American flight attendants OK concessions; bankruptcy averted

Thursday, April 17, 2003

FORT WORTH, Texas -- American Airlines flight attendants reversed themselves and approved $340 million in labor concessions Wednesday, pulling the world's largest carrier back from the brink of bankruptcy. American welcomed the reprieve but warned its troubles may not be over.

The Association of Professional Flight Attendants said 10,761 votes were cast for the concessions package and 9,652 against -- a 1,642-vote swing from just one day earlier, when the attendants had narrowly rejected the package of layoffs, wage cuts and reduced benefits.

The union and company extended the balloting, saying some workers had run into difficulty in voting. American had vowed that if the concessions were rejected, the carrier would quickly file for bankruptcy protection.

"The people of American Airlines have together made history," said Donald J. Carty, American chairman and CEO. "These agreements represent the most ambitious effort to consensually restructure costs ever, not only in airline history but in U.S. history."

But in a statement, American parent company AMR Corp. said American's financial condition is weak and its prospects remain uncertain. Said Carty: "Given the hostile financial and business environment we find ourselves in and its inherent risks, the success of our efforts is not assured."

And a union spokeswoman said "this is not a day for rejoicing."

"Tough times lie ahead for our airline and our members," spokeswoman Lori Bassani said. "By ratifying this agreement, we will be giving up a great deal to try to keep our airline out of bankruptcy."

The board of directors of American's parent company, AMR Corp., had been prepared to meet by teleconference Wednesday night and approve the bankruptcy filing, company spokesman Bruce Hicks said. He said the company faced credit payments of at least $50 million Wednesday and would have filed to avoid those payments and conserve cash.

Airlines have been reeling for months, hurt by the sluggish economy, fallout from the Sept. 11 attacks, fears over the SARS virus and the war in Iraq. United Airlines is already in bankruptcy.

American has struggled against low-cost competition and AMR has lost nearly $5.3 billion in the past two years. To stay afloat, the airline asked its three biggest unions to approve $1.8 billion in labor cuts, including the layoffs of 2,500 pilots, 2,000 flight attendants and up to 1,400 ground workers.

Union leaders reluctantly backed the plan, saying cuts could be even worse in bankruptcy.

In voting that closed Tuesday, unionized pilots and ground workers approved their share of the concessions, saying they feared even deeper cuts if they forced the company into bankruptcy. But by the Tuesday deadline, the airline's 24,000 attendants had rejected the deal, which would cut their pay by 15.6 percent on May 1, by fewer than 500 votes out of 19,000 cast.

On Wednesday, attendants who gathered at union headquarters to support concessions as an alternative to bankruptcy reacted with joy when the new ratification results were announced. "There is a God!" screamed one.

But workers who opposed to the deal said they were angered by the decision to extend voting, and they accused the company of improperly pressuring attendants to support concessions.

"This is tampering with the election. It's outrageous," said flight attendant Deborah Seale. "You can't lay bankruptcy at the feet of flight attendants. We didn't make the management decisions that put us at bankruptcy's door."

Altogether, American had sought $660 million in annual concessions from its 12,000 pilots, $620 million from 34,000 ground workers and $340 million from the flight attendants. Fitch ratings service said the labor concessions would bring American's unit labor costs in line with rivals Continental, US Airways and United. The latter two were able to reduce costs through the bankruptcy process.

In Wednesday trading on the New York Stock Exchange, AMR shares rose 83 cents to $4.23 in anticipation the flight attendants would reconsider. In after-hours trading, the shares surged another 13 percent.

Associated Press Writer Matt Curry in Fort Worth contributed to this report.

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