-----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, P2Vg6LEGYp2jJzLCaN267cZpt/O9YorCG6jyKT185VCA0sJti8fg4MGvVe4YlrqF eHKIVWCCcUtNJfFr17b+HA== 0000950134-99-009986.txt : 19991117 0000950134-99-009986.hdr.sgml : 19991117 ACCESSION NUMBER: 0000950134-99-009986 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KITTY HAWK INC CENTRAL INDEX KEY: 0000932110 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, NONSCHEDULED [4522] IRS NUMBER: 752564006 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-25202 FILM NUMBER: 99751378 BUSINESS ADDRESS: STREET 1: P O BOX 612787 STREET 2: 1515 W 20TH ST CITY: DALLAS/FORT WORTH IN STATE: TX ZIP: 75261 BUSINESS PHONE: 2144562220 MAIL ADDRESS: STREET 1: P O BOX 612787 CITY: DALLAS/FORT WORTH IN STATE: TX ZIP: 75261 10-Q 1 FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1999 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-25202 KITTY HAWK, INC. (Exact name of registrant as specified in its charter) Delaware 75-2564006 (State of Incorporation) (I.R.S. Employer Identification No.) 1515 West 20th Street P.O. Box 612787 Dallas/Fort Worth International Airport, Texas 75261 (972) 456-2200 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Number of shares outstanding of the registrant's common stock, $0.01 par value, as of November 12, 1999: 17,057,071. 2 KITTY HAWK, INC. AND SUBSIDIARIES
PAGE NUMBER PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets September 30, 1999 and December 31, 1998............................ 3 Condensed Consolidated Statements of Income Three months ended September 30, 1999 and 1998 and Nine months ended September 30, 1999 and 1998....................... 4 Condensed Consolidated Statement of Stockholders' Equity Nine months ended September 30, 1999................................ 5 Condensed Consolidated Statements of Cash Flows Nine months ended September 30, 1999 and 1998....................... 6 Notes to Condensed Consolidated Financial Statements................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................ 10 Item 3. Quantitative and Qualitative Disclosures about Market Risk......... 17 PART II. OTHER INFORMATION Item 1. Legal Proceedings.................................................. 18 Item 2. Changes in Securities.............................................. 18 Item 3. Defaults upon Senior Securities.................................... 18 Item 4. Submission of Matters to a Vote of Security Holders................ 18 Item 5. Other Information.................................................. 18 Item 6. Reports on Form 8-K and Exhibits................................... 18
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) KITTY HAWK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data)
SEPTEMBER 30, DECEMBER 31, 1999 1998 ------------- ------------ ASSETS (UNAUDITED) Current assets Cash and cash equivalents ....................... $ 986 $ 15,077 Restricted cash and short-term investments ...... -- 1,964 Trade accounts receivable ....................... 100,152 140,014 Deferred income taxes ........................... 16,088 16,088 Inventory and aircraft supplies ................. 47,626 50,135 Prepaid expenses and other current assets ....... 25,989 22,871 ------------ ------------ Total current assets ........................ 190,841 246,149 Property and equipment, net .......................... 739,175 720,808 Other assets, net .................................... 16,210 15,628 ------------ ------------ Total assets ......................................... $ 946,226 $ 982,585 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable ................................ $ 38,315 $ 53,967 Accrued expenses ................................ 92,288 104,278 Accrued maintenance reserves .................... 20,967 22,382 Current maturities of long-term debt ............ 13,283 20,564 ------------ ------------ Total current liabilities ................... 164,853 201,191 Revolving credit facility ............................ 89,100 86,900 Long-term debt ....................................... 373,845 382,287 Deferred income taxes ................................ 113,261 113,261 Minority interest .................................... -- 4,749 Commitments and contingencies Stockholders' equity Preferred stock, $1 par value: Authorized shares -1,000,000; none issued ..................... -- -- Common stock, $.01 par value: Authorized shares -25,000,000; issued and outstanding -17,057,071 and 16,927,942, respectively ..... 170 169 Additional capital .............................. 134,210 133,166 Retained earnings ............................... 70,787 60,862 ------------ ------------ Total stockholders' equity .................. 205,167 194,197 ------------ ------------ Total liabilities and stockholders' equity ........... $ 946,226 $ 982,585 ============ ============
See accompanying notes. 3 4 KITTY HAWK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) (unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------------- ----------------------------- 1999 1998 1999 1998 ------------ ------------ ------------ ------------ Revenues: Air freight carrier ............................. $ 62,380 $ 82,220 $ 188,334 $ 229,496 Air logistics ................................... 52,115 39,515 123,228 95,140 Scheduled freight ............................... 59,662 43,842 158,837 120,520 Maintenance and other ........................... 9,191 6,332 19,448 24,967 ------------ ------------ ------------ ------------ Total revenues .............................. 183,348 171,909 489,847 470,123 Costs of revenues: Flight expense .................................. 86,913 80,442 216,206 219,662 Maintenance expense ............................. 31,235 39,713 101,270 104,668 Aircraft fuel expense ........................... 21,579 15,599 51,634 46,955 Depreciation expense ............................ 18,575 13,011 53,267 35,444 ------------ ------------ ------------ ------------ Total costs of revenues ..................... 158,302 148,765 422,377 406,729 ------------ ------------ ------------ ------------ Gross profit ......................................... 25,046 23,144 67,470 63,394 General and administrative expenses .................. 9,019 8,322 25,311 23,933 Non-qualified employee profit sharing expense ........ 1,347 408 1,654 990 ------------ ------------ ------------ ------------ Operating income ..................................... 14,680 14,414 40,505 38,471 Other income (expense): Interest expense ................................ (12,172) (9,581) (36,447) (28,882) Other, net ...................................... 10,959 296 12,677 1,362 ------------ ------------ ------------ ------------ Income before minority interest and income taxes ..... 13,467 5,129 16,735 10,951 Minority interest .................................... -- 1,042 196 2,473 ------------ ------------ ------------ ------------ Income before income taxes ........................... 13,467 4,087 16,539 8,478 Income tax expense ................................... 5,386 1,550 6,614 3,306 ------------ ------------ ------------ ------------ Net income ........................................... $ 8,081 $ 2,537 $ 9,925 $ 5,172 ============ ============ ============ ============ Basic and diluted income per share ................... $ 0.47 $ 0.15 $ 0.58 $ 0.30 ============ ============ ============ ============ Weighted average common shares outstanding ........... 17,047 16,925 17,008 16,820 ============ ============ ============ ============
See accompanying notes. 4 5 KITTY HAWK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (in thousands, except share data) (unaudited)
NUMBER OF COMMON ADDITIONAL RETAINED SHARES STOCK CAPITAL EARNINGS TOTAL ---------- ---------- ---------- ---------- ---------- Balance at December 31, 1998 ............. 16,927,942 $ 169 $ 133,166 $ 60,862 $ 194,197 Shares issued in connection with the Employee Stock Purchase Plan ........... 129,129 1 1,044 -- 1,045 Net income ............................... -- -- -- 9,925 9,925 ---------- ---------- ---------- ---------- ---------- Balance at September 30, 1999 ............ 17,057,071 $ 170 $ 134,210 $ 70,787 $ 205,167 ========== ========== ========== ========== ==========
See accompanying notes. 5 6 KITTY HAWK, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
NINE MONTHS ENDED SEPTEMBER 30, ----------------------------- 1999 1998 ------------ ------------ Operating activities: Net income .............................................. $ 9,925 $ 5,172 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ......................... 55,460 37,658 Gain on sales of assets ............................... (11,553) (1,130) Minority interest ..................................... 196 2,472 Changes in operating assets and liabilities: Trade accounts receivable ........................... 40,456 45,878 Inventory and aircraft supplies ..................... (11,405) (31,173) Prepaid expenses and other current assets............ (2,069) (5,161) Accounts payable and accrued expenses ............... (26,073) 5,178 Accrued maintenance reserves ........................ (6,737) 1,413 ------------ ------------ Net cash provided by operating activities .................. 48,200 60,307 Investing activities: Capital expenditures .................................... (72,659) (161,854) Redemption of short term investments .................... -- 56,847 Proceeds from sales of assets ........................... 26,246 6,444 ------------ ------------ Net cash used in investing activities ...................... (46,413) (98,563) Financing activities: Proceeds from issuance of long-term debt ................ 2,965 5,880 Repayments of long-term debt ............................ (21,043) (3,060) Net borrowings on revolving credit facility ............. 2,200 35,000 Distributions to minority interest ...................... -- (2,420) ------------ ------------ Net cash (used in) provided by financing activities......... (15,878) 35,400 ------------ ------------ Net decrease in cash and cash equivalents .................. (14,091) (2,856) Cash and cash equivalents at beginning of period ........... 15,077 17,907 ------------ ------------ Cash and cash equivalents at end of period ................. $ 986 $ 15,051 ============ ============
See accompanying notes. 6 7 KITTY HAWK, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying condensed consolidated financial statements, which should be read in conjunction with the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1998, are unaudited (except for the December 31, 1998 condensed consolidated balance sheet, which was derived from the Company's audited consolidated balance sheet included in the aforementioned Form 10-K), but have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period and nine month period ended September 30, 1999 are not necessarily indicative of the results that may be expected for the year ended December 31, 1999. 2. LEGAL PROCEEDINGS The Company is subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. While the outcome of these claims cannot be predicted with certainty, management does not believe that the outcome of any of these legal matters will have a material adverse effect on the Company's financial position or results of operations. 3. RECLASSIFICATIONS Certain balances from the prior year have been reclassified to conform to the current year presentation. 4. SEGMENT REPORTING The Company derives revenue from four related lines of business: air freight carrier services, air logistics services, scheduled freight services and maintenance services. Each of these is considered a business segment, with its respective financial performance detailed below. Included in each are intersegment transactions for revenues and costs of revenues that generally approximate market prices. Each business segment is currently evaluated by the Company's chief operating decision maker on financial performance at the operating income line. The Company's air freight carrier line of business is conducted by the Company's two FAA Part 121 airlines: a wide-body airline (Kitty Hawk International, Inc., formerly American International Airways, Inc.) and a narrow-body airline (Kitty Hawk Aircargo, Inc.). For reporting purposes, however, the air freight carrier business is reported and referred to herein as one unit. The Company's air freight carrier provides services to third parties and the Company's scheduled freight service provider under contractual arrangements where the Company provides the aircraft, crew, maintenance and insurance (ACMI). Additionally, the air freight carrier performs ad hoc charters for the Company's air logistics service provider and other governmental and commercial customers. The air freight carrier also provided passenger charters during fiscal years 1997 and 1998. The Company eliminated its passenger charter division in January 1999. The Company's air logistics services line of business is conducted by the Company's FAA Part 135 small aircraft airline, Kitty Hawk Charters, Inc. (formerly Kalitta Flying Service, Inc.). The air logistics service provider arranges the delivery of time sensitive freight within North America, principally the United States. The air logistics service provider utilizes third party aircraft as well as its own fleet of small aircraft and the fleet of the Company's two FAA Part 121 air freight carriers. The Company's scheduled freight service, Kitty Hawk Cargo, Inc. (formerly American International Cargo and American International Freight), consists of an overnight freight service provider operating in a network of over 40 North American cities utilizing a central hub location at Fort Wayne, Indiana, as well as a service between Los Angeles, the Hawaiian islands and several Pacific Rim countries. The Company's maintenance operation has in the past provided JT8 engine overhauls for third parties as well as for certain of the 7 8 Company's aircraft. On August 13, 1999, the Company completed the sale of certain maintenance-related assets and parts to a third party and at September 30, 1999 only provided engine overhauls on JT3 engines for Douglas DC-8s and small aircraft engines. (See Note 7). The other category consists of corporate activities as well as the activities of Longhorn Solutions, Inc., the Company's wholly-owned software developer/reseller and in-house management information systems service supplier. Business assets are owned by or allocated to each of the business segments. Assets included in other include cash, investment in subsidiaries and intercompany receivables.
ACMI ACMI TOTAL WIDE- NARROW- AIR FREIGHT AIR SCHEDULED BODY BODY CARRIER LOGISTICS FREIGHT OTHER ---------- ---------- ----------- ---------- ---------- ---------- (AMOUNTS IN THOUSANDS) Quarter ended September 30, 1999 Revenue from external customers $ 20,319 $ 46,872 $ 67,191 $ 56,445 $ 59,662 $ 50 Revenue from intersegment operations 37,067 10,492 47,559 770 468 232 Operating income (loss) 7,401 3,210 10,611 2,279 4,177 (2,387) Interest expense Other income (expense) Income before minority interest and taxes Total assets $ 309,497 $ 284,912 $ 594,409 $ 85,753 $ 79,076 $ 704,879 Quarter ended September 30, 1998 Revenue from external customers $ 50,125 $ 35,078 $ 85,203 $ 42,864 $ 43,842 $ -- Revenue from intersegment operations 27,720 7,386 35,106 2,669 464 -- Operating income (loss) 1,929 3,677 5,606 3,345 5,918 (455) Interest expense Other income (expense) Income before minority interest and taxes Total assets $ 630,118 $ 172,951 $ 803,069 $ 84,524 $ 27,761 $ 520,233 Nine months ended September 30, Revenue from external customers $ 69,482 $ 128,252 $ 197,734 $ 133,081 $ 158,837 $ 195 Revenue from intersegment operations 104,814 33,355 138,169 1,675 979 495 Operating income (loss) 14,086 7,531 21,617 12,691 10,466 (4,269) Interest expense Other income (expense) Income before minority interest and taxes Total assets $ 309,497 $ 284,912 $ 594,409 $ 85,753 $ 79,076 $ 704,879 Nine months ended September 30, Revenue from external customers $ 165,550 $ 80,028 $ 245,578 $ 104,025 $ 120,520 $ -- Revenue from intersegment operations 64,339 24,517 88,856 8,420 1,104 -- Operating income (loss) 9,421 12,361 21,782 8,246 9,045 (603) Interest expense Other income (expense) Income before minority interest and taxes Total assets $ 630,118 $ 172,951 $ 803,069 $ 84,524 $ 27,761 $ 520,233 INTERSEGMENT CONSOLIDATED ELIMINATIONS BALANCE ------------ ------------ (AMOUNTS IN THOUSANDS) Quarter ended September 30, 1999 Revenue from external customers $ -- $ 183,348 Revenue from intersegment operations (48,609) -- Operating income (loss) -- 14,680 Interest expense (12,172) Other income (expense) 10,959 Income before minority interest and taxes $ 13,467 Total assets $ (517,891) $ 946,226 Quarter ended September 30, 1998 Revenue from external customers $ -- $ 171,909 Revenue from intersegment operations (38,239) -- Operating income (loss) -- 14,414 Interest expense (9,581) Other income (expense) 296 Income before minority interest and taxes $ 5,129 Total assets $ (536,630) $ 898,957 Nine months ended September 30, 1999 Revenue from external customers $ -- $ 489,847 Revenue from intersegment operations (141,318) -- Operating income (loss) -- 40,505 Interest expense (36,447) Other income (expense) 12,677 Income before minority interest and taxes $ 16,735 Total assets $ (517,891) $ 946,226 Nine months ended September 30, 1998 Revenue from external customers $ -- $ 470,123 Revenue from intersegment operations (98,380) -- Operating income (loss) -- 38,471 Interest expense (28,882) Other income (expense) 1,362 Income before minority interest and taxes $ 10,951 Total assets $ (536,630) $ 898,957
The Company does not separately report results of its maintenance operation and related asset information to the Company's chief operating decision maker. Accordingly, financial data for the maintenance operation is included under the ACMI Wide-Body, ACMI Narrow-Body and Air Logistics captions above. Third party maintenance revenue included under the ACMI Wide-Body, ACMI Narrow-Body and Air Logistics captions above amounted to $2.9 million, $1.9 million and $4.3 million, respectively, for the quarter ended September 30, 1999; $3 million, $0 and $3.3 million, respectively, for the quarter ended September 30, 1998; $6 million, $3.4 million and $9.9 million, respectively, for the nine months ended September 30, 1999; and $16.1 million, $0 and $8.9 million, 8 9 respectively, for the nine months ended September 30, 1998. 5. SUPPLEMENTAL GUARANTOR INFORMATION In November 1997, the Company issued $340 million of 9.95% Senior Secured Notes (the "Notes"). Each of the Company's subsidiaries (collectively, the "Guarantors") have fully and unconditionally and jointly and severally guaranteed (the "Guarantees") on a senior basis, the full and prompt performance of the Company's obligations under the Notes. The Guarantees are limited to the largest amount that would not render such Guarantees subject to avoidance under any applicable federal or state fraudulent conveyance or similar law. The Guarantees rank senior in right of payment to any subordinated indebtedness and, except with respect to collateral, pari passu with all existing and future unsubordinated indebtedness of the Guarantors. Each of the Guarantors is a wholly owned subsidiary of the Company. The Company has not presented separate financial statements and other disclosures concerning the Guarantors because the Company's management believes that such information is not material to investors. Summary financial information is presented for Kitty Hawk, Inc., the Parent, and the Guarantors.
KITTY HAWK, SUBSIDIARIES INC. (PARENT) (GUARANTORS) ELIMINATIONS TOTAL ------------- ------------ ------------ ------------ (amounts in thousands) As of September 30, 1999 Current assets $ 14,202 $ 176,639 $ -- $ 190,841 Non-current assets 687,364 891,663 (823,642) 755,385 Current liabilities 169,328 719,758 (724,233) 164,853 Non-current liabilities 430,750 145,456 -- 576,206 Minority interest -- -- -- -- Stockholders' equity 101,490 203,087 (99,410) 205,167 As of December 31, 1998 Current assets $ 18,273 $ 227,876 $ -- $ 246,149 Non-current assets 519,434 736,824 (519,822) 736,436 Current liabilities 10,065 620,948 (429,822) 201,191 Non-current liabilities 426,900 155,548 -- 582,448 Minority interest -- -- 4,749 4,749 Stockholders' equity 100,742 188,204 (94,749) 194,197 For the three months ended September 30, 1999 Revenue $ -- $ 183,499 $ (151) $ 183,348 Gross profit -- 25,197 (151) 25,046 Operating income (loss) (2,280) 16,960 -- 14,680 Net income 209 7,872 -- 8,081 For the nine months ended September 30, 1999 Revenue $ -- $ 490,246 $ (399) $ 489,847 Gross profit -- 67,869 (399) 67,470 Operating income (loss) (3,967) 44,472 -- 40,505 Net income (loss) (290) 10,411 (196) 9,925 For the three months ended September 30, 1998 Revenue $ -- $ 171,909 $ -- $ 171,909 Gross profit -- 23,144 -- 23,144 Operating income (loss) (455) 14,869 -- 14,414 Net income (loss) 153 3,426 (1,042) 2,537 For the nine months ended September 30, 1998 Revenue $ -- $ 470,123 $ -- $ 470,123 Gross profit -- 63,394 -- 63,394 Operating income (loss) (667) 39,138 -- 38,471 Net income (loss) (61) 7,706 (2,473) 5,172
6. EARNINGS PER SHARE Earnings per share is calculated based on the weighted average number of shares outstanding during the period, taking into consideration the dilutive effect of the Company's outstanding options issued to its employees and directors to acquire the Company's common stock. As of September 30, 1999, 690,000 options were outstanding with a weighted average exercise price of $14.50 per share. As the weighted average exercise price of the outstanding options exceeded the average market price of the Company's 9 10 common stock for each of the three and nine month periods ended September 30, 1999, the effect of the stock options was excluded from the Company's diluted earnings per share calculation. 7. SALE OF MAINTENANCE FACILITIES On August 13, 1999, the Company and certain of its wholly-owned subsidiaries completed the sale of its Oscoda, Michigan-based JT8 engine and aircraft maintenance operations to TIMCO Engine Center, Inc., a wholly-owned indirect subsidiary of Aviation Sales Company. At closing, the Company received approximately $21.4 million of consideration, consisting of approximately $17.9 million of cash and $3.5 million of purchase credits. The Company and certain of its wholly-owned subsidiaries also entered into 3-year exclusive maintenance agreements with subsidiaries of Aviation Sales Company for heavy maintenance of the Company's fleet of Boeing 727s and off-wing maintenance of the Company's JT8 engines. The Company recognized a gain of approximately $8.3 million on the sale of this maintenance facility. Upon consummation of the sale, the Company ceased providing third party overhaul services on JT8 engines for Boeing 727s and Douglas DC9s. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Revenues. The Company's revenues are derived from four related lines of business: (i) air freight carrier services, (ii) air logistics services, (iii) scheduled freight services and (iv) maintenance services. The Company's air freight carrier line of business is conducted by the Company's two FAA Part 121 airlines: a wide-body airline (Kitty Hawk International, Inc., formerly American International Airways, Inc.) and a narrow-body airline (Kitty Hawk Aircargo, Inc.). For reporting purposes, however, the air freight carrier business is reported and referred to herein as one unit. The Company's air logistics services line of business is conducted by the Company's FAA Part 135 small aircraft airline. Air freight carrier revenues are derived substantially from aircraft, crew, maintenance, and insurance ("ACMI") contract charters. In addition, revenues from the Company's passenger charter service (which was eliminated in January 1999) are also included in air freight carrier revenues. Air logistics revenues are derived substantially from on-demand air freight charters arranged by the Company for its customers utilizing the flight services of third party air freight carriers as well as the Company's own fleet of small jet and prop aircraft and the fleet of the Company's two FAA Part 121 air freight carriers. Scheduled freight service revenues are generated through an overnight airport-to-airport freight service to over 40 North American cities and an international service between Los Angeles and Honolulu, among the Hawaiian islands and once a week through Melbourne, Hong Kong and other Pacific Rim locations. Maintenance revenue was previously generated from third party maintenance work performed on engines and airframes. During the fourth quarter of 1998, the Company stopped providing third party airframe repairs and engine overhaul services, other than on JT3 engines used on Douglas DC-8s and JT8 engines used on Boeing 727s and Douglas DC-9s. In August 1999, in connection with the sale of its Oscoda, Michigan-based JT8 engine and aircraft maintenance operations to Aviation Sales Company, the Company stopped providing third party engine overhaul services on JT8 engines. The principal factors that have contributed to revenue growth over the past several years have been increases in the Company's fleet from 10 aircraft at December 31, 1993 to 96 aircraft at September 30, 1999, the general U.S. economic expansion and the increased global demand for time sensitive air freight services. Costs of Revenues. The principal components of the costs of revenues are flight expense, maintenance expense, aircraft fuel expense and depreciation expense. Flight expense includes the salaries and expenses for pilots and flight operations personnel, insurance, sub-charter costs paid to third party air freight carriers and costs paid for ground handling and transportation. Maintenance expense includes salaries and expenses for maintenance personnel and maintenance on the aircraft. Aircraft fuel expense is generally applicable only to the air logistics service provider and the scheduled freight services provider because fuel for the ACMI contract charters is generally provided by the customer or billed to the customer on a direct pass-through basis. Depreciation expense includes depreciation on airframes and engines and all other property and equipment associated with the operation of each business segment. 10 11 RESULTS OF OPERATIONS The following table presents, for the periods indicated, condensed consolidated statement of operations data expressed as a percentage of total revenues:
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, -------------------------------- ------------------------------- 1999 1998 1999 1998 ---------- ---------- ---------- ---------- Revenues: Air freight carrier ....................... 34.0% 47.8% 38.4% 48.8% Air logistics ............................. 28.4 23.0 25.2 20.2 Scheduled freight service ................. 32.6 25.5 32.4 25.7 Maintenance and other ..................... 5.0 3.7 4.0 5.3 -------- -------- -------- -------- Total revenues ........................ 100.0 100.0 100.0 100.0 Costs of revenues: Flight expense ............................ 47.4 46.8 44.1 46.7 Maintenance expense ....................... 17.0 23.1 20.7 22.3 Aircraft fuel expense ..................... 11.8 9.1 10.5 10.0 Depreciation expense ...................... 10.1 7.5 10.9 7.5 -------- -------- -------- -------- Total costs of revenues ................ 86.3 86.5 86.2 86.5 -------- -------- -------- -------- Gross profit ................................... 13.7 13.5 13.8 13.5 General and administrative expenses ............ 4.9 4.9 5.2 5.1 Non-qualified employee profit sharing expense ...................................... 0.8 0.2 0.3 0.2 -------- -------- -------- -------- Operating income ............................... 8.0 8.4 8.3 8.2 Interest expense ............................... (6.6) (5.6) (7.5) (6.2) Other income ................................... 5.9 0.2 2.6 0.3 -------- -------- -------- -------- Income before minority interest and income taxes ................................. 7.3 3.0 3.4 2.3 Minority interest .............................. -- 0.6 -- 0.5 -------- -------- -------- -------- Income before income taxes ..................... 7.3 2.4 3.4 1.8 Income tax expense ............................. 2.9 0.9 1.4 0.7 -------- -------- -------- -------- Net income ..................................... 4.4% 1.5% 2.0% 1.1% ======== ======== ======== ========
QUARTER ENDED SEPTEMBER 30, 1999 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1998 Revenues - Air Freight Carrier. Air freight carrier revenues decreased $19.8 million, or 24.1%, to $62.4 million in the quarter ended September 30, 1999, from $82.2 million in the quarter ended September 30, 1998. This decrease was primarily attributable to (i) the elimination of the Company's passenger charter division, which contributed $18 million of revenue in the quarter ended September 30, 1998, (ii) the shift of one Boeing 747 aircraft from air freight carrier service to scheduled freight service and (iii) a reduction in block hours flown by Douglas DC-8s as the Company positions itself to retire 13 of these aircraft due to FAA noise abatement regulations. This decrease was partially offset by revenue from two additional Boeing 747s added to the fleet after September 30, 1998. Additionally, the Company shifted six Boeing 727 aircraft from scheduled freight service to air freight carrier service with the award of the United States Postal Service ("USPS") W-Net contract in August 1999. The Company also implemented selective price increases for some of its ACMI contract charters. Revenues - Air Logistics. Air logistics revenues increased $12.6 million, or 31.9%, to $52.1 million in the quarter ended September 30, 1999, from $39.5 million in the quarter ended September 30, 1998. Although prices for the Company's air logistics services remained relatively constant, the average revenue per trip increased from $6,286 for the quarter ended September 30, 1998, to $8,631 for the quarter ended September 30, 1999, due to a change in the mix of aircraft used. The overall number of trips managed by the air logistics service provider decreased from 6,286 in the quarter ended September 30, 1998 to 6,038 in the quarter ended September 30, 1999, a 3.9% decrease. Revenues - Scheduled Freight. Scheduled freight revenues increased $15.8 million, or 36%, to $59.7 million in the quarter ended September 30, 1999, from $43.8 million in the quarter ended September 30, 1998. This increase was primarily due to (i) several price increases since September 30, 1998, (ii) adding another Boeing 747 into international scheduled service in May 1999 and (iii) adding a fifth night to certain domestic scheduled routes effective June 1, 1999. Freight volumes in the scheduled freight operation increased approximately 11.4% from the quarter ended September 30, 1998, as compared to the quarter ended September 30, 1999 due to the additional flight activity. The average yield per pound increased 22%, from $0.54 per pound for the quarter ended September 30, 1998 to $0.66 per pound for the quarter ended September 30, 1999. 11 12 Revenues - Maintenance and Other. Maintenance and other revenues increased $2.9 million, or 45.2%, to $9.2 million in the quarter ended September 30, 1999, from $6.3 million in the quarter ended September 30, 1998. The increase is due to increased activity in the JT3 engine shop and the small engine shop as well as a push to complete the open JT8 engine work prior to the sale of the Oscoda, Michigan maintenance operations. Costs of Revenues - Flight Expense. Flight expense increased 8% to $86.9 million in the quarter ended September 30, 1999, from $80.4 million in the quarter ended September 30, 1998. As a percent of revenues, flight expense increased to 47.4% for the quarter ended September 30, 1999, as compared to 46.8% for the quarter ended September 30, 1998. This increase as a percent of revenues was primarily due to a $15.3 million increase in flight expense attributable to the Company's air logistics service provider due to an increase in the number of large aircraft trips during the quarter ended September 30, 1999. This increase was offset by (i) the elimination of the passenger charter division (which resulted in reduced wages, catering expense, subcharter expense and ground handling costs, a savings of $5.7 million), (ii) a general reduction in crew travel costs and (iii) an overall reduction in subcharter expense as fewer Company aircraft were out of service for maintenance activities. Costs of Revenues - Maintenance Expense. Maintenance expense decreased $8.5 million, or 21.4%, to $31.2 million in the quarter ended September 30, 1999, from $39.7 million in the quarter ended September 30, 1998. The decrease is primarily due to a decrease of approximately $5 million in personnel costs, parts expense and facility expense associated with the sale of the maintenance operation in Oscoda, Michigan and an overall decrease in maintenance related to the parking of the four passenger aircraft in January 1999 and five Douglas DC-8 aircraft during the first nine months of 1999. As a percent of revenues, maintenance expense decreased from 23.1% for the quarter ended September 30, 1998 to 17.0% for the quarter ended September 30, 1999. Costs of Revenues - Aircraft Fuel Expense. Aircraft fuel expense increased $6 million, or 38.3%, to $21.6 million in the quarter ended September 30, 1999, from $15.6 million in the quarter ended September 30, 1998. As a percent of revenues, aircraft fuel expense increased from 9.1% for the quarter ended September 30, 1998 to 11.8% for the quarter ended September 30, 1999. This increase is primarily due to a 34% increase in fuel prices from an average price of $0.59 per gallon for the quarter ended September 30, 1998 as compared to an average price of $0.79 per gallon for the quarter ended September 30, 1999. Fuel expense has also increased due to increased flight activity for the Company's scheduled freight and air logistics operations and two USPS contracts, where fuel costs are not directly passed through to the USPS. The increase in fuel expense was partially offset by the elimination of the Company's passenger charter business, which resulted in a savings of $2.9 million in the quarter ended September 30, 1999. Costs of Revenues - Depreciation Expense. Depreciation expense increased $5.6 million, or 42.8%, to $18.6 million in the quarter ended September 30, 1999, from $13 million in the quarter ended September 30, 1998. As a percent of revenues, depreciation expense increased from 7.6% for the quarter ended September 30, 1998 to 10.2% for the quarter ended September 30, 1999. This increase is primarily due to the depreciation of capital expenditures of approximately $129 million since September 30, 1998, consisting principally of (i) cargo modifications to two Boeing 747s and two Boeing 727s, (ii) engine overhauls and (iii) noise abatement modifications to the Company's Boeing 727 fleet. General and Administrative Expenses. General and administrative expenses increased $0.7 million, or 8.4%, to $9 million in the quarter ended September 30, 1999, from $8.3 million in the quarter ended September 30, 1998. As a percentage of total revenues, general and administrative expenses increased to 4.9% in the quarter ended September 30, 1999, as compared to 4.8% for the quarter ended September 30, 1998, principally reflecting an increase in administrative personnel and professional fees. Operating Income. As a result of the above, operating income increased $0.3 million to $14.7 million in the quarter ended September 30, 1999, from $14.4 million in the quarter ended September 30, 1998. Operating income margin decreased to 8% in the quarter ended September 30, 1999, from 8.4% in the quarter ended September 30, 1998. Interest Expense. Interest expense increased to $12.2 million for the quarter ended September 30, 1999, from $9.6 million for the quarter ended September 30, 1998, a 27% increase. The increase was primarily the result of increased borrowings on the Company's Credit Facility, an increase of $44.1 million from September 30, 1998, and an overall increase in the interest rate under the December 10, 1998 amendment to the Credit Facility. Additionally, approximately $1.4 million of interest expense was capitalized during the quarter ended September 30, 1998 in connection with funds used in the cargo modification of one Boeing 747. Other income increased from $0.3 million for the quarter ended September 30, 1998, to $11 million for the quarter ended September 30, 1999. The increase was primarily the result of $8.3 million of gain recognized on the sale of the Company's maintenance facility in Oscoda, Michigan and $2.3 million of gain recognized on the sale of the Company's 1/3 interest in four Falcon aircraft. 12 13 Income Tax Expense. Income tax expense as a percentage of income before income taxes was 40% for the quarter ended September 30, 1999, as compared to 38% for the quarter ended September 30, 1998. This increase reflects a change in the mix of state income taxes payable and the impact of non-deductible crew travel costs. Net Income. As a result of the above, the Company's net income increased to $8.1 million in the quarter ended September 30, 1999, as compared to net income of $2.5 million in the quarter ended September 30, 1998. Net income as a percentage of total revenues increased to 4.4% in the quarter ended September 30, 1999, from 1.5% in the quarter ended September 30, 1998. NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1998 Revenues - Air Freight Carrier. Air freight carrier revenues decreased $41.2 million, or 18%, to $188.3 million in the nine months ended September 30, 1999, from $229.5 million in the nine months ended September 30, 1998. This decrease was primarily attributable to (i) the elimination of the Company's passenger charter division, which contributed $46.8 million of revenue in the nine months ended September 30, 1998, (ii) the shift of one Boeing 747 from air freight carrier service to scheduled freight service and (iii) an overall reduction in block hours flown by Douglas DC-8s as the Company positions itself to retire 13 of these aircraft due to FAA noise abatement regulations. This decrease was partially offset by two additional Boeing 747s placed into cargo service after September 30, 1998 and increased utilization of aircraft during non-peak cargo hours. Additionally, the Company shifted six Boeing 727 aircraft from scheduled freight service to air freight carrier service with the award of the USPS W-Net contract in August 1999. The Company also implemented selective price increases for some of its ACMI contract charters. Revenues - Air Logistics. Air logistics revenues increased $28.1 million, or 29.5%, to $123.2 million in the nine months ended September 30, 1999, from $95.1 million in the nine months ended September 30, 1998. This increase was primarily due to an increase in the number of trips managed from 15,317 in the nine months ended September 30, 1998 to 18,065 in the nine months ended September 30, 1999, a 17.9% increase. Although prices for the Company's air logistics services remained relatively constant, the average revenue per trip increased 9.8% due to the mix of the aircraft used for the trips. Revenues - Scheduled Freight. Scheduled freight revenues increased $38.3 million, or 31.8%, to $158.8 million in the nine months ended September 30, 1999, from $120.5 million in the nine months ended September 30, 1998. This increase was primarily due to (i) several price increases since September 30, 1998, (ii) adding another Boeing 747 aircraft into international scheduled service in May 1999 and (iii) adding a fifth night to certain domestic scheduled routes effective June 1, 1999. Freight volumes in the scheduled freight operation increased 7.3% in the nine months ended September 30, 1999 as compared to the nine months ended September 30, 1998 due to the additional flight activity. The average yield per pound increased 21.6%, from $0.51 per pound for the nine months ended September 30, 1998, to $0.62 per pound for the nine months ended September 30, 1999. Revenues - Maintenance and Other. Maintenance and other revenues decreased $5.5 million, or 22.1%, to $19.4 million in the nine months ended September 30, 1999, from $25 million in the nine months ended September 30, 1998. This decrease was primarily due to the Company's discontinuation of providing third party airframe repairs and engine overhaul services (other than on JT3 engines used on Douglas DC-8s) on JT8 engines used on Boeing 727s and Douglas DC-9s. In August 1999, the Company sold the maintenance facility used to overhaul JT8 engines. Costs of Revenues - Flight Expense. Flight expense decreased $3.5 million, or 1.6%, to $216.2 million in the nine months ended September 30, 1999, from $219.7 million in the nine months ended September 30, 1998. As a percent of revenues, flight expense decreased to 44.1% for the nine months ended September 30, 1999 as compared to 46.7% for the nine months ended September 30, 1998. This decrease was primarily due to (i) the elimination of the passenger charter division (which resulted in reduced wages, catering expenses, subcharter expenses and ground handling costs, a savings of $14.8 million), (ii) a general reduction in crew travel costs and (iii) an overall reduction in subcharter expense as fewer Company aircraft were out of service for maintenance activities. These decreases were partially offset by a $23.4 million increase in flight expense attributable to the air logistics service due to an increase in the number of trips. Costs of Revenues - Maintenance Expense. Maintenance expense decreased $3.4 million, or 3.2%, to $101.3 million in the nine months ended September 30, 1999, from $104.7 million in the nine months ended September 30, 1998. The decrease is primarily due to a decrease of approximately $5 million in personnel costs, parts expense, and facility expense associated with the sale of the maintenance operation in Oscoda, Michigan and an overall decrease in maintenance related to the parking of the four passenger aircraft in January 1999 and five Douglas DC-8 aircraft during the first nine months of 1999. As a percent of revenues, maintenance expense decreased from 22.3% for the nine months ended September 30, 1998, to 20.7% for the nine months ended September 30, 1999. 13 14 Costs of Revenues - Aircraft Fuel Expense. Aircraft fuel expense increased $4.7 million, or 10%, to $51.6 million in the nine months ended September 30, 1999, from $47 million in the nine months ended September 30, 1998. As a percent of revenues, aircraft fuel expense increased from 10% for the nine months ended September 30, 1998, to 10.6% for the nine months ended September 30, 1999. Average fuel prices remained fairly consistent at $0.68 per gallon for the nine months ended September 30, 1999 as compared to $0.67 per gallon for the nine months ended September 30, 1998. The increase in fuel expense is primarily due to increased flight activity for the Company's scheduled freight service during the middle of 1999 (adding one additional Boeing 747 and the fifth night of service for some domestic routes), increased number of trips in the air logistics service provider, and two USPS contracts, where fuel costs are not directly passed through to the USPS. This increase is offset by the Company no longer incurring aircraft fuel expense from its passenger charter business, which resulted in a savings of $7 million in the nine months ended September 30, 1999. Costs of Revenues - Depreciation Expense. Depreciation expense increased $17.8 million, or 50.3%, to $53.3 million in the nine months ended September 30, 1999, from $35.4 million in the nine months ended September 30, 1998. As a percent of revenues, depreciation expense increased from 7.5% for the nine months ended September 30, 1998 to 10.9% for the nine months ended September 30, 1999. This increase is primarily due to the depreciation of capital expenditures of approximately $129 million since September 30, 1998, consisting principally of (i) cargo modifications to two Boeing 747s and two Boeing 727s, (ii) engine overhauls and (iii) noise abatement modifications to the Company's Boeing 727 fleet. General and Administrative Expenses. General and administrative expenses increased $1.4 million, or 5.8%, to $25.3 million in the nine months ended September 30, 1999, from $23.9 million in the nine months ended September 30, 1998. As a percentage of total revenues, general and administrative expenses increased to 5.2% in the nine months ended September 30, 1999, as compared to 5.1% for the nine months ended September 30, 1998. The increase was principally due to an increase in administrative personnel and professional fees. Operating Income. As a result of the above, operating income increased $2 million to $40.5 million in the nine months ended September 30, 1999, from $38.5 million in the nine months ended September 30, 1998. Operating income margin increased to 8.3% in the nine months ended September 30, 1999, from 8.2% in the nine months ended September 30, 1998. Interest Expense. Interest expense increased to $36.4 million for the nine months ended September 30, 1999, from $28.9 million for the nine months ended September 30, 1998, a 26.2% increase. The increase was primarily the result of increased borrowings on the Company's Credit Facility, an increase of $44.1 million from September 30, 1998, and an overall increase in the interest rate under the December 10, 1998 amendment to the Credit Facility. Additionally, approximately $3 million of interest expense was capitalized during the nine months ended September 30, 1998 in connection with funds used in the cargo modification of one Boeing 747. Other income increased from $1.4 million for the nine months ended September 30, 1998, to $12.7 million for the nine months ended September 30, 1999. The increase was primarily the result of $8.3 million of gain recognized on the sale of the Company's maintenance facility in Oscoda, Michigan and $2.3 million of gain recognized on the sale of the Company's 1/3 interest in four Falcon aircraft. Income Tax Expense. Income tax expense as a percentage of income before income taxes was 40% for the nine months ended September 30, 1999, as compared to 39% for the nine months ended September 30, 1998. This increase reflects a change in the mix of state income taxes payable and the impact of non-deductible crew travel costs. Net Income. As a result of the above, the Company's net income increased to $9.9 million in the nine months ended September 30, 1999, compared to a net income of $5.2 million in the nine months ended September 30, 1998. Net income as a percentage of total revenues increased to 2.0% in the nine months ended September 30, 1999, from 1.1% in the nine months ended September 30, 1998. LIQUIDITY AND CAPITAL RESOURCES The Company's capital requirements are primarily for the acquisition and modification of aircraft and working capital. In addition, the Company has, and will continue to have, capital requirements for the requisite periodic and major overhaul maintenance checks for its fleet and for debt service. The Company also has seasonal working capital needs, because it generates higher revenue in the fourth calendar quarter and lower revenue in the first calendar quarter. Funding requirements have historically been met through internally generated funds, bank borrowings and aircraft and other asset sales and from public and private offerings of equity and debt securities. From time to time, the Company has entered into sale/leaseback transactions to acquire aircraft and may do so in the future. 14 15 In November 1997, the Company issued $340 million of 9.95% Senior Secured Notes (the "Notes"), resulting in net proceeds to the Company of approximately $329.1 million. The Notes provide for semi-annual interest payments of approximately $16.9 million on each May 15 and November 15 and mature in November 2004. The Notes are secured by a fleet of 30 aircraft, including nine Boeing 747s, eight Lockheed L-1011s and 13 Boeing 727s. The Notes are guaranteed by all of the Company's subsidiaries. The Company has a $38.7 million outstanding Term Loan. The Term Loan is due in quarterly installments of $2.25 million, with the balance of $12.5 million due upon maturity in September 2002. Except as noted below, interest on the Term Loan accrues at LIBOR plus 3% or a Base Rate plus 1.5%, subject to reduction. The Base Rate is the higher of the Prime Rate of Wells Fargo Bank, N.A. (Texas) ("WFB") or the Federal Funds Rate plus 0.5%. As of September 30, 1999, the interest rate was 8.8%. Except as provided below, the Term Loan is secured by accounts receivable, all spare parts (including rotables), inventory, intangibles and contract rights, cash, 15 Boeing 727s and related engines and the stock of each of the Company's subsidiaries. The Term Loan is guaranteed by all of the Company's subsidiaries. In addition, to fund ongoing capital requirements, including possible acquisitions, the Company has entered into a Credit Facility with WFB, individually and as agent for various lenders. The Credit Facility provides the Company with up to $100 million in revolving loans (subject to a current borrowing base limitation of $100 million, including an increase of $30 million to the borrowing base as a result of an amendment to the Credit Facility (the "Amendment") on December 10, 1998) that is secured by the same collateral as the Term Loan. Except as provided below, the Credit Facility bears interest at LIBOR plus 2.75% or a Base Rate plus 1.25%, subject to adjustment. The Base Rate is the higher of WFB's Prime Rate or the Federal Funds Rate plus 0.5%. Borrowings under the Credit Facility are subject to borrowing base limitations based on eligible inventory and accounts receivable. The Credit Facility matures in November 2002. As of September 30, 1999, the Company had a balance of $89.1 million outstanding under the Credit Facility bearing interest at a weighted average rate of 9% and available borrowings under the Credit Facility of approximately $10.5 million. Borrowings under the Credit Facility and Term Loan are subject to certain financial covenants. As of September 30, 1999, the Company was in compliance with all such financial covenants. In connection with the Amendment, the Company pledged 11 Douglas DC-8-60s and eight Douglas DC-8-50s under the Credit Facility and the Term Loan. The Company can request WFB to release its liens on the Douglas DC-8-50 aircraft at any time in connection with a sale of the aircraft for full and fair consideration. With respect to the Douglas DC-8-60 aircraft, the Company can request WFB to release its liens on the Douglas DC-8-60s after first repaying the amount borrowed, if any, under the Amendment's $30 million increase to the borrowing base. Prior to December 31, 1999, WFB is not obligated to release its liens on the Douglas DC-8-60s except in connection with a sale of the aircraft for full and fair consideration. After December 31, 1999, WFB is not obligated to release its liens on the Douglas DC-8-60s unless the Company meets specified financial criteria. The Amendment's increase in the borrowing base is available through January 1, 2000, subject to earlier termination by the Company (the "Loan Pricing Increase Period"). During the Loan Pricing Increase Period, the interest rate of the Term Loan and the Credit Facility is either the Prime Rate of WFB plus 1.75% or LIBOR plus 3.25%, regardless of financial covenant performance. Upon termination of this borrowing base increase, the interest rates on the Term Loan and the Credit Facility revert to those stated above. The Company is currently working to convert the $30 million increase in the borrowing base availability to a 5 year term loan or to enter into a sale/leaseback arrangement with the assets securing the $30 million increased borrowing base availability. Capital expenditures were $72.6 million and $161.9 million for the nine months ended September 30, 1999 and 1998, respectively. Capital expenditures for the nine months ended September 30, 1999 were primarily for (i) modification of one Boeing 727 to cargo configuration, (ii) noise abatement modifications for six Boeing 727s, (iii) engine overhauls, (iv) heavy maintenance checks on three Boeing 727s and (v) purchase of rotable aircraft parts. Capital expenditures for the nine months ended September 30, 1998 were primarily for (i) the purchase of two Boeing 747s, (ii) cargo modifications to two Boeing 747s and one Boeing 727, (iii) heavy maintenance checks on three Boeing 727s, (iv) noise abatement modifications for ten Boeing 727s, (v) engine overhauls, (vi) the purchase of 15 engines, (vii) improvements to new office space at Dallas/Fort Worth International Airport and (viii) the purchase of rotable aircraft parts. During the remainder of 1999, the Company estimates that capital expenditures will be, in the aggregate, between $20 and $25 million and that it will make substantial capital expenditures thereafter. During the remainder of 1999, the Company anticipates capital expenditures of approximately $5 million for noise abatement modifications to one Douglas DC-9 and three Boeing 727 aircraft currently owned. The entire fleet must comply with Federal Aviation Administration ("FAA") noise regulations by the year 2000. In the event more aircraft are acquired, anticipated capital expenditures for noise abatement modifications could materially increase. 15 16 Service bulletins and directives issued under the FAA's "Aging Aircraft" program or issued on an ad hoc basis cause certain of the Company's aircraft to be subject to extensive aircraft examinations and/or structural inspections and modifications to address problems of corrosion and structural fatigue, among other things. Directives applicable to the Company's fleet can be issued at any time. The cost of complying with such potential future directives cannot currently be estimated, but could be substantial. The Company operates a fleet of 32 Boeing 727s, all of which were previously converted from passenger configuration to cargo configuration by the installation of a large cargo door and numerous interior modifications related to the installation of cargo container handling systems. The FAA has issued a Directive which limits the cargo capacity of these Boeing 727s from approximately 8,000 pounds per cargo position to 4,000 pounds per cargo position until certain modifications are made. The Company received approval from the FAA to modify its fleet of Boeing 727s to increase their cargo capacity to approximately 6,000 pounds per cargo position. The modifications are expected to take from three to four days to complete and to cost between $25,000 and $50,000 per aircraft, not including aircraft downtime. The costs incurred to modify the aircraft are expensed as incurred. As of October 31, 1999, the Company had 16 aircraft left to modify. In October 1999, Kitty Hawk International, Inc. ("KHII") and the pilots and flight engineers in the service of KHII, represented by the International Brotherhood of Teamsters, entered into a Collective Bargaining Agreement (the "CBA") governing the terms and conditions of employment of KHII's pilots and flight engineers for a period of four years. The CBA calls for an increase in the pilot's and flight engineer's pay, however, KHII expects the increased salary expenses will be partially offset by reduced expenses attributable to better work rules and pilot productivity. The Company does not believe that the net increase in flight expenses resulting from the CBA will have a material adverse effect on the Company and its financial results. The Company believes that available funds, bank borrowings and cash flows expected to be generated by operations and through planned asset sales will be sufficient to meet its anticipated cash needs for working capital, debt service and capital expenditures for at least the next 12 months. Thereafter, if cash generated by operations is insufficient to satisfy the Company's liquidity requirements, the Company may sell additional equity or debt securities or obtain additional credit facilities. However, there can be no assurance that the Company will be able to sell any additional equity or debt securities or obtain additional credit facilities. Notwithstanding the foregoing, the Company may sell additional equity or debt securities or obtain additional credit facilities at any time. YEAR 2000 The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions or engage in normal business activities. Based on recent assessments, the Company determined that it will be required to modify or replace portions of its software so that those systems will properly utilize dates beyond December 31, 1999. The Company presently believes that with modifications or replacements of existing software the Year 2000 issue can be mitigated. However, if such modifications and replacements are not made, or are not completed timely, the Year 2000 issue could have a material impact on the operations of the Company. The Company's plan to resolve the Year 2000 issue involves the following four phases: assessment, remediation, testing and implementation. To date, the Company has completed its assessment of all systems that could be significantly affected by the Year 2000. The assessment indicates that most of the Company's significant information technology systems could be affected. The Company has determined that most of the services it has sold and will continue to sell do not require remediation to be Year 2000 compliant. Accordingly, the Company does not believe that the Year 2000 presents a material exposure as it relates to the Company's services. In addition, the Company has substantially completed gathering information about the Year 2000 compliance status of its significant suppliers and subcontractors and will continue to monitor their compliance. With regard to the Company's information technology exposure, to date the Company has completed the assessment phase and has completed substantially all of the necessary software reprogramming and replacement (remediation). The testing and implementation phases of the replaced or reprogrammed software have been running concurrently for different systems. The testing and remediation phase for all significant systems is expected to be completed by the end of November 1999. The Company has substantially completed working with third party vendors to ensure that any of the Company's systems that interface directly with third parties are Year 2000 compliant by November 30, 1999. 16 17 The Company has substantially completed querying its significant suppliers and subcontractors that do not share information systems with the Company ("external agents"). To date, the Company is not aware of any external agent with a Year 2000 issue that would materially impact the Company's results of operations, liquidity, or capital resources although the Company understands that certain fuel refiners may be particularly susceptible to disruption caused by non-compliant embedded chips and that certain electrical power suppliers may be similarly affected. The Company has no means of ensuring that external agents will be Year 2000 ready. The inability of certain external agents, such as the FAA, fuel refiners and suppliers generally, and electrical power suppliers, to complete their Year 2000 resolution process in a timely fashion could materially impact the Company. The effect of non-compliance by external agents is not determinable. The Company is utilizing both internal and external resources to reprogram or replace, test, and implement the software and operating equipment for Year 2000 modifications. The total cost of the Year 2000 project is estimated at less than $500,000 and is being funded through operating cash flows. As of October 1, 1999, the Company has incurred approximately $390,000 related to all phases of the Year 2000 project. The remaining project costs relate to repair of hardware and software and will be expensed as incurred. Management of the Company believes it has an effective program in place to resolve the Year 2000 issue in a timely manner. However, it is possible that the Company's or third parties' systems and equipment could fail and result in the reduction or suspension of the Company's operations. As noted above, the Company has not yet completed all necessary phases of the Year 2000 program. Disruptions in the economy generally resulting from Year 2000 issues could materially adversely affect the Company. The amount of potential liability and lost revenue cannot be reasonably estimated at this time. The Company currently has no contingency plans in place in the event it does not complete all phases of the Year 2000 program or for dealing with the most reasonably likely worst case scenario. The Company plans to evaluate the status of completion in November 1999 and determine whether such a plan is necessary. If the Company's expectations or assessments of the impact of the Year 2000 issue prove to be incorrect, the Company's business may be materially affected. SEASONALITY Certain of the Company's customers engage in seasonal businesses, especially the USPS and customers in the automotive industry. As a result, the Company has historically experienced its highest quarterly revenues and profitability during the fourth quarter of the calendar year due to the peak Christmas season activity of the USPS and during the period from June 1 to November 30 when production schedules of the automotive industry typically increase. Consequently, the Company experiences its lowest quarterly revenue and profitability during the first quarter of the calendar year. FORWARD-LOOKING STATEMENTS In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements, which can be identified by the use of forward looking terminology, such as "may," "will," "expect," "could," "anticipate," "estimate" or "continue" or the negative thereof or other variations thereon or comparable terminology. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those referred to in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Factors That May Affect Future Results" of the Company's 1998 Annual Report on Form 10-K. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. We undertake no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Readers should carefully review the risk factors described in other documents we file from time to time with the Securities and Exchange Commission. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For the period ended September 30, 1999, the Company did not experience any material changes in market risk exposures that affect the quantitative and qualitative disclosures presented in the Company's 1998 Annual Report on Form 10-K. 17 18 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable. ITEM 2. CHANGES IN SECURITIES Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. OTHER INFORMATION Not applicable. ITEM 6. REPORTS ON FORM 8-K AND EXHIBITS (a) Reports on Form 8-K: Not applicable. (b) Exhibits: The following exhibits are filed herewith or are incorporated by reference from previous filings with the Securities and Exchange Commission. EXHIBIT NO. DESCRIPTION 3.1 - Certificate of Incorporation of the Company.(2) 3.2 - Amended and Restated Bylaws of the Company.(4) 3.3 - Amendment No. 1 to the Certificate of Incorporation of the Company.(2) 4.1 - Specimen Common Stock Certificate.(3) 4.3 - Specimen Global Note in respect of 9.95% Senior Secured Notes due 2004.(4) 4.4 - Indenture, dated November 17, 1997, in regard to 9.95% Senior Secured Notes due 2004 by and among the Company and certain of its subsidiaries and Bank One, N.A. as Trustee and Collateral Trustee.(4) 4.5 - First Supplemental Indenture, dated February 5, 1998, in regard to 9.95% Senior Secured Notes due 2004 by and among the Company and certain of its subsidiaries and Bank One, N.A. as Trustee and Collateral Trustee.(4) 10.1 - Agreement dated October 30, 1999, between Kitty Hawk International, Inc. and the Pilots and Flight Engineers in the service of Kitty Hawk International, Inc. as represented by the International Brotherhood of Teamsters.(1) 18 19 21.1 - Subsidiaries of the Registrant.(4) 27.1 - Financial Data Schedule.(1) - ----------------- (1) Filed herewith. (2) Previously filed as an exhibit to the Company's Registration Statement on Form S-1 (Reg. No. 33-85698) dated as of December 1994, and incorporated herein by reference. (3) Previously filed as an exhibit to the Company's Registration Statement on Form S-1 (Reg. No. 333-8307) dated as of October 1996, and incorporated herein by reference. (4) Previously filed as an exhibit to the Company's Registration Statement on Form S-4 (Reg. No. 333-43645) dated as of February 1998, and incorporated herein by reference. 19 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November 12, 1999. KITTY HAWK, INC. By: /s/ Richard R. Wadsworth ------------------------------ Richard R. Wadsworth, Jr. Senior Vice President - Finance, Chief Financial Officer, and Secretary (Authorized officer and principal financial and accounting officer) 21 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------- ----------- 3.1 - Certificate of Incorporation of the Company.(2) 3.2 - Amended and Restated Bylaws of the Company.(4) 3.3 - Amendment No. 1 to the Certificate of Incorporation of the Company.(2) 4.1 - Specimen Common Stock Certificate.(3) 4.3 - Specimen Global Note in respect of 9.95% Senior Secured Notes due 2004.(4) 4.4 - Indenture, dated November 17, 1997, in regard to 9.95% Senior Secured Notes due 2004 by and among the Company and certain of its subsidiaries and Bank One, N.A. as Trustee and Collateral Trustee.(4) 4.5 - First Supplemental Indenture, dated February 5, 1998, in regard to 9.95% Senior Secured Notes due 2004 by and among the Company and certain of its subsidiaries and Bank One, N.A. as Trustee and Collateral Trustee.(4) 10.1 - Agreement dated October 30, 1999, between Kitty Hawk International, Inc. and the Pilots and Flight Engineers in the service of Kitty Hawk International, Inc. as represented by the International Brotherhood of Teamsters.(1) 21.1 - Subsidiaries of the Registrant.(4) 27.1 - Financial Data Schedule.(1)
- ----------------- (1) Filed herewith. (2) Previously filed as an exhibit to the Company's Registration Statement on Form S-1 (Reg. No. 33-85698) dated as of December 1994, and incorporated herein by reference. (3) Previously filed as an exhibit to the Company's Registration Statement on Form S-1 (Reg. No. 333-8307) dated as of October 1996, and incorporated herein by reference. (4) Previously filed as an exhibit to the Company's Registration Statement on Form S-4 (Reg. No. 333-43645) dated as of February 1998, and incorporated herein by reference. EX-10.1 2 AGREEMENT DATED OCTOBER 30, 1999 1 EXHIBIT 10.1 AGREEMENT BETWEEN KITTY HAWK INTERNATIONAL, INC. AND THE PILOTS AND FLIGHT ENGINEERS IN THE SERVICE OF KITTY HAWK INTERNATIONAL, INC. AS REPRESENTED BY THE INTERNATIONAL BROTHERHOOD OF TEAMSTERS, AIRLINE DIVISION This Agreement is made and entered into in accordance with the provisions of the Railway Labor Act, as amended, by and between Kitty Hawk International, Inc., hereinafter known as the "Company" and the Pilots and Flight Engineers, hereinafter known as the "Crewmembers", in the service of the Company as represented by the International Brotherhood of Teamsters, Airline Division, hereinafter known as the "Union". 2 SECTION 1 - RECOGNITION, PURPOSE, SCOPE AND MERGERS 1.1. RECOGNITION Pursuant to the certification by the National Mediation Board in Case Numbers R-6152 (Pilots) and R-6145 (Flight Engineers) dated December 17, 1992, the Company recognizes the Union as the duly designated and authorized representative of the Crewmembers in the employ of the Company for the purposes of the Railway Labor Act, as amended. 1.2. PURPOSE OF AGREEMENT In the mutual interests of the Crewmembers, the Union and the Company, the purpose of this Agreement is to provide for orderly collective bargaining relations between the Company and the Union, a method for the prompt and equitable disposition of grievances, and a method for the establishment of rates of pay, rules and working conditions for the Crewmembers. In making this Agreement, it is recognized to be the duty of the Union, the Crewmembers and the Company to cooperate fully for the advancement of the purpose of this Agreement. 1.3. SOLE AGREEMENT This Agreement supersedes all existing or previously executed agreements between the Company and the Union or any other labor organization or individual with respect to the rates of pay, rules and working conditions covered by this Agreement in accordance with the provisions of the Railway Labor Act, as amended. Any and all subsequent modifications to this Agreement will be reduced to writing, signed by the appropriate authorized representatives, and become a part of this Agreement. 1.4. SCOPE 1.4.1. FLYING PERFORMED BY CREWMEMBERS All present and future flying performed in and for the service of the Company under FAR Part 121, and all ferry flights under FAR Part 91 for the purpose of positioning to or depositioning from a revenue trip in aircraft listed by tail number on the Company's Operations Specifications issued by the FAA will be performed by full-time Crewmembers on the Seniority Lists in accordance with the terms and conditions of this Agreement. If the Company enters into code sharing or interchange arrangements with other airlines, Crewmembers will not be furloughed as a direct result of such arrangements. 1.4.2. CREWMEMBERS TEMPORARILY ASSIGNED OUT OF SENIORITY When short-term flying requirements or the introduction of new or additional aircraft into service requires the immediate use of current and qualified crewmembers and a sufficient number of Crewmembers on the Seniority Lists are not available, the Company may operate such aircraft with Crewmembers temporarily assigned out of seniority. Crewmembers temporarily assigned out of seniority will be covered by the terms of this Agreement. Use of Crewmembers temporarily assigned out of seniority will be subject to the following: -2- 3 1.4.2.1. INTRODUCTION OF NEW AIRCRAFT When the Company introduces new aircraft, up to two hundred seventy (270) Days, unless mutually extended by the Company and the Union. 1.4.2.2. INTRODUCTION OF ADDITIONAL AIRCRAFT When the Company introduces additional aircraft, up to one hundred eighty (180) Days. 1.4.2.3. SHORT-TERM FLYING REQUIREMENTS When the Company has short-term flying requirements, up to one hundred eighty (180) Days. 1.4.2.4. TRAINING OF CREWMEMBERS In the case of introduction of new aircraft or introduction of additional aircraft, within the time limits set forth in subsection 1.4.2.1. and subsection 1.4.2.2., above, the Company will conduct Training for Crewmembers who have been awarded the positions held by Crewmembers temporarily assigned out of seniority as soon as practical, taking into account safety, crew pairing and availability of Training support. 1.4.2.5. EXPIRATION OF TIME LIMITS At the expiration of the time limits set forth above or when the requirement for temporarily assigned out-of-seniority Crewmembers ceases, whichever is sooner, Crewmembers temporarily assigned out-of-seniority will be displaced from their out of seniority positions and those positions will be filled in accordance with Section 16. 1.4.2.6. PAY PROTECTION Beginning with the successful completion of OE by Crewmembers temporarily assigned out of seniority, each Crewmember not upgraded or transitioned because of the application of this provision will be pay protected in seniority order, on a one-for-one basis. 1.4.2.7. NO REDUCTIONS No Crewmember will be reduced in Crew Class or suffer any loss of MBPG or benefits as a result of the use of such temporarily assigned Crewmembers. 1.4.3. WET LEASE IN If the Company's operational requirements necessitate the Wet Lease of additional aircraft in order to provide service to its customers or potential customers or the expansion of its markets, the following applies: 1.4.3.1. UNION NOTIFICATION The Company will notify the Union not less than three (3) Days prior to the commencement of any Wet Lease agreement of more than fifteen (15) Days. The notification will include the reason(s) for the lease, the aircraft to be utilized, the hours of flying, the duration and the effect of the Wet Lease on the Crewmembers. -3- 4 1.4.3.2. NO REDUCTIONS No Crewmember covered by this Agreement on the date of any Wet Lease will be reduced in Crew Class or suffer any loss of MBPG or benefits as a result of the Wet Lease agreement. 1.4.3.3. DURATION OF WET LEASE A wet lease in will not exceed two hundred seventy (270) consecutive Days, unless extended by mutual agreement between the Company and the Union. 1.5. SALE OR DRY LEASE OF COMPANY AIRCRAFT The Company may sell or Dry Lease an aircraft to another air carrier or entity when the Company is unable to obtain sufficient business to operate the aircraft profitably. The Company will make a reasonable effort to arrange with the buyer or lessee to provide for the employment of a full or partial complement of Crewmembers. If the Company's efforts fail, it will, upon request of the Union, indicate in writing the reasons why such employment is unacceptable to the buyer or lessee. If a furlough is necessary because of the sale or Dry Lease of aircraft, the Company will provide the following information to the Union: reasons for the sale or lease, duration of the lease, the number of Crewmembers affected by Crew Class and Type, the number of aircraft affected by the sale or lease. 1.6. MERGERS AND ACQUISITIONS 1.6.1. NOTICE OF MERGER OR ACQUISITION If the Company enters into an agreement of merger or acquisition with another air carrier or entity, it will notify the Union in writing within three (3) Days after the execution of such agreement, provided the Union executes any required confidentiality agreements. The Company will give written notice of the existence of this Agreement to the air carrier or entity, with a copy to the Union within three (3) Days after the execution of such agreement. 1.6.2. INTEGRATION OF SENIORITY LISTS If the Company merges with, acquires or is acquired by another air carrier and the merger or acquisition affects the seniority rights of Crewmembers, provisions will be made for the integration of Seniority Lists in a fair and equitable manner as set forth below. 1.6.2.1. NEGOTIATIONS The method of integration will be determined through direct negotiations between representatives designated by the Union and representatives of the crewmembers from the merged, acquired or acquiring air carrier. 1.6.2.2. ARBITRATION Should negotiations to integrate the Seniority Lists not be successfully concluded, the matter will be referred to binding arbitration pursuant to Sections 3 and 13 of the Allegheny-Mohawk LPPs. -4- 5 1.6.2.3. FENCE AGREEMENT The Company, the Union and representatives of the crewmembers from the merged, acquired or acquiring carrier will formulate a fence agreement prior to the integration of the Seniority Lists. 1.6.2.4. NO SYSTEM FLUSH Implementation of integrated Seniority Lists or a fence agreement will not result in a system flush. 1.6.3. REPRESENTATION If a merger or acquisition results in creating a single air carrier, as that term has been used by the National Mediation Board, representation of Crewmembers will be determined by the National Mediation Board. 1.7. ALTER EGO The Company will not establish a third-party leasing device to evade the terms of this Agreement. 1.8. TRANSFER OF ASSETS The Company will not transfer aircraft, routes or operating authority to its Parent, a subsidiary of the Parent or a subsidiary of the Company for the purpose of evading the terms of this Agreement. The Company will not transfer aircraft to its Parent, a subsidiary of the Parent or a subsidiary of the Company if the purpose of the transfer is for the Parent, a subsidiary of the Parent or a subsidiary of the Company to operate the aircraft, and the transfer causes a Curtailment or furlough of Crewmembers. This subsection does not prohibit such a transfer if the Company is unable to operate the aircraft for reasons such as FAA, or other governmental, directives; cessation of operations or causes beyond the control of the Company. 1.9. SUCCESSORSHIP AND ASSUMPTION OF AGREEMENT This Agreement will be binding upon any successor of the Company unless and until changed in accordance with the provisions of the Railway Labor Act, as amended. 1.10 FOREIGN BASES If the Company establishes a Base outside the United States, Crewmembers assigned to such Base will be covered by the terms of this Agreement and the Railway Labor Act, as amended. -5- 6 SECTION 2 - DEFINITIONS "ACTIVE SERVICE" means all accumulated time, commencing with Date of Hire as a Crewmember, for which the Crewmember is paid by the Company. "ADEQUATE REST FACILITY" means a quiet, dark, climate-controlled room with single beds, supplied with fresh linen, with access to clean restroom facilities. "ALOFT" means Block to Block. "BASE" means the geographical point designated by the Company to which a Crewmember is permanently assigned. "BID LINE" means a Line of Flying, a Reserve Line or Composite Line. "BID SENIORITY LIST" means a list of Crewmembers who are eligible to bid, listed in Seniority order by Crew Class, Type and Base. "BLOCK TO BLOCK" means the period of time from the moment the restraining devices are removed from the aircraft for the purpose of flight, until the restraining devices are installed at either the point of departure, an intermediate stop, or the final destination. Block-to-Block time is used for, but not limited to, scheduled arrival and departure times, duty period calculations and Duty Time calculations. Block-to-Block time includes all time aloft, taxi time and time that the aircraft is being positioned by a tug. "CAPTAIN" means a Crewmember who is qualified to perform the function of pilot in command, as designated by the Company, who is qualified to serve as Captain under FAR Part 121 and this Agreement, and who holds a Crew Class bid award as a Captain. "CATEGORY" means the respective crew skill, Pilot or Flight Engineer, held by a Crewmember. "COMMUTE" means travel between a Crewmember's Residence Airport, or other location, and his Base, or other location, not at the direction of the Company. "COMPOSITE LINE" means a Bid Line containing Days free of duty, reserve Days and Trip Sequences that become available as a result of vacation awards, Training, leaves of absence, sick leave or Trip Sequences not contained in Lines of Flying. "CREW CLASS" means the respective job designation of a Crewmember within his respective Category. Within the Category of Pilot exist the Crew Classes of Captain and First Officer. Within the Category of Flight Engineer exist the Crew Classes of Second Officer and Professional Flight Engineer. "CREWMEMBER" means a Pilot or a Flight Engineer covered by this Agreement. "CURTAILMENT" means a reduction in the number of positions within a Crew Class on a specific Type at a specific Base. "DATE OF HIRE" means the date a Crewmember commences initial Training by the Company as a Crewmember, after the Crewmember has become employed by the Company. -6- 7 "DAY" means a calendar day, measured from 0000Z to 2359Z. "DEADHEAD" means the published, scheduled time spent by a Crewmember traveling, not local in nature, from one point to another at the direction of the Company. If there is no published scheduled time, Deadhead will be Block-to-Block time. Deadhead will include time spent aloft and connection times. "DISPLACEMENT" means removal of a Crewmember from his Crew Class, Type or Base because of a Curtailment or another Crewmember's exercise of bumping rights. "DOMESTIC" means the forty-eight (48) contiguous United States and the District of Columbia. "DRY LEASE" means the leasing of an aircraft without a flight crew. "DUTY DAY" means a Day that a Crewmember is subject to the Company's direction. "DUTY TIME" means that interval between the time a Crewmember is required to report for duty and the time he is released by the Company. "EFFECTIVE DATE" means, for a vacancy, the date that a Crewmember is expected to begin performing duties in an awarded vacancy and, for a Curtailment, the date that a Crewmember is expected to cease performing duties in a position. "FAR" means the Federal Aviation Regulations. "FIRST OFFICER" means a Crewmember who is qualified to perform the function of second in command, as designated by the Company, who is qualified to serve as First Officer under FAR Part 121 and this Agreement, and who holds a Crew Class bid award as a First Officer. "FLIGHT ENGINEER" means a Crewmember who is qualified to perform the function of Flight Engineer, as designated by the Company, who is qualified to serve as a Flight Engineer under FAR Part 121 and this Agreement, and who holds a Crew Class bid award as a Flight Engineer. "FLIGHT PAY" means the hourly rate of pay for performing the duties of a Crewmember. "FLIGHT SEGMENT" means a leg measured from block out to block in. "FLIGHT TIME" means the time from the moment when the aircraft first moves under its own power for the purpose of flight until the moment it comes to rest after landing. Flight Time is used for FAR Flight Time limitations. "INTERNATIONAL" means any point or area outside the forty-eight (48) contiguous United States and the District of Columbia. "LINE OF FLYING" means a Bid Line containing Trip Sequences and scheduled Days free of duty. "MANAGEMENT CREWMEMBER" means a Crewmember, designated by the Company, who participates in the establishment or implementation of Company policies related to flight operations or in the supervision of Crewmembers, including the making of decisions affecting the status of Crewmembers, including discipline. Status as Check Airman does not alone designate a Crewmember as a Management Crewmember. -7- 8 "MINIMUM BID PERIOD GUARANTEE (MBPG)" means the minimum credit hours a Crewmember will receive in a Bid Period. "MONTH" means the period of time commencing with and including the first Day of a calendar month up to and including the last Day of the month. "OPEN TIME" means known flying that is not placed into Lines of Flying and flying that becomes available for reasons such as Training, vacations, sick leave, Bid Period-to-Bid Period transitions, ad hoc charter or other unforeseen circumstances after completion of the bid awards. "PILOT" means Captain or First Officer. "POSITIONING OR DE-POSITIONING" means Deadhead. "PRIOR RIGHTS FLIGHT ENGINEER" means a Crewmember who was listed on the Flight Engineers' Seniority List on the date of ratification of this Agreement and so indicated on the Flight Engineers' Seniority List. "PROFESSIONAL FLIGHT ENGINEER" means a Crewmember who is qualified to perform the function of a Flight Engineer, as designated by the Company, who holds an Airframe and Powerplant Mechanic Certificate, who is qualified to serve as a Flight Engineer under FAR Part 121 and this Agreement and has been designated by the Company to perform maintenance on Company aircraft and who holds a Crew Class bid award as a Flight Engineer. "RECURRENT TRAINING" means all FAA-mandated Training required to maintain qualification and currency, excluding remedial Training and re-qualification Training after a Training failure. "RESERVE CREWMEMBER" means a Crewmember who is awarded or assigned to a Reserve Line or who is serving on a designated reserve day as part of a Line of Flying or a Composite Line or who is temporarily assigned to reserve in accordance with this Agreement. "RESERVE LINE" means a Bid Line containing reserve Days and scheduled Days free of Duty. "RESIDENCE AIRPORT" means the airport, designated by a Crewmember, served by a scheduled air carrier, where a Crewmember is considered to reside. "SECOND OFFICER" means a Crewmember who is qualified to perform the function of Flight Engineer, as designated by the Company, who is qualified to serve as a Flight Engineer under FAR Part 121 and this Agreement, and who holds a Crew Class bid award as a Second Officer. A Second Officer must possess a Commercial Pilot Certificate with Multi-Engine and Instrument ratings and is not required to possess an Airframe and Powerplant Mechanic Certificate. "SENIORITY LIST(S)" means a listing of Crewmembers, as set forth in Section 15, according to Date of Hire. "STANDING BID" means a bid that reflects a Crewmember's preference(s) for Category, Crew Class, Type and Base. -8- 9 "TRAINING" means classroom, simulator and flight Training including, but not limited to, Initial, Transition, Recurrent, Proficiency, Upgrade and Differences. "TRIP SEQUENCE" means a series of Flight Segments, including Deadheading, with the initial segment departing from a Crewmember's Base and the final segment arriving at the Crewmember's Base. A Trip Sequence may begin in one Bid Period and end in the following Bid Period. A Trip sequence may start and end at a location other than a Crewmember's Base, provided that both the starting and ending locations are the same. Deadhead between two Trip Sequences is a Trip Sequence. "TYPE" means the type of aircraft, as defined by the FARs, operated by the Company, designated by manufacturer and model. "WET LEASE" means the leasing of aircraft with a flight crew. -9- 10 SECTION 3 - UNION SECURITY 3.1. UNION MEMBERSHIP It will be a condition of employment for all Crewmembers covered by this Agreement on or before the ninetieth (90th) Day following their Date of Hire to tender to the Union directly the required initiation fees. It will also be a condition of employment that all Crewmembers become and remain members in good standing in the Union, or in the alternative, tender to the Union the Monthly dues required of the Union members, such sums to be recognized as a service fee. It will also be a condition of employment that all Crewmembers tender to the Executive Council Monthly assessments required of Crewmembers. 3.2. INITIATION FEES AND DUES OR SERVICE FEES AND ASSESSMENTS DEDUCTION The Company will deduct from the wages of any Crewmember covered by this Agreement dues as a member of the Union, or the service fee, the Executive Council assessment and the Teamsters Legal Services Plan fee, upon receiving the Crewmember's voluntary and individual written authorization for the Company to make such deductions. The authorization forms will be provided by the Union. No Crewmember will be deprived of employment under this Section for any reason other than failure to tender initiation fees and failure to pay the Monthly dues which are uniformly required as a condition of acquiring and retaining membership in the Union, or service fees which will be not more than the dues and initiation fees, or Executive Council assessments. The Company will deduct dues or service fees and Executive Council assessments in the Month in which a Crewmember is recalled from furlough or returns from a leave of absence. If a Crewmember is recalled from furlough or returns from a leave of absence after the dues or service fees and Executive Council assessments have been deducted for the Month, the Company will be permitted to make a double deduction in the following Month. 3.2.1. TRANSFER OF DUES OR SERVICE FEES TO UNION The Company will pay to the proper officers of the Union the withheld dues or service fees. The Company will also pay to the proper officers of the Executive Council the withheld assessments. The Monthly dues or service fees will be deducted from the first paycheck in each Month and paid to the Union within seven (7) Days of the issuance of the paychecks. The Teamsters Legal Services Plan fee and the Executive Council assessments will be deducted from the second paycheck in each Month and paid to the Union within seven (7) Days of the issuance of paychecks. The following information will be reported and transmitted with each payment: Social security number, full name, amount of dues or service fees or assessments, rate of pay and status of employment. 3.2.2. INDEMNIFICATION CLAUSE The Union will indemnify the Company and hold the Company harmless from any and all claims that may be made by Crewmembers against the Company by virtue of the wrongful application or misapplication of any of the terms of this Section. -10- 11 3.2.3. DUES OR SERVICE FEES AND ASSESSMENTS AFTER TERMINATION In the event of the termination of a Crewmember's employment, there will be no obligation for the Company to collect dues, or service fees, or assessments until all other deductions have been made. 3.2.4. DEDUCTION ERROR If a deduction is missed, or if an insufficient amount is deducted, it is the Crewmember's responsibility to make the proper adjustment with the Union. 3.3. FAILURE TO PAY DUES OR SERVICE FEES AND ASSESSMENTS Written notice will be given to the Company by the Union at least thirty (30) days before the Company is required to remove a Crewmember from employment for failure to maintain membership in good standing in the Union, or pay service fees, or assessments in accordance with subsection 3.1. 3.4. CREWMEMBER LIST The Company will notify the Union each Month of all new-hires, terminations, recalls or furloughs. The notification will include the Crewmember's name, address, social security number, Crew Class and Date of Hire, termination, recall or furlough. -11- 12 SECTION 4 - MANAGEMENT RIGHTS The Company retains the sole and exclusive right to operate, control and manage its business and exercise all traditional management rights, powers and authority it had prior to signing this Agreement, except those modified specifically by an express provision of this Agreement. Included by way of description, and not by way of limitation, are rights to direct the working force and determine its size and composition; maintain order and efficiency; hire, transfer, and promote Crewmembers and discipline, suspend, and discharge for cause; assign work to Crewmembers; extend, maintain, curtail or terminate its operations in whole or part; determine the nature and extent of services to be rendered; determine the business concerns with whom it will deal and the customers it wishes to serve; establish and enforce quality standards for its services; determine and change methods, processes and techniques of operation; determine when and if vacancies will be filled; establish and modify reasonable rules and regulations and require observance thereof. A right of management will not be impaired or waived by any contrary course of conduct. -12- 13 SECTION 5 - COMPENSATION 5.1. NEW-HIRE PAY A new-hire Crewmember who receives Training prior to his qualification as a Crewmember will be paid five hundred dollars ($500.00) per week while in Training. A new-hire Crewmember will not receive Flight Pay until he completes OE. 5.2. FLIGHT PAY RATES A Crewmember will be paid Flight Pay in United States Dollars in accordance with the following schedules: 5.2.1. CAPTAINS
-------------------------------------------------------------------------------- Year of Active Effective Effective Effective Effective Service October 16 October 16 October 16 October 16 1999 2000 2001 2002 -------------------------------------------------------------------------------- 1ST 60.00 60.00 60.00 60.00 -------------------------------------------------------------------------------- 2ND 82.00 84.46 87.84 91.79 -------------------------------------------------------------------------------- 3RD 95.00 97.85 101.76 106.34 -------------------------------------------------------------------------------- 4TH 98.00 100.94 104.98 109.70 -------------------------------------------------------------------------------- 5TH 102.00 105.06 109.26 114.18 -------------------------------------------------------------------------------- 6TH 105.00 108.15 112.48 117.54 -------------------------------------------------------------------------------- 7TH 108.00 111.24 115.69 120.90 -------------------------------------------------------------------------------- 8TH 111.00 114.33 118.90 124.25 -------------------------------------------------------------------------------- 9TH 114.00 117.42 122.12 127.61 -------------------------------------------------------------------------------- 10TH 117.00 120.51 125.33 130.97 -------------------------------------------------------------------------------- 11TH 120.00 123.60 128.54 134.33 -------------------------------------------------------------------------------- 12TH 122.50 126.18 131.22 137.13 -------------------------------------------------------------------------------- 13TH 124.50 128.24 133.36 139.37 -------------------------------------------------------------------------------- 14TH 126.00 129.78 134.97 141.04 -------------------------------------------------------------------------------- 15TH 127.50 131.33 136.58 142.72 -------------------------------------------------------------------------------- 16TH 128.50 132.36 137.65 143.84 -------------------------------------------------------------------------------- 17TH 129.50 133.39 138.72 144.96 -------------------------------------------------------------------------------- 18TH 130.50 134.42 139.79 146.08 -------------------------------------------------------------------------------- 19TH 131.50 135.45 140.86 147.20 -------------------------------------------------------------------------------- 20TH 132.50 136.48 141.93 148.32 --------------------------------------------------------------------------------
Notes: The Company may modify first year pay rates at its discretion. There will be no longevity increases for Captains after the twentieth (20th) year of Active Service. The maximum Flight Pay rate for a narrow body Captain will be the rate for the ninth (9th) year of Active Service. -13- 14 5.2.2. PROFESSIONAL FLIGHT ENGINEERS
--------------------------------------------------------------------------------- Year of Active Effective Effective Effective Effective Service October 16 October 16 October 16 October 16 1999 2000 2001 2002 --------------------------------------------------------------------------------- 1ST 45.00 45.00 45.00 45.00 --------------------------------------------------------------------------------- 2ND 61.50 63.35 65.88 68.84 --------------------------------------------------------------------------------- 3RD 71.25 73.39 76.32 79.76 --------------------------------------------------------------------------------- 4TH 73.50 75.71 78.73 82.28 --------------------------------------------------------------------------------- 5TH 76.50 78.80 81.95 85.63 --------------------------------------------------------------------------------- 6TH 78.75 81.11 84.36 88.15 --------------------------------------------------------------------------------- 7TH 81.00 83.43 86.77 90.67 --------------------------------------------------------------------------------- 8TH 83.25 85.75 89.18 93.19 --------------------------------------------------------------------------------- 9TH 85.50 88.07 91.59 95.71 --------------------------------------------------------------------------------- 10TH 87.75 90.38 94.00 98.23 --------------------------------------------------------------------------------- 11TH 90.00 92.70 96.41 100.75 --------------------------------------------------------------------------------- 12TH 91.88 94.63 98.42 102.85 --------------------------------------------------------------------------------- 13TH 93.38 96.18 100.02 104.52 --------------------------------------------------------------------------------- 14TH 94.50 97.34 101.23 105.78 --------------------------------------------------------------------------------- 15TH 95.63 98.49 102.43 107.04 --------------------------------------------------------------------------------- 16TH 96.38 99.27 103.24 107.88 --------------------------------------------------------------------------------- 17TH 97.13 100.04 104.04 108.72 --------------------------------------------------------------------------------- 18TH 97.88 100.81 104.84 109.56 --------------------------------------------------------------------------------- 19TH 98.63 101.58 105.65 110.40 --------------------------------------------------------------------------------- 20TH 99.38 102.36 106.45 111.24 ---------------------------------------------------------------------------------
Notes: The Company may modify first year pay rates at its discretion. There are no longevity increases for Professional Flight Engineers after the twentieth (20th) year of Active Service. The maximum Flight Pay rate for a narrow body Professional Flight Engineer will be the rate for the ninth (9th) year of Active Service. -14- 15 5.2.3. FIRST OFFICERS
--------------------------------------------------------------------------------- Year of Active Effective Effective Effective Effective Service October 16 October 16 October 16 October 16 1999 2000 2001 2002 --------------------------------------------------------------------------------- 1st 40.80 40.80 40.80 40.80 --------------------------------------------------------------------------------- 2nd 55.76 57.43 59.73 62.42 --------------------------------------------------------------------------------- 3rd 64.60 66.54 69.20 72.31 --------------------------------------------------------------------------------- 4th 66.64 68.64 71.38 74.60 --------------------------------------------------------------------------------- 5th 69.36 71.44 74.30 77.64 --------------------------------------------------------------------------------- 6th 71.40 73.54 76.48 79.93 --------------------------------------------------------------------------------- 7th 73.44 75.64 78.67 82.21 --------------------------------------------------------------------------------- 8th 75.48 77.74 80.85 84.49 --------------------------------------------------------------------------------- 9th 77.52 79.85 83.04 86.78 --------------------------------------------------------------------------------- 10th 79.56 81.95 85.22 89.06 ---------------------------------------------------------------------------------
Notes: The Company may modify first year pay rates at its discretion. There are no longevity increases for First Officers after the tenth (10th) year of Active Service. The maximum Flight Pay rate for a narrow body First Officer will be the rate for the ninth (9th) year of Active Service. A Professional Flight Engineer who upgrades to First Officer will not suffer any loss of pay and will remain at his greater rate of pay until the pay rate shown above exceeds such greater rate, at which time he will be paid according to the schedule above. 5.2.4. SECOND OFFICERS
--------------------------------------------------------------------------------- Year of Active Effective Effective Effective Effective Service October 16 October 16 October 16 October 16 1999 2000 2001 2002 --------------------------------------------------------------------------------- 1st 33.00 33.00 33.00 33.00 --------------------------------------------------------------------------------- 2nd 45.10 46.45 48.31 50.49 --------------------------------------------------------------------------------- 3rd 52.25 53.82 55.97 58.49 --------------------------------------------------------------------------------- 4th 53.90 55.52 57.74 60.34 --------------------------------------------------------------------------------- 5th 56.10 57.78 60.09 62.80 ---------------------------------------------------------------------------------
Notes: The Company may modify first year pay rates at its discretion. There are no longevity increases for Second Officers after the fifth (5th) year of Active Service. A Pilot who transitions to Second Officer will receive fifty-five percent (55%) of the Captain's pay rate for his year of Active Service. 5.3. FLIGHT PAY COMPUTATION The departure Day for a Flight Segment will be the Day on which all Flight Pay for that Flight Segment will be credited. 5.3.1. FLIGHT PAY Flight Pay credit will be computed on the basis of actual Block-to-Block time. -15- 16 5.4. CHECK AIRMAN OVERRIDE A Check Airman will be paid a minimum override of fifteen dollars ($15.00) per hour for all hours flown or credited, regardless of whether actual instructor or Check Airman duties are being performed. MBPG will be paid including Check Airman override. Any increase in the Check Airman override will be applied uniformly. 5.5. INSTRUCTOR PAY 5.5.1. GROUND SCHOOL INSTRUCTION When a Crewmember performs ground school instruction, he will be paid a minimum of ten dollars ($10.00) per classroom hour. Any increase in the ground school instructor rate will be applied uniformly. 5.5.2. SIMULATOR INSTRUCTION When a Crewmember, who is not a Check Airman, performs simulator instruction he will be paid a minimum override of fifteen dollars ($15.00) per simulator hour, including briefing and de-briefing. Any increase in the simulator instructor override will be applied uniformly. 5.6. REPORT PAY When a Crewmember reports to the field for the purpose of flight and does not fly, he will be credited one (1) hour of Flight Pay for each four (4) hours of duty or fraction thereof, with a minimum of one (1) hour's credit per occurrence. 5.7. MINIMUM PAY CREDIT When a Crewmember reports to the field for the purpose of flight and does fly, he will be credited with actual Block Time. If the Flight Pay credit is less than one (1) hour, the Crewmember will be credited with one (1) of hour of Flight Pay. 5.8. TAXI PAY 5.8.1. REPORT FOR TAXI ONLY When a Crewmember reports to the field for the purpose of repositioning an aircraft and not for the purpose of flight, the Crewmember will be credited for all Block to Block time with a minimum of one (1) hour of Flight Pay. 5.8.2. WITHIN A DUTY PERIOD When a Crewmember is required to reposition an aircraft within the same duty period as a flight, the Crewmember will be credited for the Block to Block time. 5.9. PAY ON A SCHEDULED DUTY FREE DAY 5.9.1. DAYS OFF When a Crewmember performs duty other than Training on a scheduled duty free Day, he will be paid four point two (4.2) hours of Flight Pay, or the actual hours credited for the Day, whichever is greater, in addition to MBPG. -16- 17 5.9.2. JUNIOR ASSIGNMENT When a Crewmember is junior assigned he will be paid as set forth in subsection 5.9.1., multiplied by one point two five (1.25). Effective November 1, 2000, when a Crewmember is junior assigned he will be paid as set forth in subsection 5.9.1., multiplied by one point five (1.5). 5.10. DEADHEAD PAY For Deadhead Pay, refer to Section 22. 5.11. TRAINING PAY 5.11.1. RECURRENT AND ADDITIONAL REQUIREMENT TRAINING 5.11.1.1. SCHEDULED DUTY DAYS When a Crewmember is required to attend (not home study) recurrent Training, a recurrent proficiency check or Training for additional requirements to maintain his qualification, e.g., TCAS or passenger qualification, or Check Airman meetings on a scheduled Duty Day, he will be credited with three point five (3.5) hours of Flight Pay for each Day of such Training. A Crewmember Deadheading to or from Training on a scheduled Duty Day will be credited with either all pay credit earned or three point five (3.5) hours of Flight Pay, whichever is greater. When a Crewmember's recurrent Training is interrupted or he receives one Day off in seven Days as a result of recurrent Training on a scheduled Duty Day, he will be credited with three point five (3.5) hours of Flight Pay for such Day. 5.11.1.2. SCHEDULED DUTY FREE DAYS When a Crewmember is required to attend (not home study) recurrent Training, a recurrent proficiency check or Training for additional requirements to maintain his qualification, e.g., TCAS or passenger qualification, or Check Airman meetings on a scheduled duty free Day, he will be paid four point two (4.2) hours of Flight Pay for each Day of such Training, in addition to MBPG. A Crewmember Deadheading to or from Training on a scheduled duty free Day will be paid either all pay credit earned or four point two (4.2) hours of Flight Pay, whichever is greater, in addition to MBPG. When a Crewmember's recurrent Training is interrupted or he receives one Day off in seven Days on a scheduled duty free Day as a result of recurrent Training, he will be paid four point two (4.2) hours of Flight Pay for such Day, in addition to MBPG. 5.11.2. INITIAL, TRANSITION AND UPGRADE When a Crewmember attends Initial (but not new-hire initial), transition or upgrade Training, he will be paid his pro rated MBPG for the Type and Crew Class for which he is current and qualified. -17- 18 5.11.3. PILOT TO FLIGHT ENGINEER TRANSITIONS A Pilot who has not exceeded the FAA-mandated retirement age for Pilots at the time his Training commences will be paid no less than his pro-rated MBPG for the Type and Crew Class for which he is current and qualified while being trained. A Pilot who has exceeded the FAA-mandated retirement age for Pilots at the time his Training commences will be paid six hundred sixty dollars ($660) per week while in Training. A Pilot who is awarded a class that commences prior to reaching the FAA-mandated retirement age for Pilots and has his Training delayed by the Company will be paid no less than his pro-rated MBPG for the Type and Crew Class held at the time he reaches the FAA -mandated retirement age for Pilots until his Training is completed. A Pilot who is awarded a class date that commences not more than sixty (60) days prior to his reaching the FAA-mandated retirement age for Pilots and bypasses that class for another class that commences prior to his reaching the FAA-mandated retirement age for Pilots will be paid no less than his pro-rated MBPG for the Type and Crew class for which he is current until he reaches the FAA-mandated retirement age for Pilots and thereafter will be paid six hundred and sixty dollars ($660) per week while in Training. 5.11.4. REMEDIAL TRAINING A Crewmember will not be paid Training pay for additional Training or checking caused by a Training failure. 5.12. MAINTENANCE PAY When a Crewmember performs maintenance in addition to his normal duties on the aircraft, he will be paid fifteen dollars ($15.00) per hour or fraction thereof, in addition to all other compensation. 5.13. MINIMUM BID PERIOD GUARANTEE (MBPG) The MBPG is fifty-six (56) Flight Pay hours in a Bid Period. If a Crewmember is unavailable for duty for a portion of a Bid Period, the MBPG will be pro-rated. 5.14. BONUS INCENTIVE PLAN Effective January 1, 2000, a bonus incentive plan will be implemented. The plan will be no less favorable than that provided to other Company employee groups. The plan may be terminated or modified by the Company in accordance with the terms of the plan provided that such modification will be no less favorable than modifications made to the plans provided to other Company employee groups. 5.15. GENERAL 5.15.1. PAYROLL SCHEDULE Crewmembers will be paid bi-weekly. The first paycheck of the Bid Period will contain one-half (1/2) of the applicable MBPG earned during the prior Bid Period. The second paycheck of the Bid Period will contain one-half (1/2) of the applicable MBPG earned during the current Bid Period plus adjustments such as additional compensation earned in the prior Bid Period. Unless otherwise required by applicable law, a furloughed Crewmember will be paid all pay due him on the first paycheck that covers the pay period in which he was furloughed. -18- 19 5.15.2. PAYCHECK DELIVERY AND DEPOSIT Upon written request, the Company will mail a Crewmember's paycheck to a specified address, other than a bank. The Company must receive such request at least thirty (30) Days before the paycheck is due. The Company will provide electronic direct deposit of paychecks. When electronic direct deposit of per diem and expense checks becomes available to other Company employees, the Company will provide the service for Crewmembers. 5.15.3. JURY DUTY A Crewmember who is required to serve on jury duty will receive no reduction in his MBPG for up to five (5) Duty Days of jury duty, per occurrence. Any jury pay received during the five (5) Days will be reimbursed to the Company. A Crewmember who receives notice of jury duty will immediately inform the Director of Operations, or his designee, and will cooperate with the Company in obtaining a postponement or release from jury duty, if required. Any transportation required to attend jury duty is the responsibility of the Crewmember. 5.15.4. SPECIAL PROJECTS A Crewmember who performs a special project for the Company will be compensated at an individually negotiated rate. -19- 20 SECTION 6 - EXPENSES, LODGING AND TRANSPORTATION 6.1. PER DIEM 6.1.1. DOMESTIC Per Diem for Domestic duty will be paid at the rate set forth below:
-------------------------------------------------------------------------------- EFFECTIVE DATE RATE -------------------------------------------------------------------------------- November 1, 1999 $1.50 -------------------------------------------------------------------------------- November 1, 2000 $1.60 -------------------------------------------------------------------------------- November 1, 2001 $1.65 -------------------------------------------------------------------------------- November 1, 2002 $1.70 --------------------------------------------------------------------------------
Except as provided in subsection 17.3.3., Domestic per diem will commence when a Crewmember is required to report for duty at his Base or depart his Residence Airport, if applicable, until the Crewmember is released from duty at his Base or is returned to his Residence Airport, if applicable. 6.1.2. INTERNATIONAL Per Diem for International duty will be paid at the rate set forth below:
-------------------------------------------------------------------------------- EFFECTIVE DATE RATE -------------------------------------------------------------------------------- November 1, 1999 $2.05 -------------------------------------------------------------------------------- November 1, 2000 $2.15 -------------------------------------------------------------------------------- November 1, 2001 $2.25 -------------------------------------------------------------------------------- November 1, 2002 $2.35 --------------------------------------------------------------------------------
International Per Diem will be paid while a Crewmember is on assignment outside the contiguous forty-eight (48) United States, commencing at block out from the last Domestic airport and ending at block in at the first Domestic airport. In addition, an extended layover override of fifty cents ($0.50) per hour will be paid for all International layovers that exceed seventy-two (72) hours. The extended layover override will begin at the seventy-third (73rd) hour and end at block out from the layover station. 6.1.3. NEW HIRE TRAINING A new-hire Crewmember who receives Training prior to his qualification as a Crewmember will not be paid per diem until completion of OE. 6.1.4. PAYMENT Per Diem will be paid no later than the end of the Bid Period following the Bid Period in which it was earned. 6.2. LODGING Except as provided in subsection 17.3.3., when a Crewmember is away from his Base, the Company will designate and provide suitable single occupancy lodging in a location convenient to the airport when the Company determines it is necessary or when a scheduled layover or anticipated delay is greater than six (6) hours, block in to block out. The Company will consult periodically with the Union Hotel Committee to discuss the suitability of lodging and will give reasonable consideration to the recommendations of the committee. The Company will pay for lodging, tax, and Company-related telephone calls or faxes. All other incidental charges will be paid by the Crewmember when checking out. -20- 21 6.2.1. NEW HIRE TRAINING A new-hire Crewmember who receives Training prior to his qualification as a Crewmember will not be provided lodging until completion of OE. 6.3. LOCAL TRANSPORTATION When the Company is required to provide lodging, the Company will provide transportation between the airport and the place of lodging. When transportation is not provided by the Company within one (1) hour after block in, a Crewmember may use any available means of transportation to the place of lodging and will be reimbursed for expenses substantiated by receipts. 6.4. RENTAL CAR If approved by the Director of Operations, or his designee, Crewmembers on layover greater than forty-eight (48) hours may rent a car, limited to one (1) car per crew. Moving violations and parking tickets and all other incurred expenses in connection with such rental cars are the responsibility of the Crewmember. 6.5. PERSONAL VEHICLE If a Crewmember is authorized to use his vehicle on Company business, he will be reimbursed at the current Company rate, but not less than twenty-nine ($.29) cents per mile and for necessary tolls substantiated by receipts. The Crewmember must indicate the origination and termination points of travel and must properly submit the expense for payment. -21- 22 SECTION 7 - MOVING EXPENSES 7.1. ELIGIBILITY A Crewmember may move at Company expense under any of the following circumstances, provided he moves to within one hundred (100) miles of his new Base from a point beyond one hundred (100) miles of his new Base: 7.1.1. NEW BASE AWARD When a Crewmember is awarded a vacancy at a new Base as a result of the initial bid to that Base. 7.1.2. INVOLUNTARY BASE ASSIGNMENT When a Crewmember (except a new-hire Crewmember who is being assigned to his first Base) is involuntarily assigned to fill a Base vacancy as a result of insufficient bidders. 7.1.3. BASE DISPLACEMENT When a Crewmember's move is the result of his Displacement from a Base. 7.1.4. RECALL TO A DIFFERENT BASE When a furloughed Crewmember is recalled to a different Base than that from which he was furloughed. 7.2. COORDINATION WITH COMPANY Prior to committing for a move, a Crewmember must coordinate the move with the Company. 7.3. MOVING EXPENSES A Crewmember will be reimbursed for the following expenses, provided he moves his primary residence within one (1) year after being eligible: 7.3.1. PERSONAL Actual moving expenses, including insurance and other normal costs, for up to a maximum of fifteen thousand (15,000) pounds of household effects, including yard and workshop tools, motorcycles and lawn equipment. Moving expenses for household effects must be substantiated by receipts. 7.3.2. VEHICLES When a Crewmember drives his vehicle(s) from his former residence to his new residence, the rate of reimbursement will be at the current Company rate, but not less than twenty-nine ($.29) cents per mile, for the most direct AAA mileage between such points for the first two (2) automobiles. The Company will reimburse the Crewmember for the reasonable and actual expenses of meals and lodging for the Crewmember and his family for the time spent in travel to his new residence. A day of travel will be four hundred (400) miles by the most direct AAA mileage. All lodging will be the quality of that used on Crewmember layovers. -22- 23 7.3.3. MOBILE HOMES A Crewmember owning and living in a mobile home who moves such mobile home to his new Base will be allowed actual moving expenses, provided those expenses do not exceed the amount provided for in subsections 7.3.1. and 7.3.2., above. 7.4. ACCOMMODATIONS IN LIEU OF MOVING EXPENSES If a Crewmember eligible for moving expenses elects not to move to his new Base, the Company will provide lodging and per diem in accordance with subsection 17.3.3. at his new Base. If a Crewmember exercises this subsection and subsequently moves, the cost of lodging and per diem will be deducted from the reimbursable moving expenses. 7.5. NEW-HIRE CREWMEMBERS A new-hire Crewmember will not be eligible for moving expenses when reporting to his initial Base assignment or award. -23- 24 SECTION 8 - SICK LEAVE 8.1. ACCRUAL A new-hire Crewmember will be credited with seven (7) Days of sick leave but will not accrue additional sick leave until the completion of one (1) year of Active Service. Upon completion of one (1) year of Active Service, a Crewmember will accrue sick leave at the rate of seven-thirteenths (.54) of a Day for each Bid Period of Active Service to a maximum of forty-two (42) Days. 8.2. SICK LEAVE PAY 8.2.1. BANK DEBIT A Crewmember's sick leave bank will be debited the lesser of one (1) Day for each Day on sick leave or, at a rate of three point five (3.5) hours per Day, the number of whole Days necessary to bring him to MBPG. The sick leave bank of a Crewmember who has exceeded his MBPG at the time he becomes unavailable for duty because of illness or injury will be debited one (1) Day of sick leave as an administrative charge, regardless of the number of Days that he is unavailable for duty. At no time will sick leave result in payment that exceeds a Crewmember's MBPG. 8.2.2. SCHEDULED DUTY DAYS A Crewmember will not be charged sick leave on a scheduled duty free Day. 8.3. SICK LEAVE USAGE 8.3.1. CREW SCHEDULING CONTACT A Crewmember will contact Crew Scheduling at least every third (3rd) consecutive duty Day missed because of illness or injury. A Crewmember need not comply with the preceding sentence if he specifies a specific period of time for the absence because of the nature of the illness or injury. A Crewmember must report when he is available for duty. 8.3.2. EXCLUSIONS A Crewmember will not be entitled to sick leave when illness or injury is a result of the Crewmember's willful disregard of accepted safety practices, willful intention to injure himself or another, illness or injury while in the employ of another employer, the abuse of alcohol or the use of illegal drugs. 8.3.3. WORKER'S COMPENSATION If an illness or injury is occupationally related, sick leave may be used to augment workers compensation income replacement benefits. The combination of sick leave and workers compensation income replacement will not exceed a Crewmember's MBPG. -24- 25 8.4. SICK LEAVE BANK REPLENISHMENT Within the two (2) Bid Periods following the Bid Period in which a Crewmember uses sick leave, he may have his sick leave bank replenished, on a Day for a Day basis, by performing duty pursuant to subsection 20.4.1.5. A Crewmember must notify Crew Scheduling at the time he accepts Open Time of his intent to replenish his sick leave bank. If the Crewmember is assigned a Trip Sequence containing more Days than his sick leave bank was debited, the remaining Days will be paid in accordance with subsection 5.9. 8.5. DISABILITY A Crewmember may use his accrued sick leave to supplement his short-term disability benefits provided for in subsection 10.4. The sum of sick leave and short-term disability benefits will not exceed a Crewmember's MBPG. 8.6. PHYSICIAN'S STATEMENTS The Company may require a physician's statement, which will state, at a minimum, the nature of the illness or injury and the expected duration of the Crewmember's inability to perform his duties to substantiate illness or injury. The Company may also require a physician's statement authorizing return to duty. If the Crewmember is required to visit a physician designated by the Company, the Company will pay for the examination. 8.7. VACATION CONCURRENT WITH ILLNESS A Crewmember on sick leave when his scheduled vacation commences will be removed from sick leave during the vacation and, if scheduled for duty, returned to sick leave at the end of the vacation if the illness or injury continues. 8.8. RETIREMENT On or after reaching the FAA-required retirement age for Pilots, the Company will pay a Crewmember fifty percent (50%) of any accrued sick leave at the time of his retirement at the hourly rate that the Crewmember held at retirement. 8.9. GENERAL 8.9.1. RECALL A recalled Crewmember will retain all unused sick leave accrued prior to the furlough. 8.9.2. STATEMENTS Each Crewmember's pay statement will show unused accrued sick leave. 8.9.3. OUTSIDE WORK A Crewmember will not work for any other employer while on sick leave. 8.9.4. SENIORITY AND LONGEVITY A Crewmember on sick leave will continue to accrue seniority and longevity. 8.9.5. RESUMPTION OF DUTY A Crewmember returning from sick leave will be returned to his assigned duty at the earliest, reasonable opportunity. The Company may assign the Crewmember to reserve until he is returned to his assigned duty. -25- 26 SECTION 9 - VACATION 9.1. ACCRUAL Upon completion of one (1) year of Active Service, a Crewmember will be credited with fourteen (14) days of vacation. A Crewmember will accrue vacation based on Active Service in accordance with the following:
Completed Years Vacation Days Vacation Days Of Service Accrued Per Bid Accrued Per Year Period --------------- --------------- ---------------- 1 - 4 1.08 14 5 + 1.62 21
9.2. VACATION PAY Vacation pay will be computed at the Crewmember's rate of pay at the time vacation is taken or paid in lieu of vacation. A Crewmember will not receive less than his MBPG in a Bid Period in which all or part of his vacation occurs provided he is available for duty for the remainder of his scheduled duty Days. Vacation pay is three point five (3.5) hours of Flight Pay for each Day of vacation. Pay in lieu of vacation may be requested at any time. 9.3. DUTY 9.3.1. NO DUTY A Crewmember will not be required to perform any duty while on vacation. 9.3.2. DUTY FREE DAYS A scheduled vacation Day that falls on a scheduled duty free Day will not be deducted from a Crewmember's vacation bank. A Crewmember who has awarded vacation covering an entire Bid Line will not be awarded that Bid Line, but his bid choice will be used to determine the number of vacation Days to be deducted from his vacation bank. 9.4. ANNUAL VACATION BID 9.4.1. PROCEDURE On or before October 1st of each year, the Company will mail to each Crewmember a bid package containing vacation periods available for the next calendar year and a bid form. The Company must receive the completed bid form no later than October 31st. Vacation will be awarded in order of seniority at the Base in Type and Crew Class. A Union representative may be present during the awarding of vacation. The Company will mail the results to all Crewmembers no later than November 20th. 9.4.2. PROBATIONARY CREWMEMBER At the time of the annual vacation bid, a Crewmember with less than one (1) year of Active Service may bid a scheduled vacation in the following calendar year provided such vacation occurs after completion of one (1) year of Active Service. -26- 27 9.4.3. FAILURE TO BID A Crewmember who fails to bid or fails to bid sufficient choices will not be awarded a scheduled vacation. 9.5. VACATION OPTIONS A Crewmember may exercise the following options with his accrued vacation (The desired option(s) must be indicated on the bid form): Take the vacation in the calendar year, be paid in lieu of vacation, bank the vacation or a combination of the above. 9.6. VACATION SPLITS Scheduled vacation may be split into periods of not less than seven (7) Days. Split vacation bids must be designated primary, secondary and tertiary on the bid form. A Crewmember's primary vacation block will be awarded in seniority order. The secondary vacation block will be awarded after all other Crewmembers have been awarded their primary vacation bid. Secondary vacation blocks will be awarded in seniority order among those Crewmembers who have bid a secondary block. Tertiary vacation blocks, if any, will be awarded in the same manner. 9.7. UNSCHEDULED VACATION If a Crewmember has vacation Days in his bank, he may, depending on the operational needs of the Company, be awarded previously unscheduled vacation. 9.8. VACATION RESCHEDULING 9.8.1. RESCHEDULE The Company will not change any vacation date after the sixtieth (60th) Day prior to the beginning of the vacation except by mutual agreement between the Crewmember and the Company. 9.8.2. RELINQUISH A Crewmember may elect to relinquish his awarded vacation by giving the Company written notice at least sixty (60) Days prior to the beginning of the vacation. 9.8.3. CHANGE OF CREWMEMBER STATUS Irrespective of subsection 9.8.1., above, a Crewmember who changes Base, Type or Crew Class after vacation periods have been awarded will be granted his choice of remaining available vacation periods in his new Base, Type and Crew Class. The Company will make every effort to permit the Crewmember to retain his originally awarded vacation period. If Company requirements preclude retention of this period, the Crewmember will be notified, within twenty-one (21) Days after changing Base, Type or Crew Class, that his vacation must be changed and will be provided a list of vacation periods available. 9.8.4. VACATION SLIDE A Crewmember's vacation period will slide one (1) Day if, because of a reroute or reschedule, the Crewmember will have less than a twelve (12) hour rest period after release at his Base immediately prior to the beginning of his vacation. The Company will return a Crewmember to his Base or a mutually agreed upon location prior to the beginning of his vacation. -27- 28 9.9. VACATION BANK 9.9.1. MAXIMUM BANK A Crewmember with five (5) years or less of Active Service may bank up to twenty-eight (28) vacation Days. A Crewmember with more than five (5) years of Active Service may bank up to forty-two (42) vacation Days. 9.9.2. PAY OUT 9.9.2.1. EXCESS BANK Vacation Days accrued in excess of the maximum allowable bank as of December 31 of each year will be paid on the second paycheck of January in the following year. 9.9.2.2. CESSATION OF EMPLOYMENT If a Crewmember resigns, retires, is terminated or dies, the Crewmember or his estate will be paid for all accrued vacation provided the Crewmember has completed one (1) year of Active Service. In case of resignation, the Crewmember must give the Company at least fourteen (14) Days written notice of resignation in order to receive accrued vacation. 9.9.2.3. SUPPLEMENT TO SICK LEAVE OR DISABILITY BENEFITS A Crewmember may use accrued vacation to supplement his sick leave or short-term disability benefits. The combination of sick leave, disability benefits and vacation will not exceed a Crewmember's MBPG. 9.10. GENERAL 9.10.1. VACATION DAY Vacation will begin at 0000Z and end at 2359Z at a Crewmember's Base. 9.10.2. STATEMENTS A Crewmember's pay statement will show his accrued vacation. -28- 29 SECTION 10 - HEALTH AND WELFARE 10.1. LIFE INSURANCE The Company will provide life insurance for a Crewmember who has completed ninety (90) Days of Active Service. Coverage will be equal to one (1) year at the Crewmember's MBPG, rounded to the nearest one thousand dollars ($1,000). Effective July 1, 2000, a Crewmember who has completed five (5) years of Active Service will be provided coverage equal to two (2) years at the Crewmember's MBPG, rounded to the nearest one thousand dollars ($1,000). A Crewmember will continue to be covered by life insurance while operating a Company flight within a hostile area. Life insurance will be continued during the first thirty (30) Days of a leave of absence. 10.1.1. ADDITIONAL LIFE INSURANCE The Company may offer additional life insurance that each Crewmember would be eligible to purchase. 10.2. ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE The Company will provide accidental death and dismemberment insurance for a Crewmember who has completed ninety (90) Days of Active Service. Coverage will be equal to one (1) year at the Crewmember's MBPG, rounded to the nearest one thousand dollars ($1,000). Accidental death and dismemberment insurance will be continued during the first thirty (30) Days of a leave of absence. 10.3. HEALTH AND DENTAL INSURANCE The Company will provide health and dental insurance for a Crewmember desiring coverage who has completed ninety (90) Days of Active Service. Overall coverage levels will not be less than the overall coverage levels in effect on the effective date of this Agreement. The Company may change insurance carriers or offer alternative plans, such as HMOs or PPOs. 10.3.1. COBRA When a Crewmember leaves the service of the Company, including leaves of absence, he may be entitled to a continuation of all or part of his health and dental insurance coverage under COBRA. If a Crewmember is eligible for coverage under COBRA, all information regarding coverage, premiums, deadlines and forms will be forwarded to him at the address the Company has on file. 10.3.2. LEAVES OF ABSENCE A Crewmember on a leave of absence must pay the employee portion of premiums during the first thirty (30) Days of the leave if he desires to remain covered. For leaves extending beyond thirty (30) Days, the Crewmember must, if he is eligible, elect COBRA to continue coverage, except as required by applicable law. -29- 30 10.3.3. PREMIUMS FOR HEALTH AND DENTAL INSURANCE The premium costs of health and dental insurance coverage will be shared between the Company and the Crewmember. Premium costs for Crewmembers will be no less favorable than those provided to other groups of Company employees. Notwithstanding the above, Crewmembers will have premium costs no greater than set forth in the table below:
Years of Active Service Single Coverage Family Coverage ----------------------- --------------- --------------- 1 through 3 $60.00 $150.00 4 through 6 $40.00 $100.00 greater than 6 no cost no cost
10.3.4. CONTINUATION OF HEALTH AND DENTAL INSURANCE AFTER RETIREMENT The Company will provide for continuation of all or a portion of a Crewmember's health and dental insurance coverage after retirement. Such coverage will be offset by COBRA. The cost of such coverage will be borne by the Crewmember and will not exceed the Company's cost for such insurance. Such coverage will be available to retired Crewmembers who have exceeded the FAA mandatory retirement age for Pilots and will continue until the minimum age to qualify for Medicare health insurance. If a Crewmember does not elect this coverage or elects to discontinue this coverage, he will no longer be eligible for such coverage. 10.4. SHORT-TERM DISABILITY INSURANCE The Company will provide short-term disability insurance for a Crewmember who has completed ninety (90) Days of Active Service. Short-term disability benefits will be not less than sixty (60) percent of a Crewmember's MBPG. The maximum benefit per week will be not more than six hundred dollars ($600). Short-term disability benefits will begin, pursuant to the terms of the policy, after the required waiting period and after the Crewmember has been placed on a Medical Leave of Absence. Short-term disability benefits will continue for up to six (6) Months. 10.5. LONG-TERM DISABILITY INSURANCE The Company will offer long-term disability insurance that each Crewmember would be eligible to purchase in accordance with the terms of the policy. The Union and the Company will periodically review the advisability of changing coverage and insurance carriers. 10.6. ILLNESS OR INJURY WHILE IN THE SERVICE OF THE COMPANY 10.6.1. MEDICAL CARE AWAY FROM BASE If a Crewmember suffers a work-related illness or injury away from his Base on Company business and the injury requires medical care away from his Base, the Company will pay all hospitalization and medical expenses that are not covered by applicable insurance. -30- 31 10.6.2. TRANSPORTATION A Crewmember who becomes ill or injured on Company business and who as a result is unable to complete his assignment will be provided with necessary transportation to his Base or residence as soon as prudent and possible. Such transportation will be provided at Company expense if not otherwise covered by applicable insurance. 10.6.3. WORKER'S COMPENSATION FILING PROCEDURE A Crewmember who suffers a work-related illness or injury covered by Worker's Compensation must report such illness to the Company as soon as possible and complete an injury/illness report. A claim for Worker's Compensation must be filed in the state where the Crewmember is Based. -31- 32 SECTION 11 - RETIREMENT 11.1. TAX DEFERRED SAVINGS PLAN Not later than six (6) months after the date of signing of this Agreement, the Company will establish the Kitty Hawk International Crewmember's 401(k) Tax Deferred Savings Plan (the "Plan"). In accordance with the terms of the Plan, the Plan will be extended to all eligible Crewmembers. Crewmember participation in the Teamsters National 401(k) Plan will cease when the Kitty Hawk International Crewmember's 401(k) Plan is made available. All funds in the Teamsters National 401(k) Plan will be rolled over into the Plan without cost to the Crewmember. The Plan will allow a Crewmember to make self-directed investments. Transition from the Teamsters National 401(k) Plan to the Plan will occur with no interruption in payroll deductions. 11.2. COMPANY CONTRIBUTIONS Pursuant to the Plan, the Company will match twenty-five percent (25%) of the first four percent (4%) of a Crewmember's contribution to the Plan, to a maximum of five hundred dollars ($500). For the year 2001 and subsequent years the Company will match twenty-five percent (25%) of a Crewmember's contribution to the Plan, up to the maximum permitted by law. 11.3. VESTING SCHEDULE Company contributions to a Crewmember's 401(k) account will be vested in accordance with the following schedule:
--------------------------------------------------------------------------- Year of Active Service Percent of total Company contribution that is vested --------------------------------------------------------------------------- 1st Zero percent (0%) --------------------------------------------------------------------------- 2nd Twenty percent (20%) --------------------------------------------------------------------------- 3rd Forty percent (40%) --------------------------------------------------------------------------- 4th Sixty percent (60%) --------------------------------------------------------------------------- 5th Eighty percent (80%) ---------------------------------------------------------------------------
All Company contributions will be fully vested after five (5) years of Active Service. 11.4. PAYROLL DEDUCTIONS The Company will make payroll deductions for each Crewmember who participates in the Plan and deposit the funds into the account designated by the Plan Administrator in accordance with applicable laws. Prior to making the Plan available to Crewmembers, such funds will be deposited in the account designated by the Teamsters National 401(k) Plan Administrator. Subsequent to making the Plan available to Crewmembers, such funds will be deposited in the account designated by the Plan Administrator. 11.5. CREWMEMBER FUNDS IN PRE-EXISTING COMPANY 401(k) PLAN Those Crewmembers who have funds in the pre-existing Company 401(k) plan that were deposited into the Company plan prior to the Teamsters National 401(k) Plan being offered to Crewmembers will continue to have those funds held in the Company 401(k) plan, until or unless such Crewmembers elect to transfer the pre-existing Company 401(k) plan into the new Plan, in accordance with applicable laws. -32- 33 SECTION 12 - UNIFORMS 12.1. INITIAL UNIFORMS A Crewmember will wear the standard uniform as prescribed by the Company while on duty. The cost of the original uniform will be borne by the Crewmember. A payroll deduction plan will be made available. 12.2. MAINTENANCE ALLOWANCE The annual uniform maintenance allowance for a Crewmember will be one hundred thirty dollars ($130.00), paid during the first Month following the anniversary of his Date of Hire and every year thereafter, provided the Crewmember is employed at the time the allowance is paid. 12.3. REPLACEMENT OF DAMAGED ITEMS The Company will reimburse a Crewmember for any items of the uniform that are damaged in the performance of duty. A Crewmember requesting reimbursement for replacement of an item damaged in the performance of duty must submit an expense reimbursement form to the Company with the original receipt along with the damaged uniform item. 12.4. COMPANY INSIGNIA The Company will provide each Crewmember, free of charge, any Company insignia, epaulets or emblem worn as part of the uniform. Such items will remain the property of the Company. Each Crewmember will be responsible for replacement of these items if they are lost. 12.5. UNION INSIGNIA A Union lapel pin may be worn on the uniform. 12.6. CHANGES IN UNIFORM The Company will consider the recommendations of the Crewmembers regarding any changes to the uniform. -33- 34 SECTION 13 - PHYSICAL EXAMINATIONS 13.1. COMPANY STANDARDS The physical standards required of a Crewmember are the standards established by the Federal Aviation Administration (FAA). 13.2. CONFIDENTIALITY Information obtained from an FAA-required physical examination will be kept confidential between the doctor(s), the Crewmember and Company personnel concerned with the Crewmember's physical condition, unless otherwise required by law or regulation. 13.3. FAA PHYSICAL EXAMINATIONS 13.3.1. CERTIFICATES TO TRAINING DEPARTMENT A Crewmember will provide the Training Department with a copy of his new current medical certificate by the twenty fifth (25th) Day of the Month in which the old medical certificate will expire. The Company may remove a Crewmember from service without pay if he fails to comply with this requirement. A Crewmember who is not able to exercise the privileges of his medical certificate will notify the Company of such inability in writing within twenty four (24) hours. 13.3.2. SCHEDULING OF FAA PHYSICAL During the Month in which a Crewmember's physical examination is due, the Company will not prevent a Crewmember from attending the examination. A Crewmember will schedule his physical examination so as not to interfere with any Company-required duty. 13.3.3. INABILITY TO MAINTAIN A FIRST CLASS MEDICAL CERTIFICATE A Pilot who is unable to maintain a First Class Medical Certificate but who is able to maintain a Second Class Medical Certificate may elect to remain as, or revert to, a First Officer. If the Pilot regains a First Class Medical Certificate, he may bid for Captain. 13.4. REIMBURSEMENT FOR A PHYSICAL EXAMINATION If a Crewmember is eligible for, and carries, Company health insurance, the Company will pay the cost of one (1) physical examination annually. The examination will be paid in full up to one hundred dollars ($100) without regard to the annual deductible. If the cost of the examination exceeds one hundred dollars ($100), the additional amount will be covered at eighty percent (80%), provided that the annual deductible has been satisfied. -34- 35 13.5. FAA DRUG AND ALCOHOL TESTING PROGRAMS 13.5.1. PROGRAM ADMINISTRATION AND DESCRIPTION The Company and the Crewmembers will adhere to the current FAA Drug and Alcohol Testing Programs. The Company will provide each Crewmember and the Union with all FAA-required material and information regarding the programs. The Company will make every effort to schedule FAA-required drug testing on a Crewmember's Duty Day. A Crewmember will not be called in to take an FAA-required random alcohol test on a duty free Day. The Company will notify Crewmembers, in writing, of any changes, modifications, or additions to the programs. 13.5.2. REIMBURSEMENT OF EXPENSES The Company will reimburse a Crewmember for the cost of transportation, including mileage, to and from all FAA-required drug and alcohol testing. 13.5.3. DRUG TESTING ON A SCHEDULED DUTY FREE DAY A Crewmember who is called in for an FAA-required random drug test on a scheduled duty free Day will be paid two (2) hours Flight Pay in addition to all other compensation. -35- 36 SECTION 14 - LEAVES OF ABSENCE 14.1. PERSONAL LEAVE 14.1.1. REQUESTS When the requirements of the Company will permit, at the sole discretion of the Company, and upon written request submitted by a Crewmember to the Company as far in advance as possible, a Crewmember may be granted a leave of absence without pay. Such approval will not be effective unless stated in writing, specifying the beginning and ending dates for the leave and signed by the Director of Operations, or his designee. 14.1.2. SENIORITY AND LONGEVITY ACCRUAL When a personal leave is granted, a Crewmember will continue to accrue seniority during the first sixty (60) Days of the leave. A Crewmember will not accrue sick leave, vacation or longevity for pay purposes, starting with the first day of the Bid Period following the Bid Period in which his leave commenced. Accrual will recommence on the first Day of the Bid Period in which a Crewmember returns from leave. 14.1.3. EXTENSIONS Personal leave may be extended for additional periods when approved in writing by the Company. Such approval will state the ending date of the leave and be signed by the Director of Operations, or his designee. 14.2. MILITARY LEAVE A Crewmember who enters involuntary, extended military service will be granted military leave in accordance with applicable federal laws and regulations. Military leave will be without pay. Return to duty will be subject to a requalifying period not to exceed thirty (30) Days. Weekend drills and annual two (2) week requirements are dealt with in Section 20. 14.3. UNION LEAVE With thirty (30) Days written notice, up to four (4) Crewmembers appointed as Union officials, representatives, or delegates will be granted leaves of absence without pay. A Crewmember on Union leave will accrue seniority and longevity for pay purposes but will not accrue longevity for any other purpose. 14.4. MEDICAL LEAVE A Crewmember whose sick leave bank has been exhausted, or who has been on sick leave for seven (7) consecutive Days and who is unable to return to active status will be placed on medical leave of absence without pay. A medical leave of absence will not exceed three (3) years. A Crewmember on medical leave of absence will accrue seniority but will not accrue longevity for any purpose. -36- 37 14.5. FUNERAL LEAVE 14.5.1. DURATION In the case of death in the immediate family, a Crewmember is entitled to three (3) Days leave with pay for the purpose of attending the funeral. The Crewmember will inform Crew Scheduling which three (3) Day period is to be taken. 14.5.2. IMMEDIATE FAMILY Immediate family will be limited to the Crewmember's spouse, children, stepchildren, father, father-in-law, stepfather, mother, mother-in-law, stepmother, sister, stepsister, brother, and stepbrother. The Crewmember may be required to provide verification of attendance at the funeral. 14.5.3. VACATION A Crewmember who experiences the a death of an immediate family member during a vacation must notify his supervisor immediately upon receiving notice of the death and will have up to three (3) Days of remaining vacation rescheduled at a later date provided the Crewmember attends the funeral. 14.5.4. SCHEDULED DUTY FREE DAYS Funeral leave will not apply when a Crewmember is on a scheduled duty free Day. 14.6. FAMILY AND MEDICAL LEAVE ACT (FMLA) 14.6.1. FMLA A Crewmember is permitted a leave of absence to the extent required by, and in accordance with, the terms of the FMLA. 14.6.2. SENIORITY AND LONGEVITY ACCRUAL During FMLA leave, a Crewmember will accrue seniority and longevity for pay purposes but will not accrue longevity for any other purpose. 14.7. MANAGEMENT CREWMEMBER LEAVE 14.7.1. SENIORITY AND LONGEVITY ACCRUAL A Management Crewmember will be included on the Seniority List(s), designated by title. A Management Crewmember will accrue seniority and longevity, but will not accrue sick leave or vacation in accordance with this Agreement. 14.7.2. EXCLUSION FROM THE AGREEMENT A Management Crewmember is not subject to this Agreement. 14.7.3. MAXIMUM NUMBER Management leave is limited to a maximum of eleven (11) Crewmembers. The Company will provide the Union with a list of Management Crewmembers and notify the Union in writing of any changes. -37- 38 14.7.4. 401(k) PLAN Management Crewmembers may participate in the 401(k) plan set forth in Section 11. 14.7.5. DUES EXEMPTION A Management Crewmember will not be required to pay a Union initiation fee, Union dues or service fees. 14.7.6. FLYING RESTRICTION A Management Crewmember will be limited to twenty-eight (28) hours of out-of-seniority flying in any Bid Period when a furlough is in effect. 14.8. GENERAL 14.8.1. OTHER EMPLOYMENT A Crewmember on a leave of absence will not, without prior written permission of the Company, engage in any employment. 14.8.2. RETURN FROM LEAVE A Crewmember returning from leave will return to a vacancy, pursuant to Section 16, or to his former position, provided that it still exists and his seniority will allow him to hold the position. If the former position does not exist or he can no longer hold the position, the Crewmember may bump into any position for which he is qualified. If no such position exists, the Crewmember may exercise his seniority to assume another position. 14.8.3. PAY DURING REQUALIFICATION Should qualification or requalification be necessary, a Crewmember returning from leave will be paid new-hire pay during such qualification or requalification for not more than thirty (30) Days. If the qualification or requalification period exceeds thirty (30) Days, the Crewmember will receive his applicable MBPG for that portion of the requalification that exceeds thirty (30) Days. If qualification or requalification is necessary, the Company will have up to thirty (30) Days following the Crewmember's notification that he is available to resume duty to return the Crewmember to pay status in accordance with this subsection. -38- 39 SECTION 15 - SENIORITY 15.1. SENIORITY GOVERNS Except as otherwise provided in this Agreement, seniority will govern awards and assignments. 15.2. SENIORITY LISTS 15.2.1. SEPARATE LISTS Two (2) separate Seniority Lists will be maintained. The Pilot's Seniority List will be based on a Crewmember's Date of Hire with the Company as a Crewmember. The Flight Engineer's Seniority List will be based on a Crewmember's Date of Hire with the Company as a Crewmember. When two (2) or more Crewmembers have the same Date of Hire in the same Category, they will be placed on the applicable Seniority List according to their age, i.e., the oldest Crewmember will receive the more senior position. 15.2.2. LIST CONTENTS The Pilots' Seniority List will include all Captains and First Officers. The Flight Engineers' Seniority List will include all Second Officers and Professional Flight Engineers. Crewmembers hired by the Company after the date of ratification of this Agreement will be placed on either the Pilots' Seniority List or the Flight Engineers' Seniority List by Date of Hire. 15.3. SENIORITY ACCRUAL A Crewmember will accrue seniority continuously during his employment, except as otherwise provided in this Agreement. 15.4. SENIORITY LIST CONTENT AND PUBLISHING 15.4.1. CONTENT The Seniority Lists will contain the date of the List, the category identification of the List, i.e., Pilot or Flight Engineer, seniority numbers, Crewmembers' names, Dates of Hire, birth dates, aircraft assignments, Crew Class, Check Airman or management status, Leave Status, assigned Base and designation as Prior Rights Flight Engineers. 15.4.2. POSTING The Company will post the Seniority Lists at all Base(s) and hubs. On or before January 15 and July 15 of each year, the Company will mail an updated copy of the Seniority Lists to each Crewmember's home address and to the Union. The person issuing the Seniority Lists will date and sign the Lists. 15.5. PROTESTS A Crewmember will be permitted ninety (90) days after posting of a Seniority List in which to protest, in writing to the Company, any omission or incorrect posting affecting his seniority. If a Crewmember fails to file such protest, he is bound by the list and has no further recourse regarding that or any subsequent list containing that omission or incorrect posting. -39- 40 15.6. LOSS OF SENIORITY A Crewmember having established a seniority date hereunder will not lose that date except by resignation or retirement, termination, furlough of more than six (6) continuous years or failure to return to duty upon expiration of a leave of absence. 15.7. EFFECT OF BYPASS ON SENIORITY When a junior Crewmember is promoted over a senior Crewmember by reason of the failure of the latter to qualify in his turn, the more senior Crewmember will retain his position on the applicable Seniority List. 15.8. LONGEVITY Longevity for pay and benefits will be based on a Crewmember's Date of Hire with the Company in any capacity, adjusted for leaves of absence and furloughs. Longevity will be utilized to determine entitlement to benefits and to establish rates of pay. 15.9. PROBATION A Crewmember will be on probation until he has accumulated twelve (12) Months of Active Service from his Date of Hire as a Crewmember or the successful completion of his next proficiency check, whichever is later. 15.10. FLIGHT ENGINEER TO PILOT BIDDING A Crewmember may exercise his seniority to move from the Flight Engineers' Seniority List to the Pilots' Seniority List by bidding for a Pilot vacancy. 15.10.1. MINIMUM REQUIREMENTS A Crewmember submitting such a bid must meet the First Officer minimum requirements set forth in Section 19. 15.10.2. TRAINING AVAILABILITY A Crewmember who is awarded a bid pursuant to this subsection must make himself available at a time convenient to the Company for Training for the Pilot position. 15.10.3. FAILURE TO QUALIFY A Crewmember awarded a bid pursuant to this subsection who fails to qualify as a Pilot may return to his previous position on the Flight Engineers' Seniority List provided the Crewmember can qualify for such position. 15.10.4. REMOVAL FROM SENIORITY LIST Upon successful qualification as a Pilot, including completion of all required Training, a Crewmember awarded a bid pursuant to this subsection will be removed from the Flight Engineers' Seniority List. 15.11. PILOT TO FLIGHT ENGINEER BIDDING A Crewmember may exercise his seniority to move from the Pilots' Seniority List to the Flight Engineers' Seniority List one (1) time only by bidding for a Flight Engineer vacancy. -40- 41 15.11.1. BID SUBMISSION DEADLINE Such a bid must be on file not less than one hundred eighty (180) Days before the Crewmember reaches the FAA mandatory Pilot retirement age. 15.11.2. MINIMUM REQUIREMENTS A Crewmember submitting such a bid must meet the Flight Engineer minimum requirements set forth in Section 19. 15.11.3. BID TO PROFESSIONAL FLIGHT ENGINEER A Crewmember who, at the time of bid award, can qualify as a Professional Flight Engineer will be placed on the Flight Engineers' Seniority List, in accordance with his seniority, upon successful qualification as a Flight Engineer. 15.11.4. BID TO SECOND OFFICER A Crewmember who, at the time of bid award, cannot qualify as a Professional Flight Engineer will be placed on the Flight Engineers' Seniority List, in seniority order, below the lowest seniority Prior Rights Flight Engineer, upon successful qualification as a Flight Engineer. 15.11.5. HOLDING A BID ON FILE If a bid filed pursuant to subsection 15.11.1. is not awarded before the Crewmember reaches the FAA mandatory Pilot retirement age, such bid will remain on file and eligible for award until twenty-four (24) months after the Crewmember reaches the FAA mandatory Pilot retirement age. However, in such a case the Crewmember will be placed on the Flight Engineer's Seniority List, in seniority order, below the lowest seniority Prior Rights Flight Engineer. 15.11.6. TRAINING AVAILABILITY A Crewmember who is awarded a bid pursuant to this subsection must make himself available at a time convenient to the Company for Training for the Flight Engineer position. A Crewmember who declines a Flight Engineer class date for reasons within his control forfeits rights to subsections 15.11.3. and 15.11.5. If the Company elects to delay Training, the affected Crewmember will not forfeit rights to any part of this Section. 15.11.7. REMOVAL FROM SENIORITY LIST Upon successful qualification as a Flight Engineer, including completion of all required Training, a Crewmember awarded a bid pursuant to this subsection will be removed from the Pilots' Seniority List. 15.11.8. FAILURE TO QUALIFY A Crewmember awarded a bid pursuant to this subsection who fails to qualify as a Flight Engineer may return to his previous position on the Pilots' Seniority List, provided the Crewmember can qualify for such position. 15.11.9. DISPLACEMENT TO FLIGHT ENGINEER The one-time bid limitation of this subsection will not apply to a Crewmember who is Displaced from the Pilots' Seniority List to the Flight Engineers' Seniority List. -41- 42 SECTION 16 - FILLING OF VACANCIES 16.1. VACANCY DEFINITION A vacancy means additional or open positions designated by the Company in any Base, Type and Crew Class. 16.2. STANDING BID 16.2.1. STANDING BID DEFINITION Each Crewmember must submit a signed and dated Standing Bid on a form provided by the Company to the Director of Operations, or his designee, by certified or registered mail, return receipt requested, fax or hand delivery. Standing Bids are effective upon receipt but will not be considered for a vacancy notice that has closed. The Standing Bid will indicate the Crewmember's preferences for all Base, Type and Crew Class listings. A Standing Bid file will be maintained by the Director of Operations, or his designee. A Crewmember may inspect his bid during normal office hours. A Crewmember who has no Standing Bid on file will be assumed to have bid his present position. 16.2.2. STANDING BID UPDATES A Crewmember's Standing Bid may be updated at any time. An updated Standing Bid must be submitted on a form provided by the Company, signed and dated by the Crewmember, to the Director of Operations, or his designee, by certified or registered mail, return receipt requested, fax or hand delivery. Updated Standing Bids are effective upon receipt, but will not be considered for a vacancy notice that has closed. 16.3. VACANCY FILLING Vacancies will be filled in accordance with the following procedure: 16.3.1. VACANCY NOTICE The Company will determine the number of vacancies and post a notice announcing all known vacancies. The notice will state the Effective Date for each vacancy and the total number of positions, by Base, Type and Crew Class, required system wide. A copy of such notice will be mailed to each Crewmember, including each furloughed Crewmember. 16.3.2. VACANCY CLOSING AND BID SUBMISSION The notice will include a deadline by which updated Standing Bids must be received by the Director of Operations, or his designee, which will not be less than fourteen (14) Days after the date such notice is mailed to Crewmembers. Each notice will be numbered consecutively during a calendar year. By mutual agreement, the Union and the Company may reduce the deadline period. 16.3.3. BID AWARD Bids will be awarded in seniority order to Crewmembers who will be, or reasonably can be expected to be, available on the date Training for the award commences. A Crewmember appointed by the Union will be present at the time of bid awards, if the Union so requests. A Crewmember awarded a bid must meet the qualifications set forth in Section 19. -42- 43 16.3.4. ADDITIONAL VACANCIES Additional vacancies created by the bid awards will be filled concurrent with the bid awards in seniority order, based on a Crewmember's Standing Bid. No additional vacancy notice will be required. 16.3.5. UNFILLED VACANCIES Vacancies that remain unfilled after bids have been awarded may be assigned in reverse Category seniority order or filled by new-hire Crewmembers. 16.3.6. PUBLISHING OF BID RESULTS Results of bid awards and assignments will be mailed to each Crewmember within fourteen (14) Days after the specified closing date and will refer to the notice number that announced such vacancy(s). Results will include the Effective Date, Base, Type, Crew Class, name and seniority number of each successful bidder or assigned Crewmember. 16.4. EQUIPMENT LOCK A Crewmember is not eligible to bid on any type of aircraft other than the type he is flying unless , on the Effective Date of the vacancy, he has completed eighteen (18) Months of Active Service from completion of his initial line check in his Type and Crew Class. This provision does not apply in the case of any Crewmember who has received notice of Curtailment in his Base, Type and Crew Class or who has been Displaced. When posting a vacancy notice, the Company may waive the equipment lock, provided the waiver is applied equally to all Crewmembers within a Crew Class. The waiver must be contained within the vacancy notice. 16.4.1. NEW EQUIPMENT TYPE If the Company acquires a Type not previously in its fleet, all non-probationary Crewmembers who bid for that Type will have any existing equipment lock waived. This waiver applies for twelve (12) Months from the date such Type is placed in service. 16.5. BYPASS If a Pilot, or a Flight Engineer who has bid for the Category of Pilot, has attained the age of 57 at the time of his bid award or Displacement, and Training is required, the Company may elect not to train the Crewmember and pay him as follows: 16.5.1. UPGRADE TO CAPTAIN The Crewmember will be paid as a Captain until reaching the FAA mandated retirement age for Pilots. 16.5.2. TRANSITION The Crewmember will be paid an override of ten dollars ($10.00) per hour for each hour credited until reaching the FAA mandated retirement age for Pilots. -43- 44 SECTION 17 - BASES 17.1. UNION CONSULTATION The Company will confer with the Union before opening any new Base. 17.2. INTERNATIONAL BASES If the Company desires to establish any Base outside the contiguous United States and the District of Columbia, the Union and the Company will meet and agree upon the changes necessary in this Agreement prior to establishing such a Base. 17.3. DOMESTIC BASES 17.3.1. MINIMUM STAFFING LEVEL If the Company desires to establish any Base inside the contiguous United States and the District of Columbia, the Base will be staffed initially with at least four (4) crews by Type. The average annualized staffing at the base will be maintained at a minimum of four (4) crews. 17.3.2. STAFFING LEVEL CHANGES Subject to subsection 17.3.1., the Company may increase or decrease the staffing level at any domestic Base as follows: 17.3.2.1. INCREASED STAFFING If the Company opens a new base or desires to increase staffing within a Type and Crew Class at an existing Base, it will award such positions in seniority order in accordance with standing bids on file from among Crewmembers in the appropriate Type and Crew Class. If no Crewmember in the Type and Crew Class has a standing bid on file for such Base, the Company may junior assign to such position from among Crewmembers in the Type and Crew Class or may fill the position in accordance with Section 16. 17.3.2.2. DECREASED STAFFING If the Company desires to decrease staffing within a Type and Crew Class at a Base, it will displace the most junior Crewmember in that Type and Crew Class at the Base. In accordance with his standing bid on file, the displaced Crewmember will displace a more junior Crewmember in his Type and Crew Class at any other Base. If the displaced Crewmember is unable to fill a position in his Type and Crew Class pursuant to subsections 17.3.2.1. or 17.3.2.2., he will be subject to the provisions of subsection 18.2.. 17.3.2.3. NO MOVING EXPENSES A Crewmember who changes Bases voluntarily or involuntarily in accordance with the provisions of subsection 17.3. will not be eligible for moving expenses. -44- 45 17.3.3. THIRTY-FIVE (35) MILE RULE 17.3.3.1. PER DIEM IN BASE A Crewmember whose principal residence is more than thirty-five (35) miles from his Base will be eligible for Per Diem for all hours beginning when he reports for a flight assignment at his Base or is required to be on reserve, other than R-3, at his Base and ending when he is released from all duty at his Base for a Day off meeting the requirements of subsection 20.2.2.3. 17.3.3.2. LODGING IN BASE A Crewmember whose principal residence is more than thirty-five (35) miles from his Base will be eligible for lodging in his base beginning when he reports for a flight assignment at his Base or is required to be on reserve, other than R-3, at his Base and ending when he is released from all duty at his Base for a Day off meeting the requirements of subsection 20.2.2.3. A Crewmember who is eligible for lodging under this subsection who reports for an assignment during which he will be provided with lodging in accordance with subsection 6.2. will check out from the in-Base lodging during such an assignment. 17.4. TEMPORARY BASES The Company may establish temporary Bases within the contiguous United States and the District of Columbia for up to three (3) consecutive Bid Periods, when establishment of a permanent Base is not practical. Temporary Bases may be bid only by Crewmembers in the Base, Type and Crew Class designated by the Company. If there are insufficient bidders, the Company may assign Crewmembers to a temporary Base, in inverse seniority order. Lodging will be provided while the Crewmember is in his temporary Base. Per Diem will be provided continuously from the time the Crewmember leaves his permanent Base or Residence Airport for the temporary Base assignment until he returns to his permanent Base or Residence Airport after his temporary assignment is completed. Transportation to and from the temporary Base will be provided at the beginning and the end of the temporary assignment. Release for all scheduled Days free of duty will occur at the Crewmember's temporary Base. -45- 46 SECTION 18 - CURTAILMENT, DISPLACEMENT, FURLOUGH AND RECALL 18.1. CURTAILMENT When a reduction in the required number of Crewmembers becomes necessary in any Base, Type and Crew Class, a Curtailment will occur. A notice of Curtailment will be published prior to the effective date of the Curtailment. 18.1.1. CURTAILMENT PROCEDURE If a Curtailment is not satisfied by the awarding of a vacancy, retirement, resignation, termination, death or leave of absence, a Displacement will occur. 18.2. DISPLACEMENT When, because of a Curtailment, a Crewmember can no longer hold his position, a Displacement will occur. 18.2.1. DISPLACEMENT PROCEDURE Displacement will occur in inverse order of seniority. A displaced Crewmember may exercise his seniority to assume any position in his Type and Crew Class or, if no such position is available, to assume any position he can hold. 18.3. FURLOUGH If a Displaced Crewmember is unable to hold any position, he may be furloughed. 18.3.1. VOLUNTARY FURLOUGH Prior to a furlough, the Company may grant voluntary furloughs. 18.3.2. NOTICE OF FURLOUGH When a Crewmember is to be furloughed, he will be given at least fourteen (14) Days written notice, or pay in lieu thereof, except when the furlough is caused by a strike, Act of God, involuntary grounding of Company aircraft or other circumstances beyond the Company's control. In such cases, the Company will give as much notice as possible. Announcements of furlough will be posted at all Bases and hubs. Notice to an affected Crewmember will be registered or certified mail, return receipt requested, or hand delivered to, and signed for by, the Crewmember. An affected Crewmember on a Trip Sequence that does not transit any Bases or hubs will be notified of his furlough directly by the Company not later than twelve (12) Days prior to the effective date of the furlough. 18.3.3. RETENTION OF SENIORITY A Crewmember will accrue seniority but not longevity while on furlough. 18.3.4. CHANGE IN ADDRESS OR TELEPHONE NUMBER A furloughed Crewmember will notify the Company within twenty four (24) hours of any change in his address or telephone number. 18.3.5. STANDING BID A furloughed Crewmember should maintain his Standing Bid while on furlough. If no Standing Bid is on file, or if insufficient choices are listed, the Crewmember will be recalled to the Base, Type and Crew Class of the Company's choice. -46- 47 18.3.6. FURLOUGH EXPIRATION A Crewmember who has not been recalled within six (6) years from the date of his furlough will forfeit his seniority and will not be entitled to recall. 18.4. RECALL When a vacancy exists in a Category that is not filled in accordance with Section 16, the Company will recall a furloughed Crewmember in that Category before filling the vacancy with a new-hire Crewmember. 18.4.1. CATEGORY SENIORITY ORDER A furloughed Crewmember will be recalled in Category seniority order to unfilled vacancies in his Category. However, a furloughed Second Officer meeting the requirements of subsection 19.1.2.1. will be recalled to First Officer provided no Pilot is on furlough, and, a furloughed Pilot meeting the requirements of subsection 19.1.2.2. will be recalled to Second Officer provided no Prior Rights Flight Engineer is on furlough and he is unable to hold a position as First Officer. 18.4.2. BYPASS OF RECALL If a furloughed Crewmember desires to be bypassed for recall, he must notify the Company in writing that he wishes to be placed on the bypass list. The Crewmember may remove his name from the bypass list at any time. If all furloughed Crewmembers in a Category are on the bypass list at the time of a recall, the most junior Crewmember in the recalled Category on the bypass list must accept recall or he will be terminated. 18.4.3. RECALL NOTICE A notice of recall will be in writing, by certified or registered mail, return receipt requested, to the Crewmember's last address on file with the Company, with a copy to the Union. The recalled Crewmember must reply in writing to the Company, by certified or registered mail, return receipt requested, within seven (7) Days of date of receipt of the recall notice. A Crewmember accepting recall must be able to report for duty within fourteen (14) Days of receipt of the recall notice. If the Crewmember's address on file with the Company is outside the United States, he will be allowed thirty-one (31) Days in which to be able to report for duty. If, after accepting recall, the Crewmember is unable to report for duty because of circumstances beyond his control, he will be placed on an appropriate leave of absence. 18.4.4. WAIVER OF RECALL NOTICE A Crewmember may accept early recall and waive the provisions of subsection 18.4.3., above, by telephone or any other means. Oral waivers will be followed up in writing. 18.4.5. FAILURE TO RESPOND OR REPORT A Crewmember will be terminated if he fails to state his intent to accept recall within seven (7) Days of receipt of the recall notice, if the US Post Office informs the Company that the recall notice is undeliverable, if he fails to respond to a recall notice within thirty-one (31) Days of the mailing of the recall notice or if he fails to report for duty after recall. -47- 48 18.4.6. MINIMUM RECALL DURATION A recall will be for a minimum of sixty (60) Days. 18.4.7. NEW-HIRE FLYING EXCLUSION A new-hire Crewmember will not be placed on Flight Pay status until all recalled Crewmembers in his Category have been placed on Flight Pay status unless a recalled Crewmember fails to complete Training successfully or delays his own Training. 18.4.8. PAY WHEN RECALLED Should qualification or requalification be necessary, a recalled Crewmember will be paid new-hire pay during such qualification or requalification, for not more than thirty (30) Days. If the qualification or requalification period exceeds thirty (30) Days, the Crewmember will receive his applicable MBPG for that portion of the qualification or requalification period that exceeds thirty (30) Days. -48- 49 SECTION 19 - TRAINING 19.1. QUALIFICATIONS 19.1.1. FAA REQUIREMENTS A Crewmember must meet all FAA qualifications and certification requirements applicable to his Crew Class and Type. 19.1.2. COMPANY MINIMUM REQUIREMENTS The minimum requirements for bid award are set forth below. The Company may reduce the requirements provided they are applied equally to all Crewmembers in any notice of vacancy. The minimum requirements may be increased if required by the FAA or with the agreement of the Union. 19.1.2.1. FIRST OFFICER MINIMUM REQUIREMENTS: 19.1.2.1.1. CERTIFICATES A Commercial Pilot Certificate with Instrument and Multi-Engine Land Rating; and 19.1.2.1.2. FLYING EXPERIENCE 1,500 hours total pilot time; and 19.1.2.1.3. MEDICAL CERTIFICATE An FAA First Class Medical Certificate, and 19.1.2.1.4. SIMULATOR EVALUATION A satisfactory simulator evaluation; and 19.1.2.1.5. WRITTEN EXAMINATION Successfully complete the FAA ATP written examination or an equivalent Company examination. 19.1.2.1.6. FLIGHT ENGINEER UPGRADES A Flight Engineer may use fifty percent (50%) of his Flight Engineer time with the Company, up to a maximum of 750 hours, to satisfy the requirement set forth in subsection 19.1.2.1.2. 19.1.2.2. SECOND OFFICER MINIMUM REQUIREMENTS: 19.1.2.2.1. CERTIFICATES A Commercial Pilot Certificate with Instrument and Multi-Engine Land Ratings; and 19.1.2.2.2. FLYING EXPERIENCE 1,500 hours total pilot time; and 19.1.2.2.3. MEDICAL CERTIFICATE An FAA First or Second Class Medical Certificate, and -49- 50 19.1.2.2.4. WRITTEN EXAMINATION Successfully complete the FAA Flight Engineer written examination(s). 19.1.2.3. PROFESSIONAL FLIGHT ENGINEER MINIMUM REQUIREMENTS: 19.1.2.3.1. CERTIFICATES An Aircraft Mechanic Certificate with Airframe and Powerplant Ratings. A Flight Engineer Certificate with a Turbojet Rating; and 19.1.2.3.2. MEDICAL CERTIFICATE An FAA First or Second Class Medical Certificate; and 19.1.2.3.3. COMPANY EMPLOYEES A Company employee may substitute the appropriate FAA written examination(s) for the Flight Engineer Certificate requirement set forth in subsection 19.1.2.3.1. 19.1.2.4. CAPTAIN MINIMUM REQUIREMENTS: 19.1.2.4.1. CERTIFICATES An Airline Transport Pilot Certificate; and 19.1.2.4.2. FLYING EXPERIENCE 5,000 hours of total pilot time, or, twenty-four (24) Months of pilot experience on Company aircraft, or, 500 hours of pilot time with the Company in Type, but not less than 2,500 hours of total pilot time; and 19.1.2.4.3. MEDICAL CERTIFICATE An FAA First Class Medical Certificate. 19.1.2.4.4. FIRST OFFICER UPGRADES A First Officer with the Company is exempted from the requirements of subsection 19.1.2.4.1., provided he has passed the FAA ATP written examination. 19.2. COMPANY-PROVIDED TRAINING The Company will provide the necessary manuals and Training to meet the requirements of the FAA-Approved Training Program at no cost to the Crewmember. 19.3. TRAINING RECORDS REVIEW A Crewmember may review all pertinent forms at the conclusion of each Training or check period. He will be provided a copy of his Training event form(s) at the conclusion of each Training course or check period. The Crewmember will sign the Training event form(s). Upon written request to the Training Department, a Crewmember may review his permanent Training record. -50- 51 19.4. NOTICE OF TRAINING The Company will provide at least seven (7) Day's notice of all ground and simulator Training unless the Crewmember agrees to shorter notice. 19.5. TRAINING SCHEDULES 19.5.1. RECURRENT GROUND SCHOOL Recurrent ground school will not be scheduled so as to conflict with a Crewmember's scheduled vacation. However, in a Crewmember's grace Month, when the scheduling of recurrent ground school is the result of his own actions, recurrent ground school may conflict with his scheduled vacation. If more than one (1) recurrent ground school period is available in a Bid Period, the ground school periods will be assigned at the Company's discretion. 19.5.2. RECURRENT SIMULATOR TRAINING Recurrent simulator Training and recurrent proficiency checks will not be scheduled so as to conflict with a Crewmember's scheduled vacation, unless a Crewmember is in his grace Month. A Crewmember must attend his assigned recurrent simulator Training period(s) and recurrent proficiency check(s). 19.5.3. ONE-IN-SEVEN Unless waived by all Crewmembers in a Training class, a Crewmember will be provided at least one (1) period of twenty-four (24) consecutive hours free of all duty during any seven (7) consecutive Days assigned to Training, except for recurrent Training. 19.5.4. MINIMUM SCHEDULED DAYS FREE OF DUTY A Crewmember scheduled for initial, transition or upgrade Training of fifteen (15) or more Days duration will be scheduled for five (5) consecutive Days free of duty prior to the commencement of such Training. A Crewmember may waive such Days free of duty. However, such waiver will not cause the waived Days to be paid under subsection 5.9. Training will not be scheduled for seven (7) consecutive Days. 19.5.5. REST BEFORE SIMULATOR If a Crewmember reports directly from line flying to the simulator, the Company will schedule that Crewmember for twelve (12) hours free of all duty between arrival at the simulator city and the simulator briefing. If, because of circumstances beyond the Company's control, less than ten (10) hours free of all duty is available, the Crewmember may elect to reschedule the simulator period. 19.5.6. SIMULATOR PERIOD DURATION Simulator Training or check periods will not be scheduled to exceed four (4) hours per Day, excluding briefing and debriefing. -51- 52 19.6. INITIAL, UPGRADE AND TRANSITION TRAINING FAILURES 19.6.1. FIRST TRAINING FAILURE When a successful bidder fails to qualify, he will be returned to his former Crew Class and Type and will be given requalification Training in accordance with the Company's FAA-Approved Training Program. If the Crewmember fails to requalify, he may be terminated. If his former Type is no longer a part of the Company fleet, he will be given his second Training attempt. 19.6.2. INELIGIBILITY TO BID AFTER FAILURES A Crewmember who fails to complete Training successfully or fails a pre-Training simulator evaluation will be ineligible to bid on any vacancy requiring Training until he has completed an additional five hundred (500) hours and twelve (12) Months of active flying on the Type to which he is assigned. The Company may waive this restriction. A withdrawal from Training will be considered a failure to complete Training under the terms of this Section. 19.6.3. SECOND TRAINING FAILURE A Crewmember who fails to complete two (2) consecutive Initial, Upgrade or Transition Training events successfully may be terminated or be returned to his former Crew Class for the duration of his employment. 19.6.4. FAILURE TO MEET TRAINING TIME LINES A Crewmember who fails to complete Training because of the failure to meet FAA-mandated Training time lines will receive additional Training. If the failure to meet the time lines was for reasons beyond the Crewmember's control and he subsequently fails to complete Training successfully, he will not be subject to subsection 19.6.3. However, he will be subject to subsection 19.6.2. 19.6.5. FAILURE TO PASS PRE-TRAINING EVALUATIONS A Crewmember who fails three (3) consecutive pre-Training simulator evaluations may be restricted in his present Crew Class for the duration of his employment. 19.7. RECURRENT TRAINING FAILURES 19.7.1. FIRST FAILURE A Crewmember who fails to complete a recurrent Training event successfully will be given additional Training in the areas of deficiency, as determined by the Director of Training in consultation with the Professional Standards Committee. 19.7.2. SECOND FAILURE A Crewmember who receives additional Training and subsequently fails to complete recurrent Training successfully may be terminated. -52- 53 19.8. PROFESSIONAL STANDARDS COMMITTEE INVOLVEMENT 19.8.1. TRAINING FAILURES The Company will advise a member of the Professional Standards Committee whenever a Crewmember fails to complete any Training event. Upon request, the Director of Training will consult with a member of the Professional Standards Committee and the Crewmember before the disposition of the affected Crewmember is determined. 19.8.2. COMMITTEE MEMBER PAY PROTECTION Committee Member pay protection is dealt with in subsection 28.7. 19.9. TRAINING PAY Training Pay is dealt with in Section 5. 19.10. GENERAL 19.10.1. REVENUE FLYING Except for OE, a Crewmember will not be required to fly a revenue flight while in initial or transition Training. 19.10.2. PROBATIONARY CREWMEMBERS Training of probationary Crewmembers will be handled at the Company's discretion. 19.10.3. RECURRENT TRAINING ORDER Recurrent ground school must be completed successfully prior to administering simulator Training or a proficiency check. 19.10.4. RE-INDEXING The Company may reschedule the due Month of recurrent Training to equalize the number of Crewmembers needing recurrent Training over a twelve (12) Month period. The Company will provide at least thirty (30) days notice to a Crewmember whose due Month is being rescheduled. The Crewmember may waive such notice. 19.10.5. GROUND TRANSPORTATION The Company will provide ground transportation between a place of lodging and a Training facility if ground transportation is not provided by the place of lodging or the Training facility. -53- 54 SECTION 20 - SCHEDULING 20.1. BID PERIOD A Bid Period will contain twenty-eight (28) days. The Company may utilize Bid Periods of other than twenty-eight (28) Days with mutual agreement between the Union and the Company. 20.1.1. MULTIPLE BID PERIODS AWARDED SEPARATELY The Company may include up to three (3) Bid Periods in one (1) Bid Package. Each Bid Period will be bid and awarded separately and sequentially. 20.1.2. MULTIPLE BID PERIODS AWARDED CONCURRENTLY When a scheduling requirement exceeds twenty-eight (28), but no more than fifty-six (56) days, the Company may include two (2) bid periods in one (1) Bid Package for one (1) or more Lines of Flying, Composite Lines or Reserve Lines. The two (2) bid periods will be bid and awarded as if they were one (1) Bid Period. Concurrently awarded or assigned consecutive Bid Lines will not contain more than twenty-one (21) consecutive duty Days. 20.2. BID LINE CONSTRUCTION 20.2.1. LINES OF FLYING, COMPOSITE LINES AND RESERVE LINES The Company will construct Lines of Flying that may contain Days free of duty, Trip Sequences and reserve Days. The Company may also construct Composite Lines that will be blank when published. The Company may also construct Reserve Lines containing Days free of duty and reserve Days. Reserve Days on a Bid Line will be designated R-1, R-2 or R-3. Lines of Flying will contain all known flying, except that the Company may withhold from Lines of Flying up to five (5) percent of known flying, by Type, Base and Crew Class, to be used for management flying or Training. Such time may be designated Open Time at the Company's discretion. 20.2.1. SCHEDULED DUTY FREE DAYS Except as provided in subsection 17.4., release for a Crewmember's scheduled Days free of duty will occur in his Base or Residence Airport. 20.2.1.1. MINIMUM SCHEDULED DUTY FREE DAYS Bid Lines will contain a minimum of twelve (12) scheduled Days free of duty. 20.2.1.2. INVIOLATE SCHEDULED DUTY FREE DAYS A Crewmember may declare up to three (3) consecutive scheduled duty free Days as inviolate. Such declaration must be made not later than forty-eight (48) hours prior to the beginning of the Bid Period. A Crewmember is not required to perform duty, including Junior Assignment and Training, on an inviolate scheduled duty free Day. -54- 55 20.2.2.3. MINIMUM CONSECUTIVE SCHEDULED DUTY FREE DAYS The minimum scheduled duty free Days required in subsection 20.2.2.1. will be scheduled in a maximum of two (2) blocks of Days off, with a minimum of three (3) Days off in any block. Additional Days free of duty may be in blocks of less than three (3). 20.2.2.4. CONTACT ON SCHEDULED DUTY FREE DAYS A Crewmember is not required to keep the Company informed of his whereabouts or carry a pager while on his scheduled duty free Days. A Crewmember is not required to maintain contact with the Company on a scheduled duty free Day other than to comply with subsection 20.6.5. 20.3. BID PROCEDURES 20.3.1. ELIGIBILITY TO BID A Crewmember must be Type and Crew Class current and qualified at bid close to bid a line. A Crewmember scheduled for upgrade or transition Training in a Bid Period will not be awarded a Bid Line that conflicts with such Training. A Crewmember who is not expected to be available for at least one half of the Days in the Bid Period will not be awarded a line. Crew Scheduling will assign or construct a line with pro-rated scheduled duty free Days, rounded to the nearest whole Day for a Crewmember who is not awarded a line pursuant to this subsection. A Crewmember who becomes available after bid close will be assigned a Reserve Line with pro-rated scheduled duty free Days, rounded to the nearest whole Day. The Crew Scheduler will consider a Crewmember's request regarding the scheduling of such duty free Days. 20.3.2. BID PACKAGE CONTENTS A Bid Package will be published for each Type at each Base for each Bid Period. It will contain Trip Sequence descriptions including report times, Bid Lines, Open Time, the bid request form, the Bid Seniority List, Crewmember vacation dates, the anticipated Recurrent ground school dates, the anticipated Recurrent simulator periods and a list of Crewmembers who require recurrent Training. 20.3.3. BID PACKAGE DISTRIBUTION The Company will mail or e-mail a Bid Package to each Crewmember's residence and post the Bid Package at Bases and hubs, not later than twenty (20) Days before the last Day of the Bid Period prior to the one being bid. If a Crewmember does not have access to his residence, Bases or hubs, Crew Scheduling will fax or e-mail a bid package to him upon request. 20.3.4. BID SUBMISSION Completed bid request forms may be submitted to the Scheduling Department. A Crewmember may request confirmation that his bid has been received. -55- 56 20.3.5. BID AWARD SCHEDULE Bids will close ten (10) Days before the last Day of the Bid Period prior to the one being bid. The Company will award and post the awards at Bases and hubs no later than five (5) Days before the last Day of the Bid Period prior to the one being bid. A re-bid will not occur after Bid Line awards are posted. However, this will not prevent correction, within seventy-two (72) hours of award, for errors in the bid award. 20.3.5.1. COMPOSITE LINE CONSTRUCTION No later than seventy-two (72) hours after bid award, the Company will utilize Open Time, reserve Days and Days free of duty to construct Composite Lines. Crewmembers awarded or assigned Composite Lines will then be provided with a copy of the Bid Line. 20.3.5.2. RESERVE STATUS CHANGE A Crewmember may have his reserve status (R-3, R-2, R-1) on any reserve Day(s) changed before the beginning of the Bid Period in accordance with the response times in Section 23. Changes to reserve status after the beginning of the Bid Period are dealt with in Section 23. 20.3.6. BID PERIOD TRANSITION A Crewmember must complete a Trip Sequence that continues into the subsequent Bid Period. 20.3.6.1. SCHEDULE CONFLICTS If a Crewmember is awarded or assigned a Bid Line that conflicts with a Trip Sequence from the preceding Bid Period (e.g., he must be in two places at once) or results in a potential conflict with the FARs, Crew Scheduling will adjust his Bid Line by dropping the conflicting Days from the conflicting Trip Sequence(s) or replacing them with a Trip Sequence(s) or reserve Day that does not conflict. 20.3.6.2. EXCESS DAYS If a Crewmember is awarded or assigned a Bid Line that, in combination with a Trip Sequence that continues from the preceding Bid Period, will cause him to have fewer than the minimum scheduled duty free Days set forth in subsection 20.2.2.1., he may elect to drop sufficient Days from a Trip Sequence(s) to meet the requirements of subsections 20.2.2.1. and 20.2.2.3. Such election will be coordinated with Crew Scheduling. As an alternative, he may elect to fly the extra Days and have the Days paid at the rate set forth in subsection 5.9. If he elects to fly the Trip Sequence(s), pay under subsection 5.9. will be calculated from the last Day of the Trip Sequence(s) forward. He must coordinate his election with Crew Scheduling within forty-eight (48) hours of the bid award. If the Crewmember fails to contact Crew Scheduling within forty-eight (48) hours of the bid award, Crew Scheduling will adjust his Bid Line by dropping sufficient Days from a Trip Sequence(s) to cause his Bid Line to comply with subsections 20.2.2.1. and 20.2.2.3. -56- 57 20.3.7. BID AWARDS Bids will be awarded in seniority order by Type and Crew Class in each Base. If a member of the Scheduling Committee requests to be present at the award, he will be accommodated, provided that his attendance does not interfere with his ability to perform any scheduled duty. If a Captain is unable to hold a line as a Captain because of an insufficient number of lines, he will be awarded a line as a First Officer in seniority order after all First Officers have been awarded their bids. 20.3.8. FAILURE TO BID If a Crewmember does not bid or if his bid does not comply with this Section or contain sufficient choices, he will be assigned a Bid Line after all other bids are awarded. 20.4. OPEN TIME Open Time is known flying that is not placed into Lines of Flying and flying that subsequently becomes available during the Bid Period. A Trip Sequence that is dropped from a Crewmember's Bid Line for reasons such as vacation, leaves of absence, sick leave, Bid Period transition or Training is also Open Time. Prior to the beginning of a Bid Period, Open Time may be used to construct Composite Lines. The Company may award or assign a partial Trip Sequence. 20.4.1. OPEN TIME AWARD AND ASSIGNMENT After the beginning of the Bid Period, except for a trip scheduled to depart within forty-eight (48) hours of the Company becoming aware of such trip, or for time assigned to a Crewmember pursuant to other provisions of this Section, Open Time will be awarded or assigned in the order listed below: 20.4.1.1. DEDICATED RESERVE At the Company's option, to a Crewmember who is serving in a designated reserve or standby role, such as a reserve that is dedicated to the specific customer for whom the trip is operating, e.g., AMC and USPS standby. 20.4.1.2. TRAINING At the Company's option, to a Crewmember who requires OE, route qualification or other line flight Training. 20.4.1.3. SHORTED TIME CREWMEMBER To a Crewmember, in seniority order, who has lost flying from his Bid Line and who is on a scheduled Duty Day. 20.4.1.4. MANAGEMENT CREWMEMBERS At the Company's option, to a Management Crewmember. -57- 58 20.4.1.5. VOLUNTEER To a Crewmember, in seniority order by Type, Category and Crew Class, who has volunteered for Open Time. The Crewmember will have the option to either replenish his sick leave bank, in accordance with subsection 8.4., or be paid for the flying. The Company may bypass a Crewmember who, including the Open Time, is projected to exceed eighty-four (84) actual flight hours for the Bid Period or FAR annual Flight Time limitations. 20.4.1.6. RESERVE To a Crewmember on reserve. 20.4.1.7. JUNIOR ASSIGNMENT If no reserve is available, to the most junior available Crewmember on a scheduled duty free Day. The most junior available Crewmember may be bypassed if his junior assignment will create a conflict with a Trip Sequence on his Bid Line. 20.4.1.7.1. MAXIMUM NUMBER OF JUNIOR ASSIGNMENTS A Crewmember will not be junior assigned more than six (6) Days in any thirteen (13) consecutive Bid Periods, unless the Crewmember agrees otherwise. 20.4.1.7.2. SCHEDULE CONFLICTS AS A RESULT OF JUNIOR ASSIGNMENT A Crewmember who, as a result of a junior assignment, is required to drop a subsequent Trip Sequence(s) because of either FAR or contractual Flight or Duty Time limitations may be rescheduled under subsection 20.5.2. However, he will be credited with the value of the junior assigned trip and the greater of the Trip Sequence(s) dropped or the Trip Sequence(s), if any, to which he is reassigned. 20.5. RESCHEDULE AFTER BID AWARD 20.5.1. RESCHEDULE FOR TRAINING 20.5.1.1. RESCHEDULE FOR ANOTHER CREWMEMBER'S TRAINING If the Company removes a Crewmember from a Trip Sequence(s) or reserve assignment for the purpose of Training another Crewmember, the Company will return the Crewmember to his Bid Line as soon as practical. A Crewmember will not be required to make up lost time on his scheduled duty free Days. The Crewmember will be credited with the greater of the Trip Sequence(s) from which he is removed or the Trip Sequence(s) or reserve duty, if any, to which he is assigned. -58- 59 20.5.1.2. RESCHEDULE FOR A CREWMEMBER'S OWN TRAINING If the Company removes a Crewmember from a Trip Sequence(s) or reserve assignment for the purpose of his recurrent Training, the Company will return the Crewmember to his Bid Line as soon as practical. A Crewmember will not be required to make up lost time on his scheduled duty free Days. The Crewmember will be credited with Training pay pursuant to subsection 5.11.1.1. for all Days rescheduled. 20.5.2. RESCHEDULE FOR OTHER THAN TRAINING If the Company removes a Crewmember from a Trip Sequence(s) for reasons such as trip cancellations, crew legality or weather, it will return the Crewmember to his Bid Line as soon as practical. A Crewmember will not be required to make up lost time on his scheduled duty free Days. The Crewmember will not be credited for the Trip Sequence(s) from which he was removed. The Crewmember may be assigned to another Trip Sequence(s) or to reserve. 20.6. SCHEDULING PROCEDURES 20.6.1. TRIP SEQUENCE TRADES Trip Sequence trades are permitted in accordance with Crew Scheduling guidelines. 20.6.2. RESERVE ASSIGNMENTS Reserve assignments are dealt with in Section 23. 20.6.3. RELEASE FROM DUTY The Company may release a Crewmember from his Bid Line, provided there are no additional flying or reserve requirements. 20.6.4. DUTY AT RESIDENCE A Crewmember may satisfy his Duty Day(s) on a Line of Flying, Composite Line or Reserve Line at his residence at the Company's discretion. A Crewmember will not be paid in-base per diem or be provided with lodging on such days. 20.6.5. PRE-DUTY CHECK IN A Crewmember will call Crew Scheduling within twenty-four (24) to forty-eight (48) hours prior to the first Day of his duty assignment(s). 20.6.6. POST DUTY CHECK IN When a Crewmember completes a duty assignment, he will contact the Company. -59- 60 20.7. GENERAL 20.7.1. SCHEDULING COMMITTEE The Union will appoint a Scheduling Committee composed of Crewmembers. Bid packages will be made available to Scheduling Committee members, upon request, before publication. The Company will consider recommendations of the Scheduling Committee concerning scheduling policies and procedures. 20.7.2. MILITARY DUTY When a Crewmember has military duty of fourteen (14) Days or less, he must bid all Bid Lines that accommodate such military duty. Days of military duty will be considered a Crewmember's scheduled duty free Days. If a Crewmember is unable or fails to bid around his military duty, he will be assigned Duty Days that will not conflict with his military duty requirements. 20.7.3. REQUIRED RECORDS The Company will keep a record of all Bid Packages and Bid Line awards or assignments, and bid request forms for thirteen (13) Bid Periods. 20.7.4. HOSTILE AREAS Prior to operating a flight(s) into an area with ongoing armed conflicts that may affect the personal safety of Crewmembers, the Union and the Company will consult to determine the procedures for such flight(s). 20.7.5. NOTIFICATION OF APPRECIABLE DELAY The Company will notify a Crewmember of any appreciable delay in his departure time as soon as practical after the delay becomes known. -60- 61 SECTION 21 - HOURS OF SERVICE 21.1. FAR CONFLICTS If an FAR is more restrictive than a provision of this Section, the FAR will apply. 21.2. DUTY TIME 21.2.1. DIRECTION OF THE COMPANY During Duty Time, a Crewmember is under the control and direction of the Company. 21.2.2. REPORT AND RELEASE TIMES Duty Time or duty period begins when a Crewmember is required to report for duty (normally one (1) hour prior to scheduled departure for domestic flights and two (2) hours for international flights but not more than two and one-half (2 1/2) hours prior to scheduled departure for any flights) or actually reports to the airport, whichever is later. Duty Time or duty period ends fifteen (15) minutes after block-in at the point where the flight terminates or when the Crewmember is released by the Company, whichever is later. If a Crewmember is called to the field for the purpose of flight and is not used, his Duty Time or duty period ends when the Crewmember is released by the Company. 21.2.3. REDUCED REPORT TIME Affected Crewmembers and the Director of Operations, or his designee, may reduce report time, in coordination with the Captain, as provided in the Company GOM. A late departure caused by this reduced report time will not be the responsibility of the Crewmembers. 21.2.4. SUSPENSION OF DUTY TIME 21.2.4.1. INVOLUNTARY A Crewmember's Duty Time may be suspended once in a duty period for less than a required rest period provided Adequate Rest Facilities, convenient to the airport, are made available. The minimum time for such a suspension is five (5) hours from release to report. If this provision is exercised by the Company, the affected Crewmember's previously accumulated Duty Time is not changed by such suspension. Such suspension will not be assigned retroactively. 21.2.4.2. VOLUNTARY A Crewmember may suspend his Duty Time once in a duty period due to unforeseen operational circumstances for less than a required rest period, provided Adequate Rest Facilities are made available. If this provision is exercised by the Crewmember, with the concurrence of Crew Scheduling, his previously accumulated Duty Time is not changed by such suspension. Such suspension will not occur retroactively. -61- 62 21.2.5. MAXIMUM DUTY TIMES When scheduling Crewmembers for flying, the Company will not exceed the following Duty Time limitations: 21.2.5.1. SINGLE CREW - DOMESTIC Single Crew operating domestic flight(s) only - sixteen (16) hours. 21.2.5.2. AUGMENTED CREW - DOMESTIC Augmented Crew operating domestic flight(s) only - eighteen (18) hours. 21.2.5.3. DOUBLE CREW - DOMESTIC Double Crew operating domestic flight(s) only - twenty (20) hours. 21.2.5.4. SINGLE CREW - INTERNATIONAL Single Crew operating international flight(s) - eighteen (18) hours. 21.2.5.5. AUGMENTED CREW - INTERNATIONAL Augmented Crew operating international flight(s) - twenty six (26) hours. 21.2.5.6. DOUBLE CREW - INTERNATIONAL Double Crew operating international flight(s) - thirty (30) hours. 21.2.6. DEADHEAD DUTY LIMITATIONS Deadhead duty limitations are dealt with in Section 22. 21.3. REST 21.3.1. REST PERIOD Rest is measured from release from duty until report for duty as adjusted for operational requirements, delays in transportation to and from the place of lodging and the availability of lodging. 21.3.2. MINIMUM REST PERIOD - DOMESTIC The rest period will be a minimum of eight (8) hours free of all duty, unless a Crewmember exceeds, or is scheduled to exceed eight (8) hours of flight in a twenty-four (24) hour period. 21.3.3. MINIMUM REST PERIOD - INTERNATIONAL If a Crewmember's duty period is less than eighteen (18) hours, the rest period will be a minimum of ten (10) hours free of all duty. If a Crewmember's duty period exceeds eighteen (18) hours, the rest period will be a minimum of twelve (12) hours free of all duty. 21.3.4. FATIGUE If a Crewmember determines that fatigue is a factor in continuing a flight or series of flights, the Captain will coordinate with Crew Scheduling a rest period for the affected Crewmember(s) of not less than twelve (12) hours free of all duty. -62- 63 21.3.5. INTERRUPTION OF REST PERIOD During a rest period of twelve (12) hours or less, a Crewmember will not be disturbed by the Company, except to receive calls no more than two (2) hours prior to report time or to notify a Crewmember that his flight will be appreciably delayed. Any other earlier calls from the Company during a rest period, except in case of personal emergency, permits the Crewmember to begin a new rest period. 21.3.6. REST AFTER RELEASE A Crewmember released from duty after a Trip Sequence that immediately precedes his scheduled duty free Days may elect to remain at a release location for a rest period. If he elects to remain at the release location, the Company will provide the Crewmember with lodging so long as the release location is not his Residence Airport and the release occurs after a duty period of at least twelve (12) hours or viable transportation from the release location to the Crewmember's Residence Airport or Base is unavailable within four (4) hours of release. Deadhead required after release from duty remains the responsibility of the Company. If a Crewmember is released at his Residence Airport or Base and elects to remain in the release location, he will not be entitled to pay under subsection 5.9. 21.4. GENERAL 21.4.1. MIXING OF DOMESTIC AND INTERNATIONAL FLIGHTS The Company may combine domestic and international flights provided the maximum flight and Duty Time limitations of FAR Part 121 or this Section are not exceeded. 21.4.2. ONE-IN-SEVEN A Crewmember will receive at least one (1) twenty-four (24) hour period free of all duty in any consecutive seven (7) Days. A one-in-seven may be moved by the Company, with notice to the Crewmember, but will not be assigned retroactively. 21.4.3. AIRCRAFT REST FACILITIES FOR DOUBLE AND AUGMENTED CREWS When the Company operates a flight scheduled for twenty (20) or more hours of duty with a double or an augmented crew, the aircraft must have enclosed, fully reclining, first class seats or enclosed bunks with clean bedding to allow each Crewmember to sleep. When the Company operates a flight scheduled for less than twenty (20), but more than sixteen (16), hours of duty with a double or an augmented crew, the aircraft must have reclining seats located outside the cockpit to allow each Crewmember to rest. -63- 64 SECTION 22 - DEADHEADING AND COMMUTING 22.1. COMMUTING 22.1.1. COMMUTE TO BASE OR ASSIGNMENT A Crewmember who elects to Commute to his Base is responsible for being at his Base prior to report time for an assignment. A Crewmember who wishes to report to his first point of departure or reserve assignment instead of reporting to his Base must first coordinate with Crew Scheduling and report for his first assignment at the time determined by Crew Scheduling. 22.1.2. DUTY AND REST Time spent Commuting is not duty. A Crewmember Commuting to an assignment will ensure that he is adequately rested to perform his required duties. 22.2. DEADHEADING 22.2.1. COST OF DEADHEAD The cost of Deadhead transportation will be paid by the Company. 22.2.2. RESPONSIBILITY FOR DELAYS When the Company provides transportation to an assignment for a Crewmember, the Crewmember will not be held responsible for delays beyond his control. 22.2.3. COMMERCIAL AIR TRANSPORTATION When negotiating contracts with airline customers, the Company will attempt to secure, at no additional cost to itself, business class travel for commercial deadhead legs that exceed six (6) hours published scheduled time. If such travel has not been secured, the Company will provide relevant correspondence to the Union, upon request. 22.2.4. TRANSPORTATION FOR JUNIOR ASSIGNMENT A Crewmember who performs duty on a scheduled duty free Day pursuant to Section 20.4.1.7. will be provided deadhead transportation between his Residence Airport and his assignment, if necessary, at no cost to the Crewmember. 22.3. DEADHEAD DUTY CALCULATIONS 22.3.1. SINGLE CREW DEADHEAD TO A DUTY ASSIGNMENT If a Crewmember who is part of a single crew Deadheads to a duty assignment, he will not be scheduled for the combination of the Deadhead time and duty in excess of twenty (20) hours without an intervening rest period. If such a Crewmember is provided the equivalent of business class or better transportation, or a bunk, one-half (1/2) of the Deadhead time will be credited toward the Duty Time limitations set forth in Section 21. -64- 65 22.3.2. AUGMENTED AND DOUBLE CREW DEADHEAD TO A DUTY ASSIGNMENT If a Crewmember who is part of an augmented or double crew Deadheads to a duty assignment without an intervening rest period, one-half (1/2) of the Deadhead time will be credited toward the Duty Time limitations set forth in Section 21. 22.3.3. DEADHEAD BETWEEN DUTY ASSIGNMENTS If a Crewmember Deadheads between duty assignments and is not provided an intervening rest period, all Deadhead time will be credited toward Duty Time limitations. 22.3.4. DEADHEAD FROM A DUTY ASSIGNMENT If a Crewmember Deadheads from a duty assignment to his Residence Airport or Base, the Deadhead time will not be credited toward Duty Time limitations, provided the Crewmember waives his required rest period. 22.3.5. DEADHEAD TO AND FROM TRAINING If a Crewmember Deadheads to and from a Training assignment, the Deadhead time will not be credited toward Duty Time limitations. For the purpose of this subsection, OE is not Training. 22.4. NO COCKPIT DUTY DURING DEADHEAD A Crewmember will not be required to operate the aircraft when Deadheading. 22.5. DEADHEAD PAY 22.5.1. AIR TRANSPORTATION A Crewmember who Deadheads by air will be credited with Flight Pay for one-half (1/2) of the published scheduled time. If a Crewmember Deadheads by air on a segment for which there is no published schedule, he will be credited with Flight Pay for one-half (1/2) of the Block-to-Block time. 22.5.2. SURFACE TRANSPORTATION A Crewmember who Deadheads by surface transportation will be credited with Flight Pay for one-fourth (1/4) of the published scheduled time. If a Crewmember Deadheads by surface transportation on a segment for which there is no published schedule, he will be credited with Flight Pay for one-fourth (1/4) of the actual time. 22.5.3. REPORT TO DUTY ASSIGNMENT INSTEAD OF BASE A Crewmember who reports to a duty assignment directly from his Residence Airport in accordance with subsection 22.1.1. will be paid Deadhead pay as if he had Deadheaded from his Base to the duty assignment. 22.5.4. TRAINING Travel to and from Training not in a Crewmember's Base is Deadhead. Travel between Training in a Crewmember's Base and a duty assignment on a scheduled Duty Day is Deadhead. All other travel to and from Training is a Commute. -65- 66 SECTION 23 - RESERVE 23.1. LONG CALL RESERVE (R - 3) Long call reserve will be performed at a Crewmember's residence. A long call reserve Day begins at 0000Z and ends at 2359Z. A Crewmember on R-3 may be moved up to either R-2 or R-1. 23.1.1. CONTACT When on long call reserve, a Crewmember must be able to be contacted at his designated telephone number, pager or answering machine. A Crewmember who elects to use an answering machine or a pager is considered to have been contacted when the pager is activated or a message is left by Crew Scheduling. A Crewmember on long call reserve must return a call to Crew Scheduling within one (1) hour of being paged or from the time of the message, unless other arrangements are made with Crew Scheduling. 23.1.2. RESPONSE A Crewmember on long call reserve will use his best efforts to obtain the first available departure from his Residence Airport, unless a later departure is selected by Crew Scheduling. A Crewmember on long call reserve must be able to report to either his Base or another location that can reasonably be reached within twelve (12) hours after being contacted by Crew Scheduling. A Crewmember on R-3 who is moved up to R-2 or R-1 must be able to report to the R-2 or R-1 location within twelve (12) hours after being contacted by Crew Scheduling. 23.1.3. COMPENSATION A Crewmember who performs long call reserve on a scheduled duty free Day will be paid in accordance with subsection 5.9. 23.1.4. EXPENSES A Crewmember on long call reserve will not be provided lodging or Per Diem. 23.2. SHORT CALL RESERVE (R - 2) Short call reserve will be performed at any Company-designated location. A Crewmember on R-2 may be moved up to R-1 or moved down to R-3. 23.2.1. CONTACT A Crewmember on short call reserve must be able to be contacted at his designated telephone number or pager. A Crewmember who elects to use a pager is considered to have been contacted when the pager is activated. A Crewmember on short call reserve must return a call to Crew Scheduling within twenty (20) minutes of being paged or from the time of a message, unless other arrangements are made with Crew Scheduling. 23.2.2. RESPONSE A Crewmember on short call reserve must be at the location designated by the Company as soon as possible but no later than two (2) hours after being contacted by Crew Scheduling. -66- 67 23.2.3. COMPENSATION A Crewmember who holds a Line of Flying or a Composite Line who performs short call reserve will be credited with the greater of three point five (3.5) hours of Flight Pay for each such Day or the actual pay credit for that Day. A Crewmember who performs short call reserve on a scheduled duty free Day will be paid in accordance with subsection 5.9. 23.2.4. EXPENSES A Crewmember on short call reserve will be provided lodging and Per Diem in accordance with Section 6 and subsection 17.3.3. 23.2.5. ASSIGNMENT If more than one qualified Crewmember, by Type and Crew Class, is on short call reserve at the same location, assignments will be on a first-in, first-out basis, except when legality, Flight Time, Duty Time or scheduled Days free from duty considerations preclude such an assignment order. 23.3. STANDBY (R - 1) Standby will be performed at any Company-designated location. A Crewmember on R-1 may be moved down to either R-2 or R-3. Duty Time for standby begins when a Crewmember reports to the airport or other standby location assigned by the Company and ends when the Crewmember is released. 23.3.1. CONTACT A Crewmember on standby must be available for immediate contact by Crew Scheduling. 23.3.2. RESPONSE Taking into account operational considerations, a Crewmember on standby must be able to depart from the assigned airport within one (1) hour of being contacted by Crew Scheduling. 23.3.3. COMPENSATION A Crewmember on standby will be credited with three point five (3.5) hours of Flight Pay for each standby Day or the actual Flight Pay credit for the Day, whichever is greater. A Crewmember who performs standby on a scheduled duty free Day will be paid in accordance with subsection 5.9. 23.3.4. EXPENSES A Crewmember on standby will be provided lodging and Per Diem in accordance with Section 6 and subsection 17.3.3. 23.3.5. ASSIGNMENT If more than one qualified Crewmember, by Type and Crew Class, is on standby at the same location, assignments will be on a first-in, first-out basis, except when legality, Flight Time, Duty Time or scheduled Days free of duty considerations preclude such an assignment order. -67- 68 23.3.6. REST FACILITIES A Crewmember on standby for more than six (6) hours will be provided Adequate Rest Facilities or the aircraft rest facilities set forth in subsection 21.4.3. -68- 69 SECTION 24 - DISCIPLINE AND DISCHARGE 24.1. HOLDING OUT OF SERVICE Prior to disciplining or discharging a Crewmember, the Company may hold the Crewmember out of service, with pay, until the conclusion of an investigatory hearing. Thereafter, the Crewmember may be held out of service pending further investigation with or without pay. If a Crewmember is held out of service without pay, the Company will either take disciplinary action or restore the Crewmember to pay status within sixty (60) Days after the conclusion of an investigatory hearing. 24.2. INVESTIGATORY HEARING The Company will notify the Crewmember and the Union of the time, date and location of an investigatory hearing. A Crewmember may be represented by a Union representative at an investigatory hearing. It is the responsibility of the Crewmember to obtain Union representation. 24.2.1. EXPENSES The Company will provide transportation and lodging for a Crewmember required to attend an investigatory hearing, except when the Crewmember is scheduled to be in the location of the hearing or resides in the location of the hearing or is Based in the location where the hearing will be held. 24.3. WRITTEN NOTIFICATION The Company will notify a Crewmember in writing of the reasons for any discipline or discharge, with a copy to the Union. 24.4. GRIEVANCE RIGHTS A Crewmember who has been disciplined or discharged may file a grievance pursuant to Section 25. A non-probationary Crewmember who has been discharged may file a grievance directly at the step contained in subsection 25.4. -69- 70 SECTION 25 - GRIEVANCE PROCEDURE 25.1. GRIEVANCE DEFINITION A grievance is defined as a dispute between the Company and a Crewmember or the Union arising out of the interpretation or application of this Agreement or the discipline or discharge of a Crewmember. Grievances will not include proposed changes in rates of pay, hours of service or working conditions. 25.2. STEP ONE - REQUEST FOR RELIEF Prior to filing a written grievance and within ten (10) Days after the Crewmember became aware or reasonably should have become aware of the circumstances from which the grievance arose, the Crewmember will discuss the matter with the Chief Pilot, or his designee, in an effort to resolve it. The Chief Pilot, or his designee, will respond to the Crewmember within ten (10) Days of the discussion. 25.3. STEP TWO - FILING A WRITTEN GRIEVANCE If the Crewmember is not satisfied with the Chief Pilot's, or his designee's, response or if the Chief Pilot, or his designee, does not respond within ten (10) Days after the discussion in subsection 25.2., the Union may file a written grievance with the Director of Operations, or his designee, by certified or registered mail, return receipt requested. Written grievances must contain a reference to the provision of the Agreement alleged to have been violated, a statement of the facts involved which is sufficiently detailed to allow investigation of the incident and any supporting documentation. 25.3.1. TIMELINES FOR FILING AND RESPONSE Except for discharge grievances, a grievance must be filed within thirty (30) Days after the Crewmember receives an unsatisfactory response made in accordance with subsection 25.2., above, or forty (40) Days after the Crewmember discusses the matter with his Chief Pilot, or his designee, whichever occurs first. In the case of a discharged Crewmember, the Union must file a grievance within thirty (30) Days after the Crewmember receives written notice of discharge. The Director of Operations, or his designee, will file his decision with the Union in writing within twenty (20) Days after receiving the grievance from the Union by certified or registered mail, return receipt requested. 25.4. STEP THREE - APPEAL TO SYSTEM BOARD OF ADJUSTMENT If the decision in subsection 25.3.1., above, is not satisfactory, the Union may appeal the decision to the Chairman of the System Board of Adjustment, with a copy to the Vice-Chairman. The appeal must be made in writing within fifteen (15) Days after receipt of the decision of the Director of Operations, or his designee, with a copy of the appeal to the Director of Operations, or his designee, sent by certified or registered mail, return receipt requested. 25.5. TIMELINE VERIFICATION Filing dates will be considered to be postmark dates. Receipt dates will be considered to be the dates on the return receipt. -70- 71 25.6. TIME LIMIT EXTENSIONS AND PENALTIES All time limits in this Section may be extended by mutual agreement of the parties, confirmed in writing. If any decision made by the Company is not appealed by the Union within the time limit prescribed for such appeal, the decision of the Company will become final and binding. If the Company fails to render a decision within the time limits prescribed above, the grievance will be considered denied and automatically appealed to the System Board of Adjustment. 25.7. PROBATIONARY CREWMEMBER EXCLUSION A probationary Crewmember may not file a grievance involving discipline or discharge. 25.8. UNION REPRESENTATION Upon request, a Crewmember may be represented by a Union representative at any step of the Grievance Procedure. 25.9. RECORDING OF SETTLEMENT If a grievance is settled, the settlement will be reduced to writing with a date certain for implementation. The Union will mail a copy of the settlement to the affected Crewmember(s) not later than thirty (30) Days after settlement. -71- 72 SECTION 26 - SYSTEM BOARD OF ADJUSTMENT 26.1. THE BOARD In compliance with the Railway Labor Act, as amended, a System Board of Adjustment is hereby established for the purpose of adjusting and deciding grievances that may arise under the terms of the Grievance Procedure and that are properly submitted to it. The Board will be known as The "Kitty Hawk International, Inc. Crewmembers' System Board of Adjustment," hereafter referred to as the "Board." 26.2. COMPOSITION OF THE BOARD 26.2.1. MEMBER SELECTION The Board will consist of four (4) members. Two (2) will be selected by the Company and two (2) will be selected by the Union. These appointees will be known as "Board Members." In addition, the Company and the Union will each select an alternate. If a Board Member is unavailable, the alternate will serve in place of the absent Board Member. All members of the Board will be employees of the Company. 26.2.2. TERMS OF OFFICE FOR BOARD MEMBERS The Board Members and their alternates will serve for one (1) year from the date of their selection and, thereafter, until their successors have been selected. Vacancies will be filled within thirty (30) Days in the same manner provided for the selection of the original Board Members and alternates. 26.2.3. CHAIRMAN AND VICE CHAIRMAN The office of Chairman will be filled and held alternately by a Board Member selected by the Union and by a Board Member selected by the Company. When a Board Member selected by the Union is Chairman, a Board Member selected by the Company will be Vice Chairman and vice versa. The Chairman or, in his absence, the Vice Chairman, will preside at meetings of the Board and at hearings and will have a vote in connection with all actions taken by the Board. 26.2.4. TERMS OF OFFICE FOR CHAIRMAN AND VICE CHAIRMAN The terms of office of Chairman and Vice Chairman will be one (1) year. A Company Board Member will be Chairman in odd numbered years; a Union Board Member will be Chairman in even numbered years. Terms of office will commence on January 1 of each year. 26.3. MEETING SCHEDULE The Board will meet quarterly in the city where the Company's general offices are located, unless the Parties agree upon an alternate location, at a time to be fixed by the Board, provided that at that time there are cases filed with the Board for consideration. The meetings will continue in session until all matters before the Board have been considered, unless otherwise mutually agreed to in writing. The Chairman may schedule additional meetings if requested by at least two (2) other Board Members. Each Party will assume the cost of their own expenses. -72- 73 26.4. BOARD MEMBER COMPENSATION Crewmembers will be released from flight duty to serve on the Board. Each Party will bear the cost of the compensation and expenses of its Board Members. 26.5. JURISDICTION OF THE BOARD 26.5.1. LIMITATIONS The Board has jurisdiction over all grievances growing out of this Agreement. The jurisdiction of the Board does not extend to proposed changes in rates of pay, hours of service or working conditions. 26.5.2. REQUIREMENTS The Board will consider any grievance properly submitted to it, provided that the grievance has not been previously settled in accordance with the provisions of Section 25. 26.6. PROCEEDINGS BEFORE THE BOARD 26.6.1. AGENDA AND SUBMISSIONS The Company and the Union will determine the agenda for the Board not less than ten (10) Days prior to the date of the hearing. The Union will forward copies of each submission, including all papers and exhibits, to each Board member no later than seven (7) Days prior to the date of the hearing. Each submission will include the following: 26.6.1.1. ISSUE Question or questions at issue, including the Section of the Agreement alleged to have been breached; and 26.6.1.2. FACTS Statement of facts; and 26.6.1.3. GRIEVANT POSITION Position of the grievant(s); and 26.6.1.4. COMPANY POSITION Position of the Company; and 26.6.1.5. DOCUMENTATION Available supporting documentation. 26.6.2. ADDITIONAL MEETING DATES If at least two (2) Board Members, one (1) from the Company and one (1) from the Union, consider a matter of sufficient urgency, an additional Board will meet at an earlier date and place agreeable to the Board Members. The meeting will be not more than thirty (30) Days after such request for a meeting is made. The Chairman will give the necessary notices of such a meeting to the Board Members and to the parties to the dispute. -73- 74 26.6.3. REPRESENTATION Crewmembers may be represented at the Board hearing by any person, or persons, as they may choose and designate. The Company may be represented by any person, or persons, as it may choose and designate. Evidence may be presented either orally or in writing, or both. 26.6.4. WITNESSES The Board Members selected by either Party may summon witnesses who are deemed necessary by such Board Members. Each Party will bear the cost of the compensation and expenses of witnesses summoned by its Board Members. The number of witnesses summoned at any one time will not be greater than the number that can be spared without interference with the operation of the Company. Each Party may present witnesses on its behalf. Each Party will bear the cost of the compensation and expenses of its witnesses. 26.6.5. COMPETENCY The Board is competent to hear any grievance properly submitted to it and decide that grievance by a majority vote of all members of the Board. Decisions of the Board will be in writing, final and binding, and will include implementation dates. The Company will mail a copy of the decision to the affected Crewmember(s) not later than thirty (30) Days after decision is rendered. 26.7. DEADLOCK PROCEDURES 26.7.1. SUBMISSION TO ARBITRATION When a grievance is properly submitted to the Board and the Board is unable, by majority vote, to decide the grievance, the Board will declare itself deadlocked. The grievance upon which the Board is deadlocked may be submitted to arbitration by the Union or the Company within twenty (20) Days from the close of the Board hearing by written notice to the other Party with copies to the Chairman and Vice Chairman of the Board. 26.7.2. FAILURE TO TIMELY SUBMIT TO ARBITRATION If notice that arbitration is desired is not properly served upon the other Party, with a copy to the Chairman and the Vice-Chairman within twenty (20) Days after the close of the Board hearing, the arbitrator will have no jurisdiction to consider that grievance, and the grievance will be considered withdrawn. 26.8. FREEDOM TO ACT INDEPENDENTLY Each Board Member will be free to discharge his duty in an independent and uncoerced manner without fear that his individual relations with the Company, the Crewmembers, or the Union will be affected in any manner by any action taken by him in good faith in his capacity as a Board Member. -74- 75 SECTION 27 - ARBITRATION 27.1. THE ARBITRATION PROCEDURE An arbitration procedure is hereby established for the purpose of adjusting grievances that may arise under the terms of the Grievance Procedure and that are properly submitted to the procedure after all steps for settling grievances in the Grievance Procedure and System Board of Adjustment have been exhausted. 27.2. STANDING PANEL If any grievance is properly appealed to arbitration, the arbitrator will be appointed by mutual agreement of the Company and the Union from the following standing panel of arbitrators: Benjamin Aaron Richard Bloch Herbert Fishgold Robert Harris Peter Meyers M. David Vaughn Nicholas Zumas The Parties may mutually agree to add to or delete from the panel of arbitrators. The panel must always contain an odd number of arbitrators, but never less than seven (7). 27.3. ARBITRATOR SELECTION METHOD If the Parties are unable to agree on the selection of an arbitrator, the Company and the Union will alternately strike a name from the panel until only one name remains. That individual will serve as the arbitrator for the grievance at issue. The order in which the Parties alternately strike names from the panel will be determined by a coin toss. 27.4. HEARING DATE AND LOCATION The arbitrator will hear and decide the grievance as promptly as possible. All hearings will be held at a place determined by the Company and the Union. 27.5. EXPENSES Each of the Parties will assume the compensation, traveling expense, and other expenses of its representatives and witnesses called or summoned by it. The number of witnesses summoned at any one time will not be greater than the number that can be spared without interference with the operation of the Company. 27.6. ARBITRATOR'S COMPENSATION AND EXPENSES The compensation, traveling expense and other expenses of the arbitrator will be shared equally between the Company and the Union. 27.7. COURT REPORTER COST If the Company or the Union independently requests that a court reporter be present at the hearing, the cost of the court reporter will be borne by the requesting party. If both Parties request a court reporter, the cost will be shared equally between the Company and the Union. -75- 76 27.8. LIMITATIONS The arbitrator will have no power to add to, subtract from, or modify any of the terms of this Agreement. 27.9. AWARDS The award of the arbitrator will be final and binding on both Parties. The award of the arbitrator will be enforceable, at law or in equity, in any Federal Court having jurisdiction. The Company will mail a copy of the award to the affected Crewmember(s) not later than thirty (30) Days after it receives the award. 27.10. JURISDICTION The arbitrator will have the sole and exclusive jurisdiction to determine whether a particular grievance is arbitrable. -76- 77 SECTION 28 - PROFESSIONAL STANDARDS COMMITTEE 28.1. COMMITTEE SELECTION The Union will appoint a Professional Standards Committee composed of Crewmembers. The Union will provide the Director of Operations, or his designee, with a current list of Professional Standards Committee members. 28.2. COMMITTEE PURPOSE The purpose of the Professional Standards Committee is to identify problems affecting the professionalism, Training, safety and the overall performance of Crewmembers. The goal of the Professional Standards Committee is to identify and correct problems through early intervention before official notice and action is required. 28.3. COMPANY INTERACTION The Professional Standards Committee will confer and attempt to reach consensus with the Company on matters relating to professional standards. 28.4. REPORTS The Professional Standards Committee will be under no obligation to report its activities to the Company. 28.5. CONFIDENTIALITY The Professional Standards Committee will maintain confidentiality in all of its functions, except where necessary to prevent the compromise of safety or injury to personnel or property. 28.6. INVESTIGATIONS The Professional Standards Committee will investigate any problems brought to its attention by Crewmembers or the Company. 28.7. COMMITTEE MEMBER PAY PROTECTION The Director of Operations, or his designee, will release Professional Standards Committee members to pursue Committee functions, consistent with reasonable scheduling requirements. In such case, the Committee member will suffer no loss of pay or benefits if the Committee member is pursuing Committee functions at the request of the Company. If the Committee member is pursuing Committee functions at the request of the Union, the Union will reimburse the Company for the pay and benefits of the Committee member. A Professional Standards Committee member performing professional standards duties on a scheduled duty free Day will not be entitled to compensation. Expenses incurred by a Professional Standards Committee member while acting on behalf of the Committee will be paid by the Union. -77- 78 SECTION 29 - MISSING, INTERNMENT, PRISONER OR HOSTAGE OF WAR AND HIJACKING 29.1. COMPENSATION A Crewmember who, in the course of his employment, becomes involuntarily missing, is interned or held hostage will be paid his MBPG. Payments will continue until released or, if missing, until proof of death is established in fact, or until there is reasonable presumption of death, to a maximum of thirty-six (36) Months. The MBPG will be paid to the beneficiary or beneficiaries designated in writing by the Crewmember as set forth in subsection 29.5. 29.2. SENIORITY AND LONGEVITY ACCRUAL A Crewmember will accrue seniority and longevity during a period in which he is involuntarily missing or interned. 29.3. SICK LEAVE USE A Crewmember who requires the use of sick leave as a result of hijack or terrorist activity that occurs in the course of his employment will be allowed to use sick leave with no charge to the Crewmember's sick leave account for a period not to exceed one hundred eighty (180) Days. 29.4. DIRECTION OF PAYMENTS 29.4.1. WRITTEN DIRECTION The MBPG will be disbursed by the Company in accordance with written direction from the Crewmember. The Company will require each Crewmember to execute and deliver to the Company such written direction. 29.4.2. NO WRITTEN DIRECTION Any payments due a Crewmember under this Section which are not covered by a written direction will be held by the Company for such Crewmember and in the event of his death will be paid to the legal representative of his estate. 29.5. FORM FOR PAYMENT DIRECTION The direction will be in substantially the following form: TO: Kitty Hawk International, Inc. You are hereby directed to pay all compensation due me under the terms of the Collective Bargaining Agreement between Kitty Hawk International, Inc. and the International Brotherhood of Teamsters, Airline Division, while missing, or resulting from death or any other condition that makes direct payment to me impossible under the Agreement, as follows: $__________ per month to _________________________________ ____________________________________________ as long as living, and thereafter to ________________________________________ _____________________________________________as long as living. -78- 79 The balance, if any, and any amounts accrued after the death of all persons named in the above designation will be held for me, or in the event of my death before receipt thereof, will be paid to the legal representative of my estate. This direction may be modified from time to time by letter signed by the undersigned, and any such modification will become effective upon receipt of such letter by the Company. Payments made by the Company pursuant to this direction will fully relieve the Company from the obligation of making payment with respect thereto. ----------------------- -------------------- Crewmember Name (Print) Witness Name (Print) ----------------------- -------------------- Signature Signature ------------ ------------ Date Date SECTION 30 - STRIKES, LOCKOUTS AND PICKET LINES 30.1. STRIKE During the term of this Agreement, the Union will not authorize, cause, sanction or engage in any strike, non-informational picketing, slowdown, or work stoppage. 30.2. LOCKOUT During the term of this Agreement, the Company will not cause, permit, or engage in any lockout of Crewmembers. 30.3. PICKET LINE The Union and the Company will consult prior to the Company conducting any flight operations behind a picket line on behalf of an air carrier involved in an AFL-CIO sanctioned labor dispute. -79- 80 SECTION 31 - GENERAL 31.1. NO DISCRIMINATION In accordance with applicable law, there will be no discrimination by either party against any Crewmember covered by this Agreement because of race, color, religion, sex, national origin, age, veteran status or disability. 31.2. GENDER NEUTRAL Wherever a Crewmember is referred to in this Agreement in the masculine, it is understood to include the feminine. 31.3. INVALIDATION OF AGREEMENT PROVISIONS If any provision of this Agreement is held invalid by operation of law or by any court of competent jurisdiction, or if compliance with or enforcement of any provision should be restrained by such court pending a final determination as to its validity, the remainder of this Agreement, or the application of such to persons or circumstances other than those as to which it has been held invalid or as to which compliance with or enforcement of has been restrained, will not be affected. If any provision is held invalid, either party may request negotiations for the purpose of arriving at a mutually satisfactory replacement of such provision. If such negotiations fail to produce an agreement as to such replacement, either party, notwithstanding the provisions of Section 32, may invoke the services of the National Mediation Board in accordance with Section 6, Title 1, of the Railway Labor Act, as amended, to resolve such dispute. 31.4. MODIFICATIONS TO THE AGREEMENT Any modification to this Agreement must be in writing, signed by a representative of the Union, a representative of the Executive Council, and two (2) representatives of the Company, one of whom must be the Director of Operations or his superior. 31.5. ID CARDS The Company will provide identification cards to each Crewmember indicating his Crew Class. 31.6. CHARTS AND MANUALS The Company will provide current charts and manuals for each aircraft. A Crewmember will not be required to update or maintain manuals, documents or charts during flight. 31.7. VISAS AND INOCULATIONS The Company will pay for visas, visa photographs and inoculations required of Crewmembers and, if practicable, the Company will obtain such visas. 31.8. USE AND DAMAGE OF COMPANY EQUIPMENT A Crewmember will not be required to pay for the use of any Company equipment used in Training and will not be required to pay for any Company aircraft damaged while under the direction of the Company unless such damage occurs as a result of the gross negligence of the Crewmember. -80- 81 31.9. CREWMEMBER LIABILITY COVERAGE The Company will include each Crewmember as an insured under the Company's Airline Liability Policy while the Crewmember is performing duty at the direction of the Company. 31.10. PERSONNEL FILES 31.10.1. CONTENTS The Company will maintain a personnel file for each Crewmember. The personnel file will contain all personnel-related documents involving the Crewmember. All orders to a Crewmember involving promotions, demotions, furloughs and leaves of absences will be stated in writing, and will be placed in the Crewmember's personnel file. 31.10.2. ACCESS Upon written request, a Crewmember may review his personnel file in the presence of an appropriate Company representative at a time and place mutually agreed upon between the Crewmember and the Company and will be entitled to copies of any document(s) in his personnel file. Such request(s) will be limited to one (1) every six (6) Months. 31.11. UNION REPRESENTATION 31.11.1. BULLETIN BOARD The Company will provide the Union with a suitable location for a bulletin board at all Base(s) for the posting of official notices of Union meetings, elections, and other notices pertaining to internal Union matters. The bulletin board will not contain any inflammatory material or material derogatory to the Company or any of its employees. 31.11.2. UNION ACCESS TO PROPERTY The Company will admit to its Base(s) and operational line stations, the official designated representatives of the Union to transact such business as is necessary for the administration of this Agreement. The Union will provide the Company with prior notice of a request to be admitted to any operational line station. All such requests must be approved by the Company. 31.11.3. CREWMEMBER REPRESENTATIVES The Union will select Crewmember representatives and notify the Company of their appointment or removal. The number of representatives will be limited to those necessary to provide convenient representation for Crewmembers. The Company will notify the Union of the appropriate Company representatives. 31.11.4. NEW-HIRE INDOCTRINATION The Company will inform the Union of any scheduled new-hire Crewmember classes and allow a reasonable period of time during new hire indoctrination for Union orientation. 31.12. MANAGEMENT POSITIONS, CHECK AIRMEN AND SPECIAL PROJECTS A Crewmember will not be required to accept a management or Check Airman position nor be required to perform special projects for the Company. -81- 82 31.13. PROMOTIONAL ACTIVITIES A Crewmember will not be required to participate in publicity or promotional activities. 31.14. HOSTILE AREAS A Crewmember with less than ninety (90) Days of Active Service will not be required to operate a flight(s) into an area with an ongoing armed conflict that may affect his personal safety. 31.15. JUMPSEAT AGREEMENTS The Company will negotiate reciprocal jumpseat agreements with other airlines and provide a list to each Crewmember. 31.16. INTERLINE AGREEMENTS Consistent with the Company's pass policy and interline agreements with other airlines, a Crewmember and his immediate family will be entitled to the same pass or reduced fare privileges afforded other groups of non-managerial Company employees and their families. The Company will provide a current list of all agreements and interline privileges to each Crewmember once each year. 31.17. CABIN AND FLIGHT DECK MAINTENANCE Aircraft cabin entry area and flight decks will be cleaned regularly and properly maintained. All aircraft will have a clean and serviceable toilet. All cockpit seats will be fully functional and clean with all seat covers and cushions in good condition. A Crewmember must assure that such areas are left in a clean and orderly condition. The Company will provide all appropriate cleaning supplies and approved wipes for oxygen mask equipment. 31.18. AIRCRAFT GALLEY EQUIPMENT When feasible at a reasonable cost, all Company aircraft will have a hot cup and a microwave or galley oven installed. Such galley equipment will be maintained in operational condition. Each aircraft will have a cooler stocked with water and ice for each flight. 31.19. CREW MEALS If a Crewmember is scheduled for eight (8) or more hours of duty and is not scheduled for an en route stop of at least three (3) hours where ground transportation to a restaurant is provided, the Company will provide crew meals. Crew meals will also be provided on Flight Segments of six (6) hours or more, Block to Block. When at an airport where catering is available, crew meals will be delivered directly to the aircraft not more than two (2) hours prior to actual departure. A flight will not be delayed because of the failure to provide a crew meal. If the Company fails to provide crew meals, the Captain may, upon obtaining approval from the Company, which approval will not be unreasonably withheld, purchase crew meals with Company funds not to exceed reasonable and customary charges. A Crewmember will not be required to provide his own crew meal when the Company is required to provide such a meal. -82- 83 SECTION 32 - DURATION Except as otherwise provided herein, this Agreement will become effective on October 30, 1999, and will remain in full force and effect until October 30, 2003, and will renew itself without change until each succeeding October 30 thereafter, unless written notice of intended change is served in accordance with Section 6, Title I of the Railway Labor Act, as amended, by either party at least sixty (60) days prior to October 30, 2003 or any October 30 thereafter. The parties agree to commence negotiations pursuant to a Section 6 notice not later than sixty (60) Days prior to October 30, 2003. IN WITNESS WHEREOF, the parties have signed this Agreement, this 30th Day of October, 1999. KITTY HAWK INTERNATIONAL, FOR INTERNATIONAL BROTHERHOOD INC.: OF TEAMSTERS, AIRLINE DIVISION: /s/ CHARLES C. CARSON II /s/ RAY W. BENNING, JR. - ----------------------------- --------------------------------- Charles C. Carson II Ray W. Benning, Jr. President Director, Airline Division /s/ TIMIOTHY D. KOMBEREC /s/ DONALD R. TREICHLER - ----------------------------- --------------------------------- Timothy D. Komberec Donald R. Treichler Vice President of Operations International Representative, Airline Division /s/ ROBERT F. VETTER, JR. --------------------------------- Robert F. Vetter, Jr. Chairman, Executive Council and Negotiating Committee /s/ BRYANT H. BEEBE --------------------------------- Bryant H. Beebe Negotiating Committee /s/ ROBERT S. WOLFE --------------------------------- Robert S. Wolfe Negotiating Committee -83- 84 LETTER OF AGREEMENT BETWEEN KITTY HAWK INTERNATIONAL, INC. AND INTERNATIONAL BROTHERHOOD OF TEAMSTERS, AIRLINE DIVISION REGARDING PRIOR RIGHTS FLIGHT ENGINEERS THIS LETTER OF AGREEMENT is made and entered into in accordance with the provisions of the Railway Labor Act, as amended, by and between Kitty Hawk International, Inc. (the "Company") and The International Brotherhood of Teamsters, Airline Division (the "Union"), hereinafter known as the "Parties". The Parties agree as follows: 1. All Flight Engineers in the employ of the Company on the date of the signing of this Agreement listed on the Flight Engineer's Seniority List appended hereto are recognized as being Prior Rights Flight Engineers. Designation as a Prior Rights Flight Engineer will continue until a Prior Rights Flight Engineer is no longer employed by the Company as a Flight Engineer. 2. No Prior Rights Flight Engineer will be furloughed until all other Flight Engineers are furloughed. No Prior Rights Flight Engineer will be furloughed as a result of any Pilot being displaced. A Prior Rights Flight Engineer who is furloughed will retain Prior Rights Flight Engineer status upon recall. 3. This Letter of Agreement will survive the duration of the Agreement between the Parties dated October 30, 1999, and all succeeding Agreements so long as any Prior Rights Flight Engineer is employed by the Company as a Flight Engineer. The Parties to this Letter of Agreement and this Agreement irrevocably waive the right to serve any notice under Section 6 of the Railway Labor Act of any intended change to the Agreement that, if adopted, would modify any terms of this Letter of Agreement. IN WITNESS WHEREOF, the Parties have signed this Letter of Agreement this 30th Day of October, 1999. For Kitty Hawk International, Inc.: For The International Brotherhood of Teamsters, Airline Division: /s/ CHARLES C. CARSON II /s/ DONALD R. TREICHLER - ------------------------- -------------------------------- Charles C. Carson II Donald R. Treichler President International Representative, Airline Division /s/ TIMOTHY D. KOMBEREC /s/ ROBERT F. VETTER, JR. - ------------------------- -------------------------------- Timothy D. Komberec Robert F. Vetter, Jr. Vice President of Operations Chairman, Executive Council -84- 85 ATTACH FLIGHT ENGINEER SENIORITY LIST AS OF SIGNING DATE (PRIOR RIGHTS ENGINEERS AS OF OCT 30, 1999.XLS) HERE -85- 86 ATTACH FLIGHT ENGINEER SENIORITY LIST AS OF SIGNING DATE (PRIOR RIGHTS ENGINEERS AS OF OCT 30, 1999.XLS) HERE -86- 87 LETTER OF AGREEMENT BETWEEN KITTY HAWK INTERNATIONAL, INC. AND INTERNATIONAL BROTHERHOOD OF TEAMSTERS, AIRLINE DIVISION REGARDING HIGH LONGEVITY DC-8 CREWMEMBERS This Letter of Agreement is made and entered into in accordance with the provisions of the Railway Labor Act, as amended, by and between Kitty Hawk International, Inc. (the "Company") and The International Brotherhood of Teamsters, Airline Division (the "Union"), hereinafter known as the "Parties". The Parties agree as follows: 1. The Parties recognize that there are DC-8 Crewmembers with nine (9) years or more of Active Service and that those Crewmembers should be afforded time in which to evaluate their best available option and exercise their seniority to either bid an available vacancy on another Type, Displace to another Type if Displacements occur on the DC-8 in 2000 or remain on the DC-8. 2. All DC-8 Crewmembers with nine (9) years or more of Active Service during 2000 will be paid at the pay rates set forth in Section 5 of this Agreement without regard to the longevity increase cap above the ninth (9th) year of Active Service. 3. Effective January 1, 2001, DC-8 Crewmembers with nine (9) or more years of Active Service will be returned to the pay rate set forth in Section 5 of this Agreement. Thereafter, those Crewmembers will not receive longevity increases. IN WITNESS WHEREOF, the Parties have signed this Letter of Agreement this 30th Day of October, 1999. For Kitty Hawk International, Inc.: For The International Brotherhood of Teamsters, Airline Division: /s/ CHARLES C. CARSON II /s/ DONALD R. TREICHLER - -------------------------- ----------------------------------- Charles C. Carson II Donald R. Treichler President International Representative, Airline Division /s/ TIMOTHY D. KOMBEREC /s/ ROBERT F. VETTER, JR. - -------------------------- ----------------------------------- Timothy D. Komberec Robert F. Vetter, Jr. Vice President of Operations Chairman, Executive Council -87- 88 KITTY HAWK, INC. (LETTERHEAD) OCTOBER 30, 1999 To: Mr. Donald R. Treichler International Representative, International Brotherhood of Teamsters, Airline Division Mr. Robert F. Vetter, Jr. Chairman, Executive Council 1. Except as provided in Section 1 of the Agreement between Kitty Hawk International, Inc. and the International Brotherhood of Teamsters (the "Agreement") and in paragraph 2, below, Kitty Hawk, Inc. agrees that all revenue flying in widebody aircraft and aircraft having an FAA certificated gross takeoff weight of 300,000 pounds or greater that are listed by tail number on the Operations Specifications issued by the FAA for Kitty Hawk, Inc., any subsidiary of Kitty Hawk, Inc. or any subsidiary of Kitty Hawk International, Inc. will be performed by Crewmembers on the Kitty Hawk International, Inc. seniority lists. 2. It is understood that the purpose of this letter is not to prevent or hinder any potential merger or acquisition of another airline that may operate widebody aircraft and aircraft having an FAA certificated gross takeoff weight of 300,000 pounds or greater. If such a merger or acquisition occurs, it would be considered to affect the seniority rights of Crewmembers at Kitty hawk International, Inc. and the procedures set forth in Section 1.6.2. of the Agreement will be followed. 3. This letter will be effective concurrently with the Agreement and, in any event, only so long as Kitty Hawk International, Inc. is owned by Kitty Hawk, Inc. Kitty Hawk, Inc. Agreed: By: /s/ DONALD R. TREICHLER ----------------------------- Donald R. Treichler International Representative, /s/ M. TOM CHRISTOPHER Airline Division - ----------------------------- (Officer of Kitty Hawk, Inc.) /s/ ROBERT F. VETTER, JR. ----------------------------- Robert F. Vetter, Jr. Chairman, Executive Council -88- 89 INDEX PREAMBLE SECTION 1 - RECOGNITION, PURPOSE, SCOPE AND MERGERS 1.1. RECOGNITION 1.2. PURPOSE OF AGREEMENT 1.3. SOLE AGREEMENT 1.4. SCOPE 1.4.1. FLYING PERFORMED BY CREWMEMBERS 1.4.2. CREWMEMBERS TEMPORARILY ASSIGNED OUT OF SENIORITY 1.4.2.1. INTRODUCTION OF NEW AIRCRAFT 1.4.2.2. INTRODUCTION OF ADDITIONAL AIRCRAFT 1.4.2.3. SHORT TERM FLYING REQUIREMENTS 1.4.2.4 TRAINING OF CREWMEMBERS 1.4.2.5. EXPIRATION OF TIME LIMITS 1.4.2.6. PAY PROTECTION 1.4.2.7. NO REDUCTIONS 1.4.3. WET LEASE IN 1.4.3.1. UNION NOTIFICATION 1.4.3.2. NO REDUCTIONS 1.4.3.3. DURATION OF WET LEASE 1.5. SALE OR DRY LEASE OF COMPANY AIRCRAFT 1.6. MERGERS AND ACQUISITIONS 1.6.1. NOTICE OF MERGER OR ACQUISITION 1.6.2. INTEGRATION OF SENIORITY LISTS 1.6.2.1. NEGOTIATIONS 1.6.2.2. ARBITRATION 1.6.2.3. FENCE AGREEMENT 1.6.2.4. NO SYSTEM FLUSH 1.6.3. REPRESENTATION 1.7. ALTER EGO 1.8. TRANSFER OF ASSETS -89- 90 1.9. SUCCESSORSHIP AND ASSUMPTION OF AGREEMENT 1.10 FOREIGN BASES SECTION 2 - DEFINITIONS "ACTIVE SERVICE" "ADEQUATE REST FACILITY" "ALOFT" "BASE" "BID LINE" "BID SENIORITY LIST" "BLOCK TO BLOCK "CAPTAIN" "CATEGORY" "COMMUTE" "COMPOSITE LINE" "CREW CLASS" "CREWMEMBER" "CURTAILMENT" "DATE OF HIRE" "DAY" "DEADHEAD" "DISPLACEMENT" "DOMESTIC" "DRY LEASE" "DUTY DAY" "DUTY TIME" "EFFECTIVE DATE" "FAR" "FIRST OFFICER" "FLIGHT ENGINEER" "FLIGHT PAY" "FLIGHT SEGMENT" "FLIGHT TIME" "INTERNATIONAL" -90- 91 "LINE OF FLYING" "MANAGEMENT CREWMEMBER" "MINIMUM BID PERIOD GUARANTEE (MBPG)" "MONTH" "OPEN TIME" "PILOT" "POSITIONING OR DE-POSITIONING" "PRIOR RIGHTS FLIGHT ENGINEER" "PROFESSIONAL FLIGHT ENGINEER" "RECURRENT TRAINING" "RESERVE CREWMEMBER" "RESERVE LINE" "RESIDENCE AIRPORT" "SECOND OFFICER" "SENIORITY LIST(S)" "STANDING BID" "TRAINING" "TRIP SEQUENCE" "TYPE" "WET LEASE" SECTION 3 - UNION SECURITY 3.1. UNION MEMBERSHIP 3.2. INITIATION FEES AND DUES OR SERVICE FEES AND ASSESSMENTS DEDUCTION 3.2.1. TRANSFER OF DUES OR SERVICE FEES TO UNION 3.2.2. INDEMNIFICATION CLAUSE 3.2.3. DUES OR SERVICE FEES AND ASSESSMENTS AFTER TERMINATION 3.2.4. DEDUCTION ERROR 3.3. FAILURE TO PAY DUES OR SERVICE FEES AND ASSESSMENTS 3.4. CREWMEMBER LIST SECTION 4 - MANAGEMENT RIGHTS -91- 92 SECTION 5 - COMPENSATION 5.1. NEW-HIRE PAY 5.2. FLIGHT PAY RATES 5.2.1. CAPTAINS 5.2.2. PROFESSIONAL FLIGHT ENGINEERS 5.2.3. FIRST OFFICERS 5.2.4. SECOND OFFICERS 5.3. FLIGHT PAY COMPUTATION 5.3.1. FLIGHT PAY 5.4. CHECK AIRMAN OVERRIDE 5.5. INSTRUCTOR PAY 5.5.1. GROUND SCHOOL INSTRUCTION 5.5.2. SIMULATOR INSTRUCTION 5.6. REPORT PAY 5.7. MINIMUM PAY CREDIT 5.8. TAXI PAY 5.8.1. REPORT FOR TAXI ONLY 5.8.2. WITHIN A DUTY PERIOD 5.9. PAY ON A SCHEDULED DUTY FREE DAY 5.9.1. DAYS OFF 5.9.2. JUNIOR ASSIGNMENT 5.10. DEADHEAD PAY 5.11. TRAINING PAY 5.11.1. RECURRENT AND ADDITIONAL REQUIREMENT TRAINING 5.11.1.1. SCHEDULED DUTY DAYS 5.11.1.2. SCHEDULED DUTY FREE DAYS 5.11.2. INITIAL, TRANSITION AND UPGRADE 5.11.3. PILOT TO FLIGHT ENGINEER TRANSITIONS 5.11.4. REMEDIAL TRAINING 5.12. MAINTENANCE PAY 5.13. MINIMUM BID PERIOD GUARANTEE (MBPG) 5.14. BONUS INCENTIVE PLAN 5.15. GENERAL 5.15.1. PAYROLL SCHEDULE -92- 93 5.15.2. PAYCHECK DELIVERY AND DEPOSIT 5.15.3. JURY DUTY 5.15.4. SPECIAL PROJECTS SECTION 6 - EXPENSES, LODGING AND TRANSPORTATION 6.1. PER DIEM 6.1.1. DOMESTIC 6.1.2. INTERNATIONAL 6.1.3. NEW HIRE TRAINING 6.1.4. PAYMENT 6.2. LODGING 6.2.1. NEW HIRE TRAINING 6.3. LOCAL TRANSPORTATION 6.4. RENTAL CAR 6.5. PERSONAL VEHICLE SECTION 7 - MOVING EXPENSES 7.1. ELIGIBILITY 7.1.1. NEW BASE AWARD 7.1.2. INVOLUNTARY BASE ASSIGNMENT 7.1.3. BASE DISPLACEMENT 7.1.4. RECALL TO A DIFFERENT BASE 7.2. COORDINATION WITH COMPANY 7.3. MOVING EXPENSES 7.3.1. PERSONAL 7.3.2. VEHICLES 7.3.3. MOBILE HOMES 7.4. ACCOMMODATIONS IN LIEU OF MOVING EXPENSES 7.5. NEW-HIRE CREWMEMBERS SECTION 8 - SICK LEAVE 8.1. ACCRUAL 8.2. SICK LEAVE PAY 8.2.1. BANK DEBIT -93- 94 8.2.2. SCHEDULED DUTY DAYS 8.3. SICK LEAVE USAGE 8.3.1. CREW SCHEDULING CONTACT 8.3.2. EXCLUSIONS 8.3.3. WORKER'S COMPENSATION 8.4. SICK LEAVE BANK REPLENISHMENT 8.5. DISABILITY 8.6. PHYSICIAN'S STATEMENTS 8.7. VACATION CONCURRENT WITH ILLNESS 8.8. RETIREMENT 8.9. GENERAL 8.9.1. RECALL 8.9.2. STATEMENTS 8.9.3. OUTSIDE WORK 8.9.4. SENIORITY AND LONGEVITY 8.9.5. RESUMPTION OF DUTY SECTION 9 - VACATION 9.1. ACCRUAL 9.2. VACATION PAY 9.3. DUTY 9.3.1. NO DUTY 9.3.1. DUTY FREE DAYS 9.4. ANNUAL VACATION BID 9.4.1. PROCEDURE 9.4.2. PROBATIONARY CREWMEMBER 9.4.3. FAILURE TO BID 9.5. VACATION OPTIONS 9.6. VACATION SPLITS 9.7. UNSCHEDULED VACATION 9.8. VACATION RESCHEDULING 9.8.1. RESCHEDULE 9.8.2. RELINQUISH 9.8.3. CHANGE OF CREWMEMBER STATUS -94- 95 9.8.4. VACATION SLIDE 9.9. VACATION BANK 9.9.1. MAXIMUM BANK 9.9.2. PAY OUT 9.9.2.1. EXCESS BANK 9.9.2.2. CESSATION OF EMPLOYMENT 9.9.2.3. SUPPLEMENT TO SICK LEAVE OR DISABILITY BENEFITS 9.10. GENERAL 9.10.1. VACATION DAY 9.10.2. STATEMENTS SECTION 10 - HEALTH AND WELFARE 10.1. LIFE INSURANCE 10.1.1. ADDITIONAL LIFE INSURANCE 10.2. ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE 10.3. HEALTH AND DENTAL INSURANCE 10.3.1. COBRA 10.3.2. LEAVES OF ABSENCE 10.3.3. PREMIUMS FOR HEALTH AND DENTAL INSURANCE 10.3.4. CONTINUATION OF HEALTH AND DENTAL INSURANCE AFTER RETIREMENT 10.4. SHORT-TERM DISABILITY INSURANCE 10.5. LONG-TERM DISABILITY INSURANCE 10.6. ILLNESS OR INJURY WHILE IN THE SERVICE OF THE COMPANY 10.6.1. MEDICAL CARE AWAY FROM BASE 10.6.2. TRANSPORTATION 10.6.3. WORKER'S COMPENSATION FILING PROCEDURE SECTION 11 - RETIREMENT 11.1. TAX DEFERRED SAVINGS PLAN 11.2. COMPANY CONTRIBUTIONS 11.3. VESTING SCHEDULE 11.4. PAYROLL DEDUCTIONS 11.5. CREWMEMBER FUNDS IN PRE-EXISTING COMPANY 401(k) PLAN -95- 96 SECTION 12 - UNIFORMS 12.1. INITIAL UNIFORMS 12.2. MAINTENANCE ALLOWANCE 12.3. REPLACEMENT OF DAMAGED ITEMS 12.4. COMPANY INSIGNIA 12.5. UNION INSIGNIA 12.6. CHANGES IN UNIFORM SECTION 13 - PHYSICAL EXAMINATIONS 13.1. COMPANY STANDARDS 13.2. CONFIDENTIALITY 13.3. FAA PHYSICAL EXAMINATIONS 13.3.1. CERTIFICATES TO TRAINING DEPARTMENT 13.3.2. SCHEDULING OF FAA PHYSICAL 13.3.3. INABILITY TO MAINTAIN A FIRST CLASS MEDICAL CERTIFICATE 13.4. REIMBURSEMENT FOR A PHYSICAL EXAMINATION 13.5. FAA DRUG AND ALCOHOL TESTING PROGRAMS 13.5.1. PROGRAM ADMINISTRATION AND DESCRIPTION 13.5.2. REIMBURSEMENT OF EXPENSES 13.5.3. DRUG TESTING ON A SCHEDULED DUTY FREE DAY SECTION 14 - LEAVES OF ABSENCE 14.1. PERSONAL LEAVE 14.1.1. REQUESTS 14.1.2. SENIORITY AND LONGEVITY ACCRUAL 14.1.3. EXTENSIONS 14.2. MILITARY LEAVE 14.3. UNION LEAVE 14.4. MEDICAL LEAVE 14.5. FUNERAL LEAVE 14.5.1. DURATION 14.5.2. IMMEDIATE FAMILY 14.5.3. VACATION 14.5.4. SCHEDULED DUTY FREE DAYS -96- 97 14.6. FAMILY AND MEDICAL LEAVE ACT (FMLA) 14.6.1. FMLA 14.6.2. SENIORITY AND LONGEVITY ACCRUAL 14.7. MANAGEMENT CREWMEMBER LEAVE 14.7.1. SENIORITY AND LONGEVITY ACCRUAL 14.7.2. EXCLUSION FROM THE AGREEMENT 14.7.3. MAXIMUM NUMBER 14.7.4. 401(K) PLAN 14.7.5. DUES EXEMPTION 14.7.6. FLYING RESTRICTION 14.8. GENERAL 14.8.1. OTHER EMPLOYMENT 14.8.2. RETURN FROM LEAVE 14.8.3. PAY DURING REQUALIFICATION SECTION 15 - SENIORITY 15.1. SENIORITY GOVERNS 15.2. SENIORITY LISTS 15.2.1. SEPARATE LISTS 15.2.2. LIST CONTENTS 15.3. SENIORITY ACCRUAL 15.4. SENIORITY LIST CONTENT AND PUBLISHING 15.4.1. CONTENT 15.4.2. POSTING 15.5. PROTESTS 15.6. LOSS OF SENIORITY 15.7. EFFECT OF BYPASS ON SENIORITY 15.8. LONGEVITY 15.9. PROBATION 15.10. FLIGHT ENGINEER TO PILOT BIDDING 15.10.1. MINIMUM REQUIREMENTS 15.10.2. TRAINING AVAILABILITY 15.10.3. FAILURE TO QUALIFY 15.10.4. REMOVAL FROM SENIORITY LIST -97- 98 15.11. PILOT TO FLIGHT ENGINEER BIDDING 15.11.1. BID SUBMISSION DEADLINE 15.11.2. MINIMUM REQUIREMENTS 15.11.3. BID TO PROFESSIONAL FLIGHT ENGINEER 15.11.4. BID TO SECOND OFFICER 15.11.5. HOLDING A BID ON FILE 15.11.6. TRAINING AVAILABILITY 15.11.7. REMOVAL FROM SENIORITY LIST 15.11.8. FAILURE TO QUALIFY 15.11.9. DISPLACEMENT TO FLIGHT ENGINEER SECTION 16 - FILLING OF VACANCIES 16.1. VACANCY DEFINITION 16.2. STANDING BID 16.2.1. STANDING BID DEFINITION 16.2.2. STANDING BID UPDATES 16.3. VACANCY FILLING 16.3.1. VACANCY NOTICE 16.3.2. VACANCY CLOSING AND BID SUBMISSION 16.3.3. BID AWARD 16.3.4. ADDITIONAL VACANCIES 16.3.5. UNFILLED VACANCIES 16.3.6. PUBLISHING OF BID RESULTS 16.4. EQUIPMENT LOCK 16.4.1. NEW EQUIPMENT TYPE 16.5. BYPASS 16.5.1. UPGRADE TO CAPTAIN 16.5.2. TRANSITION SECTION 17 - BASES 17.1. UNION CONSULTATION 17.2. INTERNATIONAL BASES 17.3. DOMESTIC BASES 17.3.1. MINIMUM STAFFING LEVEL -98- 99 17.3.2. STAFFING LEVEL CHANGES 17.3.3.2. INCREASED STAFFING 17.3.3.3. DECREASED STAFFING 17.3.3.4. NO MOVING EXPENSES 17.3.3. THIRTY-FIVE (35) MILE RULE 17.3.3.1. PER DIEM IN BASE 17.3.3.2. LODGING IN BASE 17.4. TEMPORARY BASES SECTION 18 - CURTAILMENT, DISPLACEMENT, FURLOUGH AND RECALL 18.2. CURTAILMENT 18.2.1. CURTAILMENT PROCEDURE 18.2. DISPLACEMENT 18.2.1. DISPLACEMENT PROCEDURE 18.3. FURLOUGH 18.3.1. VOLUNTARY FURLOUGH 18.3.2. NOTICE OF FURLOUGH 18.3.3. RETENTION OF SENIORITY 18.3.4. CHANGE IN ADDRESS OR TELEPHONE NUMBER 18.3.5. STANDING BID 18.3.6. FURLOUGH EXPIRATION 18.4. RECALL 18.4.1. CATEGORY SENIORITY ORDER 18.4.2. BYPASS OF RECALL 18.4.3. RECALL NOTICE 18.4.4. WAIVER OF RECALL NOTICE 18.4.5. FAILURE TO RESPOND OR REPORT 18.4.6. MINIMUM RECALL DURATION 18.4.7. NEW-HIRE FLYING EXCLUSION 18.4.8. PAY WHEN RECALLED SECTION 19 - TRAINING 19.1. QUALIFICATIONS 19.1.1. FAA REQUIREMENTS -99- 100 19.1.2. COMPANY MINIMUM REQUIREMENTS 19.1.2.1. FIRST OFFICER MINIMUM REQUIREMENTS: 19.1.2.1.1. CERTIFICATES 19.1.2.1.2. FLYING EXPERIENCE 19.1.2.1.3. MEDICAL CERTIFICATE 19.1.2.1.4. SIMULATOR EVALUATION 19.1.2.1.5. WRITTEN EXAMINATION 19.1.2.1.6. FLIGHT ENGINEER UPGRADES 19.1.2.2. SECOND OFFICER MINIMUM REQUIREMENTS: 19.1.2.2.1. CERTIFICATES 19.1.2.2.2. FLYING EXPERIENCE 19.1.2.2.3. MEDICAL CERTIFICATE 19.1.2.2.4. WRITTEN EXAMINATION 19.1.2.3. PROFESSIONAL FLIGHT ENGINEER MINIMUM REQUIREMENTS: 19.1.2.3.1. CERTIFICATES 19.1.2.3.2. MEDICAL CERTIFICATE 19.1.2.3.3. COMPANY EMPLOYEES 19.1.2.4. CAPTAIN MINIMUM REQUIREMENTS: 19.1.2.4.1. CERTIFICATES 19.1.2.4.2. FLYING EXPERIENCE 19.1.2.4.3. MEDICAL CERTIFICATE 19.1.2.4.4. FIRST OFFICER UPGRADES 19.2. COMPANY-PROVIDED TRAINING 19.3. TRAINING RECORDS REVIEW 19.4. NOTICE OF TRAINING 19.5. TRAINING SCHEDULES 19.5.1. RECURRENT GROUND SCHOOL 19.5.2. RECURRENT SIMULATOR TRAINING 19.5.3. ONE-IN-SEVEN 19.5.4. MINIMUM SCHEDULED DAYS FREE OF DUTY 19.5.5. REST BEFORE SIMULATOR 19.5.6. SIMULATOR PERIOD DURATION 19.6. INITIAL, UPGRADE AND TRANSITION TRAINING FAILURES 19.6.1. FIRST TRAINING FAILURE -100- 101 19.6.2. INELIGIBILITY TO BID AFTER FAILURES 19.6.3. SECOND TRAINING FAILURE 19.6.4. FAILURE TO MEET TRAINING TIME LINES 19.6.5. FAILURE TO PASS PRE-TRAINING EVALUATIONS 19.7. RECURRENT TRAINING FAILURES 19.7.1. FIRST FAILURE 19.7.2. SECOND FAILURE 19.8. PROFESSIONAL STANDARDS COMMITTEE INVOLVEMENT 19.8.1. TRAINING FAILURES 19.8.2. COMMITTEE MEMBER PAY PROTECTION 19.9. TRAINING PAY 19.10. GENERAL 19.10.1. REVENUE FLYING 19.10.2. PROBATIONARY CREWMEMBERS 19.10.3. RECURRENT TRAINING ORDER 19.10.4. RE-INDEXING 19.10.5. GROUND TRANSPORTATION SECTION 20 - SCHEDULING 20.1. BID PERIOD 20.1.1. MULTIPLE BID PERIODS AWARDED SEPARATELY 20.1.2. MULTIPLE BID PERIODS AWARDED CONCURRENTLY 20.2. BID LINE CONSTRUCTION 20.2.1. LINES OF FLYING, COMPOSITE LINES AND RESERVE LINES 20.2.2. SCHEDULED DUTY FREE DAYS 20.2.2.1. MINIMUM SCHEDULED DUTY FREE DAYS 20.2.2.2. INVIOLATE SCHEDULED DUTY FREE DAYS 20.2.2.3. MINIMUM CONSECUTIVE SCHEDULED DUTY FREE DAYS 20.2.2.4. CONTACT ON SCHEDULED DUTY FREE DAYS 20.3. BID PROCEDURES 20.3.1. ELIGIBILITY TO BID 20.3.2. BID PACKAGE CONTENTS 20.3.3. BID PACKAGE DISTRIBUTION -101- 102 20.3.4. BID SUBMISSION 20.3.5. BID AWARD SCHEDULE 20.3.5.1. COMPOSITE LINE CONSTRUCTION 20.3.5.2. RESERVE STATUS CHANGE 20.3.6. BID PERIOD TRANSITION 20.3.6.1. SCHEDULE CONFLICTS 20.3.6.2. EXCESS DAYS 20.3.7. BID AWARDS 20.3.8. FAILURE TO BID 20.4. OPEN TIME 20.4.1. OPEN TIME AWARD AND ASSIGNMENT 20.4.1.1. DEDICATED RESERVE 20.4.1.2. TRAINING 20.4.1.3. SHORTED TIME CREWMEMBER 20.4.1.4. MANAGEMENT CREWMEMBERS 20.4.1.5. VOLUNTEER 20.4.1.6. RESERVE 20.4.1.7. JUNIOR ASSIGNMENT 20.4.1.7.1. MAXIMUM NUMBER OF JUNIOR ASSIGNMENTS 20.4.1.7.2. SCHEDULE CONFLICTS AS A RESULT OF JUNIOR ASSIGNMENT 20.5. RESCHEDULE AFTER BID AWARD 20.5.1. RESCHEDULE FOR TRAINING 20.5.1.1. RESCHEDULE FOR ANOTHER CREWMEMBER'S TRAINING 20.5.1.2. RESCHEDULE FOR A CREWMEMBER'S OWN TRAINING 20.5.2. RESCHEDULE FOR OTHER THAN TRAINING 20.6. SCHEDULING PROCEDURES 20.6.1. TRIP SEQUENCE TRADES 20.6.2. RESERVE ASSIGNMENTS 20.6.3. RELEASE FROM DUTY 20.6.4. DUTY AT RESIDENCE 20.6.5. PRE-DUTY CHECK IN 20.6.6. POST DUTY CHECK IN 20.7. GENERAL -102- 103 20.7.1. SCHEDULING COMMITTEE 20.7.2. MILITARY DUTY 20.7.3. REQUIRED RECORDS 20.7.4. HOSTILE AREAS 20.7.5. NOTIFICATION OF APPRECIABLE DELAY SECTION 21 - HOURS OF SERVICE 21.1. FAR CONFLICTS 21.2. DUTY TIME 21.2.1. DIRECTION OF THE COMPANY 21.2.2. REPORT AND RELEASE TIMES 21.2.3. REDUCED REPORT TIME 21.2.4. SUSPENSION OF DUTY TIME 21.2.4.1. INVOLUNTARY 21.2.4.2. VOLUNTARY 21.2.5. MAXIMUM DUTY TIMES 21.2.5.1. SINGLE CREW - DOMESTIC 21.2.5.2. AUGMENTED CREW - DOMESTIC 21.2.5.3. DOUBLE CREW - DOMESTIC 21.2.5.4. SINGLE CREW - INTERNATIONAL 21.2.5.5. AUGMENTED CREW - INTERNATIONAL 21.2.5.6. DOUBLE CREW - INTERNATIONAL 21.2.6. DEADHEAD DUTY LIMITATIONS 21.3. REST 21.3.1. REST PERIOD 21.3.2. MINIMUM REST PERIOD - DOMESTIC 21.3.3. MINIMUM REST PERIOD - INTERNATIONAL 21.3.4. FATIGUE 21.3.5. INTERRUPTION OF REST PERIOD 21.3.6. REST AFTER RELEASE 21.4. GENERAL -103- 104 21.4.1. MIXING OF DOMESTIC AND INTERNATIONAL FLIGHTS 21.4.2. ONE-IN-SEVEN 21.4.3. AIRCRAFT REST FACILITIES FOR DOUBLE AND AUGMENTED CREWS SECTION 22 - DEADHEADING AND COMMUTING 22.1. COMMUTING 22.1.2. COMMUTE TO BASE OR ASSIGNMENT 22.1.2. DUTY AND REST 22.2. DEADHEADING 22.2.1. COST OF DEADHEAD 22.2.2. RESPONSIBILITY FOR DELAYS 22.2.3. COMMERCIAL AIR TRANSPORTATION 22.2.4. TRANSPORTATION FOR JUNIOR ASSIGNMENT 22.3. DEADHEAD DUTY CALCULATIONS 22.3.1. SINGLE CREW DEADHEAD TO A DUTY ASSIGNMENT 22.3.2. AUGMENTED AND DOUBLE CREW DEADHEAD TO A DUTY ASSIGNMENT 22.3.3. DEADHEAD BETWEEN DUTY ASSIGNMENTS 22.3.4. DEADHEAD FROM A DUTY ASSIGNMENT 22.3.5. DEADHEAD TO AND FROM TRAINING 22.4. NO COCKPIT DUTY DURING DEADHEAD 22.5. DEADHEAD PAY 22.5.1. AIR TRANSPORTATION 22.5.2. SURFACE TRANSPORTATION 22.5.3. REPORT TO DUTY ASSIGNMENT INSTEAD OF BASE 22.5.4. TRAINING SECTION 23 - RESERVE 23.1. LONG CALL RESERVE (R - 3) 23.1.1. CONTACT 23.1.2. RESPONSE 23.1.3. COMPENSATION 23.1.4. EXPENSES 23.2. SHORT CALL RESERVE (R - 2) 23.2.1. CONTACT -104- 105 23.2.2. RESPONSE 23.2.3. COMPENSATION 23.2.4. EXPENSES 23.2.5. ASSIGNMENT 23.3. STANDBY (R - 1) 23.3.1. CONTACT 23.3.2. RESPONSE 23.3.3. COMPENSATION 23.3.4. EXPENSES 23.3.5. ASSIGNMENT 23.3.6. REST FACILITIES SECTION 24 - DISCIPLINE AND DISCHARGE 24.1. HOLDING OUT OF SERVICE 24.2. INVESTIGATORY HEARING 24.2.1. EXPENSES 24.3. WRITTEN NOTIFICATION 24.4. GRIEVANCE RIGHTS SECTION 25 - GRIEVANCE PROCEDURE 25.1. GRIEVANCE DEFINITION 25.2. STEP ONE - REQUEST FOR RELIEF 25.3. STEP TWO - FILING A WRITTEN GRIEVANCE 25.3.1. TIMELINES FOR FILING AND RESPONSE 25.4. STEP THREE - APPEAL TO SYSTEM BOARD OF ADJUSTMENT 25.5. TIMELINE VERIFICATION 25.6. TIME LIMIT EXTENSIONS AND PENALTIES 25.7. PROBATIONARY CREWMEMBER EXCLUSION 25.8. UNION REPRESENTATION 25.9. RECORDING OF SETTLEMENT SECTION 26 - SYSTEM BOARD OF ADJUSTMENT 26.1. THE BOARD 26.2. COMPOSITION OF THE BOARD -105- 106 26.2.1. MEMBER SELECTION 26.2.2. TERMS OF OFFICE FOR BOARD MEMBERS 26.2.3. CHAIRMAN AND VICE CHAIRMAN 26.2.4. TERMS OF OFFICE FOR CHAIRMAN AND VICE CHAIRMAN 26.3. MEETING SCHEDULE 26.4. BOARD MEMBER COMPENSATION 26.5. JURISDICTION OF THE BOARD 26.5.1. LIMITATIONS 26.5.2. REQUIREMENTS 26.6. PROCEEDINGS BEFORE THE BOARD 26.6.1. AGENDA AND SUBMISSIONS 26.6.1.1. ISSUE 26.6.1.2. FACTS 26.6.1.3. GRIEVANT POSITION 26.6.1.4. COMPANY POSITION 26.6.1.5. DOCUMENTATION 26.6.2. ADDITIONAL MEETING DATES 26.6.3. REPRESENTATION 26.6.4. WITNESSES 26.6.5. COMPETENCY 26.7. DEADLOCK PROCEDURES 26.7.1. SUBMISSION TO ARBITRATION 26.7.2. FAILURE TO TIMELY SUBMIT TO ARBITRATION 26.8. FREEDOM TO ACT INDEPENDENTLY SECTION 27 - ARBITRATION 27.1. THE ARBITRATION PROCEDURE 27.2. STANDING PANEL 27.3. ARBITRATOR SELECTION METHOD 27.4. HEARING DATE AND LOCATION 27.5. EXPENSES 27.6. ARBITRATOR'S COMPENSATION AND EXPENSES 27.7. COURT REPORTER COST 27.8. LIMITATIONS -106- 107 27.9. AWARDS 27.10. JURISDICTION SECTION 28 - PROFESSIONAL STANDARDS COMMITTEE 28.1. COMMITTEE SELECTION 28.2. COMMITTEE PURPOSE 28.3. COMPANY INTERACTION 28.4. REPORTS 28.5. CONFIDENTIALITY 28.6. INVESTIGATIONS 28.7. COMMITTEE MEMBER PAY PROTECTION SECTION 29 - MISSING, INTERNMENT, PRISONER OR HOSTAGE OF WAR AND HIJACKING 29.1. COMPENSATION 29.2. SENIORITY AND LONGEVITY ACCRUAL 29.3. SICK LEAVE USE 29.4. DIRECTION OF PAYMENTS 29.4.1. WRITTEN DIRECTION 29.4.2. NO WRITTEN DIRECTION 29.5. FORM FOR PAYMENT DIRECTION SECTION 30 - STRIKES, LOCKOUTS AND PICKET LINES 30.1. STRIKE 30.2. LOCKOUT 30.3. PICKET LINE SECTION 31 - GENERAL 31.1. NO DISCRIMINATION 31.2. GENDER NEUTRAL 31.3. INVALIDATION OF AGREEMENT PROVISIONS 31.4. MODIFICATIONS TO THE AGREEMENT 31.5. ID CARDS 31.6. CHARTS AND MANUALS -107- 108 31.7. VISAS AND INOCULATIONS 31.8. USE AND DAMAGE OF COMPANY EQUIPMENT 31.9. CREWMEMBER LIABILITY COVERAGE 31.10. PERSONNEL FILES 31.10.1. CONTENTS 31.10.2. ACCESS 31.11. UNION REPRESENTATION 31.11.1. BULLETIN BOARD 31.11.2. UNION ACCESS TO PROPERTY 31.11.3. CREWMEMBER REPRESENTATIVES 31.11.4. NEW-HIRE INDOCTRINATION 31.12. MANAGEMENT POSITIONS, CHECK AIRMEN AND SPECIAL PROJECTS 31.13. PROMOTIONAL ACTIVITIES 31.14. HOSTILE AREAS 31.15. JUMPSEAT AGREEMENTS 31.16. INTERLINE AGREEMENTS 31.17. CABIN AND FLIGHT DECK MAINTENANCE 31.18. AIRCRAFT GALLEY EQUIPMENT 31.19. CREW MEALS SECTION 32 - DURATION LETTER OF AGREEMENT REGARDING PRIOR RIGHTS FLIGHT ENGINEERS LETTER OF AGREEMENT REGARDING HIGH LONGEVITY DC-8 CREWMEMBERS KITTY HAWK, INC. LETTER REGARDING SCOPE -108- EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1999 JUL-01-1999 SEP-30-1999 986 0 100,152 0 47,626 190,841 869,456 130,281 946,226 164,853 462,945 0 0 170 204,997 946,226 183,348 183,348 158,302 158,302 1,347 0 12,172 13,467 5,386 8,081 0 0 0 8,081 0.47 0.47
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