Highlights in RED The company has said that it informed Mr. Little of the TWU ATD?
IMMEDIATE ATTENTION
[SIZE= 10pt]April 17, 2003[/SIZE]
[SIZE= 10pt][/SIZE]
[SIZE= 10pt]TO: [/SIZE]All TWU/AA Members
[SIZE= 10pt]Dear Sisters & Brothers:[/SIZE]
[SIZE= 10pt]Yesterday, as contract ratification for all three union groups was being completed, the Company made a filing with the Securities and Exchange Commission, indicating it had established a special pension fund for its executives. The existence of this fund was never revealed to our consultants while they examined AA's books, nor were we informed of it in the bargaining which led to the concessions we agreed to in order to avoid a bankruptcy. We regard the failure to timely disclose the existence of this fund in bargaining by American as a material breach of its obligations to provide relevant information.
The concessions our members barely ratified the other day were based on the premise of shared sacrifice. This fund is the opposite of shared sacrifice and calls into question the basis of each of our contracts. We have signed no new agreement, and in light of the disclosure in AA's SEC filing, we must reconsider whether we will sign off, even if the consequence is a bankruptcy. Unless the Company reforms itself on the issue of executive compensation, there is no basis to cooperate in its effort to survive.[/SIZE][SIZE= 10pt][/SIZE]
[SIZE= 10pt]Sincerely & fraternally,[/SIZE]
[SIZE= 10pt][/SIZE]
[SIZE= 10pt] [/SIZE]
[SIZE= 10pt]James C. Little
Director Air Transport Division
Intl. Administrative Vice President[/SIZE]
[SIZE= 10pt][/SIZE]
Associated Press
American Airlines Trust Protected Execs
Thursday April 17, 2:24 pm ET
By Angela K. Brown, Associated Press Writer
FORT WORTH, Texas (AP) -- As it piled up record losses and made deep cost cuts, American Airlines created a pension trust that protected some benefits for dozens of top executives in case the carrier went into bankruptcy.
The executives' deals, which included huge bonuses for a few, were disclosed in a regulatory filing late Tuesday -- after the scheduled end of voting on steep concessions by the airline's major unions.
Few employees learned of the executive benefits until after they had approved the last of $1.8 billion in annual wage and other concessions, which the world's largest airline said it needed to avoid bankruptcy.
Voting for the pilots and ground workers ended Tuesday morning. Flight attendants were given a one-day extension, and in a remarkable reversal accepted $340 million in labor concessions a day after narrowly rejecting them.
"We just got slammed with this. ... We're looking into this right now," said George Price, a spokesman for the flight attendants' union. He declined further comment.
Company spokesman Bruce Hicks defended the trust and said it was disclosed to union leaders and their consultants over the past several weeks -- but under a confidentiality agreement that prohibited them from informing rank-and-file workers.
"Retention benefits are designed to keep key senior management who are constantly being wooed by other companies," Hicks said.
Hicks said the extra pensions were similar to a supplemental plan for American's pilots, which he said also would be protected in bankruptcy. Ground workers and flight attendants, who earn far less than pilots, have no such a plan, he said.
According to the filing with the Securities and Exchange Commission by American's parent, Fort Worth-based AMR Corp., the company funded a pension trust for 45 top executives in October that protected some of their benefits even if the carrier filed for bankruptcy protection.The company did not indicate the cost of funding the trust, which Hicks said was 60 percent funded. The existence of the trust was first reported Thursday by The Wall Street Journal.
In addition, the company offered its six top executives bonuses double their base salaries if they remain until early 2005.
Among the executives in line to receive the bonuses is chairman and chief executive Donald J. Carty, who had told workers last month that he would take a 33 percent pay cut. His salary in 2001 was $585,000. Carty did not publicly discuss the bonus.
In the months since the trust was created, the company demanded pay cuts of 23 percent from pilots and 16 percent from flight attendants and ground workers, effective May 1.
And after the flight attendants vote, American executives said that despite those hefty give-backs, the carrier still faces a tough environment where bankruptcy remains a possibility.
"We are not out of the woods yet," Carty said, citing the economy and other factors beyond the company's control.
The vote marked a swing of 1,642 votes from a day earlier when flight attendants narrowly rejected the package of layoffs, wage cuts and reduced benefits. They were given an extra day to vote after some workers complained about trouble voting online and by telephone.
"We are almost solely returning AMR to profitability under our concessions," said 26-year flight attendant Deborah Seale, who voted against the deal. "Management will get a 4 percent cut off the first $30,000 of their salary, and most of us don't even make $30,000 a year."
If flight attendants had rejected the labor cuts, AMR's board of directors was prepared Wednesday night to approve a Chapter 11 bankruptcy court filing to conserve cash and avoid credit payments of at least $50 million, Hicks said.
Airlines have been reeling for months, hurt by the sluggish economy, fallout from the Sept. 11 attacks, fears over the SARS virus and the war in Iraq. United Airlines is already in bankruptcy; US Airways only recently emerged from it.
American has struggled against low-cost competition and AMR has lost nearly $5.3 billion in the past two years. To stay afloat, the airline asked its three biggest unions to approve $1.8 billion in labor cuts, including the layoffs of 2,500 pilots, 2,000 flight attendants and up to 1,400 ground workers.
Union leaders reluctantly backed the plan, saying cuts could be even worse in bankruptcy.
Altogether, American got sought $660 million in annual concessions from its 12,000 pilots, $620 million from 34,000 ground workers and $340 million from the flight attendants.
Fitch ratings service said the concessions would bring American's unit labor costs in line with rivals Continental, US Airways and United.
In Thursday trading on the New York Stock Exchange, AMR shares rose 87 cents, or 21 percent, to $5.10. Other airline stocks also rose as investors were encouraged by American's ability to cut costs outside of bankruptcy. Continental Airlines shares gained 11 percent, while Delta Air Lines shares surged 10 percent.
