Bonuses irk airline workers

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April 18, 2007|By Peter Pae | Peter Pae,Los Angeles Times

When the airline industry went into a tailspin after the 2001 terrorist attacks, pilots, flight attendants and mechanics at American Airlines agreed to billions of dollars in cuts in wages and benefits to keep the carrier afloat.

Now AMR Corp., American's parent, is back in the black, so much so that 874 top executives will receive more than $150 million in stock bonuses this week.

That has the 57,000 rank-and-file employees seeing red.

"We made huge sacrifices," said Dana Davis, an 18-year American employee and spokeswoman for the Association of Professional Flight Attendants. American's 18,000 attendants took an across-the-board 16 percent pay cut and gave up vacation days. "We're not getting anything back for it."

Flight attendants staged a protest at the carrier's Fort Worth, Texas, headquarters Friday. Yesterday they had informational picket lines at selected airports around the country. Today the Allied Pilots Association plans a rally and march to AMR headquarters.

After five years of multibillion-dollar loses, airlines began making money in 2006 and executives are cashing in, setting the stage for contentious negotiations with employees whose labor contracts start expiring later this year.

"It's going to get nasty," said Michael Boyd, an industry consultant. The airlines "have really messed this up. The employees worked hard, gave back and it looks like management is basically saying, `Thanks for the give-back, suckers.'"

At United Airlines Inc., which emerged from bankruptcy in February, workers were so infuriated when they learned about chief executive Glenn Tilton's 2006 shares and options package - potentially worth $38 million - that the carrier's five unions took the unusual step of forming a coalition to press for better pay.

Flight attendants at Northwest Airlines Corp., angered by a potential payout of $380 million to 400 executives, are seeking court permission to strike. The attendants and other employees want to fight contract terms imposed during Chapter 11 bankruptcy proceedings that cut their wages by $1.1 billion. On Friday, a U.S. Bankruptcy Court judge denied requests by the union for a reversal of company-imposed pay cuts.

American says the executive bonuses, part of a stock-based performance share plan, are necessary to retain managers. And, the airline says, it's a logical way to reward managers for turning American around. The carrier was one of the few to avoid bankruptcy.

Since March 2003, when American's share price was $1.41, the stock has climbed to more than $30. Last year, the carrier, which hadn't turned a profit since 2000, recorded net income of $231 million.

American says that it is one of the few large carriers that still maintains a pension plan for employees.

"Our employees have among the best compensation packages in the airline industry, including the best-funded pensions and variable compensation plans that make them the best paid at virtually all profitability levels," said Andy Backover, a company spokesman.

He added that American in 2003 gave employees 38 million in stock options that are valued now at about $1 billion. About half of the options have been exercised.

The wage and benefits cuts that American employees agreed to in 2003 totaled $1.6 billion. The unions calculate that in the four years since, the cumulative effect has reduced workers' compensation by about $6 billion.

Daniel Pedrotty, an expert on corporate governance for the AFL-CIO, said American's executive bonuses weren't outrageous, considering the outsized executive compensation packages awarded in some other industries. The value of the bonuses will depend on share prices today, the day the incentive awards are distributed, but it will work out to about $200,000 per executive, if the pool is equally divided.

"It's not that big, but it does set the tone for how these managers are bringing the company through a challenging time," he said. "What gets the employees angry is the hypocrisy. They [the executives] think bonuses are too expensive - except for them."

Delta Air Lines Inc. stands in contrast. Its chief executive, Gerald Grinstein, has refused to take any extra cash, stock awards, stock options or a pay raise. And Grinstein cut his salary in half during the carrier's bankruptcy proceedings, to $338,000 a year, among the lowest for any major U.S. corporation.

Delta's relations with employees are fairly smooth. But at American, tensions are growing.

Last week American sent letters to its unions warning them not to disrupt airline operations or otherwise violate federal laws that govern relations between airlines and their workers.

The letter angered some union members.

"We've never been disruptive, never unprofessional," said John Nikides, a 23-year veteran who chairs the flight attendant union's Los Angeles chapter. "It sounds like a tactic on their part to portray us as merely disgruntled employees."

Peter Pae writes for the Los Angeles Times.

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