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The Honolulu Advertiser
Posted on: Tuesday, January 10, 2006

Airline’s unions question bonuses

Associated Press

FORT WORTH, Texas — Leaders of three unions at American Airlines are questioning stock-based bonuses that executives of the money-losing carrier are due to receive in April.

Last week, the company provided more details about bonuses for about 1,000 executives, from the airline's No. 2 official to mid-level managers. Four officials would get payouts of more than $1 million, if parent AMR Corp.'s stock price holds steady or increases before April.

The bonuses, first spelled out in 2003, were increased because AMR's stock price increased more than any other major U.S. carrier through the end of 2005.

The company also estimated that stock options granted to all employees in 2003 could be worth more than $500 million when they vest, also in April. The options were granted when workers took pay cuts to help the company avoid bankruptcy.

Still, leaders of unions for American's pilots, flight attendants and mechanics and other workers said the executive bonuses were poorly timed because AMR has lost more than $7 billion since early 2001.

"Saying that many of our pilots are outraged would be a significant understatement," said Ralph Hunter, president of the Allied Pilots Association in a letter to his members yesterday. "Your entire APA leadership is equally displeased."

Hunter said, "It is absolute insanity to pay out seven-figure bonuses at a time when the company is suffering nine-figure losses, mired in eleven-figure debt, and seeking further help from its employees to survive for the long term."

AMR's losses came as the airline industry went into a slump in 2001 that resulted in several carriers filing for bankruptcy protection. AMR has cut costs sharply, largely through layoffs and pay cuts, but analysts still expect the company to lose about $675 million in 2005.

In 2005, AMR's shares more than doubled, rising from just over $11 per share to $22.23 by year's end. Yesterday AMR shares rose 13 cents to close at $22.79 on the New York Stock Exchange, near their 52-week high of $23.53.