Angry unions may send American Air to bankruptcy
SUNDAY, APRIL 20, 2003 3:17 PM
- Reuters U.S. Company News
By Jon Herskovitz
DALLAS, April 20 (Reuters) - American Airlines faces bankruptcy concerns again this week -- just days after avoiding Chapter 11 -- as unions for its flight attendants, ground workers and mechanics threaten to pull back concessions in anger at lucrative payment plans for the AMR Corp. (AMR) unit's top brass.
The three major unions have expressed outrage at news last week of special pension funds for senior management that would be paid even in bankruptcy. The plans came to light in a filing to the Securities and Exchange Commission just as workers agreed on Wednesday to pay cuts of 15 percent to 23 percent and thousands of layoffs that would save the world's largest carrier $1.8 billion a year.
"The concessions our members barely ratified the other day were based on the premise of shared sacrifice. This fund is the opposite of shared sacrifice and calls into question the basis of each of our contracts," said Jim Little, the head of a division of the Transport Workers Union, which represents about 34,000 mechanics and ground workers at the airline.
At least one of the unions which ratified the concessions last week has threatened not to sign off on its vote, even if that means dragging the carrier into Chapter 11.
The Association of Professional Flight Attendants, which represents about a quarter of American's some 100,000-strong work force is calling for a new vote on the concessions, saying its ratification last Wednesday had been tainted by revelations of the executive compensation packages.
The management perks include bonuses for six top executives if they stayed with the company and funding for a special pension trust that would be paid to the airline's top 45 executives, even if the carrier went bankrupt. American has said that these plans had been around for some time, were common among major companies and were needed to keep top executives on board.
American has tried to quell the anger of labor groups by announcing last Friday it it had voluntary canceled retention plans put in place more than a year ago to keep its key executives.
According to filings with the SEC, the retention bonuses would give the airline's top six executives a bonus of twice their base pay if they stayed with the company through 2005.
The airline also said it funded a pension trust for its top executives in October 2002. It said the pension plan was not new, adding its "supplemental executive retirement plan" was established in 1985.
The airline said it would stop funding for the trust but added that initial payment to the pension fund would remain in place because it was a benefit already earned.
AMR Chief Executive Don Carty, who, after the historic concessions had bounded down the steps of its corporate headquarters last week to the cheers of employees, apologized for not properly informing them about the compensation plans.
Carty's future at American has been the buzz of Internet chat pages for union members over the weekend, with several American workers saying it was time for the CEO to step down.
To add fuel to the fire, AMR will announce its first-quarter earnings this week. The airline said it suffered a severe drop in travel due to the war in Iraq and is almost certain to show bleeding of hundreds of millions of dollars from its balance sheet in the quarter.
AMR has lost billions since the Sept. 11, 2001, attacks sliced demand for air travel, including an industry record $3.5 billion in 2002. |
