Remarks by Capt. Randy Helling, ALPA Vice-President—Finance
105th Regular Executive Board Meeting
October 27, 2009

My fellow pilots, good morning. As your Vice President of Finance, I am proud to join the other national officers in addressing the fine members of our Union – members who have shown a remarkable sense of dedication and perseverance toward implementing the initiatives set forth in our Strategic Plan over the past year.

It is no secret that ALPA has been in a continuous state of re-engineering this year. “Re-engineering” is a fancy accounting term for “cost cutting.” The cost-cutting our union has taken on over the past several months, however, is anything but fancy. It is very real.

We’ve asked you to make some difficult decisions this year, and we know that the MECs had to make drastic changes in how they spent their pilots’ hard earned dues money.

Round after round of cost-cutting measures occurred in a direct effort to trim the fat, streamline the organization, and live within a carefully revised budget. In the process, the challenge to do more with less extended to our members and staff.

Because of our collective efforts – your efforts – we have stabilized ALPA’s finances. We ARE doing more with less, we ARE functioning efficiently, and we ARE living within our revised budget.

In fact, the cost-cutting measures we’ve taken so far in an effort to focus on our core priorities are beginning to show a measurable impact.

The MECs requiring contingency fund supplements to make up deficits have dropped significantly. We have taken the first steps to achieving a more stable footing for our union.

Going forward we want to ensure that our members understand that when their money comes to National, it is for the benefit of the entire profession. Because of your response throughout this challenging year everyone in this room can take credit for helping to regain a stable course.

We continue to exercise financial discipline across the board; however, we have taken our steadfast resolve to implement course corrections beyond budgetary challenges.

The aviation industry is in perpetual motion with many important legislative initiatives. ALPA has a seat at the table on a number of those initiatives that are impacting the present and future integrity of our industry and our profession, especially in the areas of safety and security.

In many cases, we are not just bringing our expertise and determination to the table, we are at the head of the table.

From NextGen to Unmanned Aerial Systems, the FFDO program, pilot professionalism, and secondary barriers initiatives, our collective voice on critical issues affecting our industry, our profession, and our safety and security is being heard globally.

Ladies and Gentlemen – WE ARE making a difference.

Safety and Security

As we all know, the National Airspace System, the NAS, is in dire need of improvement.

If we don’t, the air transportation system and the huge impact on the global economy will be in jeopardy.

ALPA’s support of the efforts to move our industry toward NextGen, the Next Generation Air Transportation System, is having an impact and we are plugged into that process well.

There are ALPA pilots doing the detailed technical work in working groups and Capt Prater holds an executive level seat on the Air Traffic Management Advisory Council, which sets the strategic direction for airspace modernization activities.

That means front line employees, pilots and controllers, have to be involved every step of the way. For us to safely move forward toward the NextGen goals, we need to make sure that all relevant issues are subject to a robust human factors analysis and that all the people involved are well trained.

Unmanned Aerial Systems continue to be a major safety issue for ALPA. Our position has been, and will continue to be, that unmanned systems operated in the NAS must be held to the same standards as all other aircraft operating in the NAS.

To ensure that objective is met, we continue to actively participate in the development of standards for the aircraft and their operation as well as the regulatory umbrella under which they must operate.

Other important initiatives include promoting the ALPA Code of Ethics and working with the University Aviation Association to create a professionalism course for future airline pilots at institutes of higher learning.

ALPA was successful last year in persuading the FAA to call upon RTCA to develop performance standards for secondary barriers.

ALPA continues to press for improvements to the Federal Flight Deck Officer program at every opportunity.

On October 6th, the Federal Air Marshal Service convened a meeting of designated FFDO representatives from around the U.S. to provide updates to the program, at which ALPA was well represented.

The FAMS advised that its communications system is being rebuilt to upgrade the current so-called “Dashboard” to provide a secure communication network between FFDOs and FAMS management.

The President’s Committee for Cargo is continuing its efforts to resolve regulatory deficiencies which prevent the achievement of one level of safety and security for all-cargo aircraft.

There are other areas of involvement that are too numerous to detail in this presentation but ALPA is making an impact in these improvements as well.

Intro to Finance Portion of Remarks and Financial Slides:

At the 2008 October Board of Directors meeting, ALPA’s Strategic Plan, devised by eight delegate committees, was introduced, and three very important financial initiatives of the plan emerged:

  1. Understand our financial situation

  2. Identify the red ink and stop the bleeding

  3. Run the organization as efficiently as we possibly can

Well, we’ve not only cut out the fat, we’ve had to cut into the muscle and, in some cases, bone. We’ve done this as a necessity in order for us to shrink our footprint and then rebuild a stronger, more stable foundation.

This new footprint will allow us to adequately maintain the level of services our members have come to expect. In any new business transaction or business model, maintaining the current services to our members has been a driving factor in shaping our future financial strategies.

However, if we have to make any further cuts, it is going to be a material reduction in the services that we require or that our pilots expect.

Financial Results (Slides 1 through 19)

Slide 1: Intro to Financial Report

In 2009, we were successful in our efforts to pull out of the financial free-fall of 2008 that was a result of the catastrophic economic climate, the loss of US Airways, America West, Atlas Air, and Polar Air Cargo, unfavorable bankruptcy laws, a hostile political administration, an opportunistic management, and the insidious repercussions of post-9/11. The result was painful, and the losses had a tremendous impact on our organization.

Slide 2: 6-Year Consolidated Net Income

As you can see from this first slide (slide 2), we are showing a modest surplus in 2009. Our cash flow has stabilized due to the cost-cutting measures and difficult decisions that National and the MECs have had to make over the past few months on how they spent their money.

Slide 3: 2008 Net Income Profile

Now, what happened in 2008 was the perfect storm. Our efforts to save, and then the eventual loss of, nine carriers combined with the financial market collapse in the last quarter of 2008 had a devastating effect on our organization. But we’ve survived…The results for 2009, so far, are showing that our efforts are paying off.

For 2010 our goal is straightforward:

We will maintain what we have and continue to stabilize our financial condition. We just completed the budget for 2010. The Executive Council approved it at the September meeting. I will tell you that it looks much better than it did one year ago when we were faced with the challenge of cutting $12.5 million out of the budget.

Slide 4: ALPA Actual and Projected Dues

This year, by contrast, we have very little if any gap to close. This next slide reflects our actual vs. projected dues revenue from 2004 to 2010.

Instead of $92 million for 2009, we’re actually closer to $95 million. The increase is, in part, directly attributable to Air Tran and Colgan joining our union this year.

In addition, FedEx and Delta were primary revenue drivers, as they received pay raises that offset a lot of the capacity reductions, furloughs, and downgrades experienced this year.

Thinking positively, if revenue projections stay the same and we don’t have any further announcements of material reductions or capacity reductions at our carriers, this budget for 2010 will hold.

If not, we will go back and do another reality check and go through the process of streamlining our operations yet again. But for now, our expectation is that this budget is going to hold and we will continue to “fly level” with the horizon.

Slide 5: 2010 Budget Allocation

This next slide reflects how the $95 million is allocated for 2010 in accordance with ALPA’s spending limit policy.

Slide 6: 2010 A&S Budget

This next slide (slide 6) details the National or Administrative & Support Account budget for 2010. The majority of the modest increase over the 2009 budget is employee cutbacks, which include a pay freeze and cost sharing with the staff of the increased medical costs that have been projected for 2010. Our goal for the 2010 budget was to keep costs constant at 2009 levels.

More importantly at this stage of the mission, MECs need to start budgeting around their MEC income and using their SMRA for what it was originally intended – unbudgeted contingencies. This is the financial stability we need to build back the necessary cushion should we be faced with future financial challenges.

Building back our reserves will provide us with a more solid foundation, and it will help break the fall should an unexpected downturn occur.

Slides 7 and 8: 2009 SMRA and 6-Year SMRA (as of 8/31/09)

You can see from this slide (slides 7&8) that our 2009 SMRA level is below our 2005 level. Last year I said we must live within our budgets – MEC income plus SMRA income. Now I’m asking you to re-build your savings. Consistent with this message, Committee 2 will have a presentation on a Financial Oversight Committee structure for an MEC.

Slide 9: 6-Year OCF (as of 8/31/09)

We have also increased oversight of MECs in financial difficulties because our funds are so limited.

The OCF was created to provide MECs additional resources during the negotiations cycle and to provide a backup if they experienced unanticipated costs, but it was depleted in 2008 and needs to be rebuilt.

Re-building your SMRA will relieve pressure on the OCF and help us achieve that goal.

Slide 10: 2009 OCF

You can see on this next slide that during 2009, due to the increased use of Contingency Fund Oversight Boards or “CFOBs,” we are seeing a modest increase in the balance of the OCF.

Slides 11: MCF History (1985 BOD increased dues…)

Slide 12: History of the MCF and Where We Are Now

In January 2009, the MCF balance broke through a floor outlined in ALPA’s Constitution & By-Laws that necessitated a review of the MCF’s funding.

That review has been completed by a subcommittee of the Executive Council, and Committee 2 will receive a briefing on the Executive Council report.

Part of this review entailed revisiting our history and the birth of the MCF. It was looking at the past that put into perspective how important the MCF is to our union and the successes we’ve enjoyed because of it.

Slide 13: MCF – The Largest Outlays…

This next slide (slide 13) shows how those monies were spent – all extremely hard-fought challenges that prepared us for the challenges we’ve been facing recently. Many of us have battle scars from these fights, but we were able to fight because of the resources our members invested in this union.

Slide 15: MCF History—Primary Sources of Income

For the last 14 years, since 1994, the MCF has had two primary sources of income – investment returns and the sale of the 1625 Mass Avenue building. No dues money has provided funding since 1994. We have had the luxury of living off those returns without additional dues contributions.

Slide 16: 6-Year MCF (as of 8/31/09)

In 2006, the MCF was at an all-time high of $86 million. Three years later, it is at $61 million. Huge investment losses in late 2008 as well as significant commitments to MECs in protracted negotiations and increased litigation costs have contributed to the drop.

Slides 17 and 18: 2009 MCF and MCF Users

You can see the utilization of the MCF for this year.

Slide 18

For 2009: Our message to you was “Live Within Your Means,” and by all accounts, everyone in this room can take credit for helping our members and our union regain a stable course.

Final Slide – Slide 19: 2010 Goals

For 2010: ALPA’s finances have been stabilized, However, it will be imperative that you continue to exercise the financial discipline from the past year if we are to continue rebuilding the Association’s finances.

In closing, I am confident that with a stable platform from which to move forward, we can start building surpluses again so that when we have contingencies in the future, we’ll be able to meet them.

More importantly, we’ll have the money available so that the significant work of our dedicated pilots can continue until the job is done.

Thank you.