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 \----------------------------------------------------------/ American Air's Parent Reports Huge Loss April 24, 2003 By EDWARD WONG AMR, the parent of American Airlines, reported a first-quarter loss of $1.04 billion yesterday, reflecting a dismal three months in which it struggled to fill seats and avoid bankruptcy court even as air travel plummeted because of a depressed economy, the invasion of Iraq and the global spread of a new respiratory illness. AMR's loss equaled $6.68 a share; analysts polled by Thomson First Call had expected a loss of $6.08 a share. In the quarter a year earlier, AMR had a loss of $1.56 billion, or $10.09 a share, which included the effect of an accounting change of $988 million, or $6.38 a share. The first-quarter loss this year came on revenue of $4.12 billion, a 1 percent drop from the period last year. "Our first-quarter results were truly dreadful," Donald J. Carty, the chief executive of AMR, said in a statement. Yesterday, the company canceled a planned conference call between its chief financial officer, Jeff Campbell, and industry analysts and reporters, citing the "fluidity" of the situation at the airline. The losses in 2001 and 2002 totaled nearly $5.2 billion. Its loss last year, $3.51 billion, was the largest in aviation history. AMR's stock closed yesterday at $3.80 a share, up 37 cents. The worst could still be ahead for American, the world's largest airline, including a possible trip to bankruptcy court, an overhaul of senior management and increased scrutiny of its board - all because of a fiasco last week involving management's delayed disclosure of what labor leaders perceive to be generous executive compensation packages. The Transport Workers Union and the Association of Professional Flight Attendants said they would vote again on $906 million in annual concessions they had agreed to give the company last week, and the Allied Pilots Association said it would withhold final approval of $660 million in annual concessions. The unions are fuming over the failure of Mr. Carty to disclose in a timely manner AMR's intent to pay retention bonuses in the next two years that areworth up to twice base salary to seven executives. The company had also put off disclosing a payment of $41 million it made last October to a trust fund set up to protect the pension benefits of 45 executives in the event of bankruptcy. The company had been negotiating since February with the unions for the $1.62 billion in annual concessions, saying the cuts were necessary to avoid a trip to bankruptcy court. But it neglected to disclose the new executive benefits until it made a securities filing on the night of April 15. By then, two of the unions had finished voting and a third was close to finishing. George Price, a spokesman for the flight attendants' union, said yesterday that the union would use a paper ballot for the vote, which would take 30 days. It has not scheduled a starting date for the voting, he said. The ground workers' union has not announced details of its new vote. The flight attendants had complained to management on April 14 that the union was having problems with the phone voting system. American Airlines, which last Friday canceled the cash bonuses to executives but kept the payment to the pension trust, insists it has valid concession agreements and will go ahead with putting them into effect by May 1. The flight attendants' union said it was looking at legal options to block that. Gregg Overman, a spokesman for the pilots' union, said yesterday that the union would not vote again on concessions, but would not approve the concessions it had agreed to on April 15 until it determined what happened at the other unions. Mr. Overman said the union's lawyers had concluded that a provision in the agreement allowed the union's board to void it if it chose. On Tuesday, the board told John Darrah, the union president, not to sign the agreement. When asked what the union would do if American puts into effect the concessions on May 1, Mr. Overman said, "It remains to be seen." Raymond L. Neidl, an analyst at Blaylock & Partners, wrote in an investor's report yesterday that "even if a revote is ruled not to be legal and cost cuts are implemented, AMR would probably face turmoil and probably bankruptcy if current management cannot patch up things with its workers and cut the ill will, since this is a service industry and distrustful employees can ruin service and drive away customers." Starting at 9 a.m. yesterday, union leaders met in the Dallas area with Mr. Carty; Representative Martin Frost, a Democrat from Texas; and other local politicians to talk about the situation. American is based in Fort Worth. There is now widespread speculation over whether AMR's board is seriously considering asking Mr. Carty to step down. Board members have remained quiet on that, though some union officials have been demanding Mr. Carty's removal. Mr. Carty also serves as chairman and has not indicated that he would leave the company. The board is scheduled to meet today, and Mr. Carty's performance will be on the agenda. But the board itself is also being criticized - not only for giving out the executive compensation packages, but also for failing to push Mr. Carty to disclose them during labor negotiations. Mr. Carty has said the board's decision to give the executive benefits was justified. But what did directors know about Mr. Carty's decision to delay the disclosure? They have not answered that question. http://www.nytimes.com/2003/04/24/business/24AIR.html?ex=1052197512&ei=1&en=f5bcfa6cbbec42c5 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