This article from NYTimes.com has been sent to you by psa188@xxxxxxxxx /-------------------- advertisement -----------------------\ Explore more of Starbucks at Starbucks.com. http://www.starbucks.com/default.asp?ci=1015 \----------------------------------------------------------/ Flight Attendants Approve Concessions at American April 17, 2003 By EDWARD WONG Flight attendants at American Airlines narrowly approved $340 million in annual wage and benefit cuts yesterday, giving the carrier more breathing room to avert a bankruptcy filing. The vote in favor of concessions, 52 percent to 48 percent, came after a tumultuous two days in which the flight attendants initially rejected the cuts by a tiny margin, making theirs the only union to vote against the cuts. Before those votes were counted Tuesday morning, American had said that it would immediately seek protection from its creditors if it did not obtain $1.8 billion in annual concessions from its unions. But the airline, the world's largest, did not follow through after the Association of Professional Flight Attendants announced that its members had voted against the concessions. Instead, American and union leaders extended the telephone voting period until 5 p.m. yesterday in Fort Worth, where the AMR Corporation, the parent of American, is based. Union leaders also allowed members to change their votes, something they had barred before. About an hour after voting ended yesterday, the union said its members had voted 10,761 to 9,652 to accept the concessions. The previous day, polling had closed with 9,842 flight attendants - or 51 percent of voters - rejecting the concessions. Under the cuts, the flight attendants will take a 15.6 percent pay cut, starting May 1, and about 2,000 will be laid off. Like the agreements with the other unions, there will also be changes to benefits and work rules. "This has been a race against the clock," Donald J. Carty, the chief executive of AMR, said in a written statement yesterday. "My thanks go to the union leadership and to all our employees who recognized the urgency of our financial crisis and rose to meet the challenge." Analysts say American is not in the clear yet, though. The carrier is still operating in a travel market that has been pummeled by the United States-led invasion of Iraq and fears about a new respiratory illness that originated in southern China. The company has yet to negotiate significant cost cuts with its aircraft lessors and suppliers, although those talks are expected to be much easier now that American has labor concessions in hand. "American and the other network carriers continue to struggle with a destructive pricing environment, weak business travel demand and stiffening competition from low-cost carriers," William T. Warlick, an analyst at Fitch Ratings, wrote in an investor's report yesterday. He added that American could find it tough to meet significant debt obligations and liquidity covenants on that debt. The same workers who just agreed to significant concessions could also become angry over continuing generous treatment of executive pay. Although Mr. Carty agreed last month to take a 33 percent cut in his base salary and forgo a bonus this year, a securities filing yesterday by the company shows that American set up a trust on Oct. 15 to protect executive pension funds. If American entered bankruptcy court, creditors would not be able to touch those funds, the filing said. When American was negotiating with the Allied Pilots Association over the union members' cuts, the company threatened to wipe out the pilots' pension plan if the company filed for bankruptcy protection, union officials have said. Though tensions will undoubtedly remain between workers and management, some industry experts said Mr. Carty had performed impressively and partly salvaged what looked to be a questionable tenure by winning the concessions. "I think this is Don Carty's highest moment," said Darryl Jenkins, director of the Aviation Institute at George Washington University. "If they do go Chapter 11, it will be easy because 90 percent of the issues are already settled. They would be in and out of court in six months." American began its quest for labor concessions after it said it had already gotten $2 billion in annual cost cuts by making its operations more efficient. Negotiations with its unions were relatively lukewarm until executives began threatening bankruptcy. In the last month, bankers have said that American was lining up $1.5 billion to $1.75 billion in financing to keep operating in bankruptcy court. Experts say American made headway with its unions because US Airways and United Airlines, a unit of the UAL Corporation, had already laid the groundwork. Both of those companies told their unions that they would invoke Section 1113 of the bankruptcy code to void labor contracts if the workers did not agree to concessions. Workers at US Airways gave two rounds of concessions - one before entering court, the other one after - while pilots at United ratified $1.1 billion in cuts last week. United's ground workers and flight attendants will vote on their share of concessions at the end of the month. American's flight attendants began voting on April 1, and its two other major unions began voting the next week. During the telephone polling, the pilots and ground workers were allowed to change their votes, while the flight attendants were not. It was a contentious time for all the unions. Although they had reached tentative agreements with American on March 29, there were many challenges by members to the new contract terms. For instance, union leaders told executives that many workers thought the length of the contracts (six years starting May 1) and the annual pay raises outlined in them (1.5 percent starting in 2004) were too onerous. On Monday night, a half-day before voting was to conclude, leaders at the flight attendants' union asked American to allow them to extend voting for a week, saying that members had not been adequately informed of the new details of the contract. The company turned down the request. But it was the first significant sign that the vote could be going against American. All three unions closed voting the next morning, and the Allied Pilots Association and Transport Workers Union promptly announced results of their polling. The pilots said 69 percent of their voting members had supported concessions, while the ground workers said 53 percent of their voting members had. Those groups are expected to give $660 million and $620 million in annual cuts. But the flight attendants' union said in the afternoon that its members had voted by 51 percent to reject the concessions. Instead of filing for bankruptcy protection, as it had threatened to do, American said it and the union would extend the voting until 5 p.m. yesterday and agreed with union leaders to let members change their votes. The company said to do that, though, it had to pay several million dollars of a loan that had come due on Tuesday. Last night, it turned out that American's gamble paid off. http://www.nytimes.com/2003/04/17/business/17AIR.html?ex=1051584935&ei=1&en=cead6ef17dfd4d10 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