American gets $1.6 billion in labor concessions
By Dan Reed, USA TODAY
FORT WORTH =97 Negotiators for American Airlines and its three unions agreed=
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Monday to concessions that will save the world's largest airline $1.6=20
billion annually and keep it out of Chapter 11 bankruptcy-court protection,=
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at least for now.
If union members accept the terms, it would represent the biggest rollback=
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of labor costs in industry history. American's labor costs would fall by=20
23% if all the deals are ratified. That would increase the pressure on=20
rivals Delta, Northwest and Continental to cut their costs. US Airways cut=
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its labor costs by nearly 20% through reorganization, and United is seeking=
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similar savings in its Chapter 11 case. Most American employees would see=20
pay cuts of 15% to 19%, and an additional 10,000 could lose their jobs.=20
American has let 14,700 people go since the Sept. 11 attacks and now=20
employs 99,000.
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American's parent, AMR, had been prepared to file for Chapter 11 as soon as=
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Monday in New York if it couldn't strike deals with its unions. Its shares=
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rose almost 33% Monday on word of the agreements and closed at $2.10. The=20
tentative deals with the unions must be ratified by mid-April. In addition=
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to the $1.6 billion from the labor groups, non-union workers and managers=20
will kick in $200 million a year in savings. The airline aims to trim $2.2=
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billion in operating and financial costs. Despite the possibility of more=20
furloughs from productivity improvements in the labor agreements, American=
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officials say they won't shrink the airline further. It now operates 807=20
jets and 2,600 departures a day, down from 904 jets and 3,300 daily=20
departures before the attacks. American CEO Don Carty praised union leaders=
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for "their unwavering commitment to the future of the company." But he=20
cautioned that American still needs "meaningful concessions" from its=20
vendors, lessors and suppliers. The airline is believed to be asking for=20
more than $1 billion a year in such concessions. Carty also warned that=20
American's financial condition continues to be "weak and its prospects=20
remain uncertain &ellipsis; particularly given the impact of the continuing=
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war in Iraq." Carty also is taking a 33% cut in pay and will decline a=20
bonus for the third year in a row. AMR's board also will be asked to reduce=
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the value of corporate officers' compensation packages. In addition to pay=
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cuts, American employees will be asked to accept tighter work rules, give=20
up some vacation time and sacrifice some benefits. Workers also will get to=
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participate in new stock-option and profit-sharing programs.
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