American Lands Maintenance Deal

Bucking an industry trend toward outsourcing, American Airlines unveiled a deal Wednesday to provide maintenance on 29 airplanes operated by Latin American carriers.


Bucking an industry trend toward outsourcing, American Airlines unveiled a deal Wednesday to provide maintenance on 29 airplanes operated by Latin American carriers.

American said it reached an "agreement in principle" to perform heavy maintenance checks on Fokker F-100 airplanes owned by Synergy Aerospace, a division of the Synergy Group, a privately held Brazilian company. The firm controls Colombian airline Avianca, Brazilian carrier Ocean Air and Peruvian airline Wayra.

American executives unveiled the deal, which they valued in the tens of millions of dollars, on Wednesday at the annual shareholders meeting of AMR Corp., American's parent. American will do the work at its Tulsa, Okla., facility.

At the meeting, Gerard Arpey, AMR's chief executive, noted the positive developments but said the industry remains in financial gloom.

"The industry is even more troubled today than a year ago," Arpey said, noting that high fuel prices and low fares continue to devastate the major hub airlines.

AMR has lost $7.4 billion since 2000, including $162 million during this year's first quarter.

Still, the airline's stock (ticker: AMR) surged nearly 10 percent Wednesday. It closed at $12.09 per share, up $1.07.

Arpey discussed his airline's focus on working with employees to turn the company around, and he said the Synergy contract was possible because of a joint effort of management and union officials in Tulsa.

But some labor strife remains. Outside the annual meeting, several dozen flight attendants from American Eagle, American's regional affiliate, complained about low pay and benefits.

Leaders with the Association of Flight Attendants said they would authorize a vote by attendants on whether they should strike, if negotiations stall. Eagle flight attendants have been negotiating for a new contract for more than four years.

"American Eagle is an afterthought for AMR, and so are the employees," said Soad Hamdan, an eight-year veteran based in Chicago.

Veronica Tenerelli, an 11-year flight attendant, said she and her colleagues are "tired of living at poverty-level wages."

Arpey said the company has made several contract proposals that "are responsible offers, given industry conditions."

When asked about the possibility of a strike, Arpey said "we're a long way away from that right now."

Under the Railway Labor Act, which governs airline contract negotiations, strikes are only authorized if the National Mediation Board declares an impasse, and after a 30-day cooling-off period expires.

Other union leaders, meanwhile, lauded the airline for landing the Synergy deal.

"This really validates the track that we're on," said Dennis Burchette, president of the Tulsa chapter of the Transport Workers Union of America, which represents American's mechanics and ground workers. He said mechanics broke into applause when the deal was announced at the maintenance base Wednesday morning.

American originally owned the Synergy airplanes and phased the F-100 out of its fleet several years ago. The Tulsa facility did the maintenance work on the F-100.

"This is a great opportunity to bring more work to our maintenance bases," said Bob Reding, American's senior vice president of technical operations.

The Synergy deal comes as many U.S. carriers, including Delta Air Lines and JetBlue Airways, are sending their airplanes overseas to be maintained by outside contractors.

American executives and union leaders began working this year to turn the Tulsa maintenance base into a profit center, with a combination of efficiency improvements and third-party contracts.

During the annual meeting, Arpey also:

Said American isn't rushing to follow bankrupt rival United Airlines in dumping its pensions. He said American's pensions, while underfunded, are in better shape than those of the other major hub carriers outside of bankruptcy.

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