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 \----------------------------------------------------------/ Unions at American Airlines Criticize Plan for Pensions April 18, 2003 By EDWARD WONG Union leaders at American Airlines yesterday denounced the company's disclosure on Tuesday night that it had set up a trust fund to protect top executives' pensions if the company went into bankruptcy and that it planned to pay bonuses to several executives for staying with the company until 2005. Union officials said they might not agree to concessions their members had voted to give management, even if that meant forcing the airline to file for bankruptcy protection. The problem arose a day after American appeared to have secured $1.8 billion in annual labor concessions, which it said were necessary for it to stay out of bankruptcy court. The Allied Pilots Association and the Transport Workers Union closed voting Tuesday morning and said they had ratified $660 million in annual concessions from pilots and $620 million from mechanics and ground workers. The Association of Professional Flight Attendants agreed with management to extend its voting until Wednesday, when its members ratified $340 million in concessions. But the unions said yesterday they had no idea that AMR, the parent company of American, had agreed to give compensation packages to executives even as the company was demanding concessions from the unions. The existence of the trust fund for AMR's top 45 executives, and "cash retention" bonuses for the company's top six executives of twice their base salaries, were disclosed Tuesday night in AMR's annual 10-K filing with the Securities and Exchange Commission. American had delayed the filing for two weeks by saying that it was in the middle of labor negotiations. "We regard the failure to timely disclose the existence of this fund in bargaining by American as a material breach of its obligations to provide relevant information," James Little, director of the air transport division of the Transport Workers Union, said yesterday in a written statement. "We have signed no new agreement, and in light of the disclosure in AA's S.E.C. filing, we must reconsider whether we will sign off, even if the consequence is a bankruptcy filing." On Tuesday, the union said 53 percent of its voting members had ratified the concessions agreement. In its filing, the company said it created a trust last October to provide the top 45 executives with supplemental pension benefits that would be protected from "the claims of the creditors" if the company had to file for bankruptcy protection. The company's top four executives would also be paid an undisclosed amount for managing that trust. The company did not reveal exactly how much it was putting in the trust. Yesterday, it issued a lengthy statement defending the trust. It said the board decided to partially fund the trust to "avoid the loss of additional senior management." The fund is similar to pension trusts for other employees, the company said. The company set up a pension plan for executives in 1985, but benefits in that plan were vulnerable in a bankruptcy. American's new pension fund is similar to an executive pension trust fund that Delta Air Lines set up in the name of its chief executive, Leo F. Mullin. That fund has been heavily criticized by Delta workers and former executives. American also said yesterday it was cutting its management ranks and support staff by 5 percent. That is part of $100 million in annual cost savings from nonunion workers that the company had said for months it was getting. John E. Darrah, president of the Allied Pilots Association, said yesterday he was holding off approving the concessions until he saw what management intended to do about the recently disclosed compensation packages. He said none of the union leaders knew about the pension fund or bonuses during negotiations, and all the unions were talking to their lawyers now. "Everybody's in disbelief," he said. John Ward, president of the flight attendants' union, said "the only responsible course of action for the company to take" is "for this money-grab to be rescinded, immediately." "Give it back," he said. On Tuesday, 51 percent of voting flight attendants declined to give concessions to American, prompting the extension of the voting period for a day and a half. American's "cash retention bonus" is the kind of compensation that has been attacked by critics of executive pay. In its filing, the company said the top six executives would get a bonus equal to twice their base salaries and a seventh executive would receive a bonus equal to 1.5 times the base salary for staying at the company until January 2005. AMR would pay half of each bonus on Jan. 30, 2004, and the rest on Jan. 31, 2005. The bonus of Donald J. Carty, the chief executive, would be more than $1.6 million. Last month, he agreed to a 33 percent cut in his base salary, and to forgo a bonus for a third year in a row. Other executives have also agreed to take base salary cuts. Management experts said the company's handling of executive pay will deepen the rift between managers and workers. "It contributes to the sense that `we are not all in this together,' particularly when companies are asking employees for concessions," said Peter Cappelli, director of the Center for Human Resources at the Wharton School of the University of Pennsylvania. "This specifically suggests that the concessions are benefiting the executives and not the company per se. Does this create long-term problems? Does this make it worse? Yes, it certainly does." http://www.nytimes.com/2003/04/18/business/18AIR.html?ex=1051674900&ei=1&en=8896e18930dd52f7 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