This article from NYTimes.com has been sent to you by psa188@xxxxxxxxx American Air Reaches Deal With 3 Unions on Big Cuts April 1, 2003 By EDWARD WONG American Airlines said yesterday that it had reached tentative agreements with all three of its major unions on $1.8 billion in annual concessions, a move that reduces the airline's chances of having to file for bankruptcy protection immediately. The airline, the world's largest, and its unions worked out the agreements in frantic negotiations that began over the weekend in Fort Worth, where American is based. Yesterday afternoon, the pilots' union, the flight attendants' union and the mechanics in the Transport Workers Union approved tentative agreements, becoming the final labor groups to accept wage and benefit cuts. Baggage handlers and six smaller groups at the Transport Workers Union had already reached tentative agreements last week. Industry experts said that the agreements gave American, a unit of the AMR Corporation, more breathing room but did not guarantee that the company would stay out of bankruptcy court in the next several months or even weeks. The concessions still have to be approved by union leaders and members, with all voting to be finished by April 15. And the cuts might not even be enough to sustain American through the steep drop in passenger traffic caused by the war with Iraq. American also said it still needed to obtain concessions from its suppliers and aircraft lessors. Executives at American continued talks yesterday for over $1.5 billion in financing that it would need if it filed for bankruptcy protection. That money would probably come from four lenders, led by Citigroup, bankers said. Donald J. Carty, chief executive of American, said last night that the tentative labor agreements would help the company avoid an immediate bankruptcy filing. "By taking these decisive actions, the union leadership and our employees have demonstrated an unwavering commitment to the future of the company and have enabled us to avoid an immediate filing with the bankruptcy court," Mr. Carty said. Of the $1.8 billion in annual concessions, $660 million would come from the pilots, $340 million from the flight attendants, $620 million from the T.W.U. workers, $80 million from agents and representatives and $100 million from management. In exchange, employees would take part in a new stock option and profit-sharing program, the company said. American also said Mr. Carty would take a 33 percent pay cut from his annual base salary and would decline a bonus. He will also ask the board to cut executive compensation packages, the company said. Those statements come after lawmakers recently criticized airlines for doling out what they called lavish packages to executives last year while the carriers were losing billions of dollars. Despite all the cuts, American said its "prospects remain uncertain" and "the days ahead will be difficult and the success of our joint efforts is not yet assured." Jim Corridore, an industry analyst at Standard & Poor's, echoed that assessment, saying that American would still have to deal with the drop in revenue that has accompanied the outbreak of war. In the first week of the war, overall traffic fell by 10 percent, according to the Air Transport Association, the industry's main trade group. "I think they're still in significant danger," Mr. Corridore said. "I wouldn't say it's likely that they'll file for bankruptcy or that it'll happen. But the danger is there because of the extent of the bad environment given the war." There is also a chance that one or more of the agreements will be rejected during the votes by the various union memberships. All the unions have said they intend to have members vote on the concessions by mid-April if union leaders give their approval. But voting can be capricious, and Mr. Corridore said that the mechanics are "very unpredictable." The mechanics have complained that they already made large sacrifices. Moreover, a competing union has tried to take over representation of the mechanics, stirring up bitter feelings among the workers and making leaders of the Transport Workers Union more defensive. The T.W.U., which has 34,000 workers at American, posted details of the tentative agreements on its Web site yesterday. For the eight labor groups that it represents, wage cuts range from 6.6 percent to 19 percent. The main cuts, though, would come from the mechanics and baggage handlers because there are more than 16,000 workers in each group. Pay would be cut 16 percent for baggage handlers and 17.5 percent for mechanics. In addition, the company will make changes to scheduling and work rules to increase productivity. Last November, United Airlines faced a nearly identical situation - relying on its workers to vote in favor of concessions to keep the airline out of bankruptcy. All the labor groups voted for the cuts except for the mechanics, represented by the International Association of Machinists. That contributed to the many factors that pushed United to file for bankruptcy protection in December. The Association of Professional Flight Attendants declined yesterday to release details of its tentative agreement with American, saying that leaders were still reviewing it. Gregg Overman, a spokesman for the Allied Pilots Association, said the pilots had offered American wage and benefit cuts of 20 percent in the first year and 15 percent in subsequent years, in addition to work rule changes. Productivity changes will result in 2,000 to 3,000 layoffs. As it talked to its unions, American Airlines was also trying to put together more than $1.5 billion in so-called debtor-in-possession financing that would allow it to keep operating under bankruptcy protection. Executives from American and bankers were in talks all day yesterday. One person briefed on the discussions said that Citibank, which would lead the financing, had agreed to put up $750 million because its parent, Citigroup, issues the credit card tied to American's frequent-flier program. The $750 million might come in the form of a straight loan or become part of the overall debtor-in-possession package, this person said. Citibank would contribute several hundred million more to the package. The other lenders involved in discussions were J. P. Morgan Chase, the CIT Group and Merrill Lynch. GE Capital, the financing arm of General Electric, dropped out of talks, possibly on Friday night, said the person briefed on the discussions. In Washington, Republican lawmakers were trying to pull together legislation that would give financial aid to the airline industry. The House Appropriations Committee and the Senate Appropriations Committee will be marking up the supplemental financing bill to cover Iraqi war costs this week, and each will attach some kind of aid to the airline industry, worth about $2.8 billion. The Senate Republican leadership agreed on a package that would include a one-year extension on war-risk insurance, which expires this summer, and would offer at least a temporary respite from some of the fees and taxes imposed since the Sept. 11 attacks. That package will also have conditions limiting executive compensation. House Republican staff members said their package was likely to be in the same financial range as the Senate plan but that the details could differ. The assistance under discussion is much less than what the airline industry has been seeking. "There's a widespread recognition that you should not bail out the industry," said Carlos Bonilla, a lobbyist at the Washington Group, whose clients include Delta Air Lines. "On the other hand, you should not let nonmarket issues - war - decide the fate of the industry." http://www.nytimes.com/2003/04/01/business/01AIR.html?ex=1050210023&ei=1&en=76cabe08260f9547 HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@xxxxxxxxxxx or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@xxxxxxxxxxxx Copyright 2003 The New York Times Company