American ready for bankruptcy as vote deadline nears (merged)

[OneWorld22]

RRAAMJET,

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!

[B767300ER]

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.

[RRAAMJET]

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.

[Wino]

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.
AA - PUT NAME ON SELWYN THEATER, 42ND ST, NYC $8.5 MILL OVER 10 YRS
AA - NAMING RIGHTS ON TWO STADIUMS (MIA, DFW)

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.

[411A]

A taste of their own medicine...

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]

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.

[B767300ER]

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".

[RRAAMJET]

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.....

[skidcanuck]

So long, Donnie

[WhatsaLizad?]

AA - PUT NAME ON SELWYN THEATER, 42ND ST, NYC $8.5 MILL OVER 10 YRS

Wino,

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]

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.

[B767300ER]

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]

The FAs should approve the deal, I hear they are expected to announce today.

[OldAg84]

OneWorld

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.

[AAL_Silverbird]

Click Here For Article

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.

[B767300ER]

Hey Silverbird...

This just in from CentralCommand:

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

[Flight Safety]

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.

[Airbubba]

"...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

By EDWARD WONG and MICHELINE MAYNARD


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.

[B767300ER]

New Logo...

Something SPECIOUS in the air...

[AAL_Silverbird]