Unions Won't Take Concessions Again To Help Carrier

Employees at American Airlines say they won't be so willing to accept steep pay cuts and other concessions, should the Fort Worth-based airline approach them a second time, hat in hand.

This month marks the five-year anniversary since American workers took the unprecedented step of agreeing to voluntary cuts to pay and benefits, in order to keep their airline out of bankruptcy. It worked: American avoided Chapter 11 as those around it fell deeper into the red, and today the airline points to employee generosity as the airline's first step back from the brink.

"We wanted to preserve jobs, keep our work in-house and protect retirement and healthcare," Transport Workers Union president Jim Little told The Fort Worth Star-Telegram. "So we were looking to make adjustments anywhere else we could... We thought we had dodged a bullet."

But that was then, and this is now. American employees agreed to take one for the team in April 2003... and then learned the team's leaders were taking advantage. Just one day after American's unions agreed to across-the-board concessions, news surfaced American's leaders had also voted in their own bankruptcy-proof pension plan, to the tune of $25 million, and bonuses tied to employee retention.

That wasn't all. As it turned out, the pension plan and related bonuses were originally due to be disclosed April 1, when union workers were still deciding on the concessions. American asked for a 15-day extension to the filing with the Securities and Exchange Commission, however... apparently, to give workers time to vote before learning of the executives' plan.

"We felt like we'd been duped," Little said.

As ANN reported, AMR Chairman Don Carty (shown at right) later apologized for the disclosure. By then, however, the damage had been done. Carty resigned under pressure (and with the most dazzling of golden parachutes) on April 25.

American also cancelled the executive bonuses, in the face of union threats to revoke the pay agreements. The cuts held, and American slowly recovered. But no one forgot what American had tried to do... and that mistrust could come back to bite the airline very soon.

Once again, American is in financial trouble. The world's largest airline posted a $328 million loss for the first quarter of 2008, and despite steps such as reducing capacity to compensate, it's likely the airline will continue to suffer against a declining US economy, and astronomical fuel prices.

And this time, unions say, workers won't be so eager to help. "The employees aren't going to go back and gut the contract again," TWU's Little says. "That was a one-time deal."

"Absolutely not," adds Laura Glading, president of the Association of Professional Flight Attendants. "Our members would simply tell you that they don't have anything more to give."

In fact, both unions plan to continue pressure on American to restore pay levels to pre-2003 levels. American's pilots, represented by the Allied Pilots Association, have submitted a contract plan asking for a pay increase to 1992 levels, post-inflation.

That kind of labor relations environment makes things dicey for American, should things continue heading south.

"I don't think the labor pool is available for additional cuts," says William Swelbar of the International Center for Air Transportation at the Massachusetts Institute of Technology. "Is bankruptcy inevitable? No, but you can't ignore the fact that American has some significant obligations coming due that can't be ignored."

Jeff Brundage, senior VP for human resources at American, helped the carrier negotiate the 2003 concessions. He believes if American is backed against the financial precipice, employees will once again lend a hand.

"We still have that same spirit at the company," said Brundage. "We would do our best to face whatever the world throws at us and achieve as good an outcome as we can."

Time will tell whether Brundage's comments are optimistic, foretelling... or delusional.

FMI: www.aa.com