2 big unions at American to vote again on give-backs

Pilots may follow suit amid fury over executive perks

April 22, 2003|By NEW YORK TIMES NEWS SERVICE

Still fuming over American Airlines' failure to inform them of its compensation plans for senior management, all three of the company's major unions said yesterday that they would vote again or were considering voting again on $1.62 billion in annual concessions that their members had approved last week.

The Transport Workers Union, representing ground workers, joined the flight attendants union yesterday in seeking a new vote on the concessions. And the pilots union said it was discussing another membership vote if the other two unions did so. None of the unions said when they might vote again.

Donald J. Carty, chief executive of AMR Corp., American's parent, said the airline had already begun implementing some of the concessions and would continue doing so. He apologized for not disclosing the compensation packages more quickly, but defended them as justified.

Just last Wednesday, the airline was pounding its chest over winning huge labor concessions that it said were needed to avoid filing for bankruptcy protection. Unions for the pilots and the ground workers approved measures last Tuesday to give the company $660 million and $620 million in annual savings.

The flight attendants union said that day that its members had rejected $340 million in cuts by 51 percent. But it agreed to extend the voting by one day, and on Wednesday it said members had approved the deal by 52 percent.

But on Thursday, workers became infuriated after reading newspaper reports that American's board had decided to give seven top executives cash retention bonuses in 2004 and 2005 equal to up to twice their base annual salary if they stayed until January 2005.

Workers also learned, to their shock, that American had started putting money into a trust fund set up to protect the pension benefits of 45 executives from creditors in the event of a bankruptcy filing.

These executive benefits were disclosed in a filing with the Securities and Exchange Commission by AMR on Tuesday night, after voting had ended at two unions and almost ended at the third.

Carty said yesterday that a payment of $41 million - $16 million of it for federal taxes - had been put into the executive pension fund in October.

On Friday, the day after the unions learned of the executive compensation plans, Carty said he would get rid of the so-called retention bonuses for the seven executives, though he added that the company would not withdraw its executive pension payment.

That announcement was clearly an attempt to appease the workers, but it did little to douse the flames.

John Ward, president of the Association of Professional Flight Attendants, said that night that his union would vote again on its concessions.

The Transport Workers Union said the same thing yesterday.

Sam Mayer, of the Allied Pilots Association's board, told workers that "we are ruling nothing out at this time."

It would be an understatement to say that all this comes as stunningly bad news for American. The airline has lost $5.2 billion over the past two years and is expected to announce another significant first-quarter loss tomorrow.

Carty said last night that his mistake in not earlier disclosing the executive compensation packages was a "big one." But he also said those packages were perfectly justified, because the board wanted to keep executives from being lured away by other companies.

"Throughout all this, I should say, the AMR board operated well within the standards of all corporate guidelines" to address the retention issue, he said.

But many critics are not convinced. They say the bonuses are given to executives just for staying in a job and not for how they perform or the company performs. Such bonuses also assume that the executives should be kept around, but American's dismal financial performance suggests that perhaps the wrong people are running the company.

Second, the critics say, executives' annual compensation packages are already so much higher than the average workers' that companies in bankruptcy should not take extra measures to protect those parts of executive pension benefits that are not already federally guaranteed.

The other question critics are asking is: Why did American delay its annual 10-K securities filing, which detailed all this compensation, until Tuesday night? The most cynical workers say American was withholding the information so as not to jeopardize the union votes.

Carty said yesterday that the company had kept putting off the filing because it was in the middle of labor negotiations, and circumstances were changing by the day.

Several experts in labor law said the unions have proper legal grounds to redo the votes.

For one thing, none of the union presidents have actually signed off on the concessions, an action needed to make the contracts binding, said Charles B. Craver, a professor of labor law at George Washington University. The unions also have enough grounds to accuse management of bargaining in bad faith, he said.

David L. Gregory, a professor of labor law at St. John's University, said the flight attendants union could also redo its vote on the grounds that management was unduly interfering with the election process, because management put pressure on the vote's timing, and then asked union leaders to extend the voting in hopes that the concessions would be ratified.

He added that the constant warnings of bankruptcy from management could also count as undue interference.

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