Greetings,

 Divestiture Meetings

Your AFA MEC has met with the ALPA MEC and the Company to get more insight to the possible divestiture of American Eagle.

 We met with the ALPA MEC representatives first. The ALPA MEC and AFA MEC stand united.  This divestiture has to be a win-win for the hard-working Eagle Employees. The timing of this divestiture comes at a critical point for ALPA’s contract negotiations. ALPA’s concern is that the Air Service Agreement (ASA) may become a 5 year contract which would expire the same time that the ALPA contract expires and is concurrent with the expiration of both Trans States and Chautauqua’s ASA expirations.  This would give AMR the ability to pit each of the above airlines to compete and lower current pay scales.

 After the meeting with ALPA, we met with Peter Bowler, Linda Kunz and Jon Snook. The following is the information we were given from the company:

·        Terms of Air Service and Ground Service are being compiled. Peter said it may take years to complete the divestiture, depending on the state of the airline industry in the future.

·        The Company is working with Merck to keep our insurance benefits and rates as they are now.

·        The Company will soon put out details on Non-Rev travel with AA.

·        If there is a spin-off of the Company, going public with Eagle stock, it could take place in the 2^nd half of 2008.

·        Peter believes Eagle can survive and grow without being owned by AMR.

The Air Service Agreement (ASA) is the agreement between AA and Eagle that covers the terms of how we will provide feed/service to AA. Currently this agreement is renewed annually. Peter Bowler says that these terms will be renegotiated for a longer period (longer than the current year to year agreement) following a divestiture.

When AMR no longer owns Eagle, the ASA will contain the restrictions set forth in the APA Scope Agreement, which limits Eagle’s flying from hub to hub and spoke to spoke. This will change our current flying structure drastically, requiring shifts in flying at our bases. Peter said Eagle will begin flying new markets once this goes into effect.

Given this restriction of flying because of the APA Scope Agreement, we asked Peter how Eagle will grow. He stated that our ability to grow will be based upon our contracts with other airlines. We will only be able to secure those contracts if we are cost-competitive.

We asked if the sale was a spin off, what would be the ramifications. Peter responded that if a spin-off occurred, AMR stock would be split into two parts. AMR Eagle stocks would be sold separately from AMR AA stocks.

We inquired about who owns the aircraft we currently fly. Peter stated that the aircraft are owned by Eagle and Eagle Holdings. AMR is the guarantor for the debt on the airplanes.

Your AFA leaders remain very guarded about any possible divestiture. We are working on setting up more meetings with the ALPA MEC and we will keep communications with the Company flowing. As we get more information, we will of course pass it along to you.