Posted on 04/17/2003 7:00:49 PM PDT by getmeouttaPalmBeachCounty_FL
After Employees Agree to Cuts, American Airlines Discloses Trust to Shield Executives
FORT WORTH, Texas (AP) -- One day after American Airlines employees agreed to annual cuts of $1.8 billion, the cooperative spirit turned acrimonious Thursday as union leaders expressed outrage over newly disclosed perks granted to executives.
One angry union leader said if workers had known earlier about a pension trust created last year to protect executives' benefits in the event of a bankruptcy filing, they might have voted against the steep concessions intended to keep the world's largest carrier out of Chapter 11.
The executive perks, which included huge bonuses for a few, were disclosed late Tuesday in a filing with the Securities and Exchange Commission. The filing was made after the scheduled end of voting on the concessions.
"We are appalled and just disgusted. It's the equivalent of an obscene gesture from management," John Ward, president of the flight attendants' union, said. Flight attendants initially rejected their share of the $1.8 billion cost-cutting plan but reversed themselves Wednesday after the company extended the original deadline.
James C. Little, leader of the ground workers' union, said he was considering whether to withhold signing the concessions contract that his members narrowly approved.
"If members had known about these compensation agreements, there would have been a higher turnout of 'No' votes," Little said.
According to the SEC filing, the company's board agreed to fund 60 percent of the pension trust established for 45 top executives and it approved bonuses for six top executives if they stay through January 2005. The bonuses would be double each executive's pay.
American spokesman Bruce Hicks said the benefits were designed to retain top talent and were similar to deals offered by other major companies.
"Retention benefits are designed to keep key senior management who are constantly being wooed by other companies -- other airlines and non-airlines," he said.
Hicks said the extra pensions were similar to a supplemental plan for American's pilots, which he said would also be protected in bankruptcy. Ground workers and flight attendants, who earn far less than pilots, have no such a plan, he said.
Chairman and chief executive Donald J. Carty could get a $1.6 million bonus, based on his 2002 salary of $811,000. Carty told workers last month that he would take a 33 percent pay cut to demonstrate management's willingness to make sacrifices for the company's good.
Carty did not publicly discuss the bonus he could get in 2005.
Few employees learned of the executive benefits until after they had approved concessions that call for pay cuts of about 16 percent for flight attendants and ground workers and 23 percent for pilots.
"It's pretty blatant to us that we found out about it after they disclosed it to the SEC. ... It was done intentionally that way to wait until after the voting process," said Little, the Transport Workers Union official. "This ... leaves the issue to us whether they were actually bargaining in good faith."
Hicks, the airline spokesman, said union leaders and their consultants were briefed about the executive benefits over the past several weeks -- but under a confidentiality agreement that prohibited them from informing rank-and-file workers.
Little and Ward said they were given general information about executive compensation but denied being told about the bonuses and pension funding.
"The only thing we were told is that (Carty) wasn't going to receive any bonuses," Ward said. "We were not advised of anything like this."
Little said he would talk to lawyers before signing the final paperwork on a concessions deal that will cost ground workers $620 million a year. John Darrah, president of the pilots' union, which approved $660 million a year in concessions, said he too was talking to lawyers and had asked management to rescind the perks.
But Ward, whose flight attendants agreed to $340 million in annual givebacks, said it was too late.
"It's done," Ward said of the cost-cutting agreements.
Analysts said the episode would further damage American's already troubled relationship with employees.
"This puts a huge amount of pressure on AMR to come clean with details of how and why this was done, and possibly even to change it," said Michael Miller, an aviation-industry communications consultant.
AMR shares jumped as high as $6 Thursday on news of employees' ratification of concessions. The shares closed at $5, up 77 cents, or 18 percent, on the New York Stock Exchange, but fell nearly 4 percent in after-hours trading amid the threat to the concessions pacts.
I NEVER in my life thought I would ever want to sue anyone, but I have felt for days that this thing...this PIG of a tentative agreement was the worst thing I'd ever heard of!
So FReepers...do we have a case? If so...send only the best attorneys this way!
They don't care. It's a game, you got snookered.
This is disgusting. The company is failing, possibly going into bankruptcy so you give bonuses to the top executives! The board should all be voted out.
I swear it's things like this that make it really hard to be a capitalist sometimes. Not to mention using taxpayer money to bail these yahoos out! Errrrr...
You can make money as a bull or as a bear...but not as a pig
Clearly, that doesn't apply to modern American capitalism.
For point of clarification: They did not give bonuses now. They set up a structure such that the executives who stay to bail out the sinking ship in bankruptcy get bonuses for staying. I am not neccessarily defending this, but it is common and exists in every single industry. Without these bonuses, you would have the execs spending all of their time looking for other jobs rather than trying to save the company.
Is there a great demand for management that will run your company into bankruptcy?
It may be standard business practice and I do understand it but I still don't like it. Fortunately, I never fly American.
Yeah, I don't disagree with you. My only point was that retention bonuses are extremely common. The union leaders are guarantee were not surprised by this. It is to be expected. Funding their pensions, however, is outrageous.
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