- The Washington Times - Thursday, April 24, 2003

FORT WORTH, Texas (AP) American Airlines, struggling to regain control of a tumultuous labor situation and ward off bankruptcy, yesterday reported a $1.04 billion first-quarter loss.
The labor unrest and financial distress increase pressure on the company's board to remove Chairman and Chief Executive Donald J. Carty, analysts said. The board is scheduled to meet today.
American canceled a conference call yesterday to discuss its quarterly results as Mr. Carty met again with labor leaders and four Texas congressmen to try to salvage cost-cutting deals that he said American needs to avoid bankruptcy.
Workers and union leaders remain outraged after learning late last week that while they were asked to accept $1.8 billion in annual cuts, American approved executive bonuses and pension payments that would be protected in bankruptcy.
Unions representing flight attendants and ground workers plan to hold new votes on the concessions, and the pilots union is threatening to withhold formal approval. The flight attendants and Transport Workers Union are considering 30-day elections, which the airline considers unacceptably long.
The quarterly loss was equivalent to $6.68 per share, compared with a loss of $1.56 billion, or $10.09 per share, in last year's first quarter. Analysts surveyed by Thomson First Call had expected a loss of $6.08 per share, or $948 million.
Mr. Carty blamed the first-quarter results on weak travel demand caused by the sluggish economy, war in Iraq and the outbreak of severe acute respiratory syndrome, or SARS. He also said high fuel prices and low fares contributed to results that were "truly dreadful."
"All told, it's a perilous climate and our success is far from assured," he said in a statement.
Revenue fell slightly to $4.12 billion from $4.16 billion a year earlier, and analysts warned that the company's liquidity is slipping.
Standard & Poor's said that it believes the company's unrestricted cash has "fallen substantially" since Dec. 31, when it had $1.9 billion. The company needs $1 billion in unrestricted cash and short-term investments to meet the terms of its loans.
Shares of American's parent company, AMR Corp., rose 37 cents to close yesterday at $3.80 on the New York Stock Exchange.
The Dallas Morning News reported yesterday that AMR board members were unhappy with Mr. Carty's failure to tell unions about the executive bonuses and pension payments. A company spokesman declined to comment on the report.
Ray Neidl, an analyst with Blaylock & Partners, said that the dismal first-quarter numbers added to Mr. Carty's problems, and that the CEO's future at the company could be decided this week.
"It puts pressure on Don," Mr. Neidl said. "The board views him as a very valuable manager, having structured these consensual agreements, and they want to give him every chance to put this back together."
None of American's unions has demanded Mr. Carty's resignation, but some members of the pilots union board believe he should go, said spokesman Steve Blankenship.
"We're not having to do much. This guy is setting himself up to fail," Mr. Blankenship said.
"The issue is clearly on the AMR board's shoulders."
Mr. Carty has apologized several times for not disclosing the perks sooner. The company has canceled the bonuses but not the $41 million in pension funding for 45 executives.

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