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Airline's executive perks spark revote

Sunday, April 20, 2003

DALLAS -- A flight attendants' union said it was rescinding its approval of $10 billion in wage cuts and other concessions to American Airlines over six years, striking a serious blow to a plan that the company said it needed to avoid bankruptcy.

Enraged by the recent revelation that the airline planned to give bonuses to top executives, the union said late Friday that it would schedule a new vote on the concessions.

American chairman and chief executive Donald J. Carty had apologized earlier Friday for not telling unions sooner about the bonuses, which were disclosed after employees voted to accept the concessions. The company also said executives had decided not to accept the bonuses.

Still, the president of the flight attendants' union said the company had failed in its obligations to employees.

"The vote is so tainted that we are proceeding with a revote," said John Ward, president of the Association of Professional Flight Attendants.

After learning of the plan for a new round of voting by the union, American said it stood by the results of the earlier vote.

"American Airlines has a valid, ratified agreement with the APFA," said a company spokesman, Bruce Hicks. He said the company would not comment further.

The union's move threatened to push American closer to bankruptcy just two days after flight attendants and members of its two other main unions narrowly approved the concessions.

The company had said it would file for bankruptcy if the unions failed to approve the plan.

Leaders of unions representing pilots and ground workers also complained about the bonuses, along with the company's decision to partially fund supplementary pensions for 45 top executives. The pensions would be protected even if American files for bankruptcy.

The unions called those moves inappropriate at a time when the airline was asking employees to ratify pay cuts of 15.6 percent to 23 percent.

American said it would not rescind the added pensions, which it said were necessary to keep senior executives.

American disclosed the bonuses and extra pension benefits late Tuesday in a Securities and Exchange Commission filing. They caused an uproar when employees learned of them Thursday.

On Friday, before the flight attendants' union announced plans to revote, Carty asked the unions for continued cooperation in helping the airline recover from a severe industrywide slump.

"Those executives who have made the personal commitment to remain with American during this financial crisis, myself included, are not here solely for monetary reasons and we have all agreed to give up these retention payments in order to give our employees confidence in management's ongoing commitment to shared sacrifice," he said in a written statement.

Ward said Carty's apology wasn't enough.

"They had an obligation to provide us with the most reliable, up-to-date information available about the company" before employees voted, he said. "That obviously wasn't the case."

Ward said the new election would begin as quickly as possible. The last one, conducted by phone and the Internet, lasted two weeks. The concessionary pay cuts are scheduled to begin May 1.

In the earlier vote, flight attendants originally rejected their share of concessions -- $340 million a year. But the company agreed to delay a bankruptcy filing and gave attendants an extra day to vote or to change their vote. With the extra day, the concessions were approved.

The union and the company said the extension was needed because some workers had technical difficulties voting the first time.

The bonuses offered to Carty and five other senior executives were equal to twice their salaries, and a seventh official was offered a bonus equal to his salary.

The flap over executive perks has delivered a damaging blow to the already poor management-labor relations at the airline, which has been hit by strikes and a pilot sickout.

"Labor-management relations have been acrimonious ever since I started working here," said Jay Narey, a 16-year flight attendant, "but this is beyond anything I imagined."

Analysts said American's managers showed poor judgment in approving executive perks while the airline industry slumped, shareholders were losing money and employees were asked to take big pay cuts.

"They basically blackmailed their workers with threats of bankruptcy," said Lance Compa, a Cornell University labor law professor. "It puts a moral onus on management to share the pain."

Much of the employees' anger was aimed at Carty.

"I will be the first one calling for his resignation if this thing tanks, if the company goes into bankruptcy," Ward said.


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