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American Airlines Labor Deal in Jeopardy - 2003-04-22


A hard-won labor deal designed to keep the financially-strapped American Airlines out of bankruptcy is in jeopardy. Labor unions are considering new votes on a package of concessions after learning that top executives were to receive bonuses and extra pension benefits.

Last week, the future looked brighter for American Airlines, which has lost more than $5 billion over the last two years. Labor unions representing pilots, flight attendants and ground workers approved deep wage cuts and other concessions totaling $1.8 billion as a last-ditch effort to keep the carrier out of bankruptcy. Stock of the airline's parent company (AMR) shot up 25 percent on the news.

Now, the deal appears to be falling apart. Shortly after the union voted, reports surfaced that American Airlines had approved pay bonuses and pension protection plans for its top executives. The company said the perks were designed to keep executives from leaving the company during what is expected to be a painful reorganization process in the carrier's quest for profitability.

But union leaders are outraged, and have pledged new votes on the concessions package for ground workers and flight attendants. Pilots are expected to follow suit.

American Airlines Chief Operating Officer Donald Carty has been working feverishly to control the damage and salvage the original concessions deal.

"I made a mistake. And, of course, it was a big one," he said. "Because I failed to fully communicate about the details [of the executives' program] in advance, I inadvertently created a perception that there was something improper [taking place]."

But union leaders say they no longer trust management. In a taped message to rank-and-file members, the head of the flight attendants' union, John Ward, said American Airlines has acted improperly.

"Carty's apology does not change the fact that by withholding information about these bonuses and pension trusts it committed a material breach of its obligation to disclose all relevant information to us," he said. "Because of this material breach, we still intend to commence with the re-balloting of the [union] membership."

Headquartered in Dallas, Texas, American Airlines operates throughout much of the United States as well as internationally. The company is the biggest single employer in Miami, Florida, one of the carrier's main hubs. Miami-based flight attendant Chris Lewis says, whatever faith he once had in the company has been shattered.

"Who knows if they [top executives] would ever have come clean about this if they had not been caught? That is what has a lot of flight attendants concerned," he said.

American Airlines says, if forced to declared bankruptcy, the resulting job losses and pay cuts would be even more severe than those mandated by the original concessions package. The carrier says it has no choice to reduce its operating expenses, either through negotiated agreement with unions or through a massive reorganization stemming from bankruptcy.

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