It Was This Or Bankruptcy (Rock/Hard Place Scenario?)
AMR Chairman Don Carty (right) expressed his
gratitude, Wednesday, to the employees of American Airlines and
their union leadership for ratifying ground-breaking agreements to
achieve $1.8 billion in annual employee cost savings. American's
unionized employee groups rallied to ratify consensual agreements
reached just two weeks ago with the Allied Pilots Association, the
Association of Professional Flight Attendants and the Transport
"This development is unprecedented in the history of the U.S.
airline industry," Carty said, heralding ratification votes to
approve the restructured contracts, "and I am enormously proud of
our employees... These votes clearly demonstrate our employees'
dedication and commitment to creating a secure future for American
Airlines and its people," he added.
Carty also thanked union leaders for agreeing to accelerate the
ratification process from the standard 30 days to two weeks, and
credited all three unions for working together to overcome
last-minute issues with the APFA's balloting process and urging the
extension of voting for flight attendants. "This has been a race
against the clock," Carty said. "My thanks go to the union
leadership and to all our employees who recognized the urgency of
our financial crisis and rose to meet the challenge."
Commenting on the fact that the company had made millions of
dollars in loan repayments to allow the extension, Carty said
American's employees had proved that the risk was worth taking.
"I'll bank on the employees of American Airlines any day," Carty
said. "I believed it was important to make an investment in the
future of this company, just as our employees have made a
significant investment themselves. Today I have even more
confidence that, by continuing to work together, we can make our
investment pay off."
Carty and AMR President and COO Gerard Arpey said
ratification of the labor agreements is a significant step toward
helping the company in its efforts to restructure costs on its own.
In addition, the company continues its work to secure
accommodations from its lenders and suppliers.
"Today was an important step in our ability to transition to the
21st century as a new airline in a new era. With the help of our
employees -- our greatest asset -- we will take on the competition,
and work together to succeed," Carty and Arpey said. But the
company cautioned that even with ratification of the agreements,
American's financial condition is weak and its prospects remain
uncertain. Carty warned that the company is not yet "out of the
woods," and "that given the hostile financial and business
environment we find ourselves in and its inherent risks the success
of our efforts is not assured."
accords with the three unions are far reaching and touch on nearly
every aspect of pay, benefits and work rules. The company has also
announced changes to pay, benefits and work rules for all non-union
employees, including agents, representatives, planners, support
staff and management.
The cost savings were divided by work group as follows:
- Pilots: $660 million
- Flight attendants: $340 million
- TWU Represented employees: $620 million
- Agents, representatives and planners: $80 million
- Management and support staff: $100 million
Carty, who said the restructuring effort is based on a model of
"shared sacrifice," took a 33 percent base pay cut, declined a
bonus for the third consecutive year, and participated in other
changes that significantly reduced the value of compensation for
"These are difficult times for the company and our people,"
Carty said. "Rest assured that I would not ask for these sacrifices
if I weren't convinced that they were absolutely necessary. The
company recently announced a new profit sharing and stock option
program that will allow employees to benefit from the company's
"Working together, we have made hard choices, but they are
choices that are ultimately in the best interest of American
Airlines and its employees," Carty said.