Just a day after American Airlines' unions agreed to $1.8 billion in pay and benefit cuts to avert a bankruptcy filing, union leaders yesterday threatened not to sign the agreements, contending that American kept details of executive compensation perks secret until after employees ratified their new cost-cutting contracts.
As its flight attendants were in the last hours of voting for $340 million in annual pay and benefit cuts Tuesday, American filed its year-end annual report with the Securities and Exchange Commission. It disclosed that the airline funded a supplemental pension trust for its top 45 employees that would protect a portion of their retirement income if the airline were forced to file Chapter 11. The airline also offered its top six executives cash bonuses of twice their base salaries if they were to remain with the airline through January 2005.
As the filing's contents became known yesterday, American's labor leaders became outraged. "We have signed no new agreement, and in light of the disclosure of American Airlines' SEC filing, we must reconsider whether we will sign off, even if the consequence is bankruptcy," James C. Little, a director of the Transport Workers Union, which represents mechanics and ground workers, said in a communication with members.
American spokesman Bruce Hicks said no union officials have told American that they would not sign the agreements. "If they did, that would be tragic," Hicks said.
He added that union leaders were aware of the senior executives' pension trust because it was created in 1985. But the trust was not funded until October.
For weeks, American warned that if any of its three unions voted against the company's proposed concessions, it would seek bankruptcy protection. More than 69 percent of American's pilots voted to accept a 23 percent pay reduction and the elimination of 2,000 jobs to save $660 million. More than 53 percent of American's mechanics and baggage handlers voted in favor of $620 million in concessions. The flight attendants on Wednesday reversed their initial rejection of the concessions package after the union and management agreed to extend elections for one day.
John Darrah, president of the pilots union, said his members were "justifiably irate" with the compensation package and that "every employee on the property should question management's motives and judgments."
John Ward, president of the flight attendants union, said the executive bonuses destroyed the trust management had with its flight attendants.
"The only responsible course of action for the company to take at this time, if it has any sense of decency and any hope of restoring any level of trust from flight attendants, is for this money grab to be rescinded immediately," Ward said.
Ward questioned the timing of American's SEC filing. For weeks, American held off filing the annual report as it tried to reach agreements with its unions. Last month, the airline asked federal regulators for a two-week extension.
"Knowledge of this outrage would probably have doomed any agreement, and rightly so," Ward said.
American's Hicks denied the accusation and said the airline held off filing its annual report to determine whether it could reach agreements with its employees or would instead file for bankruptcy. "We simply did not have the ability to get the filing completed to meet the deadline," Hicks said.
American is the latest airline -- joining Delta Air Lines, US Airways and Continental Airlines -- to come under fire from employees for doling out hefty compensation packages to executives while asking for concessions from workers.
American said the compensation package for chairman and chief executive Donald J. Carty was 88 percent lower than his package in 2001 and that he agreed to cut his base pay this year by 33 percent.
One local American pilot said he was "outraged" by the bonuses. "We gave up $1.8 billion as a group of employees, and management is not sharing," he said. "To me, this smacks of Enron."