American Airlines averts bankruptcy

WASHINGTON American Airlines concluded belt-tightening agreements on Friday with three labour unions and averted a bankruptcy filing for the world's largest carrier.

By (AFP)

Published: Sun 27 Apr 2003, 2:16 AM

Last updated: Wed 1 Apr 2015, 7:45 PM

The deals capped a tumultuous week in which the company ousted its top executive and had to fend off criticism about hefty perks being offered to top managers even as it was seeking big concessions from rank-and-file employees.

The Association of Professional Flight Attendants was the last of three unions to endorse the offer by American's parent firm AMR Corp.

In all, American said the cuts will save $1.8 billion annually.

Gerard Arpey, the AMR executive tapped late Thursday to be chief executive, said the new management team would "strive quickly and diligently to rebuild the financial strength of our company."

Arpey said the airline industry still faces turbulence: "By any measure, we have our work cut out for us; we are not out of the woods yet. But as your new CEO, I am up to the task. Together with our unions, we will put American Airlines back on top."

Standard and Poor's said in a research note that AMR still faces troubles even with the cost-cutting deals.

The deals "should materially improve American's operating cost structure, narrowing the airline's losses and operating cash flow outlook," analysts Betsy Snyder and Philip Baggaley said in the note.

"However, American continues to face a weak revenue environment and AMR carries a consolidated total of 22 billion dollars of debt and leases, leaving the companies' financial condition improved but still fragile."

Arpey, who replaced Don Carty, said the new agreements "include a new incentive plan that ties the unions and management together in the success of this company."

AMR said the last-minute changes will shorten the duration of the labor contracts to five years instead of six.

Arpey and the new management team were joined by the three union leaders in announcing the deals aimed at keeping the airline afloat a day after the board authorized a filing for Chapter 11 bankruptcy protection if necessary.

The flight attendants board said it finally agreed to the plan as a result of the last-minute improvements offered.

APFA president John Ward said his members would receive pay increase incentives tied to the company's performance and management's bonus structure.

"This will ensure flight attendants will receive fair treatment when the company returns to financial viability," said Ward.

"We have worked diligently over the last several weeks and months to do our part to try to keep American Airlines out of bankruptcy while still protecting our members as much as possible.

"That effort continued over this past weekend, and up through last night. With new leadership in place at AMR, there was a renewed willingness from management to begin to repair the damage done to relations with its employees."

Ward said union members "made it clear that the company's outrageous actions last week would not be tolerated."

Carty resigned under pressure late Thursday, with unions angry that he failed to disclose hefty perks for top management before employees voted on givebacks.

American Airlines' management had drawn up retention bonuses for six top airline executives and had set up a trust to protect management pensions even in the event of bankruptcy.

The bonuses were withdrawn in the ensuing fury, but the pension trust remains in place.

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