Deal helps stave off bankruptcy

By Trebor Banstetter
Knight Ridder News Service

FORT WORTH, Texas — On the first day under its new leadership, American Airlines drew back from the precipice of bankruptcy when flight attendants accepted an enhanced concessions deal and canceled plans for a second vote on the cutbacks.

Ticket counter worker Kay Hull and pilot Bob H. Johnson, along with other AMR employees, applauded yesterday's announcement of Gerard Arpey as the new CEO of AMR, the parent company of American Airlines. Associated Press

The tide apparently turned in the evening, when officers of the flight attendants' union met with newly tapped Chief Executive Gerard Arpey in a last-ditch attempt to break the stalemate. Arpey offered to alter a key contract point that allowed attendants to be paid for the number of hours they are scheduled to fly, rather than the hours actually in the air.

The change was enough to tilt the union's board in favor of the agreement yesterday, voting 13-5 to accept the sweetened deal — an eight-month reduction in its six-year duration, cash bonuses of up to 10 percent for all workers if American meets performance goals and the ability to begin negotiations on new contracts after three years. In return, the unions had to promise to drop plans to vote again.

It was the third time in as many weeks that the airline averted a trip to bankruptcy court.

This time, however, it was a significant first victory for Arpey and Edward Brennan, the airline's new chairman, as they took over leadership of the world's largest airline.

The duo replaced Chairman and Chief Executive Don Carty on Thursday. Carty resigned amid an uproar over a slate of lucrative bonuses and a $41 million supplemental retirement plan for top executives that had been kept secret until after union members had voted on $1.6 billion in concessions.

"As you might imagine, today is an emotional day at AMR," Arpey said during a news conference at the airline's Fort Worth headquarters yesterday afternoon, just hours after the flight attendants had signed off on the deal.

The conference resembled a pep rally, packed with employees cheering airline executives, board members, union leaders and politicians as they spoke about American's future.

But John Ward, president of the Association of Professional Flight Attendants, reminded airline executives that workers are making a big sacrifice to keep the airline aloft, and that labor leaders would be watching management closely in the days to come.

"We will not travel down this path simply on blind faith that everything's going to get better," Ward said. "We're not going to be idle or silent in the face of any future actions or inactions by the company that we believe will threaten the long-term viability of American Airlines."

Wall Street appeared to approve of the change. Shares of AMR rose 36 cents to close at $4.40, up 9 percent.

The concessions will cut American's labor costs by a total of $1.8 billion annually — about 20 percent. For workers, it will mean steep cuts in wages and benefits, more than 7,000 layoffs and tightened work rules that will mean more hours on the job.

American had been prepared to file for Chapter 11 in New York Monday morning if the flight attendants union failed to accept the enhancements to concessions without a new vote, a company source said.

Leaders of the airline and the labor unions agreed yesterday that with the labor unrest and concessions talks finally complete, workers and management can focus on the difficult task of turning the troubled airline around.

No one thinks it will be easy. American is rapidly running out of cash, and on Wednesday reported a $1 billion loss for the first three months of the year.

The airline's financial picture is still unclear, as AMR failed to report a balance sheet listing its assets, debt and cash on hand. Companies typically release that information when they report their quarterly results.

American officials said yesterday they did not know when the company would release the information.