Airline Won’t Give Workers Severance Pay
American Airlines said Monday that it is invoking an emergency clause in its union contracts that will allow it to forgo paying severance to the 20,000 workers it plans to let go. Union leaders said they will fight the decision, including the possibility of legal action.
The nation’s largest airline informed employees of its decision Saturday in an e-mail shortly after Congress approved a $15-billion federal bailout of the airline industry. American is expected to receive about $808 million in direct cash assistance as part of the package.
American spokeswoman Karen Watson said the Dallas-based carrier needs to withhold severance payments in order to continue operating. She did not say how much the company expects to save.
“Obviously there would be a significant amount of cash involved in providing furlough pay,” Watson said. “What we’re focusing on now is getting the airline back in the air and getting our customers back and building the airline as best as we can.”
American and most U.S. carriers reduced their work forces and trimmed service by 20% after the Sept. 11 terrorist attacks that shut down the nation’s air travel system for two days and caused passenger skittishness about flying. The industry has been losing millions of dollars a day since then.
American’s severance pay decision was denounced by union leaders, who vigorously supported the federal rescue plan but had urged that it include protections for laid-off workers, and a congressman who voted against the bailout because it did not include those provisions.
“When they are taking taxpayers’ money--$15 billion--they ought to act responsibly,” said Rep. Bob Filner (D-San Diego), a member of the House Transportation Committee.
“We are strongly opposed, and we’re going to do everything in our power to stop them,” said Edward Wytkind, executive director of the AFL-CIO Transportation Trades Department, which is coordinating organized labor’s response to the fallout from the attacks. He said suing the airline is among the options under discussion.
Congressional leaders are scheduled to meet privately with President Bush today. Among the topics expected to be discussed is aid for laid-off airline employees.
U.S. air carriers have announced 80,000 job cuts, and more are expected. Many of those affected are nonunion employees with no contractual protections. But unionized workers, from pilots to mechanics, had expected to walk away with two to four weeks’ severance pay, as stipulated in their contracts.
Watson said American invoked a force majeure clause in its union contracts, allowing it to forgo making severance payments to the workers it plans to lay off, including 506 pilots and 1,000 flight attendants.
Force majeure, a French term that in legal contexts means an unforeseen accident, allows the airline to unilaterally declare an emergency and sidestep its agreements to give laid-off workers a certain amount of notice, severance pay and recall rights, Watson said.
The clauses “are not new in the contracts,” she said. “They have been there for years. They say that in the event of an emergency, the airline is not required to provide a normal separation package.”
Spokesmen for United Airlines and Delta Air Lines said those companies had not yet made decisions.
But Houston-based Continental Airlines, which plans to cut 12,000 positions, is honoring its regular contracts, spokeswoman Julie King said. Continental is giving most employee groups options to avoid layoffs, such as taking a year’s leave, relocating and early retirement, she said.
Northwest Airlines and US Airways could not be reached for comment.
In a message to his 138,000 employees Monday, American Chief Executive Don Carty underscored the severity of the company’s financial difficulties. He pledged to forgo his compensation through the end of the year.
He said the layoffs and $808-million cash infusion from the government “are not enough to save the company. Our passengers have not come back to us yet.”
He asked other employees to follow his lead by taking voluntary cuts in pay. For every $1 saved, Carty said, 20 cents will be put into a fund to help pay for the educations of the children of American employees killed in the attacks.
