Airline dumps bonuses for executives amid criticism

DALLAS -- After sharp criticism from angry employees, the head of American Airlines apologized Friday as the company dropped a plan to give bonuses to six top executives if they stay on until 2005.

But American will keep a supplemental pension program for a broader group of executives that will be protected even if the world's largest airline files for bankruptcy.

The bonuses and pension plan caused an uproar among employees. They learned of the perks this week only after deciding to cut their own benefits by $10 billion over six years -- cuts the company said it needed to stay afloat.

"I have apologized to our union leaders for this and for the concern it has caused our employees," said chairman and CEO Donald J. Carty, who was one of the six executives eligible for the bonuses.

"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."

Leaders of the airline's three biggest unions warned they might try to have the concessions thrown out because American didn't tell them about the executive perks until workers agreed to pay cuts of 15.6 percent to 23 percent.

Company officials say the perks are necessary to prevent senior executives from taking better offers elsewhere.

The perks were disclosed in a Securities and Exchange Commission filing late Tuesday.

News that the bonuses were being scrapped only partly mollified employees.

"That's the only responsible thing that could be done," said George Price, spokesman for the flight attendants' union. But he said disclosing the perks after most employees had voted on concessions "is outrageous."

"The damage is done. The element of trust with senior management of this company has been destroyed," Price said.

He also said the union would go ahead with a legal review of the executive perks, which might have affected the voting had employees known about them. The pay cuts don't take effect until May 1.

The bonuses, equal to twice their salary, were offered to Carty and five other senior executives. Under the plan, Carty would have received a $1.6 million bonus. A seventh official was offered a bonus of 1 1/2 times salary.

The supplemental pension trust covers 45 executives and is shielded in case the airline's parent, AMR Corp., files for bankruptcy. The company has not disclosed how much it put into the extra pensions last October.

In the months since then, American demanded pay cuts of 23 percent from pilots and 16 percent from flight attendants and ground workers -- cuts it got from reluctant unions.

The flap appears to have worsened management-labor relations at a company already known for strikes and other problems.

"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. This has taken the distrust to a new level."