American Airlines Bonus Doesn't Fly

This year has been heralded as the possible comeback of the airline industry, but unions at American Airlines are wondering if it's too early to be celebrating with bonuses.

The three American labor groups, the Transport Workers Union, the Allied Pilots Association and the Association of Professional Flight Attendants, expressed concern over an executive bonus plan last week.

The payments are part of a compensation program devised in 2003 giving financial incentives to managers for AMR Corp.'s stock price performance. It was then that American employees, union and nonunion, took significant pay cuts in an effort to save the airline from filing bankruptcy. American has lost more than $7 billion since 2001.

The years of cost-cutting as well as changes in American's route structure have begun to produce positive results. American would have made profits in 2005 had it not been for historically high fuel prices.

The improvements boosted American's stock. Under the program about 1,000 managers are eligible for bonuses. At the current stock price, the bonuses range from $2,000 for midlevel managers to $1.4 million or more for four senior executives. Gerard Arpey, AMR's chief executive, did not participate in the bonus program.

The unions last week said they were concerned with the "irrationality" of giving bonuses based solely on stock performance.

Union officials met with senior American executives last Thursday, said Gordon Clark, president of TWU 530 in Kansas City, which represents mechanics at the airline's Kansas City overhaul base.

Clark said management did not have immediate answers to some questions, so another meeting will be held.

"I think we still have a lot of questions about who gets these bonuses, how much, and what it's tied to," he said. "I think the union wants to know more about management's interpretation of this program."

American confirmed it has met with the unions and planned to meet again.

"We can't disclose what's been discussed so far, but we're committed to continuing the dialogue," said Lisa Bailey, an American spokeswoman.

Despite drastic cuts that have eliminated thousands of jobs at American since the Sept. 11 terrorist attacks and the recession that followed, American's unions have had decent relations with Arpey's management team. Arpey in 2003 succeeded Don Carty, who resigned after wrecking his relationship with American's unions. Shortly after American's hourly employees approved $1.8 billion in annual pay cuts, it was disclosed that Carty and other top executives were eligible for bonuses and had a protected pension plan worth millions.

Arpey, on the other hand, turned down a pay raise upon being appointed CEO.

The job cuts have also affected the Kansas City overhaul base, which currently has about 800 hourly employees and 135 salaried staff, according to Clark.

Employment has stabilized since American's last round of big layoffs at the base in June, and Clark said American recently secured a contract for maintenance work on six Boeing 767 planes of Air Canada.

Kansas City Star


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