Associated Press
American Flight Attendants OK Concessions
Friday April 25, 2:43 pm ET
By David Koenig, AP Business Writer
American Airlines Flight Attendants OK Concessions Airline Says It Needs to Avoid Bankruptcy
FORT WORTH, Texas (AP) -- Flight attendants at American Airlines agreed Friday to concessions that the company said it needed to avoid bankruptcy.
Following approval Thursday by the carrier's two other unions, the flight attendants' decision appeared to push American back from the brink of a Chapter 11 filing.
Leaders of the Association of Professional Flight Attendants had been badly split over a concessions offer that the company sweetened this week, with lingering anger aimed at Donald J. Carty, who resigned as chairman and chief executive Thursday.
"With new leadership in place at AMR, there was a renewed willingness from management to begin to repair the damage done to relations with its employees," said John Ward, president of the flight attendants' union.
Gerard J. Arpey, the company's president, replaces Carty as CEO, while board member and former Sears CEO Edward A. Brennan will take over as chairman.
Arpey said some employees will lose their jobs, and he praised the unions for agreeing to the concessions.
"By any measure, we have our work cut out for us," Arpey said at a news conference Friday afternoon shortly after the flight attendants announced their agreement.
"We are not out of the woods yet, but as your new CEO, I am up to the task. I will always do what is right. Working with our unions and all of our employees, together we will put American Airlines back on top," he said.
The sweetened concession offer includes potential bonuses up to 10 percent for employees and shortens the length of concessions to five years, with limited renegotiations possible even sooner.
Unions representing pilots and ground workers approved the new offer Thursday and urged the flight attendants to follow suit, sources said.
Airline officials said the world's largest carrier would file for Chapter 11 protection unless all three unions accepted the wage and benefit concessions.
Wall Street reacted positively to the news; investors bid up AMR stock on news of the flight attendants' decision. In midday trading Friday on the New York Stock Exchange, the shares rose 96 cents, or 24 percent, to $5.
Employees voted last week to accept concessions but reacted angrily when they later learned that the company had approved bonuses and pension payments for top executives. The company canceled bonuses for the top seven executives but left in place the $41 million in pension funding for 45 executives.
Carty apologized for not disclosing the executive perks sooner, but his relationship with employees was beyond repair, union leaders said.
With the airline's fate still up in the air and its financial situation deteriorating, Carty resigned after an emergency meeting of parent AMR Corp.'s board Thursday in Dallas.
"It is now clear that my continuing on as chairman and CEO of American Airlines is still a barrier that, if removed, could give improved relations -- and thus long-term success -- the best possible chance," Carty, 58, said in a statement.
One of Arpey's first moves was to call four leaders of the flight attendants' union to his office when it became clear the union was balking at accepting concessions.
It was not clear, however, whether the new leadership and labor deal would be enough to keep American out of bankruptcy for long.
On Wednesday, AMR reported a $1 billion loss for the first quarter -- more than half the annual amount of the labor just-approved labor concessions, which take effect May 1.
Airlines have been hit hard by a downturn in travel caused by the weak economy, the 2001 terrorist attacks, fear of new terrorism around the Iraq war, and the SARS outbreak. Competition from low-fare carriers has also put a lid on prices.
Arpey, who will remain president of American and AMR, said he would work to "restore the confidence of all employees in their great company."
Arpey, 44, has held a variety of management jobs at the airline since 1982, including chief financial officer, executive vice president of operations and president and chief operating officer of American and AMR since April 2002.
Brennan, 69, retired as chairman and CEO of Sears in 1995. Some shareholders had demanded his resignation because of the retailer's flagging fortunes and its sales or spinoff of successful side businesses. He joined the AMR board in 1987.
"It's a very good team that's been put in place, and I'm very supportive of it," said board member David Boren, president of the University of Oklahoma, who had called openly for Carty's removal.