Fumbling a Last Chance
Hours after American Airlines employees approved a $1.8-billion concessions package last week, a union representative issued a prophetic statement: “The company has been provided with everything it needs to survive. We can only hope that [management] will not squander the opportunity our members have provided them.”
American Airlines’ top executives may already have fumbled away their last chance to keep the nation’s largest airline out of Bankruptcy Court.
What American did -- grant bonuses to top executives and fund a bankruptcy-proof trust for their pensions -- was bad. How it became public knowledge was worse. Don Carty, chairman of parent company AMR Corp., kept word of the financial package quiet until after the last union vote was tallied.
Irate flight attendants and ground crews Tuesday pressed forward with plans to vote again on the concessions.
American officials maintain that last week’s votes represent a ratified contract. Sadly, the airline’s precarious financial position leaves no more room for maneuvering. Creditors are expected to force American into a bankruptcy filing now that unions are demanding another vote.
The crisis at American exemplifies a blindness in the airline industry, where executives seem to think their dire situation is entirely someone else’s doing. The industry has leaned on Congress for billions of dollars in federal assistance and turned up the pressure on union members to submit to baseball-style binding arbitration.
What the big airlines should be doing is developing a rational ticket pricing plan to lure corporate travelers back onto empty airplanes and delivering business plans for competing against such lower-cost carriers as Southwest and JetBlue.
American’s latest misstep savages its reputation as well. Carty initially defended the bonuses as necessary to avert a possible executive exodus. He continues to defend the executive pension trust fund, even though the federal Pension Benefit Guaranty Corp. won’t fully protect pensions of American’s other employees in the event of bankruptcy.
Carty maintains that American’s board is “committed to the highest ethical standards.” Board members should prove it by inviting employees into the boardroom to ensure there are no more secrets. Directors also must question whether a man whose credibility is so shot can manage the enormous task ahead. And employees should take a deep breath before letting an emotional response add to impending financial pain.
American Airlines should have kept a history of Eastern Airlines close at hand. That airline was driven out of business permanently by a venomous labor-management relationship that spilled over into passenger relations.
The AMR executive compensation package was a blunder that would have fit right in at Eastern Airlines. American can only hope its story doesn’t have an Eastern Airlines ending.
