View Full Version : American ready for bankruptcy as vote deadline nears (merged)

15th Apr 2003, 13:06
AMR lines up bankruptcy finances as zero-hour nears
Mon April 14, 2003 05:29 PM ET

By Kathy Fieweger and Jon Herskovitz

CHICAGO/DALLAS, April 14 (Reuters) - American Airlines has almost wrapped up $1.5 billion in debtor-in-possession financing should it file for bankruptcy as its labor groups face a Tuesday deadline on accepting concession deals aimed at staving off a Chapter 11 filing, a source familiar with the matter said.

American, a division of AMR Corp. AMR.N , said it would file for bankruptcy if any of its three main unions did not ratify the concession deals. All voting results are due at 11 a.m. CDT Tuesday (1600 GMT) and the pacts are aimed at saving the world's largest carrier $1.8 billion a year in labor costs.

The source said the DIP financing is "virtually complete." The potential DIP lenders are the lead bank, Citibank C.N , along with J.P. Morgan Chase & Co Inc. JPM.N , Merrill Lynch & Co Inc. MER.N , and CIT Group Inc. CIT.N , the source said.

If Fort Worth, Texas-based American files for Chapter 11 protection, Citibank will put up $750 million in a special credit-card backed DIP, similar to what Bank One Corp. ONE.N did for UAL Corp.'s UAL.N United Airlines last December.

The four lenders will take equal part in the remaining $750 million of financing. The total DIP loan can be increased to $1.75 billion, if necessary, upon a special vote, the source said.

Sources familiar with the situation have told Reuters American's management remains committed to the idea that the airline can restructure outside of bankruptcy court if workers go along, even though others are skeptical.

The union representing pilots at American Airlines changed the deadline for voting by its 13,500 members to Tuesday at 9 a.m. CDT (1400 GMT) from Monday at 4 p.m. CDT (2100 GMT) because the group processing the vote has been overwhelmed with phone calls, a spokesman for the Allied Pilots Association said.


Union groups that represent about 74,000 of American's 100,000-member work force are voting on concession pacts that are aimed at staving off the imminent bankruptcy filing.

"Voting 'no' is a vote for bankruptcy. Voting 'no' is a vote for additional job cuts," AMR Chief Executive Don Carty told employees last week at a town hall meeting.

The Transport Workers Union, which represents about 34,500 ground workers and mechanics, changed its deadline for voting to 9 a.m CDT (1400 GMT) on Tuesday from a Monday deadline because of a technical problems in its voting process.

The Association of Professional Flight Attendants, which represents more than 26,000 flight attendants at American, has set a deadline of 10 a.m. CDT (1500 GMT) on Tuesday for its vote.

"The pilots, with the most to lose (in particular, their generous pensions), seem likely to approve their contract, while the mechanics appear to be the most hostile to management's proposals," ratings agency Standard & Poor's said. Industry sources have said the vote is difficult to handicap.

A federal judge on Monday afternoon dismissed a lawsuit from a dissident group of American pilots aimed at stopping voting. The pilots argued the group has not received adequate information about their new contracts.

Carty has told workers that American would seek an additional $500 million in labor-cost cuts in bankruptcy and the carrier would seek several thousand additional job cuts if it is in Chapter 11 protection.

Union members have expressed anger at the deals that will cut pay for several major groups by between 15 percent and 23 percent. But union leaders said that, while the concession deals would entail painful cuts, the lack of approval would force the company into bankruptcy court, which would prompt even deeper cuts for labor.

The tentative deals include $660 million in savings from pilots, $340 million from flight attendants and $620 million from ground workers and mechanics. The carrier also obtained $180 million in savings from management and other groups.

AMR shares closed down 22 cents, almost 7 percent, to $3.08 in active trading on the New York Stock Exchange, where it was among the top percentage loss leaders.

15th Apr 2003, 15:23
AA unions have NO idea of the problems involved, especially the APA.
Fish or cut bait time...make no mistake.
Expect the worst...:(

15th Apr 2003, 22:52
411--The APA is regarded as the LEAST likely union on the property to turn this down. The group that attempted to stop the vote is the last bastion of ultra-radicals left.

Until AMR comes to grips with the fact that they are at least half responsible for the well-deserved moniker "Sky Nazi's", there will never be true labor cooperation. AA management aspires to be more like SWA but won't take even one baby-step toward fostering that kind of employee-management relationship.

The floggings will continue until morale improves!:( TC

Flight Safety
16th Apr 2003, 00:32
Associated Press
American Airlines Pilots OK Concessions
Tuesday April 15, 12:25 pm ET
By Angela K. Brown, Associated Press Writer
American Airlines Pilots' Union Approve Concessions Deal

FORT WORTH, Texas (AP) -- American Airlines pilots approved wage and other concessions that the airline said it needed to avoid filing for bankruptcy, the pilots' union announced Tuesday.
American, the world's largest carrier, was waiting for results of voting by flight attendants and ground workers, which were also expected Tuesday.

Airline officials had vowed to file for bankruptcy quickly if any of the three unions rejected the concessions. American is trying to cut labor costs by $1.8 billion a year, or more than 20 percent.

Leaders of American's three main unions had reluctantly supported the concessions as a better alternative than bankruptcy. They feared that American could use the bankruptcy process to impose even harsher cuts and reduced pension benefits.

But angry employees packed union meetings to complain that terms of the concession deals were too harsh. They objected to the length of the deals -- nearly six years -- and small raises in later years.

American sweetened the deals last week by offering one-time bonuses of up to 4.5 percent in 2006 or later if the company's credit ratings improve sharply.

The Allied Pilots Association said its members approved the concessions 69 percent to 31 percent. The union said 10,200 pilots, a high turnout, took part.

Discussions between the company and union leaders continued up to the end of voting. Pilots' union president John Darrah met with American chairman and chief executive Donald J. Carty on Tuesday morning before either man knew the results of the voting, a union spokesman said.

The flight attendants' union said it asked Monday for more time to vote because of problems with balloting but American denied the request. A union spokesman said there was a delay in making contract language available to employees.

The union elections were conducted by phone and over the Internet -- an accelerated process needed to meet American's ratification deadline.

Employees began voting shortly after negotiators for the company and unions reached tentative agreements March 31.

Pilots and ground workers were able to change their votes until Tuesday, but flight attendants were not, raising concern that many flight attendants had voted to reject the deal before American sweetened the offer last week with possible bonuses.

American sought $660 million in annual concessions from its 12,000 pilots, $620 million from 34,000 ground workers and $340 million from 24,000 flight attendants. The agreements include layoffs for 2,500 pilots, about 2,000 flight attendants and up to 1,400 ground workers.

Carty warned that if American went into bankruptcy, it would seek $500 million in additional labor concessions.

American's parent, Fort Worth-based AMR, has lost nearly $5.3 billion in the past two years and continues to lose about $5 million a day.

In a report disclosed Tuesday, AMR's auditor, Ernst & Young LLP, questioned the company's ability to stay in business.

The auditors cited AMR's "significant losses" and uncertainty about its ability to cut operating costs. They also raised doubt about whether AMR could meet a $1 billion liquidity requirement for an $834 million line of credit.

16th Apr 2003, 01:17
Two American unions OK deals

Vote by pilots, ground workers clears 2 of 3 hurdles airline needs to avoid bankruptcy.

April 15, 2003: 12:48 PM EDT

NEW YORK (CNN/Money) - American Airlines pilots and ground workers agreed to concession contracts, letting the world's largest airline clear two of three hurdles needed in its effort to stay out of bankruptcy.

The rank and file of the Allied Pilots Association voted 69 percent in favor the pact, which is expected to save the airline $660 million a year in labor costs. The Transport Workers Union, which represents ground workers such as mechanics and baggage handlers, also approved their deals, but by more narrow margins, with about 53 percent support, CNNfn has learned.

But the airline has said it also needs rank and file approval by the Association of Professional Flight Attendants to avoid bankruptcy, and there was no immediate word on results of that vote that was concluded Tuesday morning. The company had set an 11 a.m. CT (noon ET) deadline for all the ratifications to take place.


the flying scot
16th Apr 2003, 03:48
AMR shares halted at the NYSE due to the cabin crew voting against cuts - look at any news site for info. Good Luck AA.....

16th Apr 2003, 04:02
American Airlines Attendants Reject Plan

Tuesday, April 15, 2003; 3:16 PM

DALLAS - Flight attendants at American Airlines on Tuesday voted against a concession agreement, paving the way for an imminent bankruptcy filing by the world's largest carrier, a local news radio station reported.

The airline has said that if its three major union groups do not ratify deals that will help save the carrier $1.8 billion a year in labor costs, American, a division of AMR Corp. , would be forced to file for bankruptcy.

News radio station KRLD reported that the union had narrowly rejected the deal and was in talks with the airline to see if they could quickly poll their members again. The two other major unions at American had approved concession deals earlier in the day.

The Association of Professional Flight Attendants voted against a deal that would cut annual pay and benefits for flight attendants collectively by $340 million.


American Attendants Vote
To Reject Wage Concessions


The flight attendants union at AMR Corp.'s American Airlines narrowly rejected $340 million of contract concessions by only a few hundred votes, people familiar with the situation said, but the company and union are discussing whether to hold a new vote because of problems in balloting.

The board of the Association of Professional Flight Attendants is meeting to discuss the results. People familiar with the matter say there have been discussions between the union and AMR management on the possibility of allowing a new vote, perhaps in as short a time as 24 hours, because flight attendants weren't allowed to change their vote even as contract terms changed last week.

Unions representing pilots and ground workers approved concessions earlier today. Without ratification by all three unions of the plan to slash $1.8 billion in annual labor costs, American has said it will file for bankruptcy reorganization.

Updated April 15, 2003 3:41 p.m.


From http://www.apfa.org/ :

APFA Balloting Results

APFA/AAL Restructuring Participation Agreement




Total Votes Cast

16th Apr 2003, 05:16
"Until AMR comes to grips with the fact that they are at least half responsible for the well-deserved moniker "Sky Nazi's", there will never be true labor cooperation."

AA717driver, I have not heard the term "Sky Nazi's" before. What does it mean?

16th Apr 2003, 05:16
American puts bankruptcy on hold

Flight attendants reject concessions but AMR delays bankruptcy filing to allow second vote on pact.

April 15, 2003: 5:05 PM EDT

By Chris Isidore, CNN/Money Senior Writer

NEW YORK (CNN/Money) - American Airlines pulled back on its bankruptcy deadline late Tuesday afternoon, allowing the flight attendants' union a second chance to ratify the concession contract the airline said it needs to stay out of bankruptcy court.

The world's largest airline and the union, the Association of Professional Flight Attendants, said that the new electronic vote would be concluded by 5 p.m. CT (6 p.m. ET) Wednesday in what the airline said is a last chance to avoid bankruptcy.

The airline previously said it was prepared to file for bankruptcy unless all three unions had agreed to the deal by 11 a.m. CT Tuesday. The company said late Tuesday afternoon that it had set the deadline for ratification because it had a substantial amount of loan repayments due. But it said it made millions of dollars in scheduled debt payments due Tuesday in order to give the company a last chance to avoid bankruptcy.

"With almost 10,000 jobs hanging in the balance, and the future of 100,000 employees at stake, we agreed to take this risk and make this investment for our employees because we believe that all employees will be better off if we can save jobs and restructure our costs consensually rather than through the bankruptcy process," said a statement from Don Carty, chairman of American parent AMR Corp. "This is our last chance to avoid bankruptcy."

The two other major unions at American -- the Allied Pilots Association and the Transport Workers Union, which represents most American ground workers, approved the concession deals, but the rank and file for the APFA voted narrowly against the proposal. Management and the leadership of all three unions agreed to the new vote by the APFA in meetings that stretched throughout Tuesday afternoon.

16th Apr 2003, 10:20
Now the hosties are at it again, throwing a wrench into the works. AA will downsize to meet the available traffic, regardless of the unions involved. Survival of the company will mean substantial wage and contractual concessions whether the employees like it or not...and many won't.

Ignition Override
16th Apr 2003, 11:41
This refers to a comment which was seen on another topic about AMR.

A few years ago when the industry was healthier, AMR reportedly spent more than a billion dollars to buy back its own stock. If this is true, whose brilliant idea was that? Was it just to have more control over the Board of Directors?

If they are still in upper mgmt, then are those people also still in charge of AMR's strategic decisions?:8

16th Apr 2003, 12:05
2.6 Billion and it was Don Carty that piled the money that high and then set fire to it....

Worst airline manager in the history of the airlines. Took the best balance sheet in the industry and wrecked it in 4 years.

2.6 billion for stock.
1.something billion for a white elephant terminal in JFK
Billions and billions buying an airline that couldn't make money if it was hauling cocaine (TWA)
The American Airlines arena (we are still paying 5 million dollars/month on that one...
the beat goes on.

Crandall was conservative. Carty spends like a drunken sailor


16th Apr 2003, 12:22
F Carty, F Bush, F Bin Laden, F Hussein, and most of all F all those pussy ass consumers that cower under their coffee tables afraid to get on a jet.

With these agreements at American and United we have set back the quality of this profession for years to come. We may never get back to where we were. I have 21 years to go before I can "retire" from this catastrophe. I can't wait!

16th Apr 2003, 12:37
Have to agree Wino, the AA senior management is about as abysmal as it gets...cash thrown away like it's goin' out of style.
Compared to Carty, Juan Trippe was a piker.

16th Apr 2003, 13:22
Wino & Raamjet,

You're right on some counts. I agree Carty has been wasteful, inefficient and arrogant about running a high-cost airline. He has'nt done any pioneering things that shook up the industry like Crandall did, and his employee relations are the worst. But, some ideas (that other managers may have come up with) like rolling hubs, eliminating cost overruns and streamlining fleets are good ones.

One thing about the AA purchase of TWA you guys keep dwelling on, inaccurately. AA did not 'spend billions and billions' on TWA. It paid $750 million (only $500 million in cash) for an airline analysts and Wall Street had valued at $2.5 billion. In other words, AA got a great deal for a valuable company with good assets, many of which have allowed your junior pilots/FAs/ground workers to continue working. After 9-11, without the TWA purchase, 20,000 AA employees would have been cut from the payroll, but instead, 14,000 TWA employees softened the blow, and allowed much more junior AA employees to continue working.

Also, the TWA buyout is'nt the reason AA is losing millions presently. If you care to look at UA, US and other 'legacy' carriers, all with high costs, they are all losing large sums of money. Keep in mind AA has lost more money in the past 2 years (over $5.2 BILLION) than TWA lost in its 75-year HISTORY. True fact.

Let's hope the F/As wake up; I hear they did'nt have any road shows to 'educate' them on how bad bankruptcy will be. If they vote "NO" again, it just goes to show what idiots they really are, and they'll unfortunately cause MORE pay cuts and MORE layoffs.

APA/TWU did a good job of communicating what will happen if chapter 11 comes. I give both groups credit for realizing it will be WORSE in bankruptcy, for all concerned.

16th Apr 2003, 22:40
767, good post.
The TWU is the one that astonished me - that was a very tough sell, and a job well done.

The sad fact with a great # of the FA's I have spoken to is that they voted "no" in the blind without any research, thinking it would be a stab at Carty. Large numbers of them had very little idea of the bankruptcy process; the claim that there was no information available to them is false - there was plenty on their website for them to read. None of them had any kind of alternative plan for cost re-structuring - one of them told me we should cut Don Carty's wife's investment returns, my reply was that only leaves us looking fo $1.799 billion....

They're such a diverse group, whereas the pilots at any carrier tend to fit a much tighter mold; I think their FA leaders have a nightmare trying to convey anything to them.

As one of the pilot reps said ref. helping the FA union with the process and disseminating info: "...it's like herding cats..." :rolleyes:

16th Apr 2003, 23:23
I can't believe how ignorant and unducated they are, if thats the reasoning for their 'NO' vote. 'Cut Carty's wife's investments'??? He does have a young trophy wife, but why do ANY of these F/As think Carty or his wife is the problem?

THE AIRLINE IS LOSING MILLIONS PER DAY, and all they can think about is that its somehow personal between employees and Carty?

Mark my words, their industry-leading pay will be cut DOUBLE the 15% to 30% after a judge gets through with them. THEY will be the reason for a chapter 11 filing, and all the other employees will let them know.

You're right about roadshows, too; APFA really dropped the ball, by not educating the most ill-informed and uneducated group on the property.Idiots...

'Cut Carty's Wife's investments'??? Jeez.

17th Apr 2003, 05:29
750 million in cash, 3 BILLION in debt assumption for twa so they paid 3.75 billion for TWA. They just didn't have to write the check for it all at once.

Rolling hubs is nothing new either. Delta did it 6 years ago in Atlanta. Furthermore, the efficiency gains (flying more flights with less planes, they claim they have saved about 10 wide bodies and 20 md80s total) are completely meaningless as we park aircraft that we have already paid for. That efficiency gain would have been very meaningfull before we bought the 10 wide bodies and 20 md80s...

Elimating cost overuns is MANAGMENTS JOB! So the fact that they didn't do it for a decade means I have to thank them for doing their job now? Can I go home and get paid full time for a decade, then come back to work and get thanked for doing it?

Streaminglining fleets? Are you sure? we simply traded the Md-11 for the 777, The 727 for the 737, the fokker for about 3 different types of RJ... You should actually examine the spin before you swallow it whole...

The Net effect of the TWA purchase was to push the average length of service of our airline WAY up. So instead of getting everyone at frst year pay, everyone came over at 12th year pay or greater. Except for a few LGA slots there was nothing there that we couldn't do through open skies ourselves (without taking on more non common fleets and topped out payscale people) On the other hand it made furloughs far more efficient than it would have been otherwise (furloughing a probationary employee gains almost nothing, cause they earn nothing) so it is quite likely that the company would not have been nearly as aggressive in its furloughs because the gain on the bottom line would be minimal.

The fact that AA lost more than the TWA did is irrelevant and TWA is tied up in that loss.

Electric Sky
17th Apr 2003, 07:30
From the BBC News website:

Flight attendants employed by the beleaguered American Airlines have narrowly voted in favour of accepting a pay cut to help the firm stave off bankruptcy proceedings.
They voted by 10,761 to 9,652 to support the proposed measure, according to results posted on the website of the Association of Professional Flight Attendants.

A further 562 votes were deemed ineligible.

Don Carty, chairman of American's parent company AMR, had said he would be "left with no alternative but to immediately file for bankruptcy" if the attendants rejected the deal.

Agreements secured

The future of 100,000 jobs rested on the outcome, Mr Carty said.

Earlier this week, American Airlines' mechanics voted to accept cuts in pay and conditions adding up to about $300m a year.

The pilots union has also ratified an agreement that cuts its members' wages and benefits by $660m.

Members of the Association of Professional Flight Attendants had earlier rejected the deal, which would cut annual pay and benefits by $340m.

But a union spokesman said members who did not vote - or who cast their votes early - were allowed to vote or change their vote.

The carrier has said the three pay deals will help save it $1.8bn a year in labour costs.

Don Carty said: "We believe that all employees will be better off if we can save jobs and restructure our costs consensually rather than through the bankruptcy process.

"This is our last chance to avoid bankruptcy."

Shares in AMR rose in early trading on Wednesday on growing hopes the vote would go in the airline's favour.

17th Apr 2003, 07:47
Ignition Override and Wino; I want to pick up on just one of your points - buying back stock.

You make it sound like a bad idea.

In general, it's not - it's a smart (i.e. tax-efficient) way of paying a return to shareholders (you may not care much for them, but you DO need them - or rather their money).

Buying back stock is only a bad idea if the company does not have sufficient cash or is overburdened with debt already. I think at that time the cash and debt position was OK.

[Anticipating a possible reply that Carty just increased AA debt to pay out cash for stock purchases - debt is not necessarily bad either. Debt payments (interest...) are tax-efficient (i.e. save money). There is an optimum proportion between debt and equity (trouble is, no-one really knows what it is). Arguably, AA had the best cash position and debt rating in the industry (of the majors) on 9/11, so probably had managed its capital relatively well.]

17th Apr 2003, 10:29
You guys want the latest in the American Airlines "how to motivate your employees"?

The Security and Exchange Commission filing was delayed until after the unions voted.

In the filing, AA management stated that last October, they switched the retirement for 44 senior corporate officers into an irrevocable trust that cannot be touched in the event of bankruptcy or liquidation.

Great leadership, huh?

The Iraqi information minister couldn't make them look good.

Ignition Override
17th Apr 2003, 12:11
Groaner: that info is educational. Your nickname sounds like me at 0600. Why did American's unions need to agree to six years without a partial "snapback" in wages?

The next person's comments were also enlightening, regarding the iron-clad retirements for AA's "leadership", or should we say instead, just for the working folks in cost management. The CEO at my company reacted in a defensive manner when a pilot asked him if he would also take a paycut-he pointed out that his pay package was a lot lower than that of Mr. Mullins, the Delta CEO.

LEADERSHIP? Many of this industry's so-called leaders believe that either you are one of the very few "special people", or you are one of the "unwashed masses", unworthy of having a solid retirement or competitive working conditions, even after two or three years. For example, many feel that we are simply barbarians, who are obstacles to their "Empire's" expansionary ambitions.


What is the icon for (their) utter contempt and arrogance??:hmm:

18th Apr 2003, 02:11
I was appalled to find out that AA management takes every effort to keep non-working crew members out of first class. At TWA, we were encouraged to commute in FC and given Ambassador Club memberships to mingle with the members and engage in PR and to assist displaced pax.

I guess we're good enough to drive the plane but not good enough to mingle with the customers...:rolleyes: TC

18th Apr 2003, 09:32
Did everyone notice that the reason that we had to get the deal done before April 15th is that was the date that the latest cash grab would no longer be able to be hidden!

Turns out Management set up and funded a whole new pension plan for themselves this year!

Robin hood in the 21st century is management stealing from the employees.


18th Apr 2003, 12:12
American Airlines deal in jeopardy

Unions outraged by executive pension arrangements

By Jon Bonné

April 17 — The union that represents 35,000 American Airlines ground staff said Thursday it would not sign a deal to help save the ailing air carrier after finding out about a special arrangement that would preserve some top executives’ pensions even if the airline went bankrupt. The decision could force the airline to file for bankruptcy, which it had threatened to do earlier in the week if its unions did not agree to deep wage concessions.

“I AM DEEPLY angered and disappointed about the Company’s handling of this matter,” Transport Workers Union vice president James Little wrote in a letter to Donald J. Carty, CEO and chairman of AMR Corp., the airline’s parent company.
The pension arrangement, reported Wednesday by MSNBC.com, would preserve some payments for Carty and 44 of his top executives even if the airline were forced to file for Chapter 11. The payments would be transferred to an independent trust, where they would be taxable, but no longer considered assets of the airline.
The arrangement was revealed this week as unions for ground workers, pilots and flight attendants were voting to cut their wages and benefits by $1.8 billion — savings that the airline said were necessary to avoid bankruptcy.
Few employees learned of the executive benefits until after they had approved the benefit cuts.
“We have sacrificed deeply to enable American Airlines to avoid an immediate bankruptcy filing,” said Allied Pilots Association President John Darrah. “Unfortunately, it appears that management is not off to a very promising start at making the most of the reprieve the unionized employees have provided through our collective sacrifices.”
An American spokesman said Wednesday that the unions were informed of the arrangement during negotiations, but later corrected himself, saying the briefings covered executive retention but did not detail bonuses and pensions.
In his letter, Little wrote: “No official of our organization or consultant hired by us was briefed on any aspect of this program.”
Little also sent an urgent memo to all union members, telling them: “We have signed no new agreement, and in light of the disclosure in AA’s SEC filing, we must reconsider whether we will sign off, even if the consequence is a bankruptcy.
“Unless the Company reforms itself on the issue of executive compensation, there is no basis to cooperate in its effort to survive,” he continued.
Carty had said that unless American’s unions approved the wage and benefit concessions this week, the company would immediately file for bankruptcy. He set Tuesday as the deadline, but AMR extended that one day when the flight attendants — who originally voted no by a close margin — revoted and approved $340 million in wage cuts for their 26,000 members.
“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 on learning of the pension arrangement. He said, however, it was too late to reject the pay cuts. “It’s done,” he said.
The arrangement was disclosed in a filing with the Securities and Exchange Commission on Tuesday. It was tucked into AMR’s annual report, filed as most union members completed their voting. The annual report also cited comments from Ernst & Young, American’s auditors, questioning whether the company could continue to operate.
The company also approved bonuses for six top executives if they stay through January 2005. The bonuses would be double each executive’s pay.


18th Apr 2003, 14:07
The REAL union goons have spoken.

Carty & Co. are just trying to pull up the ladder and protect themselves if anything bad happens. What did you expect? If he and Arpey still have chauffer-driven limos to get to/from work, would'nt you expect them to protect their multi-million dollar pensions?

All animals are equal; some animals are more equal than others.

18th Apr 2003, 15:46
High salaries are only acceptable to shareholders if they are accompanied by high returns and high levels of corporate responsibility.

Golden parachute fat-cat greed is not.

No wonder the international stock markets are in such a state.....

18th Apr 2003, 16:04
A question

Lots of people on this board what to condemn AA for buying TWA. Today this looks a very bad deal. BUT if there had been no 9/11 would it still have been a bad deal.

If there had been no 9/11 the purchase of TWA would have been against the background of a weakening economy and therefor weakening airline market. But in all probability this would just have been the normal cyclical variation of the economy and the amplified effect this has on the airline sector.

I am certainly not here to act as cheerleader for airline management BUT I don’t think we should judge pre 9/11 decisions against the post 9/11 world. We need to live in the real world and sort out the mess of today but not delude our self’s that we could of should have planed for it.

18th Apr 2003, 20:58

If you look back in the months prior to 9/11, you'd see traffic was already falling off and the US economy was already slowing down significantly. (I know you've already pointed some of this out and no doubt of course 9/11 was a significant catalyst).
The giddy days of the Tech Boom were already vanishing and companies across the US were already slashing business class travel. The PAX load that fateful day of the airplanes that were used told something of the slowdown already happening.

There were signs prior to 9/11 that carriers like JetBlue were the way to go, low cost, no frills point to point. UAL and AA were/are business class airlines. When times are good they can hide their high costs by booming revenues, but like any business when they hit a downturn, that's when you can see how healthy they really are.

A recent history of Airline companies has shown some disatrous results after airlines have merged/amalgamated, PanAm and National being a good case study. People outside this industry don't realise how different employees' cultures are between different airlines and in the long run can prove very troublesome when trying to mesh them together, it's certainly not the main reason why airlines fail, but it doesn't help.

19th Apr 2003, 02:33
What about all the good mergers?

DL-WA, BA-BEA and Airtran-ValuJet worked well.

Noone really knows how their career will turn out until they retire.

Flight Safety
19th Apr 2003, 05:12
American scraps executive bonuses

Union uproar forces changes in executive compensation


April 18 — After sharp criticism from its rank-and-file, American Airlines dropped a plan Friday to award bonuses to top executives if they stay at the embattled airline until 2005.

THE BONUSES had caused an uproar among American employees, who earlier this week approved wage cuts and other concessions that the company said it needed to avoid bankruptcy.

The arrangement was revealed this week in a filing the company made with the Securities and Exchange Commission. The filing was submitted on the same day that unions for ground workers, pilots and flight attendants were voting to cut their wages and benefits by $1.8 billion — savings that the airline said were necessary to avoid bankruptcy.

Few employees learned of the executive benefits until after they had approved the benefit cuts.

“I have apologized to our union leaders for this and for the concern it has caused our employees,” Don Carty, CEO of American’s parent company AMR said in a letter to employees posted on the company’s web site.

“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 on-going commitment to shared sacrifice.”

19th Apr 2003, 07:09
American Airlines Dumps Executive Bonuses

Updated: Friday, Apr. 18, 2003 - 5:53 PM EST.

AP Business Writer

DALLAS (AP) - After sharp criticism from its rank-and-file, American Airlines dropped a plan Friday to award bonuses to select top executives if they stay at the embattled airline until 2005.

But the world's biggest airline is leaving in place a supplemental pension plan for a broader group of top executives that would be protected even if American filed for bankruptcy.

** BIG SNIP **

The company also made a payment to partially fund a supplemental pension trust for 45 executives and shield those benefits in case of an AMR bankruptcy.

The company has never disclosed how much it put into the extra pensions.

19th Apr 2003, 07:15
Hmmm, the APA multi-million dollar fine should have been a wakeup call, apparently not.
Would appear that the AA management have done 'em in again.
If backruptcy had been filed, the management pension grab would undoubtedly have been negated by the federal bankruptcy court judge. These judges have very wide discretion in these matters...assets cannot be cast aside just for the purpose of declared bankruptcy.
The AA unions must have received very poor legal advice...not surprising...some of the members must think they know it all.
The guys on the executive floor must be laughing...all the way to the bank.

19th Apr 2003, 07:43
Did the AA pilots union ever pay that fine ?

19th Apr 2003, 08:31
So 411A, which is it. Either the AA pilots are way overpaid and should have taken the concessions...


They are really stupid for going with the pay concessions to keep them out of Chapter 11. Which is it? It seems you have argued both sides.

It appears that no matter what the outcome you have something bad to say. It is starting to appear more and more like sour grapes about a group that you were never quite able to join.

19th Apr 2003, 08:31
411A, did you leave your "Depends" on too long again?

You always seem to get a little fussy with a full pair.

19th Apr 2003, 09:53
The short answer is, yes the pilots are way overpaid (but that seems to be changing), and no bankruptcy is not desired, but sometimes necessary.
IF the APA and other unions at AA had negotiated a reasonable contract just a few short years ago, much of the antagonism could have been avoided.
But they did not, so the AA management will, from time to time, exercise their authority....ala Enron.
Reminds me of the dismal labor relations at the old National Airlines in Miami years ago. Bud Maytag played the various unions against one another (especially ALPA) like a Stradivarius...and got away with it for many years. ALPA never caught on.

19th Apr 2003, 10:00
It seems to me that the managements and the employee groups are currently walking a very fine high wire. The industry is obviously in deep distress from a whole conglomeration of factors. I think the industry was deregulated about 25 years ago or so, but it appears the final result of that deregulation might actually be in its final throws. For me buying an airline ticket, it has never been better. It appears for the employees, it has never been worse. Good luck to everyone no matter how the shakeout ends.

19th Apr 2003, 10:36
Letter from Chairman Don Carty to Employees

April 18, 2003

Dear Colleague:

I want to take this opportunity to apologize to you for any misunderstanding about the benefits made available to members of senior management. From the beginning, we made a commitment to shared sacrifice. And, at a time when we have all come together to, out of necessity, give up things to save this company, it is now more important than ever for management to continue to demonstrate that commitment.

Today, I want to let you know that all of our senior officers have given up all retention payments.

Throughout this restructuring process, our chief priority has been to communicate effectively with you, our employees, and it is clear that we have not done so. You have my personal apology. It was not my intent to mislead anyone.

These retention agreements were created a year ago in March 2002 when, after the events of September 11, the industry was struggling and our Board of Directors had serious concerns about our ability to retain our senior management in light of the potential loss of several key executives.

The goal was to give senior officers incentive to stay with the company when many were offered more generous packages to go elsewhere. But unlike some of our competitors, our top priority in this effort was to conserve our financial resources to help rebuild the airline. So we did not, like some other airlines, offer executives immediate cash bonuses or pay increases, and it's important to me personally that you know this.

Instead, the Board created these incentives through retention agreements that would have made payments only to those executives who committed to working for us for the long term. We did not give our senior executives a pay increase. In fact, I gave up my salary entirely for the last quarter of 2001, and my entire senior management team took voluntary pay cuts.

In addition, the Board decided to make an initial payment -- the first ever -- to partially fund the Supplemental Executive Retirement Plan (SERP) that you have read about in recent days. The SERP -- a common tool used in our industry and others -- was established back in 1985, but it was never funded, even as we continued to fund all other employee pension programs.

In simple terms, the SERP is designed to provide a pension benefit for the portion of compensation above IRS limitations that executives have already earned. Our funding did not add benefits or enhance the program, again in contrast to some of our competitors.

I have always committed to doing our best to fund the pension plans for our employees and their families, even as we lost money through difficult financial times. In fact, last year, our worst year ever, the company contributed more than $420 million to our employee pension plans. Any pension plan should be properly funded and my ultimate goal is to provide pension security for all employees, including the management team.

Despite our efforts, we have in recent years lost the services of an unprecedented number of key executives. In my discussions with union leaders during the active engagement process, I expressed my concerns about this, and our ongoing ability to retain the most effective members of our management team.

My mistake was failing to explicitly describe these retention benefits, and because of that, many employees felt they were kept in the dark. Please know that it was never my intention to mislead you. I offer you my sincere apology, as I have to our union leaders.

I am proud of my management team and the work they have done to share the sacrifice and help get our airline back on good financial footing.

The executives who have made the personal commitment to remain with American Airlines have clearly not done so for monetary reasons alone, as all have already taken substantial cuts in overall compensation. Our senior management team is clearly committed to the secure future of this airline. As you may know from the most recent Flagship News, I had already committed to defer the retention payments until we believed the company would be profitable again. Today's commitment goes far beyond that as all senior officers, including me, continue to share in the sacrifice by completely giving up their retention agreements.

This is a trying time for our airline, and I ask your confidence in the fact that we are all sharing in the sacrifices necessary to build a more secure future. I thank all of you for your goodwill, good faith and hard work.

Our efforts to work together to restructure our costs have demonstrated to me and the world, once again, the caliber and commitment of the people of American Airlines.

Together, we will again prove to our competitors and our customers that American Airlines is in this business for the long haul.


D. J. Carty

American Airlines

CONTACT: Corporate Communications of American Airlines, +1-817-967-1577,

19th Apr 2003, 12:10

Another clueless and somewhat addled post from someone who acts if he some knowledge of the dilemma.

Facts: Last contract (1997) gave something like 7% raises over 9 years. figure the CPI over the same period.

Since 1983, in constant dollars, AA pilot salaries were down 22% even before the latest cuts.

As stated elsewhere in these forums, AA unions could never match the cash burning that management has done.

411A, you never got hired at a US major, go kick your dog and stop babbling about subjects you know nothing about.


P.S. Please elaborate on your extensive experience cruising at FL450

19th Apr 2003, 15:56
Just announced that the flight attendants have notified that they will cast votes again (or retract the last count) ...bunkruptcy 'round the corner?

Sooner or later the payroll burden at AA will head even lower, as it must, if the company is to survive. I matters not what the employees think they are worth, pilots included. They should take a clue from the folks at US Air...like it or not.
The cabin crew however may have different ideas.

20th Apr 2003, 01:29
Flight attendants scrap deal with American

Union calls new vote on news of executive bonus plan
Saturday, April 19, 2003 Posted: 4:05 AM EDT (0805 GMT)

AMR Chairman Don Carty apologized for not telling unions about the executive bonuses until after they voted.

FORT WORTH, Texas (CNN) -- Outraged by news that troubled American Airlines had planned to give its executives bonuses, flight attendants rescinded their approval of wage cuts and plan to vote again, a union official said late Friday.

No date for the new vote was set. Wednesday, the flight attendants agreed to more than $10 billion in wage concessions over six years. The airline had said it would file for bankruptcy protection if the union did not approve the cuts.

Thursday, one day after approving the cuts, the union learned that in October, American had granted 45 of its officers special supplemental retirement benefits that would be out of the reach of creditors if the company were to file bankruptcy, said John Ward, president of the Association of Professional Flight Attendants [APFA].

"This taints the agreement that was ratified just two days ago in a wrenching process for our members," Ward said in a statement. "Every APFA member -- those who voted for the agreement and those who voted against it -- are outraged by this action, as am I."

In addition, the company divulged that it had approved cash retention bonuses to its top six executives in March 2002, Ward said.

American Airlines said Friday that its top management had canceled the bonus plans.

"I sent a letter to CEO Don Carty today condemning both the [Supplemental Executive Retirement Program] and the retention bonuses, and expressing my outrage that the company had indicated to the press that the union groups had been briefed on these programs," Ward said Friday.

He said he received a letter from Carty apologizing for failing to fully brief the flight attendants.

"So much for 'fair sharing' of the pain of the company's restructuring," Ward said in his letter to Carty. "So much ... for a new company 'openness.'"

The Allied Pilots Association voted Tuesday to take concessions to avoid bankruptcy and said it also was outraged by the revelation.

The pilots union accepted Carty's apology Friday.

American told its unions that wage cuts were necessary to prevent a bankruptcy filing.
"These retention agreements were created a year ago in March 2002 when, after the events of September 11, the industry was struggling and our board of directors had serious concerns about our ability to retain our senior management in light of the potential loss of several key executives," Carty said in a letter to employees.

He apologized "for any misunderstanding about the benefits made available to members of senior management.

"My mistake was failing to explicitly describe those retention benefits, and because of that, many employees felt they were kept in the dark," Carty said. "Please know that it was never my intention to mislead you. I offer you my sincere apology, as I have to our union leaders."

Steve Blankenship, a spokesman for the Allied Pilots Association, said the pilots "appreciate the gesture ... it's a move in the right direction."

But, he said, "Trust has been violated."

Because the retirement benefit represents one already earned, in some cases over a period of 17 years, American said the initial payment to the fund remains in place. It did not say how much money was in that payment. The retirement program was set up in 1985 but not funded until October.

Ignition Override
21st Apr 2003, 12:27
Ok, there are many contradictions or ironies at work in the US industry. It would probably be really bad if many of our top executives left, were they to be offered much higher pay/benefits at another airline. We are very fortunate to have had some of them. My company could be in serious trouble if the corporate offices had only a revolving door for job turnover.

On the other hand, why do some airlines have to either threaten Chapter 11, or announce thousands of extra lay-offs, and at the same time let news leak out which announces large bonuses?

Are these reports to the SEC necessary at such times? How callous can our leaders be, when thousands of family providers (at just one airline) have already been told not to come back to work?!:ugh:

21st Apr 2003, 13:13
--- HUBRIS ---

21st Apr 2003, 21:59

The bonus program (otherwise known as "pay for showing up program") was scrapped.

The pension program was kept with excuses about it being created in 1985. This is what started the firestorm. The problem is that it was a positive benefit change for them at a time while they were persuading us to join them in making massive "sacrifices to save the airline.

I don't think it is an issue of class warfare or pay envy, but an issue of honesty, integrity and leadership.

To put it another way, the S.S. AMR is taking on water badly and the crew has been convinced by the officers to bail furiously. After the life jackets have been air-dropped just for the officers, the bailing has slowed noticeably.

21st Apr 2003, 22:47
"F Carty, F Bush, F Bin Laden, F Hussein, and most of all F all those pussy ass consumers that cower under their coffee tables afraid to get on a jet." Raas767

Well Raas, insults like that just confirm why this "PA consumer" who flies weekly won't be flying AA anytime soon. No wonder SWA is doing well....

Ignition Override
22nd Apr 2003, 11:32
I agree with Raas767's main points.

How many US consumers, who now avoid flying more than before 9/11 (whether for business or personal reasons), are killed each week in car accidents?

Do any newspaper/CNN headlines describe the horrible carnage, or does it not "make good copy"?:hmm:

22nd Apr 2003, 17:21
Does anyone else here actually think that it might be a good idea if American did actually go under? Obviously, this is no fun for the employees, but is it not clear that the US has at least one too many major carriers?

Now, I know we will hear "September 11th", "war in Iraq" as excuses, but in fact all these airlines were in the brown and smelly way before sept 11th so that is just a smokescreen.

SWA can make a profit - but maybe they are just efficient to start with? Does anyone know if SWA have had a handout, by the way?

European rules forbide handouts to airlines - yet European airlines have also had to face the effects of the economic downturn. However, under the cover of these "special circumstances", the US industry has been bailed out to the tune of several billion dollars.

Now - if one airline goes down the toilet, those passengers get shared around and everyone else's load factors go up.

Sometimes the medicine tastes nasty - but it is needed to cure the patient.

22nd Apr 2003, 20:01

When I pay (or in AA's case, would potentially pay) somebody to provide me a service- I don't expect them or their employees to say "F you." I don't neccessarilly fly in order to provide another individual with an income or employment, I fly to get somewhere I need to be. And I pay for it. So the airline is not doing me a favor- it's running a service business.

But thanks, now I have 2 data points and can draw my line....

BTW- purchased 2 Southwest Airlines roundtrips yesterday, might buy 1 or 2 more today. ;)

22nd Apr 2003, 21:47
OldAg84 is quite correct of course.
Airlines exist to provide air transportation to their customers (a very basic idea), something that some folks at the pointy end seem to have forgotten...or never knew.
Airline managements exist to provide organization and lead the company to profitability, for the shareholders.
Sometimes however, airline managements tend to 'double dip'...a bad idea. Nearly always they are found out.:eek:

23rd Apr 2003, 13:26
411A is almost correct except that:

"Airline managements exist to provide organization and lead the company to profitability, for the shareholders. "

Should read:

"Airline managements exist to provide organization and lead the company to profitability so they can pay for labour costs, etc, and still be in business tomorrow."

As for the shareholder? Well, in effect, you pays your money and you takes your chance. Shares can go up, shares can go down, but owning a tiny little piece of the pie doesn't make the pie answerable to you.

23rd Apr 2003, 14:29
No XL5, the company is owned by the shareholders and works for their benefit. They are mostly the large financial institutions who invest to make money to pay pensions and dividends etc. They expect returns on their capital and are not charities. Companies do not exist for the benefit of the employees even pilots I'm afraid, though of course they are blessed with the wisdom of Job and can walk on water.

23rd Apr 2003, 15:28

Click Here For Link (http://www.dallasnews.com/opinion/editorials/stories/042203dnediamerairlines.c90a0.html)

From the Dallas Morning News editorials page:

American Airlines: Something foul in the air


American Airlines executives give capitalism a bad name.

Under fire, AA chief Donald J. Carty has canceled the executive bonus program that became public after employee unions voted to accept major job and salary cuts to save the airline from bankruptcy. But he's sticking by a heretofore undisclosed plan to protect the pensions of 45 senior executives in case of bankruptcy ú this, even though management won concessions from workers in part by warning them they could lose their pensions in case of bankruptcy. This is disgraceful.

Irate union members are threatening to back off the deals they agreed to last week, even if that means the world's largest air carrier goes broke. After being misled and manipulated by management, who can blame them? We supported union ratification of the airline's rescue plan, as the least bad option for a corporation whose survival is vital to the Dallas-Fort Worth economy. And we still do, out of concern for families of American workers, who stand to suffer worse if the company goes under. We urge the unions to do the same. That said, if outraged unions push American over the brink, the fault will be with the airline's brass, who expected the rank-and-file to make sacrifices they weren't prepared to make ú and who didn't have the decency to be honest about it.

While not remotely in the same category as the pinstriped scoundrels who ran Enron and Tyco, Mr. Carty and his crew nevertheless join the growing ranks of business leaders who have betrayed the trust of workers and shareholders by putting their personal welfare above that of the company. The American people don't mind folks prospering, as long as they do so fair and square. That some of this country's corporate elite treat this principle with contempt adds insult to the pain thousands of jobless people and small investors hammered by the stock market are now enduring.

In a weak economy, this also creates a potent political issue. Republicans, traditionally the party of business, are particularly vulnerable on this issue. President Bush knows well that his father, victorious in Iraq, lost the White House because of mishandling the economy. He cannot afford to be silent when corporate leaders abuse the good faith of ordinary Americans. If Mr. Bush lets this slide, that something special in the air next election season is likely to be the smell of an economically distressed electorate gone sour.

24th Apr 2003, 01:01
Looks like Carty could be ousted as soon as friday. Time will tell if he screwed up these concessions for his own personal gain.

Flight Safety
24th Apr 2003, 01:50
AMR could dump Carty: Dallas paper
By Jennifer Waters, CBS.MarketWatch.com
Last Update: 9:46 AM ET April 23, 2003

NEW YORK (CBS.MW) -- Shares of American Airlines parent AMR jumped better than 12 percent in the early going Wednesday after a Dallas newspaper reported that Chief Executive Don Carty could get the ax.

The AMR board is set to meet via conference call Wednesday morning to hammer out a plan to salvage the carrier's concession agreements with its three key unions. The directors are likely to discuss Carty's fate, the Dallas Morning News reported.

Carty also is expected to be the No. 1 topic in a meeting Thursday.

Although there is no formal motion before the 12-member board, the newspaper said a source close to the board and the company said the debacle that's taken shape following contentious talks with unions has diminished Carty's credibility among some board members.

The displeasure comes after leaders of the mechanics and flight-attendants unions said they would revote on whether to accept deep cuts in pay, pensions and other work rules that were aimed at keeping the country's largest airline out of bankruptcy.

After hours of on-again, off-again talks, the unions agreed late last week to the plans, only to find out hours later that AMR senior executives would receive bonuses for sticking with the financially precarious company and that those executives' pensions were protected under trusts separate from the company. The executive perks were disclosed in a filing with the Securities and Exchange Commission.

The outcry from unions was fast and furious, something Carty acknowledged in a public apology Monday he did not expect. Claiming he was "enormously naive" about employee reaction to the perks, he canceled the bonuses. The pension plans, however, are intact.

"Some members of the board felt as betrayed as labor-union members," said the paper's unnamed source, according to the published report. "The board was told by the CEO that labor was fully informed of the details."

AMR officials were not available for comment. Spokesman Bruce Hicks refused to respond to the Dallas paper's report, labeling some of the speculation currently afloat as "quite ludicrous."

Former Chief Executive Robert Crandall told the cable channel CNBC that if called, he was not interested in serving.

AMR is expected to report a huge loss in its first-quarter earnings release Wednesday.

Jennifer Waters is the Chicago bureau chief for CBS.MarketWatch.com.

24th Apr 2003, 11:42
Hicks had made a public statement that was an outright lie when he said that the unions had been told about the bonuses and pensions.

This left the union heads in an unteneable position. Eventually the lie was proven and he retracted the statement, but the fire was already buring when all that gasoline was poured on it.

If Carty isn't dumped then the airline is finished.


24th Apr 2003, 13:56
Carty will be finished, and AA will survive, albeit a much smaller version if 2 other unions vote against concessions.

They're not out of the woods---yet.

24th Apr 2003, 20:58

Raas767 has avalid point, maybe he could have put it better!

It is a valid question to ask why US consumers, en-masse, deserted the airlines. I mean really, what was the point in that? Why wouldn't US citizens travel to Europe? Where's the risk?

I mean here in Ireland, travel to the US stayed at near normal levels post 9/11.
This is of course exactly what these terrorists want, to terrorise US citizens and hit the powerfull US economy.

We must not let them win.

24th Apr 2003, 23:11
Jolly green, correct....unfortunately, Bin L. knew his target well - he's really knocked the stuffing out of people who thought they were safe and remote from the troubles of the M.E.

I read a report the other day that it could take a new generation for US travellers to get their confidence back...ouch. The study said 66% of those interviewed in US had no intention of ever travelling abroad again. :(

Old Age 84 has a valid point, too. The number of times I've cringed at the arrogant, condescending and at times, down right rude, attitude of some of our front-line staff here in AA I hate to count. I always rush in to try and make amends. The staff usually reply "it's management's fault" when I query them, which is rubbish - NEVER EVER take it out on the travelling public. I always tell myself " this couple could be on their honeymoon; is it my right to try and ruin it for them? No. And all for the sake of a smile and some basic politeness."

I strongly believe that the new CEO needs it both ways from staff: I'll give no [email protected] if my passengers don't have to take any [email protected] from staff. It's what makes SWA tick...

I also believe that the new CEO, whoever it may be, once he's stabilized the ship needs to take a swift kick up the pants to some of our grumpiest front line staff, particularly in DFW, where they're notorious. We can't afford any baggage now, everybody is going to have to pull together. :ouch:

24th Apr 2003, 23:57
Reminds me of what Giscard d'Estaing said of Jacques Chirac......."He could have the jar open in front of him, the spoon in his hand, jam all over his face - and if you asked him, "Are you a jam eater?", he would say "What is jam?"

25th Apr 2003, 01:07

You have a superb attitude, pilots like you are a massive asset to their airlines.
You are right about the attitude of front line staff, I mean this is where Joe public gets his first impression of the airline. But I can assure you it's not just AA at DFW, from what I can see, Delta at ATL are just as bad. It seems naive to some, but a nice smile and helpful attitude can play a major role in retaining customers and making sure their dollar stays at your airline the next time and doesn't go elsewhere. It's a common feature at what are termed "excellent companies," they all have legendary customer service.

From what you're saying, looks like major training is needed for some of your staff.
Hope everything goes well for you and your airline survives and grows stronger again.

VIVA AA!:ok:

25th Apr 2003, 02:57
Raamejet and OneWorld...the new CEO could start work tommorow. The 2 choices I heard were a former US Senator, now President of Oklahoma Univ. and the CEO of Sears-Roebuck, both directors of AMR Corp.

There is NO excuse for being nasty to paying customers EVER. These idiots at DFW may be enlightened after they LOSE their jobs to either layoff or termination.

25th Apr 2003, 03:33
Hot poop:

insider info. just told me finalizing deal now - new CEO part of it - waiting for conformation. Hope it's true - we all need a rest from being in the headlines. :\

25th Apr 2003, 03:42
When Gorden Bethunen and Greg Brennerman got to continental to fix Lorenzos ****ups they wound up firing 51 out of 60 vicepresidents and managers.

That is what it is going to take here. AA's problems actually stem from CrAAndal's reign as emporer where he pitted groups against each other and encouraged fighting. cAArty was, is and always will be one of Crandal's boys in the same mold, just not as physically intimidating.

Both of em also had a penchant for overspending.
Lets look around shall we?

2.6 billion in stock buybacks (money BURNED)
1.3 billion for a white elephant of a terminal in JFK
1 billion for a terminal in Raleigh that we have pulled out of
1.6 billion Miami terminal for the miami terminal. (current spending rate 20 million per month till 2005
750 million in cash plus 3.5 billion in debt (4.25 billion) for TWA
500+ million for the Tulsa maint facilitiy.
100s of million for the Alliance maint facility
600 million lost in the failed canadian carrier Canadian
Reno Air purchase (several hundred million I think, but I forget) none of the planes or routes operated 4 years later.

This is all in the last 10 years or so! thats Well over 10 billion dollars. Not one dollar of which would have been spent by Southwest airlines. Those expenses have been running SINCE sept 11. Southwest and Jetblue don't do a single item on that list. They certainly don't spend 100s of millionos of dollars naming stadiums after themselves.

And this is all before you purchase a single aircraft, which is the only capital expense that AA does that is NECESARY to run an airline.

Southwest contracts out ALL its heavy maintence and it only operates 1 type of aircraft! If there was ever an airline that could do heavy maint efficiently it would be SWA with 400 or so more or less identical jets! So not only don't they do the maint in house, they don't have to pay for contruction of enourmously expensive facilities to do the maint.

The problem is not labor costs, its managment spending like a drunken sailor.

25th Apr 2003, 05:06
AA now finds itself on the receiving end.
Crandall and company ran Braniff out of business with their predatory pricing (Harding Lawrence didn't help either with his expansion to Asia in 1979, during high fuel prices), now the shoe is on the other foot.
IF AA treats its customers like s..t, then they deserve all that is coming, and the picture will (is) not be pretty.
Lower payroll burden/benefits for labor and management will be the rule of the day, like it or not...and many certainly will not.
The AA shareholders WILL demand nothing less.

Ignition Override
25th Apr 2003, 06:30
Jolly Green Giant (was it?) might have put part of the problem in a nutshell-some ARE cowards, but some probably have much tighter travel budgets and can use video-conferencing etc. But all of this plays into Bin Laden's hands. As for ticket taxes, well, our GOP Congress is the leopard which changed its spots: the 25% average tax on tickets represents the workings of a tax-hungry European socialistic govt, definitely not the workings of a political party which claims that it wants to help business tax rates and survival.

Just a small point about one of Crandall's tactics many years ago: find out what happened to the first edition of "Splash of Colors". The author John Nance described Braniff Airlines' story, and included a very dirty trick 'allegedly' (:)) used by some of Crandall's computer people, by which false bookings were entered for Braniff sales on certain seats (using the AA Sabre res. system), preventing flights from selling more seats.

John Nance reached an agreement whereby his first edition never made it to the bookstores. Apparently, the info in it was quite damaging to Crandall.:E

25th Apr 2003, 07:31
What's to stop him from publishing it now?

He could sell the rights to Hollywood, and they could call it:

"LIE HARD" Starring Don Carty, Gerard Arpey and Bob Kudwa.

Special cameo appearance by Bob Crandall, as the
"Ghost of Christmas Past".

25th Apr 2003, 07:36
Just announced:

Carty resigned - replaced by Arpey as CEO. The Chairman of the Board position has been divested from the CEO, as it always should have been, and is taken over by the former CEO of Sears Roebuck.

Contract shortened to 5 yrs, negotiations openers in 3yrs, arbritration on any one item. TWU signed off as well, the FA's are still "herding cats" apparently..... :rolleyes:

25th Apr 2003, 08:54
So long, Donnie

25th Apr 2003, 10:26


If you look at the history of shows at the theatre, there is one the fits the airline industry well,

It was called "The Respectful Prostitute"

Another couple of my favorites were, "Information Please", and "The Man From Toronto".

Ignition Override
25th Apr 2003, 11:43
Will American be better off, other than knowing that the CEO paid the price for the bad timing and lack of total frankness? If he was the best choice to replace Crandall, then, maybe Arpey will be committed to the airline's success, and can earn the respect needed?

I hope you guys/gals don't end up with the revolving door leaders as United experienced. At least AA can probably avoid Chapter 11 and the massive contract changes, plus the unquantifiable loss of loyal customers.

Good luck teaching cats to fetch the newspaper.

25th Apr 2003, 12:14
Carty was'nt the best choice to replace Crandall---Bob Baker was. He was the true brains behind AA, and an expert operations guy. Unfortunately, he died of lung cancer last weekend. He was a very young 58; he looked younger than Carty, even with no hair (he had chemo/radiation treatments leading up to his untimely death).

Carty should have stuck to hockey, and played for the Maple Leafs. He was definately anti-labor, and that attitude just won't work this day and age.

Wonder if his trophy wife will leave him now?

Flight Safety
25th Apr 2003, 22:35
The FAs should approve the deal, I hear they are expected to announce today.

26th Apr 2003, 00:35

Sorry it has taken so long, I've been away. Why aren't people flying?

I'll offer a couple of thoughts

-People were waiting for security to straighten out- today it is not too onerous.

-Fear- why take the chance- I'll grant you that is not reasonable- but it's there.

-People would just as soon drive tthan deal with surly airport environments.

-Finally, at some level- the overcapacity currently in seats will tend to make the planes lok empty.

Although I'm not a huge fan of AA- I'll wish all those struggling right now the best. Good Luck.

26th Apr 2003, 02:01

Click Here For Article (http://www.thestreet.com/tech/georgemannes/10082870.html)

George Mannes

The Five Dumbest Things on Wall Street This Week

By George Mannes

Senior Writer

04/25/2003 07:15 AM EDT

1. Carty, an Angel?

Once again, we at the Five Dumbest Things Research Lab are marvelling over what we call a Flying Nun -- a decision so Dumb that it's impossible for us to imagine how a group of responsible humans could have made it.

Yes, just as we still can't figure out how a person could have green-lighted a television show about the aerodynamic Sister Bertrille, we're puzzled at how anyone, anywhere at American Airlines parent AMR (AMR:NYSE - news - commentary) could have concocted an executive compensation scheme as Dumb as the one that surfaced this month.

As you may recall, AMR last week persuaded employees to make a total of $1.6 billion in annual salary concessions, as part of American's last-ditch effort to avoid bankruptcy. The sacrifice was great, but times are desperate for AMR: The company lost $5.3 billion over the past two years, while cutting 27,000 employees.

So what kind of thank-you note did the rank-and-file get in return? Why, the news of how well the company is taking care of its executives. As the company disclosed for the first time last Tuesday evening, AMR decided more than a year ago to award cash bonuses to seven top executives if they stay on through 2005. And last October, the company contributed $41 million to a pension plan for 45 top executives -- a plan that protects those executives' retirement money should AMR declare bankruptcy.

AMR Chairman and CEO Donald Carty tried to do damage control this week (perhaps unsuccessfully, as his resignation Thursday night might indicate), but we at the Research Lab can't say we were impressed. Yes, he rescinded the bonus plan. But the pension plan -- the one that's protected in the increasingly likely event of a bankruptcy -- remains untouched.

Nor was his cause helped by comments he made at his apologetic Monday news conference, the one where he suggested people would love AMR's executive compensation measures because they weren't as egregious as the ones proposed by Dumber executives at other struggling air carriers. "I really believed that we were going to look very good by comparison," said Carty, according to the Associated Press.

What caught our eye at the lab was how Carty kept insisting the problem wasn't the special treatment of executives approved by AMR's board, but the timing of the compensation disclosures. "The board's actions were proper," Carty told reporters Monday. "Because I failed to fully communicate the details in advance, I inadvertently created a perception that there was something improper."

We suspect Carty was missing the point. The problem wasn't that poor timing created "a perception that there was something improper." The executive compensation revelations would have made a stink no matter what day they were revealed. The real problem was the perception that AMR executives don't give a flying Fokker about employees' welfare.

As Carty said himself on Monday, to regain trust he'll need to persuade employees that "the sacrifices they were asked for and agreed to make are indeed shared, and that we are all in this together."

Yes, timing is immaterial. When you're dining with the captain aboard the Titanic, is there any good time to be told that he's got a lifeboat and you don't? To us, it doesn't make a difference if the news comes before he sticks you with the check, or after.

26th Apr 2003, 02:46
This just in from CentralCommand:

(in case he was trying to sneak back across the border)


Flight Safety
26th Apr 2003, 05:10
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.

28th Apr 2003, 04:02
"...The union leaders and executives at network airlines like American could cajole and threaten and bargain all they wanted, but they were looking more and more like relics of an era now vanishing as quickly as a vapor trail."

From today's New York Times:

A Taut, Last-Minute Stretch to Save an Airline


A dozen or so men walked out of the Hyatt Regency by the Dallas airport last Wednesday night holding in their hands the fate of the world's largest airline.

They were tired and anxious and hoarse, having spent 12 straight hours bargaining at a conference table in the hotel's basement. Over their heads, the silver jets of American Airlines veered toward the runways, doing the work of the very company they were trying to save.

One man, Donald J. Carty, walked from the hotel undoubtedly thinking ahead to his next meeting, this one with American's board of directors. Not only was the future of the airline at stake, but so was his job as the company's chairman and chief executive.

The leaders of American's three unions drove off to catch some sleep before the next morning's conference calls, when they would try to sell a new set of wage and benefit concessions to their boards.

What happened in that hotel, and the paths that diverged from it, ultimately pulled American Airlines back from the brink of bankruptcy while ending Mr. Carty's career at the company after more than two decades. The boards of all three unions agreed by Friday morning to accept $1.62 billion in annual wage and benefit cuts. Mr. Carty resigned at American's board meeting. Gerard J. Arpey, the 44-year-old president and chief operating officer, was promoted to chief executive, while Edward A. Brennan, a director at American and former chairman and chief executive of Sears, Roebuck, became chairman.

In one sense, the recent events that led to the fiery clash between Mr. Carty and union leaders were unexpected because Mr. Carty had tried to improve labor relations during his tenure as chief executive. And just less than two weeks ago, the unions had come around to meeting him on substantial concessions.

But in another sense, the conflict was a consequence of the bursting of the late-1990's economic bubble that has wreaked havoc at many big companies. To avoid bankruptcy, American had to ask workers to take cuts to make up for the excessive growth and wage hikes it encouraged before 2001. Yet, the company continued to dole out what many people perceived as lavish pay to its top executives, then hid some of the benefits during negotiations, aware perhaps of how abhorrent Enron-era corporate behavior had become to average wage-earners.

The outrage first exploded a week and a half ago, when workers learned that Mr. Carty had hid from union leaders new executive benefits while he was negotiating for deep concessions. The benefits — so-called retention bonuses paid to seven executives and a $41 million pretax payment to a protected executive pension trust fund — had been approved by American's board last year, but not disclosed until the company made a securities filing late on April 15, just after two unions had already voted to take concessions and a third was finishing its vote.

Infuriated, the Transport Workers Union and the Association of Professional Flight Attendants said they would hold new votes, while the Allied Pilots Association refused to sign off on the concessions.

Mr. Carty retracted the cash bonuses on April 18 and apologized publicly last Monday, although he said the company would keep the $41 million payment in the executive pension trust fund. The unions were still fuming. Without their approval of concessions expected to take effect May 1, the airline — which lost $1.04 billion in the first quarter — edged toward bankruptcy.

On Tuesday afternoon, Representative Martin Frost, a Democrat in the Dallas area, got a call from James Little, president of the ground workers' union at American. Could Congressman Frost call a meeting of all the parties and act as a mediator? Mr. Little asked, as Mr. Frost later recalled. American executives "immediately jumped at the chance," he said.

The groups walked into the Hyatt around 9 the next morning. Mr. Frost and three other local members of Congress first met with union leaders for an hour in the Meteor Room in the basement. The union leaders said they were angry that Mr. Carty had put them in an untenable position with their workers by duping them during negotiations.

"I ultimately suggested to them, `You don't have time for another vote,' " Mr. Frost said. " `You can't take a 30-day vote. The company can't survive with the uncertainty.' "

The union leaders then left the room. In came Mr. Carty, Mr. Arpey and a couple of other managers. Mr. Carty admitted to the members of Congress that he had made a big mistake, Mr. Frost said, and wanted to find a way to work it out.

All of the parties sat down at the conference table at 11 a.m. and began talking. The union leaders told Mr. Carty he had to give them something they could take back to their members, Mr. Frost said. An hour later, the executives and union leaders told the members of Congress they were ready to negotiate among themselves.

Mr. Frost said that a few of the union officials said they wanted Mr. Carty to step down but none of the unions pushed for that.

"We wouldn't have wasted our negotiating capital on that," said Sam Mayer, a member on the board of the pilots' union who had been briefed on the discussions. "Mr. Carty had mortally wounded himself."

Everyone in the room walked out at 9 p.m., having worked out new concession terms. The amounts would remain the same as in the original agreements. But the contracts would last five years instead of six, cash bonus payouts for workers would be tied to those for executives and the unions could change one item in the contracts as long as the change did not alter the value of the concessions.

The union leaders were nervous because they knew it would not be easy convincing incensed board members to vote for the contracts, Mr. Frost said.

Mr. Carty had his own demons to face.

The 12-member board of American met at 8 the next morning in the Wyndham Anatole Hotel in Dallas. The previous night, one director, David Boren, president of the University of Oklahoma, had told Tulsa World newspaper that he intended to ask for Mr. Carty's resignation.

In the morning, the board was split between those who wanted Mr. Carty to step down and those who backed him, said one person briefed on the discussions. The board also debated whether to file for bankruptcy protection immediately. Some members even advocated trying to rehire Robert L. Crandall, the legendary chief executive who left American in 1998 after 13 years at the helm. The previous week, Mr. Crandall had told CNBC that he would return to the airline if asked.

Mr. Crandall's tenure as chief executive had been fraught with labor confrontations, and Mr. Carty had spent years trying to defuse the tension. Despite his efforts, many union officials found Mr. Carty frosty and distant. He declared that he wanted to work with unions to avoid bankruptcy, but showed up only on rare occasions at the bargaining table. His absences provoked an odd nostalgia for the more confrontational Mr. Crandall, who might dress down the union leaders, but at least did it to their faces.

A handful of directors argued that Mr. Carty could weather the storm, the person said. But it became apparent that most of the directors, sensitive to the growing public outcry against American, were thinking of who could replace Mr. Carty.

Supporters of Mr. Crandall — generally among those who had joined the board before 1998 — brought up his name. But many directors felt that American had to act fast and had to provide a sense of continuity, the person said. That meant just one candidate: Mr. Arpey, the company's young president.

"Nobody else had more than a 20 percent chance," said the person briefed on the deliberations.

Mr. Arpey was almost unknown outside the airline, though he was well-regarded within the company. He was also familiar to the board, which had elected him president a year ago, and whose members had worked with him since 1995, when he was named chief financial officer. Mr. Arpey's acquaintances described him as plain-spoken and able to mix with all manner of employees at the airline, from fellow executives to pilots (he had a license and two planes himself) to ticket agents.

"Gerard is incredibly bright and personable, fanatical about details and a person with a heart that most people never see because he's so private," said a former company executive who spoke on the condition of anonymity.

Mr. Crandall once made an infamous boast that American had saved $100,000 a year by cutting olives from on-board drinks — a measure thought up by Mr. Arpey.

If there was any hesitation among directors about Mr. Arpey's ability to take on the top job, it came from the fact that he had little experience publicly representing the airline, said people briefed on the board's discussions. Mr. Arpey had struggled after being promoted to chief financial officer, when he had to face industry analysts and investors in Wall Street presentations.

But in the end, he was the obvious choice to replace Mr. Carty. The directors left the hotel shortly after 4 p.m.

Mr. Arpey rushed off that night to meet with members from the board of the flight attendants' union. While the other two unions had agreed to concessions, the flight attendants had balked. Some changes in the contract were quickly worked out, one union board member said.

On Friday morning, the flight attendants' board voted 13 to 5 to accept the cuts, allowing American to stave off bankruptcy for now. Mr. Arpey had passed his first test as chief executive.

But the real challenge remained: In an airfield across town sat a fleet of red-and-brown planes. Against all odds, Southwest Airlines had remained profitable for 30 years, and its jets were showing up more and more in the skies. The union leaders and executives at network airlines like American could cajole and threaten and bargain all they wanted, but they were looking more and more like relics of an era now vanishing as quickly as a vapor trail.

28th Apr 2003, 09:21

Something SPECIOUS in the air...:yuk:

28th Apr 2003, 23:15

29th Apr 2003, 07:00
" Out with the old boss in with the new boss, same as the old boss..."

1st May 2003, 00:35

flite idol
2nd May 2003, 07:19
I guess I`m missing something! Arpey has been prsident of American Airlines for quite some time, he is now president and CEO! Thus he must have been fully aware of and endorsed the executive retention plan along with dirty Don. For that matter Brennan, former CEO of Sears Roebuck has been on the AMR board of directors for a decade or two.
This old boy club where you sit on my board and I`ll sit on yours, pick up loadsa dosh and travel perks for showing up at a few board meetings and the annual general meeting, I`ll approve rediculous salary and benefits for you if you do for me has to change.
The people telling us that you have to have a multi million dollar package to attract these people are these people themselves!
Sure once you are in the club you will want a multi million dollar package to move within the club! Lets get someone who is not in the club, they could`nt do any worse!

2nd May 2003, 07:33
flite idol

Me too...