98 Exhibit C A00480-B 3. Ground Support Equipment Planning. Seller shall recommend --------------------------------- ground support equipment necessary for operation of the Aircraft and shall provide a summary of ground support equipment suitable for use in maintenance and servicing. 4. Maintenance Engineering Operations Review. Seller shall, at ----------------------------------------- Buyer's request, conduct a maintenance engineering operations review at Buyer's facility which consists of assistance to analyze Buyer's then current maintenance and engineering operational requirements, reliability and maintenance specifications, maintenance cost and reliability accounting practices. The object of such review is to improve the interactions of operations, engineering, maintenance and logistics for improved operational effectiveness. Seller will provide the findings and recommendations in a report to Buyer. This service will be available until three years after delivery of the last Aircraft. 5. Maintenance Reliability Program Progression. Buyer agrees ------------------------------------------- to provide Seller in-service maintenance data for the Aircraft. Seller shall analyze the data together with airline industry experience in order to provide updates to Seller's Recommended On-Aircraft Maintenance Planning (OAMP) Report. Buyer and Seller shall agree on standards and frequency for communication of such data. F. ADDITIONAL SERVICES ------------------- Seller shall provide additional services which may include training, special investigations and maintenance and repair of the Aircraft, subject to mutually agreeable terms and conditions. G. TRANSPORTATION AND PER DIEM REIMBURSEMENT ----------------------------------------- 1. With respect to all services and support provided by Seller away from Seller's Facility specified in this Part II, Buyer shall reimburse Seller for confirmed round trip air transportation (Business or First Class, as available, on international flights) for Seller's personnel. 2. Buyer shall reimburse Seller, at Seller's then current rate of per diem, for each day Seller's personnel are away from Seller's Facility for all services and support provided in this Part II. Per diem is not applicable to Seller's field service representatives at Buyer's main base of operation or other location assigned and mutually agreed to pursuant to paragraph C. of this Part II. H. RISK ALLOCATION AND INSURANCE ----------------------------- 1. Buyer agrees the quality and reliability of Seller's services provided under this Part II will be based upon the quality and reliability of the relevant data and information received from Buyer. 2. BUYER HEREBY RELEASES AND AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS SELLER, ITS AFFILIATES (INCLUDING THE BOEING COMPANY AND AFFILIATES OF THE BOEING COMPANY), THEIR TRAINING AND SERVICES II-7 2-23-98 Exhibit C A00480-B SUBSIDIARIES AND VENDORS, AND THE EMPLOYEES, DIRECTORS, OFFICERS, AGENTS AND SUBCONTRACTORS OF EACH OF THEM, FROM AND AGAINST ALL LIABILITIES, CLAIMS, DAMAGES, LOSSES, COSTS AND EXPENSES FOR ALL INJURIES TO OR DEATH OF ANY AND ALL PERSONS (INCLUDING BUYER'S OFFICERS, AGENTS AND EMPLOYEES UTILIZING SUCH SERVICES AND SUPPORT BUT EXCLUDING EMPLOYEES OF SELLER) AND FOR LOSS OF OR DAMAGE TO PROPERTY, INCLUDING THE AIRCRAFT AND LOSS OF USE THEREOF, ARISING DIRECTLY OR INDIRECTLY OUT OF OR IN CONNECTION WITH ALL TRAINING, SERVICES AND SUPPORT PROVIDED UNDER OR IN CONNECTION WITH THIS AGREEMENT, WHETHER OR NOT CAUSED BY THE NEGLIGENCE OF SELLER, ITS SUBSIDIARIES OR VENDORS, OR THE EMPLOYEES, DIRECTORS, OFFICERS, AGENTS OR SUBCONTRACTORS OF ANY OF THEM. IN PROVIDING SUCH SERVICES AND SUPPORT, SELLER, ITS AFFILIATES (INCLUDING THE BOEING COMPANY AND AFFILIATES OF THE BOEING COMPANY), THEIR SUBSIDIARIES AND VENDORS AND THEIR REPRESENTATIVES ARE DEEMED TO BE ACTING IN AN ADVISORY CAPACITY ONLY AND AT NO TIME SHALL THEY BE DEEMED TO ACT AS EMPLOYEES OR AGENTS OF BUYER EITHER DIRECTLY OR INDIRECTLY. 3. Buyer agrees to name Seller, its employees, subsidiaries and affiliates (including The Boeing Company and affiliates of The Boeing Company) and their assigns as an additional insured under Buyer's aviation liability insurance policies with respect to Buyer's obligations set forth in paragraph 2. above. In addition, Buyer shall cause the insurance carriers under Buyer's hull insurance policies to waive all rights of subrogation against Seller to the extent of Buyer's obligations set forth in paragraph 2. above. 4. One hundred twenty days prior to the scheduled month of delivery of Buyer's Aircraft, Buyer shall provide Seller certificates of insurance evidencing (i) Seller being named as an additional insured, (ii) limits of liability coverage of $ ; (iii) subrogation has been waived and (iv) the term of the insurance. Buyer's insurance shall be primary and not contributory with any insurance maintained by Seller. The certificates of insurance shall be kept current. [FN] Confidential Information omitted and filed separately with the Commission. TRAINING AND SERVICES II-8 2-23-98 Exhibit C A00480-B PART III - SPARE PARTS This Part III contains the terms and conditions applicable to the sale of Spare Parts. A. APPLICABILITY ------------- The terms and conditions of this Part III apply to all orders for Spare Parts placed by Buyer with Seller by any method of order placement (including but not limited to SITA, ARINC, Seller's Customer On-Line Order Processing (CO-OP) System, Internet, commercial telex, telephone or other telecommunication system or hard copy purchase order). Any terms or conditions in Buyer's purchase orders shall not apply. B. TERM ---- As long as at least ten aircraft of the type purchased hereunder are operated in scheduled commercial air transport service, Seller shall maintain, or have maintained, a reasonable stock of Seller Parts. C. BUYER'S ORDERS -------------- Buyer agrees that orders for Spare Parts placed with Seller shall conform to the requirements and procedures contained in ATA Specification 200 and Specification 2000. D. COMMUNICATIONS -------------- Seller shall make available its on-line order processing system through SITA, ARINC or direct communication lines which provide immediate response to inquiries for stock availability, pricing information and purchase order status. The cost for direct communication lines shall be borne by Buyer. For AOG and critical orders automatic messages will be transmitted giving shipping data such as bill of lading, flight, routing, size and weight of shipments. E. STATUS INFORMATION ------------------ Seller agrees that information about purchase order status and actions related to the shipment of Spare Parts shall be generally consistent with the provisions of the World Airline and Suppliers Guide and the applicable portions of ATA Specification 200 and Specification 2000. F. PRICES ------ Prices shall be published in the procurement data defined in ATA Specification 200, Chapter 3 or Specification 2000, Chapter 2. Seller shall also issue a price catalog for certain Seller Parts which shall be extracted from this procurement data. Seller shall hold published prices firm for twelve month intervals and shall provide at least ninety days notice prior to increasing a published price. Seller reserves the right to correct errors in said catalog. Also, Seller shall use reasonable efforts to require its SPARE PARTS III-1 2-23-98 Exhibit C A00480-B major Vendors to maintain any published price for their Vendor Parts for at least twelve month intervals with at least ninety days notice prior to changing a published price. If Buyer orders Vendor Parts from Seller, Seller's Vendor Parts prices for Initial Provisioning Orders shall be the airline acquisition price plus fifteen percent. Seller's Vendor Parts prices for replenishment orders shall be the airline acquisition price plus twenty percent. G. SHIPMENT -------- Delivery of Spare Parts ordered from Seller will be F.O.B. point of shipment. Seller assumes no liability for loss of or damage to any Spare Part during shipment. Seller agrees that shipment of Spare Parts to Buyer shall be made as follows: 1. Packaging. Seller shall generally comply with ATA --------- Specification 300, Revision 17. 2. AOG Orders. Seller shall use reasonable efforts to ship AOG ---------- orders within four hours of receipt of order. If a Spare Part must be removed from a production aircraft or procured from another source by Seller, a firm shipping schedule or status will be transmitted within four hours after receipt of Buyer's order. Buyer's affected aircraft factory serial number is required on AOG orders. 3. Critical Orders. Seller shall use reasonable efforts to --------------- ship critical orders within twenty-four hours of order receipt. 4. Expedite Orders. Seller shall use reasonable efforts to --------------- ship expedite orders within seven days of order receipt. 5. Initial Provisioning Orders. Seller shall use reasonable --------------------------- efforts to ship initial provisioning orders placed with Seller prior to delivery of the first Aircraft or as mutually agreed. 6. Other Orders. Seller Parts normally carried in Seller's ------------ inventory shall be shipped approximately ten days after Seller's receipt of Buyer's order. Shipment of non-stock Seller Parts shall be in accordance with quoted lead-times or lead-times published in the current price catalog, procurement data, or provisioning data. Spare Vendor parts shall be delivered per the Vendor's quoted lead-time plus Seller's internal processing time. H. PAYMENT ------- Payment terms shall be net thirty days of invoice date. In the absence of an established open account or an order exceeding the credit limit established by Seller, Seller may require full or partial payment prior to shipment of Spare Parts. If Buyer fails to make any of the payments within the stipulated time period, Buyer shall pay Interest on the payment from the date due until payment is received. The payment of Interest shall be in addition to any other rights or remedies available to Seller. SPARE PARTS III-2 2-23-98 Exhibit C A00480-B I. PURCHASE OF SELLER'S PARTS -------------------------- 1. In consideration of Seller's obligations to provide Seller Parts for as long as at least ten aircraft of the type purchased hereunder are operated in scheduled commercial air transport service, Buyer agrees to purchase Seller Parts only from (i) Seller, (ii) Seller's authorized licensees, (iii) designated sources identified in Seller's spare parts catalog or (iv) from airline operators of the same type aircraft purchased herein which parts were originally purchased from Seller. Buyer may purchase Seller Parts from other sources, redesign Seller Parts or have them redesigned, manufacture Seller Parts or have Seller Parts manufactured only under the following conditions: a. when less than ten aircraft of the type purchased hereunder are operated in scheduled commercial air transport service; b. any time Seller fails to fulfill its obligations under paragraph B.; c. any time Seller Parts are needed to effect emergency repairs on the Aircraft, provided that Buyer, after consulting with Seller, in good faith determines that Seller is unable to comply within a reasonable time to resolve the emergency; d. if Buyer has notified Seller in writing that any Seller Part is defective or unsatisfactory in use and if within a reasonable period Seller has not provided a satisfactory resolution or made a redesigned Seller Part available; 2. Any parts redesigned or manufactured by or for Buyer under paragraph I. of this Part III shall be identified and distinguished from Sellers Parts by distinctive and permanent markings on all said parts, in conformance with FAA regulations, to confirm that said parts are the product of Buyer and not Seller. Buyer shall at all times comply with the FAA regulations, or the foreign equivalent thereof in each country in which the Buyer operates its Aircraft, as the said regulations apply to the purchase, manufacture, redesign, and use of such parts. 3. Buyer's right to purchase, redesign or manufacture Seller Parts under the preceding conditions shall not be construed as a granting of a license by Seller, shall not obligate Seller to the payment of any license, royalty or obligation and shall not be construed to affect the rights of third parties. 4. If Buyer redesigns or has redesigned any Seller Parts pursuant to the foregoing conditions, Buyer, if Buyer has the right, shall make available to Seller any such redesigned Seller Parts or drawings. Also, if Seller requests, Buyer shall negotiate with Seller, within sixty days after such redesigned Seller Parts or drawings are available to Seller, for the exclusive manufacturing rights of the redesigned Seller Parts. If no agreement is made for such rights within the sixty days, Buyer or its licensees may manufacture, use and sell (provided it is in compliance with all regulatory requirements) such redesigned Seller Parts and Seller shall have the nonexclusive right of manufacture, use and sale of the redesigned Seller Parts, except as may be covered by patents or by the laws of the country where the SPARE PARTS III-3 2-23-98 Exhibit C A00480-B redesigned Seller Parts have been manufactured. Seller shall have the nonexclusive right of manufacture, use and sale of the redesigned Seller Parts if Buyer can grant such rights. Seller shall not be obligated to pay any royalty or license fee to Buyer for the nonexclusive right. J. VENDOR PARTS ------------ Buyer is responsible for complying with the requirements of Buyer's regulatory authority. Seller, as holder of the type certificate and production certificate for the Aircraft, has regulatory approval to sell aircraft replacement parts for the Aircraft directly to Buyer; however, Seller's Vendors may not have such approval. While Seller is not obligated to maintain a stock of Vendor parts, Seller may have certain Vendor Parts in stock for Buyer's purchase.If a Vendor has not obtained regulatory approval for a Vendor Part, then Buyer should purchase such part from Seller. K. PROVISIONING ------------ 1. If requested by Buyer, preprovisioning and provisioning conferences shall be convened at Seller's Facility on dates mutually agreed to by Buyer's and Seller's provisioning personnel in order to: a. acquaint Buyer with Seller's provisioning system and available data; b. plan the provisioning program; c. establish Buyer's data familiarization and training requirements; and d. assist Buyer in the Spare Parts selection process. 2. Initial provisioning spares support shall be provided by Seller as follows: a. Seller shall provide the initial issue of provisioning files required by ATA Specification 200, Revision 24, Chapters 1 and 2 or Specification 2000, Chapter 1, Revision 1, (as amended by MDC Document K0064) no later than nine months prior to the scheduled delivery of the first Aircraft. Revisions to these provisioning data shall be issued by Seller every forty-five days until ninety days after delivery of the last Aircraft. b. For provisioning under Specification 2000, Chapter 1, Revision 1, Seller shall provide all S, T, or V and ancillary or supplementary files U, W, X, Y and Z. For provisioning under Chapters 1 and 2 of ATA Specification 200, Seller shall provide only K, F, B and D files. c. The Illustrated Parts Catalog (IPC) designed to support provisioning shall be issued with provisioning data files and revised at forty-five day intervals up to ninety days after delivery of the last Aircraft. SPARE PARTS III-4 2-23-98 Exhibit C A00480-B d. The Illustrated Parts List designed to support provisioning shall be issued concurrently with Buyer's submittal of the T file defined in Chapter 1, Revision 1 of Specification 2000. L. GENERAL 1. Quotations. Price and delivery quotations for Seller's ---------- noncatalog listed Seller Parts shall be held firm for ninety days, except where otherwise noted on the quote provided for such items as surplus material. 2. Lease of Seller Parts. Seller agrees to lease on an interim --------------------- basis certain insurance type Seller Parts under Seller's then current standard terms and conditions. 3. Warranty. Seller Parts purchased or furnished under this -------- Agreement shall be covered by the warranty provisions and the terms and conditions set forth in Part I of this Exhibit C. 4. Seller Services. Buyer agrees that the quality and --------------- reliability of Seller Services provided under this Part III shall be based upon the quality and reliability of the data and information received from Buyer. 5. Additional Terms and Conditions. Buyer agrees that those ------------------------------- terms and conditions of this Agreement applicable to the sale of Spare Parts shall be effective during the term of this Part III. SPARE PARTS III-5 2-23-98 Exhibit C A00480-B PART IV - AIRCRAFT MANUALS AND DOCUMENTS This Part IV contains the terms and conditions applicable to furnishing the Documents. DOCUMENTS PROVIDED - - ------------------ Seller (hereinafter in this Part IV to Exhibit C "MDC") shall furnish the Documents described in Part IV, paragraph E. Unless otherwise specified herein, such Documents shall be furnished in the quantities specified by MDC at no additional cost to Buyer. Additional copies of the Documents shall be made available at MDC's then current published prices. Such Documents are intended to provide pertinent information only on items manufactured according to MDC's proprietary design. Such Documents shall be prepared in the American English language and in those units of measure specified in the Detail Specification and as may otherwise be required to reflect the Aircraft instrumentation. ATA SPECIFICATIONS - - ------------------ Unless otherwise noted, all Documents specified in this Part IV are prepared in general accordance with ATA Specification 100, Revision 18, or later as MDC may adopt. All other Documents shall be provided to MDC's existing commercial practices. SHIPMENT - - -------- All Documents provided under this Part IV shall be shipped surface F.O.B. shipping point to Buyer's designated point in the continental United States of America. REVISION SERVICE - - ---------------- Where revision service has been identified as applicable to a Document in paragraph E. of this Part IV, such revision service shall be provided for six months following delivery of the last Aircraft, unless otherwise indicated in paragraph E. Subsequent revision service may be purchased at the then current prices specified in the Services and Support Catalog. LIST OF DOCUMENTS - - ----------------- The following identifies Documents to be provided in support of the Aircraft. The explanation of the table is as follows: Aircraft Manuals and Documents IV-1 2-23-98 Exhibit C A00480-B COLUMN HEADING EXPLANATION OF CODE - - -------------- ------------------- 1 DOCUMENT Title of Document provided. 2 CONFIG Configuration: A = Contains data common to all DC-9 and MD-80 aircraft. B = Contains data tailored to specific MD-80 aircraft model, series or engine type. C = Contains data configured to Buyer's Aircraft. D = Contains data common to MD-80 aircraft. E = Contains data common to all DC-9, MD-80, MD-90, and MD-95 aircraft. 3 MEDIUM Buyer has selected one of the following optional media specified in the table. 1 = Paper 2 = Microfilm Diazo 3 = Microfilm Silver Negative 4 = Aperture Cards 5 = Magnetic Media 6 = EDP Printout [FN] = See REMARKS Column 4 REV Revision: Y = Scheduled Revision Service Applies N = Revision Service Not Applicable S = Revised as Required by MDC [FN] = See REMARKS Column 5 QTY Quantity: (Number) = Quantity per this Agreement (Number) PER = Quantity per Aircraft [FN] = See REMARKS Column 6 DEL Delivery: ASAP = As Soon As Possible following the Agreement - - - execution but not later than first Aircraft delivery. ATD = At Time of Delivery of first Aircraft. - - - ASAV = As Soon As Available - - - PTD = Prior To Delivery - - - [FN] = See REMARKS Column Aircraft Manuals and Documents IV-2 2-23-98 Exhibit C A00480-B COLUMN HEADING EXPLANATION OF CODE - - -------------- ------------------- 7 ATA ATA Specification: Y = Document is per ATA Specification as described in paragraph B. of this Part IV. N = Document is not to ATA Specification. Aircraft Manuals and Documents IV-3 2-23-98 Exhibit C A00480-B
- - --------------------------------------------------------------------------------------------------------------------- 1 2 3 4 5 6 7 8 DOCUMENT CONFIG MEDIUM REV QTY DEL ATA REMARKS - - --------------------------------------------------------------------------------------------------------------------- A. MAINTENANCE ENGINEERING DATA - - --------------------------------------------------------------------------------------------------------------------- 1. Access Door Diagrams & D 1 S 3 PTD N Data Sheets - - --------------------------------------------------------------------------------------------------------------------- 2. Aircraft Recovery Manual D 1 S 3 PTD N - - --------------------------------------------------------------------------------------------------------------------- 3. Component Description D 1 S 3 PTD N & Location List - - --------------------------------------------------------------------------------------------------------------------- 4. FAA Maintenance D 1 S 3 PTD N Review Board Report - - --------------------------------------------------------------------------------------------------------------------- 5. Maintenance Check D 1 S 1 PTD N Manual (Work Cards) - - --------------------------------------------------------------------------------------------------------------------- 6. Maintenance Facility D 1 S 3 PTD N And Equipment Planning Manual - - --------------------------------------------------------------------------------------------------------------------- 7. On-Aircraft Maintenance D 1 S 3 PTD N Planning Report (OAMP) - - --------------------------------------------------------------------------------------------------------------------- 8. Special Tool & D 4 S 1 ASAV N Equipment Drawings (MDC) - - --------------------------------------------------------------------------------------------------------------------- 9. Support Equipment Summary E 1 S 3 PTD N - - --------------------------------------------------------------------------------------------------------------------- B. TECHNICAL PUBLICATIONS DATA - - --------------------------------------------------------------------------------------------------------------------- 1. Flight Crew Operating C 1 Y 3 N See Notes Manual (FCOM) 1 & 2 - - --------------------------------------------------------------------------------------------------------------------- Aircraft Manuals and Documents IV-4 2-23-98 Exhibit C A00480-B - - ---------------------------------------------------------------------------------------------------------------------------------- 1 2 3 4 5 6 7 8 DOCUMENT CONFIG MEDIUM REV QTY DEL ATA REMARKS - - ---------------------------------------------------------------------------------------------------------------------------------- 2. Maintenance Manual C 1, 3 Y 1 PTD Y Medium 1 shall be provided on one-sided paper without holes. See Notes 2 & 3. - - ---------------------------------------------------------------------------------------------------------------------------------- 3. Product Support Supplier --- 1 S 3 PTD N Directory - - ---------------------------------------------------------------------------------------------------------------------------------- 4. Product Support Supplier A 1 S 3 PTD N Summarizes MDC's Agreements Manual Agreements with Suppliers - - ---------------------------------------------------------------------------------------------------------------------------------- 5. Schematic Manual C 1 Y 30 ASAV N See Note 2 - - ---------------------------------------------------------------------------------------------------------------------------------- 6. MDC C 1 Y 1 PTD Y See Notes 2 & 7 Overhaul/Component Maintenance Manuals - - ---------------------------------------------------------------------------------------------------------------------------------- 7. Vendor C 1 1 PTD Y See Note 4 Overhaul/Component Maintenance Manuals - - ---------------------------------------------------------------------------------------------------------------------------------- Aircraft Manuals and Documents IV-5 2-23-98 Exhibit C A00480-B - - ----------------------------------------------------------------------------------------------------------------------------------- 1 2 3 4 5 6 7 8 DOCUMENT CONFIG MEDIUM REV QTY DEL ATA REMARKS - - ----------------------------------------------------------------------------------------------------------------------------------- 8. Wiring Diagram Manual C 1 Y 18 ASA Y Quantity of 1 shall be provided on one-sided V paper (11 x 16) without holes. See Notes 2 & 5. - - ----------------------------------------------------------------------------------------------------------------------------------- 9. Tool & Equipment (T&E) A 2 Y 3 PTD Y See Note 2 Lists - - ----------------------------------------------------------------------------------------------------------------------------------- 10. Nondestructive Testing --- --- Included in Structural Manual Repair Manual - - ----------------------------------------------------------------------------------------------------------------------------------- 11. Nondestructive Testing A 1,3 S PTD N Quantity of 4 in Medium Standard Practice Manual 1. Quantify of 1 in Medium 3. - - ----------------------------------------------------------------------------------------------------------------------------------- 12. Power Plant Buildup C 1 Y 9 PTD Y See Note 2 Manual - - ----------------------------------------------------------------------------------------------------------------------------------- 13. Structural Repair Manual A 1 Y 2 PTD Y Quantity of 1 shall be provided on one-sided paper without holes. See Note 2. - - ----------------------------------------------------------------------------------------------------------------------------------- Aircraft Manuals and Documents IV-6 2-23-98 Exhibit C A00480-B - - ----------------------------------------------------------------------------------------------------------------------------------- 1 2 3 4 5 6 7 8 DOCUMENT CONFIG MEDIUM REV QTY DEL ATA REMARKS - - ----------------------------------------------------------------------------------------------------------------------------------- 14. Service Bulletins (SB) A 1 Y 2 PTD Y See Notes 2 & 12 - - ----------------------------------------------------------------------------------------------------------------------------------- 15. Service Bulletin Record A 1 S 2 ATD Y Book - - ----------------------------------------------------------------------------------------------------------------------------------- 16. Illustrated Parts Catalog C 3 Y 1 PTD Y See Notes 2 & 8 (IPC) - - ----------------------------------------------------------------------------------------------------------------------------------- 17. Airline Data Report A 1 S 3 PTD N See Note 9 - - ----------------------------------------------------------------------------------------------------------------------------------- C. ENGINEERING DATA - - ----------------------------------------------------------------------------------------------------------------------------------- 1. Aircraft Characteristics D 1 S 1 ATD N For Airport Planning - - ----------------------------------------------------------------------------------------------------------------------------------- 2. Design Handbook A 2 S 1 ATD N - - ----------------------------------------------------------------------------------------------------------------------------------- 3. Douglas Material A 2 S ATD N MDC shall continue to Specifications (DMS) provide revision Manual service, as noted in column 4, until delivery of the last Aircraft. No additional manuals will be provided. - - ----------------------------------------------------------------------------------------------------------------------------------- Aircraft Manuals and Documents IV-7 2-23-98 Exhibit C A00480-B - - ----------------------------------------------------------------------------------------------------------------------------------- 1 2 3 4 5 6 7 8 DOCUMENT CONFIG MEDIUM REV QTY DEL ATA REMARKS - - ----------------------------------------------------------------------------------------------------------------------------------- 4. Douglas Process A 1 S ATD N MDC shall continue to Material (DPM) Index provide revision service, as noted in column 4, until delivery of the last Aircraft. No additional manuals will be provided. - - ----------------------------------------------------------------------------------------------------------------------------------- 5. Douglas Process A 2 S ATD N MDC shall continue to Standards (DPS) Manual provide revision service, as noted in column 4, until delivery of the last Aircraft. No additional manuals will be provided. - - ----------------------------------------------------------------------------------------------------------------------------------- 6. Drafting Manual A 2 S 1 ATD N - - ----------------------------------------------------------------------------------------------------------------------------------- 7. Drawing Section List C 1 S 3 ATD N - - ----------------------------------------------------------------------------------------------------------------------------------- Aircraft Manuals and Documents IV-8 2-23-98 Exhibit C A00480-B - - ----------------------------------------------------------------------------------------------------------------------------------- 1 2 3 4 5 6 7 8 DOCUMENT CONFIG MEDIUM REV QTY DEL ATA REMARKS - - ----------------------------------------------------------------------------------------------------------------------------------- 8. Engineering Drawings C 4 S 1 ATD N (To Section List Level Only) - - ----------------------------------------------------------------------------------------------------------------------------------- 9. FAA Approved Airplane C 1 S 1 + 1 PER ATD N See Note 10 Flight Manual (AFM) - - ----------------------------------------------------------------------------------------------------------------------------------- 10. Flying Qualities Report D 1 S 1 ASAV N - - ----------------------------------------------------------------------------------------------------------------------------------- 11. Lamm Schematics C 1 N 10 PER ASAV N - - ----------------------------------------------------------------------------------------------------------------------------------- 12. Minimum Equipment List A 1 Y 5 PTD N (MEL) Procedures Manual - - ----------------------------------------------------------------------------------------------------------------------------------- 13. On-Board Wiring C 1 N 1 PER ATD N See Note 11 Diagram Book - - ----------------------------------------------------------------------------------------------------------------------------------- 14. Approved Equivalent A 2 S 1 PTD N MDC shall continue to Parts List (AEPL) provide revision service, as noted in column 4, until delivery of the last Aircraft. No additional manuals will be provided. - - ----------------------------------------------------------------------------------------------------------------------------------- Aircraft Manuals and Documents IV-9 2-23-98 Exhibit C A00480-B - - ----------------------------------------------------------------------------------------------------------------------------------- 1 2 3 4 5 6 7 8 DOCUMENT CONFIG MEDIUM REV QTY DEL ATA REMARKS - - ----------------------------------------------------------------------------------------------------------------------------------- 15. Master Minimum A 1 Y 5 ASAV N MDC shall continue to Equipment List (MMEL) provide revision service, as noted in column 4, until delivery of the last Aircraft. No additional manuals will be provided. - - ----------------------------------------------------------------------------------------------------------------------------------- 16. Wire Lists & Hookup C 1 S 1 PTD Y Quantity of 1 to be Charts provided for Buyer's Aircraft No. 1. An additional quantity of 1 shall be provided for Buyer's Aircraft No. 2. Both copies shall be provided on paper without holes. - - ----------------------------------------------------------------------------------------------------------------------------------- Aircraft Manuals and Documents IV-10 2-23-98 Exhibit C A00480-B - - ----------------------------------------------------------------------------------------------------------------------------------- 1 2 3 4 5 6 7 8 DOCUMENT CONFIG MEDIUM REV QTY DEL ATA REMARKS - - ----------------------------------------------------------------------------------------------------------------------------------- 17. Douglas Standards A 2 S 1 ATD N Manual (DSM) - - ----------------------------------------------------------------------------------------------------------------------------------- 18. Master Component List D 1 S 1 ASAV N See Note 13 (MCL) - - ----------------------------------------------------------------------------------------------------------------------------------- 19. Flight Planning & Cruise B 1 S 1 ASAV N See Note 14 Control Manual (FPCCM) - - ----------------------------------------------------------------------------------------------------------------------------------- 20. Weight & Balance C 1 S 2 ATD N See Note 15 Manual, Chapter 1 - - ----------------------------------------------------------------------------------------------------------------------------------- 21. Weight & Balance C 1 N 1 PER N See Note 15 Manual, Chapter 2 - - ----------------------------------------------------------------------------------------------------------------------------------- 22. Weight & Balance C 1 N 1 PER N See Note 15 Manual, Chapters 1 & 2, On-Board Copy - - ----------------------------------------------------------------------------------------------------------------------------------- 23. Weight Compliance C 1 N 3 PER N See Note 15 Report - - ----------------------------------------------------------------------------------------------------------------------------------- 24. Performance Handbook B 1 S 1 ATD N See Note 6 (PH) - - ----------------------------------------------------------------------------------------------------------------------------------- D. OTHER DATA - - ----------------------------------------------------------------------------------------------------------------------------------- 1. Flight Training Data --- --- See Part II A. - - ----------------------------------------------------------------------------------------------------------------------------------- 2. Maintenance Training --- --- See Part II B. Data - - ----------------------------------------------------------------------------------------------------------------------------------- 3. Provisioning Data --- --- See Part III - - -----------------------------------------------------------------------------------------------------------------------------------
Aircraft Manuals and Documents IV-11 2-23-98 Exhibit C A00480-B NOTES: 1. Flight Crew Operating Manual (FCOM) ----------------------------------- a. Initial issue of the FCOM will be six months prior to the scheduled month of delivery of the first Aircraft. b. Provided revision service is being supplied under the terms of this Agreement, or by subsequent purchase order, MDC will incorporate in its FCOM all applicable MDC originated Service Bulletins in a regular revision following formal notification by Buyer that such bulletins will be accomplished on Buyer's Aircraft. The manuals will then contain both original and revised configurations until Buyer advises MDC in writing within two years of Service Bulletin issue date that one configuration should be completely removed. c. Upon receipt of typed draft text in the style of the manual, MDC will incorporate Buyer originated changes into the FCOM at a reasonable charge. Illustrations should be of sufficiently high quality to be electronically scanned. Any page that is incorporated into MDC's FCOM as a result of a Buyer-originated change will bear the name of Buyer or current Aircraft operator. This will indicate that certain data contained on such pages originated with the Buyer and that MDC is not responsible for the technical accuracy of such data. Buyer originated changes incorporated by MDC shall be considered in all future revisions affecting the FCOM. d. Data contained within the FCOM will be tailored to reflect Buyer's Aircraft configuration, and will be prepared in accordance with MDC's FCOM concept. 2. Revision Service ---------------- a. Provided revision service is being supplied under the terms of this Agreement, or by subsequent Purchase Order, MDC will incorporate in its Illustrated Parts Catalog (IPC), Maintenance Manual, Overhaul/Component Maintenance Manual, Structural Repair Manual and Wiring Diagram Manuals all applicable MDC originated Service Bulletins in a regular revision following formal notification by Buyer that such bulletins will be accomplished on Buyer's Aircraft. The manuals will then contain both original and revised configurations until Buyer advises MDC in writing within two years of Service Bulletin issue date that one configuration should be completely removed. b. Upon receipt of typed draft text in the style of the existing manual, MDC will incorporate Buyer originated modifications in all manuals, except the IPC, at a reasonable charge. Requests for Buyer originated modification to the IPC should be addressed to the data subcontractor. Illustrations should be of sufficiently high quality to be electronically scanned. MDC cannot take raw data and write Aircraft Manuals and Documents IV-12 2-23-98 Exhibit C A00480-B maintenance practices, overhaul information or structural repair information, or develop illustrations, including wiring diagrams. Any page that is incorporated into MDC's manuals as a result of a Buyer-originated change will bear the name of the originating airline. This will indicate that certain data contained on such pages originated with the Buyer and that MDC is not responsible for the technical accuracy of such data. Buyer originated changes incorporated by MDC shall be considered in all future revisions affecting the applicable publications. 3. Maintenance Manual. Includes engine manufacturer's ------------------ information. Chapters 22, 34 and 70 through 80 will be prepared in general accordance with ATA Specification 100, Revision 18. The remaining Chapters, although written in general accordance with Revision 8, will be formatted in general accordance with Revision 18. 4. Vendor Overhaul/Component Maintenance Manuals. MDC shall --------------------------------------------- use reasonable efforts to assure that initial copies and subsequent revision service of Vendor's Overhaul/Component Maintenance Manuals and parts lists pertaining to repairable or recoverable components and equipment are supplied to the Buyer by such Vendors at no cost. Manuals will be in general accordance with ATA Specification 100, Revision 14, only if peculiar to the aircraft of the type leased hereunder. Existing manuals shall be provided wherever possible and will be in general accordance with ATA Specification 100, Revision 8, or later as MDC may adopt. Initial manuals and subsequent revisions and any Service Bulletins will be distributed by the Vendor directly to the Buyer. 5. Wiring Diagram Manual. Shall be customized to the Aircraft --------------------- and will be in general accordance with ATA Specification 100, Revision 14. 6. Performance Handbook (PH). Additional performance ------------------------- information for airline performance Engineers; provides thrust curves, aerodynamic performance curves, etc. This handbook shall be made available one year after certification on first aircraft series or engine type. 7. MDC Overhaul/Component Maintenance Manuals. Shall consist ------------------------------------------ of (i) existing copies of DC-9 Overhaul Manual produced to ATA Specification 100, Revision 8, to the extent applicable to the Aircraft and (ii) Component Maintenance Manuals peculiar to the type of aircraft leased hereunder produced in general accordance with ATA Specification 100, Revision 14 or later as MDC may adopt. 8. Illustrated Parts Catalog (IPC). The IPC is a customized ------------------------------- Document intended for use in the identification and requisition of replaceable aircraft parts and units. The IPC is a companion Document to the Maintenance Manual and contains all parts information for which maintenance practices coverage has been provided. The IPC shall be prepared in general accordance with ATA Specification 100, Revision 8, or later as MDC may adopt. Aircraft Manuals and Documents IV-13 2-23-98 Exhibit C A00480-B 9. Airline Data Report. This report shall include a listing of ------------------- all repairable or recoverable manufactured items grouped by part number and grouped alphabetically by Vendor name. 10. FAA Approved Airplane Flight Manual. Revisions applicable ----------------------------------- to the Aircraft shall be provided as soon as practicable after FAA approval for as long as Lessor owns or operates the Aircraft. 11. On-Board Wiring Diagram Book. Contains radio and electrical ---------------------------- wiring diagrams only. This book is to be used for interim reference only until the Wiring Diagram Manual reflects the delivery configuration of the Aircraft. 12. Service Bulletins (SB). One Aperture Card of the Service ---------------------- Drawing will be provided in lieu of printed illustrations at MDC's option. 13. Master Component List (MCL). This Document is an automated --------------------------- list of line replaceable units (LRU) that have reliability, maintenance, or cost significance. 14. Flight Planning & Cruise Control Manual (FPCCM). Tables on ----------------------------------------------- magnetic media are available upon request. 15. Weight & Balance Manuals ------------------------ a. Weight & Balance Manual, Chapter 1, is provided at the time of the first Aircraft delivery only. b. Weight & Balance Manual, Chapter 2, is provided for each Aircraft at time of delivery. c. Weight & Balance Manual, Chapters 1 & 2, On-Board copy, is provided for each Aircraft at time of delivery. d. Weight Compliance Report is provided for each Aircraft at time of delivery and compares the actual weight to the weight developed from the Detail Specification. ADDITIONAL COPIES - - ----------------- Additional replacement copies of the Documents shall be made available at MDC's then current published prices. LIMITATION ON USE OF DOCUMENTS - - ------------------------------ 1. Buyer agrees that, except with MDC's prior written consent or except as required by law or as otherwise permitted herein, none of the Documents provided or copies or duplicates thereof or the Detail Specification or copies thereof, shall be transferred or permitted out of Buyer's possession or the contents thereof divulged to any other person, firm or corporation by Buyer or used by Buyer or furnished by Aircraft Manuals and Documents IV-14 2-23-98 Exhibit C A00480-B Buyer for the design or manufacture of any aircraft or spare parts or training aids, except when manufacture or redesign is permitted under the provisions of Part III of this Exhibit C and then only to the extent and for the purposes expressly permitted therein. 2. Buyer agrees that any Documents provided by MDC in the form of Programs shall be subject to the following additional restrictions on use: a. Buyer shall have a non-exclusive, non-transferable license to use a single copy of any Program provided by MDC. b. Buyer agrees that it will not without the express written consent of MDC: (1) sub-license, assign or attempt to transfer its license for any Program, (2) copy any Program other than to create a single copy of the Program for archival or backup purposes, (3) distribute or permit access to any Program to any third party, or (4) reverse assemble, reverse compile, or otherwise translate any Program for any purpose. WARRANTY - - -------- The warranty for Documents provided hereunder is set forth in Part I of this Exhibit C. Aircraft Manuals and Documents IV-15 2-23-98 A00480-B EXHIBIT D - PRICE ADJUSTMENTS FOR FLUCTUATIONS IN THE ECONOMY 2-23-98 Exhibit D A00480-B PRICE ADJUSTMENTS FOR FLUCTUATIONS IN THE ECONOMY The Base Price of each Aircraft, after any price adjustments made in accordance with paragraphs B. and C. of Article 3, shall be subject to the following escalation provisions in order to determine the Price: A. PRICE ----- The Price shall be determined according to the following formula: P = AFn + En + SCNn where: P = Price AFn = Final Adjusted Airframe Price En = Final Adjusted Engine Price SCNn = Final Adjusted Exhibit A's Price B. FINAL ADJUSTED AIRFRAME PRICE ----------------------------- 1. The Airframe Base Price included in the Base Price contains no allowance for inflation subsequent to the period of November 1993 through March 1994. Accordingly, the Airframe Base Price shall be adjusted to determine the Final Adjusted Airframe Price, which in no event shall be less than the Airframe Base Price set forth in paragraph A. of Article 3, by use of the formula in paragraph 2. below which is based on fluctuations in the following labor and material price indexes which are published by the United States of America - Department of Labor, Bureau of Labor Statistics: a. Labor or ECI Index - "Employment Cost Index (compensation) workers in aerospace manufacturing by occupation and industry group" - Aircraft manufacturing, SIC Code 3721 (June 1989 = 100), as released by the Bureau of Labor Statistics, U.S. Department of Labor on a quarterly basis for the months of March, June, September and December. The released Employment Cost Index value for the month of March will also be used for the months of January and February; the value for June will also be used for April and May; the value for September will also be used for July and August; and the value for December will also be used for October and November. b. Material or IC Index - Producer price indexes and percent changes for commodity groupings and individual items - Industrial commodities (1982 = 100). PRICE ADJUSTMENTS FOR FLUCTUATIONS IN THE ECONOMY D-1 2-23-98 Exhibit D A00480-B 2. The formula for the airframe is as follows: ECIn ICn AFn = AFb [ .75 (-----) + .25 (-----) ] 125.8 118.7 where: AFn = The Final Adjusted Airframe Price. AFb = The Airframe Base Price. ECIn = The average of the ECI Index values for the fourth through the eighth month (as described in 1.a. above) prior to the scheduled month of delivery computed to one decimal place (Note: 1.05 rounds to 1.1). 125.8 = The average of the ECI Index values for November 1993 though March 1994 (as described in 1.a. above). ICn = The average of the IC Index values for the fourth through the eighth month prior to the scheduled month of delivery computed to one decimal place (Note: 1.05 rounds to 1.1). 118.7 = The average of the IC Index values for November 1993 through March 1994 3. Airframe Rounding Rules are as follows: Unless otherwise specified, computations shall be made to four decimal places (Note: 1.00005 rounds to 1.0001). After final computation, AFn shall be rounded to the nearest whole number (Note: 0.5 rounds to 1). 4. The most recent ECI and IC Index values released by the Bureau of Labor Statistics and made available to Seller for the applicable months shall be used to determine the ECIn and ICn values used in the calculation of the Final Adjusted Airframe Price. However, the index denominators of 125.8 and 118.7 shall not be revised. The Price of the Aircraft shall not be adjusted after delivery except as defined in paragraph B.5. below. 5. In the event any of the index values required to calculate ECIn and ICn have not been released by the Bureau of Labor Statistics and made available to Seller, Seller shall use the published value for the nearest preceding quarter for the ECIn or the nearest preceding month for the ICn for the purposes of calculating the Final Adjusted Airframe Price until such values are subsequently published or made available to Seller. Seller shall submit either a supplemental invoice or refund the amounts due Buyer as appropriate to reflect any increase or decrease in the Final Adjusted Airframe Price for the Aircraft from that determined at the time of delivery of such Aircraft. PRICE ADJUSTMENTS FOR FLUCTUATIONS IN THE ECONOMY D-2 2-23-98 Exhibit D A00480-B 6. If the Department of Labor revises the methodology (in contrast to benchmark adjustments and any other corrections of previously released values) or discontinues any of the indexes referred to in this Exhibit, the parties shall select a substitute for the revised or discontinued index. The substitute index shall lead in application to the same adjustment result, insofar as possible, as would have been achieved by continuing to use the original index as it may have fluctuated had it not been revised or discontinued. Appropriate revision of the formula shall be made to accomplish this result. 7. To implement paragraph B.6. above, either party may notify the other that a change in the indexes within the meaning of this Exhibit is anticipated or has taken place. Seller shall then propose substitute indexes and formula revision. Within ninety days from such notification or from receipt of data covering the last month of publication of the unchanged index series, whichever is later, the parties shall agree on substitute indexes and formula revision. If the parties cannot so agree, they shall select an arbitrator to decide the substitute index required to carry out the intent of paragraph B.6. above, and the decision of the arbitrator shall be binding. If, however, the parties cannot agree on an arbitrator, an arbitrator shall be selected in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Adjustment of the Price under this Exhibit and payment of invoices computed from the adjusted Price, shall continue following any change in the indexes throughout any period of negotiation or arbitration. The indexes and formula used when the unchanged indexes are not available shall be those proposed by Seller, but said payments shall be on a temporary basis and shall be corrected. Any required refunds or additional payments shall be made within thirty days following agreement between the parties or an arbitration decision. C. FINAL ADJUSTED ENGINE PRICE (En) -------------------------------- 1. The Engine Base Price contained in the Base Price of the Aircraft after any adjustment made in accordance with paragraphs B. and C. of Article 3, shall be adjusted in accordance with the escalation formula contained in paragraph 2. below to obtain the Final Adjusted Engine Price. The Final Adjusted Engine Price, which in no event shall be less than the Engine Base Price (Eb) set forth in paragraph A. of Article 3, is derived in accordance with the formula set forth below which is based on fluctuations in the following labor, material and energy price indexes which are published by the United States of America Department of Labor, Bureau of Labor Statistics: a. Labor or HE Index - Average hours and earnings of production or nonsupervisory workers on private nonfarm payrolls by detailed industry, Industry: Durable goods, Transportation equipment, Aircraft and parts - Aircraft engines and engine parts, SIC Code 3724 - Average hourly earnings. b. Material or M&MP Index - Producer price indexes and percent changes for commodity groupings and individual items - Metals and metal products, Code 10 (1982 = 100). PRICE ADJUSTMENTS FOR FLUCTUATIONS IN THE ECONOMY D-3 2-23-98 Exhibit D A00480-B c. Energy or ER Index - Producer price indexes and percent changes for commodity groupings and individual items - Fuels and related products and power, Code 5 (1982 = 100). 2. The formula for the Engines is as follows: En = (Eb + F) (.60 HE + .30 M&MP + .10 ER) where: En = Final Adjusted Engine Price included in the Price. Eb = Engine Base Price set forth in paragraph A. of Article 3. F = 0.005 (N) (Eb). N = The calendar year of scheduled Engine delivery minus 1994. The calendar year of scheduled Engine delivery shall be deemed to be the second month prior to the scheduled month of Aircraft delivery. HE = The HE Index (SIC Code 3724) value for the sixth month prior to the scheduled month of Aircraft delivery divided by $17.13 (which represents the base month of December 1993), rounded to the nearest ten thousandth (Note: 1.00005 rounds to 1.0001). M&MP = The M&MP Index value for the sixth month prior to the scheduled month of Aircraft delivery divided by 120.2 (which represents the base month of December 1993 as stated in terms of 1982 = 100), and rounded to the nearest ten thousandth (Note: 1.00005 rounds to 1.0001). ER = The ER Index value for the sixth month prior to the scheduled month of Aircraft delivery divided by 74.7 (which represents the base month of December 1993 as stated in terms of 1982 = 100) and rounded to the nearest ten thousandth (Note: 1.00005 rounds to 1.0001). 3. Engine Rounding Rules are as follows: a. The sum of the values of HE and M&MP and ER multiplied by .60, .30 and .10 respectively shall be rounded to the nearest ten thousandth (Note: 1.00005 rounds to 1.0001). b. The escalation factor shall be rounded to the nearest ten thousandth (Note: 1.00005 rounds to 1.0001). PRICE ADJUSTMENTS FOR FLUCTUATIONS IN THE ECONOMY D-4 2-23-98 Exhibit D A00480-B c. After final computation En shall be rounded to the nearest whole number (Note: 1.5 rounds to 2). 4. If the Department of Labor, by footnote, appendix or by any other method, discontinues or revises any of the data referred to above (not benchmark adjustments) or revises the methodology for obtaining them, the Engine manufacturer shall select a substitute for the revised or discontinued data, such substitute to lead in application to the same adjustment result, insofar as possible, as would have been achieved by continuing the use of the original data had it not been revised or discontinued. 5. In the event escalation provisions are made nonenforceable or otherwise rendered null and void by any agency of the Government of the United States of America, the parties agree, to the extent that they may lawfully do so, to adjust equitably the Engine Base Price of the Engine to reflect an allowance for increases in labor, material and energy costs occurring since January 1, 1994 to the sixth month preceding the scheduled month of Aircraft delivery. 6. Seller reserves the right to make appropriate changes to this paragraph C., if prior to Aircraft delivery the Engine manufacturer changes its escalation provisions applicable to the Engine Base Price of any Aircraft. D. FINAL ADJUSTED EXHIBIT A'S PRICE -------------------------------- The Exhibit A's Base Price included in the Base Price contains no allowance for inflation subsequent to the period of November 1993 through March 1994. Accordingly, the Exhibit A's Base Price shall be adjusted to determine the Final Adjusted Exhibit A's Price, which in no event shall be less than the Exhibit A's Base Price set forth in paragraph A. of Article 3, by use of the same formula used to escalate the Airframe Base Price in paragraph 2 of Part B. E. If the scheduled delivery of one or more of the Aircraft is delayed by an Excusable Delay, the adjustments in this Exhibit shall be based on the actual delivery month for any delayed Aircraft. PRICE ADJUSTMENTS FOR FLUCTUATIONS IN THE ECONOMY D-5 2-23-98 A00480-B EXHIBIT E - NEW ENGINE AND NEW PARTS WARRANTY 2-23-98 Exhibit E A00480-B NEW ENGINE AND NEW PARTS WARRANTY A. DEFECTIVE GOODS --------------- United Technologies Corporation, Pratt & Whitney Group Large, Commercial Engines (United) warrants to Buyer that at the time of delivery the goods sold by United hereunder (Engines and Engine Parts therefor) will be free from defects in material and manufacture and will conform substantially to United's applicable specification. United's liability and Buyer's remedy under this warranty are limited to the repair or replacement, at United's election, of goods or parts thereof returned to United which are shown to United's reasonable satisfaction to have been defective; provided that written notice of the defect shall have been given by Buyer to United within ninety days after the first operation or use of the goods (or if the goods are installed in new aircraft, within ninety days after acceptance of such aircraft by its first operator) but in no event later than one year after the date of delivery of such goods by United. Transportation charges for the return of defective goods to United and their reshipment to Buyer and the risk of loss thereof will be borne by United only if returned in accordance with written shipping instructions from United. B. TITLE ----- United warrants to Buyer that it will convey good title to the goods sold hereunder. United's liability and Buyer's remedy under this warranty are limited to the removal of any title defect or, at the election of United, to the replacement of the goods or parts thereof which are defective in title; provided, however, that the rights and remedies of the parties with respect to patent infringement shall be limited to the provisions of paragraph C. below. C. PATENT INFRINGEMENT ------------------- 1. United shall conduct, at its own expense, the entire defense of any claim, suit or action alleging that, without further combination, the use or resale by Buyer or any subsequent purchaser or user of the goods delivered hereunder directly infringes any United States patent, but only on the conditions that: a. United receives prompt written notice of such claim, suit or action and full opportunity and authority to assume the sole defense thereof, including settlement and appeals, and all information available to Buyer and defendant for such defense; b. said goods are made according to a specification or design furnished by United or, if a process patent is involved, the process performed by the goods is recommended in writing by United; and c. the claim, suit or action is brought against Buyer or one expressly indemnified by Buyer. NEW ENGINE AND NEW PARTS WARRANTY E-1 2-23-98 Exhibit E A00480-B 2. Provided all of the foregoing conditions have been met, United shall, at its own expense, either settle said claim, suit or action or shall pay all damages and costs awarded by the court therein and, if the use or resale of such goods is finally enjoined, United shall, at United's option: a. procure for defendant the right to use or resell the goods; b. replace them with equivalent noninfringing goods; c. modify them so that they become noninfringing but equivalent; or d. remove them and refund the purchase price (less a reasonable allowance for use, damage and obsolescence). 3. If a claim, suit or action is based on a design or specification furnished by Buyer or on the performance of a process not recommended in writing by United, or on the use or sale of the goods delivered hereunder in combination with other goods not delivered to Buyer by United, Buyer shall indemnify and save United harmless therefrom. D. ENGINE AND PARTS SERVICE POLICY ------------------------------- United warrants to Buyer that it will extend to Buyer, with respect to aircraft engines sold to Buyer whether installed as new equipment in Aircraft by Seller and delivered to Buyer or delivered directly by United to Buyer, allowances and adjustments in accordance with the applicable Engine and Parts Service Policy offered by United on the date of United's receipt of the order therefor. United's liability and Buyer's remedy under this warranty are limited to the allowances and adjustments and are subject to the general conditions stipulated in the applicable Engine and Parts Service Policy; provided, however, that no change in or retraction of such Policy shall apply to Engines delivered or to be delivered by United under orders received by United prior to United's announcement of any such change or retraction. E. EXCLUSIVE WARRANTIES AND REMEDIES --------------------------------- THE FOREGOING WARRANTIES ARE EXCLUSIVE AND ARE GIVEN AND ACCEPTED IN LIEU OF: (i) ANY AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE; AND (ii) ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN CONTRACT OR TORT, WHETHER OR NOT ARISING FROM UNITED'S NEGLIGENCE, ACTUAL OR IMPUTED. THE REMEDIES OF BUYER SHALL BE LIMITED TO THOSE PROVIDED HEREIN TO THE EXCLUSION OF ANY AND ALL OTHER REMEDIES INCLUDING, WITHOUT LIMITATION, INCIDENTAL OR CONSEQUENTIAL DAMAGES. NO AGREEMENT VARYING OR EXTENDING THE FOREGOING WARRANTIES, REMEDIES OR THIS LIMITATION WILL BE BINDING UPON UNITED UNLESS IN WRITING, SIGNED BY A DULY AUTHORIZED OFFICER OF UNITED. NEW ENGINE AND NEW PARTS WARRANTY E-2 2-23-98 Exhibit E A00480-B F. WARRANTY PASS ON ---------------- United shall, upon the written request of the Buyer, consider an extension of Warranty coverage to Engines, Modules and Parts sold by Buyer to another operator to the extent only, however, that such coverage exists at the time of such sale and subject to the provisions of the Warranty. NEW ENGINE AND NEW PARTS WARRANTY E-3 6-1162-RCN-1262 Trans World Airlines, Inc. One City Centre 515 North Sixth Street St. Louis, Missouri 63101 Subject: Business Considerations Reference: Agreement No. A00480-B (The Purchase Agreement) between MCDONNELL DOUGLAS CORPORATION a wholly owned subsidiary of THE BOEING COMPANY (Seller) and TRANS WORLD AIRLINES, INC.(Buyer) relating to Model MD-83 aircraft (the Aircraft) This letter amends the Purchase Agreement. All terms used but not defined in this Letter Agreement shall have the same meaning as in the Purchase Agreement. 1. 2. 3. 4. 5. 6. 7. 8. [FN] Confidential Information omitted and filed separately with the Commission. 6-1162-RCN-1262 Page 2 9. 10. 11. Setoff Rights Against Amounts Paid Under Other Buyer Agreements. --------------------------------------------------------------- Buyer agrees that in the event that Buyer defaults in any of its obligations hereunder, Seller may apply all or any of the advance payments paid by Buyer to Seller's affiliate under the 757 purchase agreement no. 1910 to cure any such default hereunder. Additionally, to the extent that Buyer and Seller or any of Seller's affiliates enter into any future purchase agreement for Boeing or MDC aircraft, advance payments made thereunder shall be available and may be applied by Seller or Seller's affiliate to cure any Buyer default hereunder. 12. Previously Provided Training. ---------------------------- Buyer acknowledges that the training discussed in Part II of Exhibit C has been previously provided to Buyer. 13. Previously Provided Documents. ----------------------------- Buyer acknowledges that the documents designated in Part IV of Exhibit C as "at time of delivery of the first aircraft" have been previously provided to Buyer. [FN] Confidential Information omitted and filed separately with the Commission. 6-1162-RCN-1262 Page 3 14. Confidentiality. --------------- Buyer and Seller agree that the terms of Article 16 of the Purchase Agreement shall apply to this Letter Agreement. Sincerely, MCDONNELL DOUGLAS CORPORATION, a wholly owned subsidiary of THE BOEING COMPANY BY _____________________________ ITS ____________________________ ACCEPTED AND AGREED TO THIS DATE: _____________, 1998 TRANS WORLD AIRLINES, INC. BY _____________________________ ITS ____________________________ 6-1162-RCN-1263 Trans World Airlines, Inc. One City Centre 515 North Sixth Street St. Louis, Missouri 63101 Subject: Application of Progress Payments Reference: Agreement No. A00480-B (The Purchase Agreement) between MCDONNELL DOUGLAS CORPORATION a wholly owned subsidiary of THE BOEING COMPANY (Seller) and TRANS WORLD AIRLINES, INC.(Buyer) relating to Model MD-83 aircraft (the Aircraft) [Applies to entire body of letter]. Sincerely, MCDONNELL DOUGLAS CORPORATION, a wholly owned subsidiary of THE BOEING COMPANY BY _______________________________ ITS ______________________________ ACCEPTED AND AGREED TO THIS DATE: _____________, 1998 TRANS WORLD AIRLINES, INC. BY ________________________________ ITS _______________________________ [FN] Confidential Information omitted and filed separately with the Commission. 6-1162-RCN-1266 Trans World Airlines, Inc. One City Centre 515 North Sixth Street St. Louis, Missouri 63101 Subject: Reference: Agreement No. A00480-B (The Purchase Agreement) between MCDONNELL DOUGLAS CORPORATION a wholly owned subsidiary of THE BOEING COMPANY (Seller) and TRANS WORLD AIRLINES, INC.(Buyer) relating to Model MD-83 aircraft (the Aircraft) [Applies to entire body of letter]. Sincerely, MCDONNELL DOUGLAS CORPORATION, a wholly owned subsidiary of THE BOEING COMPANY BY ________________________ ITS _______________________ ACCEPTED AND AGREED TO THIS DATE: _____________, 1998 TRANS WORLD AIRLINES, INC. BY ________________________ ITS _______________________ [FN] Confidential Information omitted and filed separately with the Commission. EX-11 7 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Twelve Months Ended December 31, ---------------------------------- ADJUSTMENTS TO NET INCOME (LOSS): 1998 1997 ---------- ---------- Loss before extraordinary items $(107,412) $ (89,862) Preferred stock dividend requirements (23,454) (16,119) ---------- ---------- Loss before extraordinary items applicable to common stock for basic earnings per share calculation (130,866) (105,981) Extraordinary items (13,069) (20,973) ---------- ---------- Net loss applicable to common stock for basic earnings per share calculation $(143,935) $(126,954) ========== ========== Net loss applicable to common stock for diluted earnings per share calculation $(143,935) $(126,954) ========== ========== ADJUSTMENTS TO OUTSTANDING SHARES: Basic earnings per share: Average number of shares of common stock 61,319 53,477 ========== ========== Total average number of common and common equivalent shares used for diluted earnings per share calculation 61,319 53,477 ========== ========== PER SHARE AMOUNTS: Loss before extraordinary items Basic $ (2.14) $ (1.98) Diluted $ (2.14) $ (1.98) Net loss Basic $ (2.35) $ (2.37) Diluted $ (2.35) $ (2.37) - - --------- (1) Includes 6,795 shares for the twelve months ended December 31, 1998 and 6,397 shares for the twelve months ended December 31, 1997, of Employee Preferred Stock which, except for a liquidation preference of $.01 per share and the right to elect a certain number of directors to the Board of Directors, is the functional equivalent of common stock. (2) Pursuant to an employee stock incentive plan (ESIP or the Plan), the Company is required to distribute additional shares of common stock and Employee Preferred Stock as a result of the distribution of additional shares following the effective date of the 1995 reorganization. The Company distributed 931,604 additional shares in July 1997 and 2,377,084 additional shares in July 1998 under this provision. Additionally, the ESIP provides that, continuing through 2002, employees may significantly increase their ownership, through grants or purchases, as set forth in the Plan. The earnings (loss) per share computations do not give any effect to future potential issuances of these shares. (3) As the effects of including the incremental shares associated with options and warrants and the assumed conversion of the 8% and the 9-1/4% Preferred Stock are antidilutive, such have not been included in the computation of diluted earnings per share.
EX-12 8 COMPUTATION OF RATIO OF EARNINGS Exhibit 12 TRANS WORLD AIRLINES, INC. COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (Amounts in Thousands Except Ratio)
Reorganized Company Predecessor Company ---------------------------------------------------- -------------------------- Four Months Eight Months Year Ended Year Ended Year Ended Ended Ended Year Ended December 31, December 31, December 31, December 31, August 31, December 31, 1998 1997 1996 1995 1995 1994 ------------ ------------ ------------ ------------ ------------ ------------ Loss from operations before income taxes $ (107,169) $ (89,335) $ (274,577) $ (32,268) $ (338,309) $ (432,869) Add: Interest on indebtedness 116,918 114,066 126,822 45,917 123,247 195,352 Portion of rents representative of the interest factor 152,779 123,609 100,997 32,131 60,849 87,122 ------------ ------------ ------------ ------------ ------------ ------------ Income as adjusted $ 162,528 $ 148,340 $ (46,758) $ 45,780 $ (154,213) $ (150,395) ------------ ------------ ------------ ------------ ------------ ------------ Fixed Charges: Interest on indebtedness $ 116,918 $ 114,066 $ 126,822 $ 45,917 $ 123,247 $ 195,352 Capitalized interest 7,085 4,784 5,463 -- -- 2,133 Portion of rents representative of the interest factor 152,779 123,609 100,997 32,131 60,849 87,122 ------------ ------------ ------------ ------------ ------------ ------------ Fixed charges $ 276,782 $ 242,459 $ 233,282 $ 78,048 $ 184,096 $ 284,607 ------------ ------------ ------------ ------------ ------------ ------------ Preferred Stock Dividends: Preferred stock dividend requirements $ 23,454 $ 16,119 $ 36,649 $ 4,754 $ 11,554 $ 15,000 Tax adjustment 14,995 10,306 23,431 3,039 7,387 9,590 ------------ ------------ ------------ ------------ ------------ ------------ Preferred stock dividends $ 38,449 $ 26,425 $ 60,080 $ 7,793 $ 18,941 $ 24,590 ------------ ------------ ------------ ------------ ------------ ------------ Combined fixed charges and preferred stock dividends $ 315,231 $ 268,884 $ 293,362 $ 85,841 $ 203,037 $ 309,197 ------------ ------------ ------------ ------------ ------------ ------------ Ratio of earnings to combined fixed charges and preferred stock dividends 0.52 0.55 (0.16) 0.53 (0.76) (0.49) ------------ ------------ ------------ ------------ ------------ ------------ Deficiency $ 152,703 $ 120,544 $ 340,120 $ 40,061 $ 357,250 $ 459,592 ------------ ------------ ------------ ------------ ------------ ------------
EX-21 9 SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES OF TRANS WORLD AIRLINES, INC. ------------------------------------------ 1. Ambassador Fuel Corporation 2. ConFin Inc. 3. Constellation Finance LLC 4. Getaway Management Services, Inc. 5. International Airport Services 6. International Aviation Security (UK) 7. International Aviation Security Gesellschaft 8. International Aviation Security Italia S.r.l. 9. International Aviation Security Ltd. 10. International Aviation Security N.V 11. International Aviation Security, Inc. 12. LAX Holding Company, Inc. 13. Mega Advertising, Inc. 14. Northwest 112th Street Corp. 15. Ozark Group, Inc. 16. Royal Ambassador Insurance Company 17. The Getaway Group (UK), Inc 18. The TWA Ambassadors Club, Inc. 19. Trans World Computer Services, Inc. 20. Trans World Express, Inc. 21. Trans World Pars, Inc. 22. Transcontinental & Western Air, Inc. 23. TWA Aviation, Inc. 24. TWA de Mexico S.A. de C.V. 25. TWA Employee Services, Inc. 26. TWA Getaway Vacations, Inc 27. TWA Group, Inc. 28. TWA Nippon, Inc. 29. TWA Standards & Controls, Inc. 30. TWA Stock Holding Company, Inc. 31. TWA-D.C. Gate Company, Inc. 32. TWA-Hangar 12 Holding Company, Inc. 33. TWA-LAX Gate Company, Inc. 34. TWA-Logan Gate Company, Inc. 35. TWA-NY/NJ Gate Company, Inc. 36. TWA-Omnibus Gate Company, Inc. 37. TWA-San Francisco Gate Company, Inc. [FN] - - ------------------------- Pursuant to Partnership Agreement ConFin is managing partner of this entity. TWA is the limited partner. Holds 25% of Worldspan EX-23.1 10 CONSENT OF EXPERT Exhibit 23.1 AUDITORS' CONSENT ----------------- The Board of Directors Trans World Airlines, Inc.: We consent to incorporation by reference in the registration statements (No. 333-01561, 333-05163, 333-04787, 333-12739, 333-32441 and 333-39739) on Forms S-8 and in the registration statements (No. 333-04977, 333-26639 and 333-44689) on Forms S-3 of Trans World Airlines, Inc. of our report dated February 19, 1999, relating to the consolidated balance sheets of Trans World Airlines, Inc. and subsidiaries as of December 31, 1998 and 1997, and the related statements of consolidated operations, cash flows and shareholders' equity (deficiency) for each of the years in the three-year period ended December 31, 1998, and all related schedules, which report appears in the December 31, 1998 annual report on Form 10-K of Trans World Airlines, Inc. KPMG LLP Kansas City, Missouri February 19, 1999 EX-24 11 POWER OF ATTORNEY EXHIBIT 24 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that I, John W. Bachmann, a Director of TRANS WORLD AIRLINES, INC., a Delaware corporation, do constitute and appoint Gerald L. Gitner, Kathleen A. Soled and Michael J. Palumbo, and each of them, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for me and in my name, on my behalf and in my stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for TRANS WORLD AIRLINES, INC. for the fiscal year ended December 31, 1998, and to file such Annual Report on Form 10-K with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments and supplements to said Annual Report on Form 10-K, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand this ______ day of March, 1999. /s/ John W. Bachmann --------------------- John W. Bachmann POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that I, William F. Compton, a Director of TRANS WORLD AIRLINES, INC., a Delaware corporation, do constitute and appoint Gerald L. Gitner, Kathleen A. Soled and Michael J. Palumbo, and each of them, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for me and in my name, on my behalf and in my stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for TRANS WORLD AIRLINES, INC. for the fiscal year ended December 31, 1998, and to file such Annual Report on Form 10-K with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments and supplements to said Annual Report on Form 10-K, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand this ______ day of March, 1999. /s/ William F. Compton ---------------------- William F. Compton POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that I, Eugene P. Conese, a Director of TRANS WORLD AIRLINES, INC., a Delaware corporation, do constitute and appoint Gerald L. Gitner, Kathleen A. Soled and Michael J. Palumbo, and each of them, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for me and in my name, on my behalf and in my stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for TRANS WORLD AIRLINES, INC. for the fiscal year ended December 31, 1998, and to file such Annual Report on Form 10-K with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments and supplements to said Annual Report on Form 10-K, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand this ______ day of March, 1999. /s/ Eugene P. Conese -------------------- Eugene P. Conese POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that I, Edgar M. House, a Director of TRANS WORLD AIRLINES, INC., a Delaware corporation, do constitute and appoint Gerald L. Gitner, Kathleen A. Soled and Michael J. Palumbo, and each of them, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for me and in my name, on my behalf and in my stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for TRANS WORLD AIRLINES, INC. for the fiscal year ended December 31, 1998, and to file such Annual Report on Form 10-K with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments and supplements to said Annual Report on Form 10-K, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand this ______ day of March, 1999. /s/ Edgar M. House ------------------- Edgar M. House POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that I, Thomas H. Jacobsen, a Director of TRANS WORLD AIRLINES, INC., a Delaware corporation, do constitute and appoint Gerald L. Gitner, Kathleen A. Soled and Michael J. Palumbo, and each of them, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for me and in my name, on my behalf and in my stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for TRANS WORLD AIRLINES, INC. for the fiscal year ended December 31, 1998, and to file such Annual Report on Form 10-K with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments and supplements to said Annual Report on Form 10-K, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand this ______ day of March, 1999. /s/ Thomas H. Jacobsen ---------------------- Thomas H. Jacobsen POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that I, Myron Kaplan, a Director of TRANS WORLD AIRLINES, INC., a Delaware corporation, do constitute and appoint Gerald L. Gitner, Kathleen A. Soled and Michael J. Palumbo, and each of them, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for me and in my name, on my behalf and in my stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for TRANS WORLD AIRLINES, INC. for the fiscal year ended December 31, 1998, and to file such Annual Report on Form 10-K with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments and supplements to said Annual Report on Form 10-K, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand this ______ day of March, 1999. /s/ Myron Kaplan ----------------- Myron Kaplan POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that I, David M. Kennedy, a Director of TRANS WORLD AIRLINES, INC., a Delaware corporation, do constitute and appoint Gerald L. Gitner, Kathleen A. Soled and Michael J. Palumbo, and each of them, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for me and in my name, on my behalf and in my stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for TRANS WORLD AIRLINES, INC. for the fiscal year ended December 31, 1998, and to file such Annual Report on Form 10-K with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments and supplements to said Annual Report on Form 10-K, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand this ______ day of March, 1999. /s/ David M. Kennedy --------------------- David M. Kennedy POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that I, Merrill A. McPeak, a Director of TRANS WORLD AIRLINES, INC., a Delaware corporation, do constitute and appoint Gerald L. Gitner, Kathleen A. Soled and Michael J. Palumbo, and each of them, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for me and in my name, on my behalf and in my stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for TRANS WORLD AIRLINES, INC. for the fiscal year ended December 31, 1998, and to file such Annual Report on Form 10-K with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments and supplements to said Annual Report on Form 10-K, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand this ______ day of March, 1999. /s/ Merrill A. McPeak --------------------- Merrill A. McPeak POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that I, Thomas F. Meagher, a Director of TRANS WORLD AIRLINES, INC., a Delaware corporation, do constitute and appoint Gerald L. Gitner, Kathleen A. Soled and Michael J. Palumbo, and each of them, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for me and in my name, on my behalf and in my stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for TRANS WORLD AIRLINES, INC. for the fiscal year ended December 31, 1998, and to file such Annual Report on Form 10-K with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments and supplements to said Annual Report on Form 10-K, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand this ______ day of March, 1999. /s/ Thomas F. Meagher --------------------- Thomas F. Meagher POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that I, G. Joseph Reddington, a Director of TRANS WORLD AIRLINES, INC., a Delaware corporation, do constitute and appoint Gerald L. Gitner, Kathleen A. Soled and Michael J. Palumbo, and each of them, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for me and in my name, on my behalf and in my stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for TRANS WORLD AIRLINES, INC. for the fiscal year ended December 31, 1998, and to file such Annual Report on Form 10-K with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments and supplements to said Annual Report on Form 10-K, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand this ______ day of March, 1999. /s/ G. Joseph Reddington ------------------------ G. Joseph Reddington POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that I, Blanche M. Touhill, a Director of TRANS WORLD AIRLINES, INC., a Delaware corporation, do constitute and appoint Gerald L. Gitner, Kathleen A. Soled and Michael J. Palumbo, and each of them, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for me and in my name, on my behalf and in my stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for TRANS WORLD AIRLINES, INC. for the fiscal year ended December 31, 1998, and to file such Annual Report on Form 10-K with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments and supplements to said Annual Report on Form 10-K, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand this ______ day of March, 1999. /s/ Blanche M. Touhill ---------------------- Blanche M. Touhill POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, that I, Brent S. Miller, a Director of TRANS WORLD AIRLINES, INC., a Delaware corporation, do constitute and appoint Gerald L. Gitner, Kathleen A. Soled and Michael J. Palumbo, and each of them, my true and lawful attorneys-in-fact, with full power of substitution and resubstitution, for me and in my name, on my behalf and in my stead, in any and all capacities, to sign, pursuant to the requirements of the Securities Exchange Act of 1934, the Annual Report on Form 10-K for TRANS WORLD AIRLINES, INC. for the fiscal year ended December 31, 1998, and to file such Annual Report on Form 10-K with the Securities and Exchange Commission, together with all exhibits thereto and other documents in connection therewith, and to sign on my behalf and in my stead, in any and all capacities, any amendments and supplements to said Annual Report on Form 10-K, incorporating such changes as any of the said attorneys-in-fact deems appropriate, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have hereunto set my hand this ______ day of March, 1999. /s/ Brent S. Miller ------------------- Brent S. Miller EX-27 12 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED FINANCIAL STATMENTS OF TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 252,408 0 184,951 14,459 99,909 605,414 860,058 240,028 2,554,623 1,002,839 735,418 578 0 119 184,625 2,554,623 0 3,259,147 0 3,324,306 0 5,711 116,918 (107,169) 243 (107,412) 0 13,069 0 (120,481) (2.35) (2.35)
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