American Airlines Employees to Get 1.5% Raise

Next month, every U.S. employee of American Airlines -- from baggage handlers and reservation agents to the airline's chairman and chief executive -- will get a bump in their salary.

At 1.5 percent, the raise isn't exactly lucrative. But American officials say it symbolizes the progress the airline has made in improving its operations amid hazardous financial conditions.

"It's something we've been working toward under the turnaround plan," spokeswoman Lisa Bailey said.

The board of directors of Fort Worth-based AMR Corp., American's parent, approved a 1.5 percent pay raise this week for all management and nonunion-represented employees, including the airline's top officers, according to a quarterly report filed Thursday with the Securities and Exchange Commission.

Union employees will also get a 1.5 percent raise, under contracts approved two years ago.

For many management employees, it will be the first increase in their base salary since 2003, Bailey said. The raise will be effective May 1.

About 6,500 of American's 85,000 employees are classified as managers.

"I think the board recognizes that it's important to keep good employees, and we want to keep the people who are here," Bailey said.

It will be the first raise that Gerard Arpey, American's chairman and chief executive, has seen in several years. In 2003, his pay dropped by 14 percent, even as he was promoted to chief executive.

And last year, Arpey turned down a proposed 22 percent annual raise, worth $110,000, that the board had offered him when he took the chairman's job.

American is expected to release full details of Arpey's and other executive officers' compensation packages today, when the airline files its annual proxy statement with the SEC.

Denny Breslin, an American pilot and spokesman for the Allied Pilots Association, said it was important that raises for executives and managers remain in line with employee increases.

"If they got more than that, I think you'd see a lot of upset people," he said.

While their base salaries haven't increased, American's top officers have been rewarded with some stock options under the company's executive performance plan. Those options, which total 400,000 shares, are linked to the airline's long-term stock performance and cannot be accessed until 2007.

Executive compensation is a sensitive issue at American. In 2003, then-chief executive Don Carty was forced to resign after the airline disclosed a slate of executive perks, including bonuses and a bankruptcy-proof pension plan, just after employees approved painful concessions.

Since then, Arpey has worked to demonstrate that executives and managers are also making sacrifices.