American Airlines Wins Labor Concessions
By ANGELA K. BROWN 04/17/2003 07:08:03 EST
American Airlines flight attendants have accepted $340 million in labor concessions, but the world's
largest carrier says it still faces the possibility of bankruptcy.
American's chairman and CEO, Donald J. Carty, praised the deals but said the economy and other
factors affecting business were beyond the company's control.
"I must caution, however, as I've said before - we are not out of the woods yet," Carty said Wednesday
after the flight attendants' vote was announced.
The vote marked a reversal from a day earlier, when flight attendants narrowly rejected the package of
layoffs, wage cuts and reduced benefits. They were given an extra day to vote after some workers
complained about trouble voting online and by telephone.
The Association of Professional Flight Attendants said 10,761 votes were cast for the concessions
package and 9,652 against. On Tuesday, the package was losing by fewer than 500 votes.
"We are almost solely returning (American parent company) AMR to profitability under our
concessions," said 26-year flight attendant Deborah Seale, who voted against the deal. "Management
will get a 4 percent cut off the first $30,000 of their salary, and most of us don't even make $30,000 a
year."
In news sure to spark anger among the rank-and-file, AMR Corp. funded a supplemental pension trust
last year for its top 45 executives that protects part of their retirement income in the event of a
bankruptcy filing, the Wall Street Journal reported Thursday.
The perks - including bonuses of twice the base salaries for AMR's top six executives if they stay
through January 2005 - were disclosed late Tuesday in the company's year-end financial filing with the
Securities and Exchange Commission. The Journal said AMR would not disclose how much money
the company put into the trust.
If flight attendants had rejected the labor cuts, AMR's board of directors was prepared Wednesday
night to approve a Chapter 11 bankruptcy court filing to conserve cash and avoid credit payments of at
least $50 million, company spokesman Bruce Hicks said.
American says it must cut annual costs by $4 billion - including $1.8 billion in spending on its 99,000
employees - to remain afloat and compete with low-cost carriers.
In earlier voting, pilots and ground workers approved their share of the concessions, saying they feared
even deeper cuts if the company filed for bankruptcy.
In its SEC filing, American said that even with the concessions from employees and vendors, "the
company may nonetheless need to initiate a Chapter 11 filing because its financial condition will
remain weak and its prospects uncertain."
Some flight attendants opposed to the concessions accused American of improperly extending the
election by one day and pressuring workers to vote for the deal, which would cut their pay by 15.6
percent on May 1.
In a letter Wednesday, union president John Ward told American to "back off and stay out of our voting
process."
The company acknowledged that it distributed informational leaflets and electronic messages to
employees but denied any wrongdoing.
Fitch ratings service said the concessions would bring American's unit labor costs in line with rivals
Continental, US Airways and United. The latter two were able to reduce costs through the bankruptcy
process.
Over the past two weeks, employees voted on whether to ratify agreements struck March 31 - on the
brink of an earlier bankruptcy deadline set by the company - that called for layoffs for 2,500 pilots,
about 2,000 flight attendants and up to 1,400 ground workers.
American sought $660 million in annual concessions from its 12,000 pilots, $620 million from 34,000
ground workers and $340 million from flight attendants.
Over the past two years, Fort Worth, Texas-based AMR has lost nearly $5.3 billion as it struggled with
a weak economy and terrorism, which dampened travel demand. |
