American Airlines Flight Attendants OK Cost-Cutting Plan
AMR Corp.’s American Airlines may have averted bankruptcy proceedings after new Chief Executive Gerard J. Arpey persuaded flight attendants Friday to accept cost cuts. AMR stock rose.
Arpey secured the agreement on his first full day after taking over from ousted Chief Executive Donald J. Carty. American now has agreements with all three of its unions, a condition the company set for preventing a Chapter 11 filing.
The board of the flight attendants union agreed to the amended plan after an overnight meeting with Arpey, 44, hours after he replaced Carty. The union had objected to Carty’s failure to disclose some management perks as unions prepared to vote on an earlier version of the plan.
“With new leadership in place at AMR, there was a renewed willingness from management to begin to repair the damage done with its employees,” said John Ward, president of the flight attendants union.
Meanwhile Friday, shareholders of Delta Air Lines Inc. showed their displeasure with corporate management over retention bonuses and other perks by passing two pilot-sponsored resolutions.
One resolution asks the board of directors to seek shareholder approval for some senior executive severance packages.
Another pilot-sponsored resolution asked that the cost of stock options be recognized as an expense on Delta’s income statement.
Delta CEO Leo Mullin apologized to shareholders and employees for his compensation, which totaled about $13 million in 2002 and was publicly criticized by members of Congress.
Asked whether American, the world’s biggest carrier, would be able to avoid bankruptcy, new AMR Chairman Edward A. Brennan said, “We’ll do our very best. We are committed to that, and we are going to work hard to make it happen.”
AMR shares rose 36 cents to $4.40 on the New York Stock Exchange.
The new agreement all three unions adopted shortens to five years from six the length of the original plan and allowed negotiations on new contracts to begin as early as April 30, 2006. The plan also created incentives that could increase wages as much as 10% if employees meet performance goals.
American has been seeking the concessions as part of $4 billion in annual cost savings. The Fort Worth-based airline posted combined losses of $5.3 billion the last two years, plus $1.04 billion in the first quarter. Union leaders for pilots and ground workers on Thursday accepted a new proposal.
In another development Friday, American was charged with discriminating against passengers believed to be Arabs after the Sept. 11 terrorist attacks, a federal agency said.
American showed bias in the months after the attacks when it prevented 10 passengers from boarding flights after they’d been ticketed and completed security checks, the Aviation Enforcement Office said.
American denied that it discriminated against any passengers and said it acted appropriately at the time because of security concerns.
