- The Washington Times - Saturday, April 26, 2003

American Airlines' flight attendants yesterday accepted a deal on labor concessions to save the airline from bankruptcy.

Union leaders agreed to revised wage, benefit and work-rule concessions after the airline's chief executive, Donald J. Carty, was forced to resign Thursday night.

The employees were angry that Mr. Carty and other top executives gave themselves bonuses and other executive perks while the rest of the company's employees were being asked to take lower salaries.

"With new leadership in place at [parent company] 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 Association of Professional Flight Attendants.

American Airlines' concessions plan shortens the length of employees' wage and benefit concessions to five years from six. Employees also would receive performance-based bonuses of up to 10 percent of their salaries.

Airline officials planned to file for Chapter 11 bankruptcy protection unless all three major unions accepted concessions.

Unions for the pilots, ground workers and flight attendants voted last week to accept concessions, but learned the company had approved bonuses and pension payments for its top executives even while flight attendants were casting the last votes.

Mr. Carty apologized several times for not disclosing the executive perks, but union officials said their trust of him was beyond repair.

Mr. Carty resigned Thursday after an emergency meeting of AMR Corp.'s board in a last effort to hold off bankruptcy. He was replaced as chief executive by Gerard Arpey, the company's president.

"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," Mr. Carty, 58, said in a statement.

The resignation persuaded union leaders to approve the new concessions after the airline gave in slightly on its demand for $1.8 billion a year of concessions over the next six years.

One of Mr. Arpey's first actions as chief executive officer was to call leaders of the flight attendants' union to his office Thursday to discuss the offer.

It was not clear yesterday whether the new leadership and labor deal would be enough to keep American out of bankruptcy for long.

"By any measure, we have our work cut out for us," Mr. Arpey said at a news conference yesterday 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.

On Wednesday, AMR reported a $1 billion loss for the first quarter more than half the annual amount of the 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 September 11 terrorist attacks, fear of new terrorism with the Iraq war, and the severe acute respiratory syndrome outbreak. Competition from low-fare carriers also has kept prices low.

Mr. Arpey, who will remain president of American and AMR, said he would work to "restore the confidence of all employees in their great company." AMR's stock value rose 36 cents yesterday on the New York Stock Exchange to close at $4.40 a share.

Mr. Arpey's challenges are widespread among airlines. The airlines have been lowering ticket prices to bring back customers but they need to reduce labor costs.

Complaints from employees are common, including at Northwest Airlines, bankrupt United Airlines, Delta Air Lines and others.

Anger over executive pay prompted flight attendants for Northwest to protest at the airline's shareholders meeting in New York yesterday.

Northwest officials have told its unions they need $1 billion in labor concessions to keep the airline out of bankruptcy. However, the Transportation Trades Department of the AFL-CIO labor federation, says Northwest's two top executives are receiving $2.5 million in raises and bonuses.

"This act of mismanagement was deeply hypocritical and grossly insensitive to the economic pain and suffering facing the company's workers each day," said Sonny Hall, president of the Transportation Trades Department.

This story is based in part on wire service reports.

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