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LAX LEC brief on TA---great read

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LAX LEC brief on TA---great read

Old 05-30-2012, 04:58 AM
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Default LAX LEC brief on TA---great read

Forwarded to me by a buddy in LA:


Memorial Day Perspective

Monday, May 28, 2012

There are a number of very relevant factors that brought us to C2012. We will cover them in this document. If you still have questions after you have finished reviewing the document, please call one of us and we’ll try to clarify the provisions.

Delta’s management team approached the Delta MEC early in 2012 with several concepts for the upcoming negotiations. These concepts were discussed as an alternative way to achieve a mutually beneficial negotiating scenario in a timely manner consistent with Delta’s future business plans. Embedded within their wish list was the concern that nearly every management team has regarding ways to improve pilot productivity. As time progressed, the MEC unanimously agreed to move forward to investigate the details. Along with these proposals, we were interested in maintaining a framework that would achieve our negotiating goals and do so in an expeditious manner.

The history of the Railway Labor Act (RLA) has not been labor friendly over the last decade. As economic losses mounted, the National Mediation Board (NMB) became less interested in providing a release for labor to strike and more inclined to perpetuate drawn out negotiating sessions with the underlying goal of protecting commerce. Indeed, many of our brothers at other organized properties have spent many years in Section 6 surrounded by an ever mounting level of frustration. Our collective opinion of the role of the NMB and its employment of the RLA was solidified with a several hour presentation by the current NMB Chairperson, Ms. Linda Puchala. In summary, she stated that a strike scenario for the Delta pilots was highly unlikely since the remainder of the aviation industry would be unable to absorb the lost capacity in the national/international airline system. Furthermore, it was more probable should an impasse develop that we could end up in a Presidential Emergency Board (PEB) where the terms of our agreement would be dictated to us or eventually a PWA crafted by Congress. She left us with a word to the wise in that the more outside groups that become involved in our negotiations, the less control we will have over the final result. In summary, we would be better served by trying to resolve our own problems by ourselves.

We subsequently proceeded with our dual path strategy that allowed for an expedited process backed up by the traditional Section 6 timeline. We crafted our opening position based on the pilot survey, pilot input, polling, and finally MEC input. The opener was approved unanimously by the MEC, and we began negotiating approximately five weeks before the start date designated in the current PWA. For those that are curious, we never expose the details of the survey publically because we do not want the company team to have that information. Why hand over the playbook after the game?

It was clear from the start that the Company team was established to reach a rapid conclusion. It is rare to ever have an executive vice-president from management at the sessions unless it is the end of the process. However, this time, decision makers were at the negotiating table from the beginning. Word from the table was that progress was being made even during the early stages. As an MEC meeting date approached in mid-April, a flurry of decisions were made by the company to close out (in our favor) a number of outstanding items. This helped us to recognize that management was serious about moving the agreement to closure. Our negotiating team wrote a Negotiators’ Notepad with a short summary of items that had been successfully concluded.

Many of us believed that the negotiations would be concluded just prior to the regular MEC meeting scheduled for early May 2012. This is exactly what happened. The MEC was handed complete contract language showing “track changes” on Tuesday morning. The proposed PWA was the size of a phone book. The expanded negotiating team spent the next four days painstakingly briefing each and every section so that we would have a comprehensive understanding of what had been achieved. We also had a discussion of what was not achieved from our opener as well as an overview of what was rejected from the company’s opener.

There are a number of general concepts that need to be covered at this point. We have already discussed the role of the RLA and NMB in our negotiations. As we have seen in the past, an airline that is profitable but has an open contract with an employee group will typically “drag their feet” since an up contract will only raise their costs. We knew that our company team could realistically delay the conclusion to our negotiations for years. Since the strike card would be unlikely, there would be little to no progress unless the company wanted it to occur. It has been mentioned in the recent “Chairman’s Letter” that once negotiations enter mediation, reaching an agreement averages 29 months. Let there be no doubt, the resolve of the pilot group is certainly a concern with a number of green bag tags in view, albeit hard to believe.

An additional union strategy is to pattern bargain off of other similar union contracts in order to improve your contract during up economic times. This is a well-known process and was mentioned in the briefing by the NMB . Regrettably, the Delta pilots find themselves with only one passenger airline contract to use as a reference document for pattern bargaining. The Southwest contract has a superior pay position compared to the final DAL 738 pay scale from the 2008 JCBA. However, their airline model is different enough in areas such as work rules, operations, routes, etc. to make a direct business comparison in most areas. A typical management response to the SWA pay rates is usually met with a reply about their higher monthly productivity and our DC plan. A comparison to cargo airline contracts is also met with minimal interest since the parent corporation is competing in a duopoly (UPS-FDX). Their pilots may perform the same job, but the similarity to the rest of the business ends there. There was also some interest following the announced UAL/CAL (UCAL) merger that perhaps they would successfully pattern bargain off our JCBA rates and make our negotiations more successful. That was not to be, and they have now sought a release by the NMB due to a lack of progress. That lack of success at that property should not be lost on the Delta pilots. Without a strong motivation from management, a negotiation can drag on for years and has done just that at UCAL.

The business model proposal by our management team remains confidential. At some point they may release more of their concepts. It is not the intent here to divulge any confidential information, so for now we will just refer to this as their “business plan.” Whenever one side has a significant need at negotiations, there is leverage for the other party. Delta’s business plan did provide us with leverage for these negotiations. The exact nature of the leverage may never really be known. What we do know is that this leverage was real - but perishable. Given enough delay, the leverage would evaporate and the opportunity would be lost. You may wish to read those two sentences again as they did play an important role in our final decision.

What we do know is that this leverage was real - but perishable. Given enough delay, the leverage would evaporate and the opportunity would be lost.

Similarly, the business plan could only hold up so much gain in the PWA before it would also force the executive team down another path for the company, and make no mistake; they do have a Plan B, and it does not involve negotiating with us. This is a judgment call and you must rely on the expertise of those directly involved to guide you. For us, we relied on the experienced negotiating team, our attorneys with many decades of negotiating experience (on this property and others), and our MEC administration and their many years dealing with our management team. Much like an individual seeking professional advice from a physician, attorney, or accountant, you selected these people with full confidence in their abilities based on their record. While the agreement did not achieve all of our goals, a seasoned pilot will remember that it never does. For the Delta MEC, it was the majority belief that our team had achieved all that was possible during these negotiations. The company team had been pushed as far as they would go. There were several discussions with management that were recounted to us that provided ample proof that this was indeed the case.

The week-long regular meeting that included deliberations on the TA was comprehensive. Every member had ample time to discuss, question, and debate the points of the document. There was no pressure to conform to the group, no threats, and all the time necessary to reach a decision. We had to discuss any possible TA rejection against a very real concept of “what’s the next step.” For us, that concept provided the end point for any thought of rejection of this TA. While it is very true that the MEC was more than prepared to travel the longer road of a traditional Section 6 negotiation, it was not at all clear that this path would improve the results. In fact, there are several recent histories in the industry that a rejected preliminary TA would result is a lesser value agreement the second time around. For the Delta property, it is little known that a preliminary JCBA deal was available that contained a larger pay raise (7%) and an improvement in the DC contribution for some pilots. This deal was not accepted at that time and the follow on JCBA that was eventually accepted was lower in value as a result. It is important to understand when to “close the deal.”* For the record, it is our view that this is the most poignant example of what path CEO Richard Anderson might pursue should the MEC (or pilot group for that matter) reject the agreement. There are two other examples in recent memory that involve SWA and, separately, AirTran. The follow-on agreement at SWA following a TA rejection did not result in more value, and arguably resulted in a deal of lesser value. Most recently the AirTran pilots rejected the first seniority integration proposal. The end result there . . . well you know the story. Our professional counsel cited numerous times where a rejected TA resulted in a follow-on agreement of lesser value. The risks are real and history has enough cases to back this fact up.

Recent discussions with fellow pilots put an interesting perspective on this rejection scenario. For those that choose to ignore guidance from counsel and our team of professionals, it is easy for them to label this advice as a ”scare tactic.” We would prefer to view it as a “reality check.” Until the ink is dry on the paper from both sides, this deal is not official and not an obligation. Every gain contained within the document can be gone tomorrow in a worst case scenario, or at least modified to be less valuable to the pilot group.

Consider another reality of the business world in that a management team is constantly in negotiations with various corporations throughout the world. Everything from joint ventures to the peanuts on our aircraft has some legal contract that defines the terms. Our TA is a public news story and a rejection by the pilot group would be viewed as a failure of both parties. It is a financial risk for our management team to respond to that rejection with a sweetening of the contract by any significant amount. Actions like that would quickly diminish their credibility on their final offer in any future deal.

Should the TA be rejected, what would be the reason to resolve it in the pilot’s favor? That concept was carefully considered by the MEC. Our management team is a business oriented team. Our services, as defined in our contract, have costs that must be justified to the Board of Directors as well as the shareholders of Delta stock. In our current negotiations, our management team can justify an increase in order to facilitate their business plan (as mentioned above). Settling the PWA for more than the hundreds of millions already on the table, while it sounds nice to the pilot group, is a business issue for management. So what exactly would have to occur to change their final offer and equally important, when would that occur?* The answers are available when considered from a historical perspective. Certainly the NWA merger is one example where Delta pilots were able to extract value for the PWA by providing value to the merged company. Other examples are possible and scenario dependent, however, the second question of when this would occur is equally important. The answer to that is we do not clearly know when, if ever, the company will need our cooperation for another business deal.

At the end of the discussions, the MEC voted 14-5 to approve this TA and send it out for membership ratification. What was missing in the discussion for me was a clear answer on how to proceed if we voted no. When Ed asked that question casually of those who voted against the agreement, he was usually met with a “just send it back” reply. That is not a plan or a strategy when hundreds of millions are at risk, all benefiting Delta pilots and our families.

A corollary to that scenario also entered into the discussions. If there is a future deal, would it not be better to have the current improvements in the PWA so that any deal can leap frog this agreement? Much like the proverbial bird in the hand analogy, a defined improvement via this TA is far better than a prospect or hope that some opportunity may present itself at some unknown time in the future. As labor leaders with access to many independent as well as internal ALPA professionals for advice, it was far preferable to achieve significant improvements now than hold out for the uncertain prospect for the increasingly elusive home run.

Another concept that is important to recount is a discussion of value. Achieving improvements today, vice a long and protracted negotiation, has the effect of providing timely improvements in life that cannot be accurately measured. How can you measure immediate financial improvements to a struggling family? It is also difficult to quantify the new job protections found in scope. For example, the cost of furlough protection is zero - unless there is a pending furlough on the horizon. Restored disability plan language (C2K) has no value - unless you find yourself unable to hold a First Class medical certificate. In short, it is easy to dismiss these improvements because they may not be relevant to you immediately. These items are not guaranteed to resurface in any future negotiation. The history of airline union leadership has viciously provided example after example of not being able to take advantage of fleeting opportunities, and in the end, not putting this value into the pockets of their membership they represent.

It is also important to recognize that management did not get everything they wanted. The bulk of their individual items were in the area of productivity. Like any negotiation, they had their wish list and it would carry equal validity with a mediator. While pilots may focus on what we did not achieve, or where we accepted compromise, there were a number of overreaching items that had to be fought off repeatedly. An example of this is the accounting for minutes under block time. This keeps popping up from our management team periodically, and it is completely unacceptable to the pilot group. It is not always as simple as stomping your foot to reject these issues. However, our team pushed it back and the expedited time line allowed little room for posturing. Another important item that was rejected was management’s desire to add seats to the current restriction of 76 seats on regional aircraft. This item was not removed from the table until the very last day. While our pilot group would not accept this provision, nearly all other legacy airlines have allowed more than 76 seats in some form. This was a limiting factor in achieving all of our goals. It is easy to realize that additional seats on already permitted airframes would increase revenue and allow for additional pilot pay. However, we recognized that the idea of more seats per aircraft is a line in the sand item for many Delta pilots, and we held that line. There are a number of additional examples that can be cited.

To support the terms of the TA, we had several informational presentations on the state of the industry, the progress of pilot contracts at other properties, and possible future developments. These were not new subjects as we hear about these topics at nearly every meeting. We have been monitoring the individual carriers and industry news on a routine basis. Regrettably, the pilot profession outside of a very few airlines is completely stagnant or in disarray. Our brothers at AMR are suffering the same destruction to their contract that we lived in bankruptcy. Their only white knight might come in the form of US Airways, the company we soundly rejected during their hostile takeover attempt of Delta. Speaking of Airways and their independent union, they remain crippled and irrelevant, unable to solve their internal pilot problems, and they continue to work for the lowest wages of any major airline. Without a forced solution, they will continue to lose ground every year. A discussion of the problems at UAL/CAL (UCAL) was briefed. While the pilot groups struggle to reach a deal, the clock continues to tick for them and they are still operating under their previous contracts. It should be noted that with a successful vote on our TA, we will have completed our second post-bankruptcy agreement while they wait for their first. The purpose of this paragraph has been to point out that no other airline has made any meaningful improvements to their contract since the middle of last decade. While we all believe we should have restoration of C2K, there is no precedent for that industry wide. As was stated in Chairman O’Malley’s letter to all pilots, some pilot groups have stagnated with no increases for years waiting for the elusive home-run payout. We would add to that by saying all pilot groups who have swung only for that home run have consistently struck out. They now sit many percentage points behind us with even more ground to make up.

In summary, it should be noted that a thorough review and debate occurred. There was no pressure from one side or the other to accept/reject this TA. Our vote was based on the following factors:

Ø* Did we achieve the majority of the pilot goals? In our view, the answer is yes. Double digit pay raises, while we acknowledge it was short of the aspirational survey’s first day demand, are significant in terms of dollars today verses a promise tomorrow. All other sections were improved including some great work in scope. Also, the potential for hundreds of long stagnated first officers to upgrade to captain on a new fleet of narrow body jets, and the opportunity for several hundred senior pilots to retire early with an account to pay for medical expenses should provide some movement for us. There are comprehensive improvements to nearly every section of our PWA.

Ø* Was there more available at the negotiating table? Our team is experienced and includes veteran pilot negotiators, outside attorneys, financial consultants, an ALPA attorney with decades of negotiating experience, and Chairman O’Malley with his many years of direct contact with this management team. To answer the question, they all stated that this is as far as this management team will go before they turn away from this business plan and our proposed gains in this contract. Do you believe the expert’s advice or do you proceed with your own assumptions? We chose to believe those with direct contact with management and a mountain more experience in negotiations than we have.

Ø* If the MEC (or pilot group) rejects this TA, what is the likelihood for future improvements? Historical precedent does not indicate favorable results. The current management team is acknowledged to have done good work for Delta. It is unlikely they will sweeten the agreement without a corresponding and equal value sweetening by us, and make no mistake, there are sections of this agreement they would love to reopen. Merely asking for more is a “fool’s errand” at best.

Ø* When will any future TA occur should we reject this one? Frankly, there is no reason short of a business need for this management team to conclude a pilot agreement quickly. With nothing on the horizon, this could go on for a long time. We already discussed the lack of support from the NMB to rapidly conclude our process so the time line is potentially extended into the distant future. Items that are currently in this TA cannot be assumed to automatically roll into the next negotiation. In fact, it is understood by both sides that we will start from scratch in many if not all areas.

Ø* Will the Delta pilots accept this TA? We reviewed the information for a week. In that time, most of us went through the same process. We are required to review the entire agreement before rendering a decision. During that week, we were able to recognize the time value of money, the significant improvements in many sections of the PWA, and the reality that we would be the best overall compensated pilots during the term of this agreement. Add to that the relatively short duration, the prospect of any future company need building on these terms, and it became a TA we elected to support. It is hard to argue with the extensive list of improvements and the fact that they are coming as soon as we sign the document, a half a year before our amendable date.

*

In closing, it is imperative that you do the following before casting your vote. First, learn as much as you can about the entire agreement. Changes, large and small, are throughout the document and provide value that you should investigate. Read the numerous Negotiators’ Notepads you will continue to receive.* If you have questions, ask us or call the Delta Pilot network at 1#%%#%#######%% . Recognize that there are those who would like to see ALPA fail (along with this contract) and there is much misinformation already out there. Do not trust your future agreement to a potential misunderstanding. Read everything, attend a road show, or view a webcast (coming soon).

Similarly, your vote should be for you and your family. Vote responsibly and as if this agreement will pass or fail based on your vote and only your vote.

Fraternally,
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Old 05-30-2012, 05:43 AM
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This sales letter is one example of why ALPA is loathed by so many.
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Old 05-30-2012, 05:54 AM
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What's the rush to complete a TA now, 7 months before the amenable date? We've heard of the 'time value of money', what about the time value of leverage? The company NEEDS this agreement to move forward in the industry, otherwise they stagnate. I read an article recently stating that Delta's new pilot agreement is poising the company for an upgrade...RA's strategy is to make DAL stock 'investment grade'. He needs this agreement to do that.

This will not take 30 months to resolve. It took 3 months from early openers to today. If both sides address pilot concerns after being voted down the first time, assuring passage the second time, then we're all happy. RA is simply "pressing to test". I admire him for it. I hope the pilot group uses their own independent thinking as well.
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Old 05-30-2012, 06:17 AM
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Originally Posted by Elvis90 View Post
What's the rush to complete a TA now, 7 months before the amenable date? We've heard of the 'time value of money', what about the time value of leverage? The company NEEDS this agreement to move forward in the industry, otherwise they stagnate. I read an article recently stating that Delta's new pilot agreement is poising the company for an upgrade...RA's strategy is to make DAL stock 'investment grade'. He needs this agreement to do that.

This will not take 30 months to resolve. It took 3 months from early openers to today. If both sides address pilot concerns after being voted down the first time, assuring passage the second time, then we're all happy. RA is simply "pressing to test". I admire him for it. I hope the pilot group uses their own independent thinking al well.
shhhhhhh...you're going to ruin Lumbergs fallacy of a "perishable" contract. This missive sounds like a re-cap of the Brady Bunch episode in which Greg buys a car from Eddie when Eddie tells him he better act now or the guy coming in 15 minutes is sure to buy it. Then Mr. Brady introduces "Caveat Emptor" to the American lexicon.
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Old 05-30-2012, 06:17 AM
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Originally Posted by Jack Bauer View Post
This sales letter is one example of why ALPA is loathed by so many.

Not so sure about that Jack. I enjoy the banter and points of view here on APC. I think it is healthy and good for debate especially when it comes to important issues in ones personal life as far as work is concerned. Being informed and making sound decisions based on fact and listening to productive debate is necessary to making the right decision. I was in SLC yesterday (ALPA Reps were there to answer questions) watching and listening to the questions from FO's Capt's and even a few guys sporting DPA lanyards. It was respectful and informative. The Reps presented fact and contractual language. They answered everyone of my questions about scope and reserve concisely. (My fears about Republic were unwarranted and clearly spelled out in the section 1, hard to find but it is there, reserve + ALV was a compromise, still not what I want)

There was emotionally charged engagement with the reps in a few instances that was sporty for a few moments. But that was emotion, and regardless of ones point of view it is natural and it is real. The reps and the pilots then got down to constructive engagement and the mis conceptions (of which i had many) and half truths were cleared up. A Straw poll from the 10 or so pilots (with differing opinions) hanging around in the crew lounge after there were no more questions? I only heard one guy say he would vote no, and he was asked by others standing around "what then"? He like me did not have an answer. That simple fact, that we don't know what will happen if we vote this TA down is very true. It is not an ALPA or a DPA issue, it is simply fact that we don't know. So each has to decide.

I will be voting YES. (and I will state that publicly at any time and any place)

Last edited by FIIGMO; 05-30-2012 at 06:28 AM.
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Old 05-30-2012, 06:25 AM
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My buddy in LA says these guys are trustworthy, and he has known the Capt rep for many years. But, you guys think this is a sell job. What if it isn't? That summary is pretty extensive. Maybe you guys should attend a road show and ask some big questions instead of discounting it because you are still upset.
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Old 05-30-2012, 06:27 AM
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Now read the DtW and CVG letters. How do they compare?
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Old 05-30-2012, 06:29 AM
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Originally Posted by Columbia View Post
Now read the DtW and CVG letters. How do they compare?

Please post them. I would like to read them.

I am sure like this whole debate they have good information. It is what we need to make a good decision.
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Old 05-30-2012, 06:37 AM
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Originally Posted by Bill Lumberg View Post
My buddy in LA says these guys are trustworthy, and he has known the Capt rep for many years. But, you guys think this is a sell job. What if it isn't? That summary is pretty extensive. Maybe you guys should attend a road show and ask some big questions instead of discounting it because you are still upset.
What if it isn't? The negotiators have said that there is no more $$$$. Then they say the company (DAL, not US, AMR, UAL) is and will continue to make billions in profits now and going forward (oil is collapsing, DAL stock at a 52 week high and upgraded). Don't you now see why they may be in a rush to push this through. Remember when dalpa said "we will not sacrifice the quality for expediency?".
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Old 05-30-2012, 06:38 AM
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Originally Posted by FIIGMO View Post
Not so sure about that Jack. I enjoy the banter and points of view here on APC. I think it is healthy and good for debate especially when it comes to important issues in ones personal life as far as work is concerned. Being informed and making sound decisions based on fact and listening to productive debate is necessary to making the right decision. I was in SLC yesterday (ALPA Reps were there to answer questions) watching and listening to the questions from FO's Capt's and even a few guys sporting DPA lanyards. It was respectful and informative. The Reps presented fact and contractual language. They answered everyone of my questions about scope and reserve concisely. (My fears about Republic were unwarranted and clearly spelled out in the section 1, hard to find but it is there, reserve + ALV was a compromise, still not what I want)

There was emotionally charged engagement with the reps in a few instances that was sporty for a few moments. But that was emotion, and regardless of ones point of view it is natural and it is real. The reps and the pilots then got down to constructive engagement and the mis conceptions (of which i had many) and half truths were cleared up. A Straw poll from the 10 or so pilots (with differing opinions) hanging around in the crew lounge after there were no more questions? I only heard one guy say he would vote no, and he was asked by others standing around "what then"? He like me did not have an answer. That simple fact, that we don't know what will happen if we vote this TA down is very true. It is not an ALPA or a DPA issue, it is simply fact that we don't know. So each has to decide.

I will be voting YES. (and I will state that publicly at any time and any place)
Question.

On the RJET Holding Company cutout; what did they correct? How was it worded? What was your perception prior to talking to your reps?

I was told DAL would not want RJET though Frontier to fly for Skyteam, not that they couldn't given the language. Further, when pressed to test, they stated that they did not "think" that it would happen. I asked to see the language that precluded them from doing just that, and we could not find it.

Would and could are two different things.

Also Brian Bedford, RJET's CEO wants to join an alliance; Skyteam or Star are his top choices. He is fighting to stay alive. I would like all of the provisions to become null and void in the PWA(TA) when they file CH7, but until then I want to make 100% certain that there is not a work around for him, or a way for him to make it happen.

If you were given the argument that they could not do this on AF, KLM, or AZ because all of their TransAtlantic flights carry our code, this is factually correct within bundle 1, but there are many more carriers than just these three that fly to the US that may or may not carry our code on a given flight.

Just food for thought.
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