AMR's Carty faces career crisis By Dan Reed, USA TODAY FORT WORTH =97 When Don Carty succeeded fiery Bob Crandall as AMR's chief=20 executive in 1998, American Airlines' parent company was heading for a=20 record $1.3 billion annual profit, and the only thing Carty wanted to=20 change was its record of poor labor relations. But his own sour=20 relationships with American's workers have left Carty fighting to save his= =20 career and his company. Almost five years after he became its CEO, AMR is=20 poised to announce Wednesday a first-quarter loss of $800 million to $1=20 billion. And bankruptcy court protection might be impossible to avoid.=20 AMR's board, which meets Wednesday, gave preliminary authority to file a=20 Chapter 11 bankruptcy petition on March 31. Bankruptcy court was avoided=20 when union leaders tentatively accepted contract concessions before lawyers= =20 could file the papers. Now, union leaders and company officials alike expect the AMR board once=20 again to order a bankruptcy filing if unions act on threats to send the=20 now-ratified concessions back to employees for a new vote. The agreements,= =20 plus pay and benefit reductions for non-union workers, would save AMR $1.8= =20 billion a year. The pilots union said Tuesday that it would not call for=20 another vote but would hold off indefinitely on signing the agreement. In addition to weighing a Chapter 11 filing, people close to the situation= =20 at American say the board likely will consider whether Carty, 56, can=20 continue to lead the airline. Carty admitted Monday that it was his "poor=20 judgment" and "dumb, naive mistake" that has angered employees and put=20 American on the brink of bankruptcy protection this time. Carty said he=20 failed to fully disclose details of the changes potentially boosting=20 executives' compensation while workers were voting on their concession=20 deals, in part because he believed the changes were reasonable in light of= =20 much more lucrative deals for executives at rival Delta, and therefore=20 unlikely to cause a problem. He also was concerned about news leaks that=20 might publicize American's growing problem with executive retention. Other= =20 American officials acknowledge that after revelations of Delta's executive= =20 compensation sparked controversy in March, Carty worried that revealing the= =20 details of American's smaller retention program might doom any chance of=20 ratification of the concessions. AMR has now canceled the retention bonuses for its top six executives, but= =20 it is keeping in place a trust fund that partially protects 45 executives'= =20 pensions if AMR winds up in bankruptcy reorganization. Carty's "hat-in-hand= =20 apology" on Monday won't "come close to rebuilding the trust that was=20 lost," says Patt Gibbs, co-founder of the Association of Professional=20 Flight Attendants. Out of office for more than a decade but still active in= =20 union dealings, Gibbs joined nearly every current and past union officer in= =20 urging members to approve the concessions costing them $340 million a year.= =20 They agreed with management that bankruptcy reorganization would be much=20 worse for all involved. "Now, we all feel like (Carty) pulled the rug out=20 from under us," says Gibbs. "I don't know how he could continue to lead=20 this company, whether or not we enter bankruptcy. Who could ever believe=20 him again?" She says she still opposes any union action that would hasten=20 an AMR Chapter 11 filing because she believes that would harm workers more. Carty was asked Monday if he would step down if unions made his continued=20 leadership the central issue in accepting the concession deals. He dodged=20 the question. Several AMR board members did not return calls seeking=20 comment on the matter. Board member and former U.S. senator David Boren,=20 president of the University of Oklahoma, said through a spokesman that he=20 expected to have something to say "in a few days," once he "reviews the=20 situation" at the board meeting. Steve Stapleton, a bankruptcy attorney in= =20 Dallas with experience in airline cases, says the late disclosure "has been= =20 handled so badly by American, it's not funny. If it weren't so serious, it= =20 would be laughable." It could prove fatal to Carty's career, he says.=20 Though the board OK'd the changes in executive compensation, "Carty is the= =20 most visible person," Stapleton says. He was the one telling workers,=20 "We're all in this together." Beyond the matter of affixing blame, there is= =20 a growing question of whether Carty remains a viable leader. Even before=20 the latest controversy broke out last week, many in labor were accusing the= =20 easygoing, collegial Carty of running roughshod over workers and of trying= =20 to break the unions. They complained that he concocted a crisis time frame= =20 to pressure them into gutting their contracts. They also accused him of=20 demanding specific cost cuts and refusing to bargain. After the revelation about executive compensation, some labor leaders=20 publicly opined for the return of the 68-year-old Crandall, known as "Darth= =20 Vader" in some labor circles in the 1980s and 1990s for his aggressive=20 stance on labor cost control, as at least a temporary replacement for=20 Carty. Former American CFO Tom Horton says he is concerned about Carty's=20 future and those of other close friends in American's management. His=20 departure last year for a better-paying job as executive vice president of= =20 AT&T was a catalyst for changes partially guaranteeing officers' pension=20 plans. "Frankly, I don't know if they can continue to lead the company=20 because it's not clear the people there will follow them," Horton says.=20 "It's a damn shame, too, because they're very good people. The wonder is=20 why they even want to stay there. Compensation at American has always been= =20 at the bottom of the industry, at least among the biggest carriers. And now= =20 they're getting all this abuse, and for what? For trying to save the=20 company and preserve jobs." Sequence of events AMR's success in winning concessions from labor unions to avoid bankruptcy= =20 court is threatened by workers' outrage over executive compensation. Here's= =20 the background. March 2002: AMR's board approves retention bonuses to keep key executives=20 from leaving during the airline's economic crisis. October 2002: AMR puts $30 million into a trust partially guaranteeing 45=20 officers' pensions against a subsequent bankruptcy and pays $16 million in= =20 taxes on trust. January 2003: Company asks its unions to negotiate permanent concessions=20 worth $1.6 billion a year. Late March: Other airlines disclose executive compensation packages that=20 outrage workers. Congress passes a $3.2 billion emergency airline aid=20 package with strict caps on executive pay. March 31: American's unions tentatively agree to concessions, meeting the=20 company's deadline to avoid filing for bankruptcy protection. April 14: Pilots and ground workers ratify concessions, but flight=20 attendants reject them. April 15: Flight attendants pass the deal. April 17: First news reports appear about the executive compensation=20 changes, which AMR disclosed in a Securities and Exchange Commission filing= =20 on April 15. Contributing: Marilyn Adams *************************************************** The owner of Roger's Trinbago Site/TnTisland.com Roj (Roger James) escape email mailto:ejames@xxxxxxxxx Trinbago site: www.tntisland.com Carib Brass Ctn site www.tntisland.com/caribbeanbrassconnection/ Steel Expressions www.mts.net/~ejames/se/ Site of the Week: http://www.pscutt.com TnT Webdirectory: http://search.co.tt *********************************************************