Promises "No More Surprises"

AMR Chairman Don Carty (right) publicly apologized Monday to American Airlines employees, saying that he had made a "big mistake" in his previous talks about executive compensation with union leaders and launching a new round of briefings to help give unions "complete confidence" as the airline's cost restructuring process goes forward.

"You know, the world's largest airline doesn't do things halfway. When we do something, we do it bigger and better than anyone else," Carty said in a statement. "We did what has never before been done... we delivered the largest consensual savings in U.S. history. And then I made a mistake and, of course, it was a big one."

Last week, Carty announced that he and his senior management team had given up their planned retention payments to further demonstrate their commitment to "shared sacrifice" as the company works to reduce employee costs by $1.8 billion a year.

Carty emphasized that there was nothing improper about the retention agreements, only in the way they were communicated.

Takes Heat for Board

In addition, Carty said the errors were his own, and should not reflect upon the AMR Board of Directors.

"Our Board will retain its historical practice of ensuring that American - - and AMR -- are conservative and responsible in all financial matters, including compensation structures," Carty said.

'What I really meant was...'

Monday, the company began a new round of discussions with labor leaders to answer their questions about executive compensation agreements and help address any misunderstandings about the company's 10-K filing.

Carty said union leaders "must have complete confidence in the fact that the sacrifices are indeed shared and that there are no more surprises. They deserve the truth and so do our employees."

In the past two years, Carty's total compensation has dropped by more than 80 percent, and he has declined any retention payment or bonus or performance share grant. Of the six major air carriers, Carty is the lowest-paid CEO.

"It is important that all the employees who have been asked to share in the sacrifice understand that despite my mishandling of this particular situation, the board has acted responsibly and I have shared in the sacrifice and my commitment is real," Carty said.

'Precipice of Bankruptcy'

Carty said that AMR remains on the "precipice of bankruptcy," and urged union leaders and employees to stand by the consensual cost-savings agreements ratified last week.

"The precariousness of our financial condition simply can't sustain any action that would delay or prevent the consensual restructuring measures from taking place on schedule," Carty said.

With large payments pending and facing "very real deadlines," Carty said that the company must immediately implement these agreements or be forced to file for Chapter 11 protection.

Chapter 11 Means 10,000 More Job Cuts (So Deal Now)

Bankruptcy would force more aggressive cost cuts, including an additional 10,000 jobs, further pay reductions and a significant threat to employee pensions.

Carty said that employees had worked too hard to stave off bankruptcy to abandon the consensual agreements now, and said that he would work hard to repair any damage he had caused to the spirit of cooperation and collaboration he is trying to build at American.

"We've come this far because everyone has pulled together to make the tough choices and do what is necessary to keep this great company of ours out of bankruptcy," Carty said. He vowed to work to "build a bridge back to the path that allowed us to forge these historic agreements in the first place."

FMI: www.amrcorp.com