AMR Flight Attendants React To Executives' Retention Plan
By SCOTT MCCARTNEY
Staff Reporter of THE WALL STREET JOURNAL
Union leaders at American Airlines, still steaming over discovery of special perks for the airline's top executives, are weighing their options despite the cancellation of a special retention-bonus program and an apology from Chief Executive Donald J. Carty.
Last week, the three unions that represent workers at AMR Corp.'s American voted to accept deep cuts in pay and benefits to keep the airline flying. But in its year-end 10-K, filed with the Securities and Exchange Commission just as voting ended, the company disclosed that it would pay seven executives special retention bonuses in 2004 and 2005 and that it funded an executive retirement trust that would be protected in the event of a bankruptcy filing.
In response, the Association of Professional Flight Attendants said it intends to vote again on its share of $1.8 billion in annual concessions, a move that could land American in bankruptcy court. Board members of the Transport Workers Union, which earlier had threatened to refuse to sign the contract agreements, will meet with attorneys Monday to study options, said Jim Little, director of the TWU's air transport division.
A spokesman for American says the company believes it already has a ratified agreement with the flight attendants. The company has already begun implementing provisions of the new contracts. Friday, for example, was a workday for mechanics; it had been a holiday under the old contract.
On Friday, Mr. Carty, who also is American's chairman, said the company was canceling retention bonuses that would have paid him and six other executives as much as twice their base salaries if they stayed until January 2005. But Mr. Carty said creation of a trust that protects supplemental pension benefits for 45 executives in the event of a bankruptcy will remain.
The timing of the pension funding, as well as American's failure to disclose the extra bonuses before workers voted on concession contracts, has infuriated workers and deepened long-held mistrust between management and workers, something Mr. Carty had made it a priority to overcome.
"My mistake was failing to explicitly describe these retention benefits, and because of that, many employees felt they were kept in the dark. Please know that it was never my intention to mislead you," Mr. Carty said Friday in a letter to American's workers.
Some workers are calling for both overturning contract concessions and pressing for Mr. Carty's resignation. Even Mr. Carty's former boss, Robert L. Crandall, has publicly said he would return to American, a move that union leaders who used to vilify Mr. Crandall are now, in some circles at least, embracing.
Flight attendants narrowly rejected contract concessions last week, then reopened voting for a day because of balloting problems. The concessions were approved, averting what American said would have been an immediate bankruptcy petition. But union leaders say if they had known about bonuses and pension protection for American executives, the tentative agreements would have been rejected.
Likewise, mechanics, baggage-handlers and other ground workers represented by the TWU approved concessions by a 53% to 47% margin that likely would go against the company after American's executive-compensation disclosures, according to union officials. Workers protested Friday outside American's major maintenance base in Tulsa, Okla.
Pilots struck a more conciliatory tone. John Darrah, president of the Allied Pilots Association, told his members the retention-bonus payments were "more problematic" than funding executive pensions. Pilots have a similar supplemental pension that is funded by an irrevocable trust.
"While I have continuing concerns about how these plans ever came to be during these troubled times, it was important for the very future of this airline that management made the correct decision concerning the revocation of these bonus payments," Mr. Darrah said. "With that said, management must surely know that the employees on this property are questioning the integrity of their actions, and will no doubt be even more watchful."
In Washington, James Oberstar, ranking Democratic member of the House Committee on Transportation and Infrastructure, sent Mr. Carty a letter saying the retention bonuses and pension protections "are part of a dangerous trend of growing economic inequality" between management and workers.
American said it believed retention bonuses were necessary because the severe industry downturn after the Sept. 11, 2001, terrorist attacks prompted several key executives to retire or leave for other companies. Other carriers, including Continental Airlines and Delta Air Lines, have offered similar retention pay plans. American also contends the trust funding for the supplemental pension plan was necessary to retain executives.
The plan, created in 1985, had never been funded. Without any protection, a bankruptcy could have wiped out supplemental benefits.
American's regular pension plan, which covers employees and management, has a trust fund but is about $3.4 billion underfunded, according to the company's annual report. |
