American Airlines Attendants Quit Cost-Cutting Talks

American Airlines' flight attendants, angry about the carrier's decision to pay managers $100 million in bonuses, say they will no longer cooperate with an effort between the company and unions to lower costs.

The dispute, triggered by the January disclosure of the payments, is threatening a plan by CEO Gerard Arpey to reduce costs and avert bankruptcy by courting the support of unions.

The airline and its three biggest labor groups began arguing before a neutral arbitrator Wednesday over whether the bonuses violate workers' contracts.

The Association of Professional Flight Attendants, the airline's second-largest union, has withdrawn from the joint effort until the bonus issue is resolved, union President Tommie Hutto-Blake said Tuesday.

AMR Corp., the Fort Worth-based parent company of the world's largest airline, plans to pay some managers $99.9 million even as it loses money and seeks cost cuts from workers.

"The minute you have one of those 'Oh my gosh' moments, it clears the board," said Bob Mann, head of R.W. Mann & Co., a Port Washington, New York-based firm that consults for airlines and unions. "All the accumulated goodwill is drained immediately. It's a fickle thing, and it's hard to win back."

Since taking over as CEO in 2003, Arpey has been trying to forge closer ties with labor, hoping to avoid union conflicts that helped push rivals such as Northwest Airlines Corp. and Delta Air Lines Inc. into bankruptcy last year.

American shares have risen sixfold since Arpey was named to the company's top position. Wednesday on the New York Stock Exchange, the stock gained $1.19, or 4.8 percent, to close at $25.96.

The fight over bonuses comes seven months after American for the first time invited unions to help it lobby Congress to change pension rules. Arpey and other American executives joined 300 workers in Washington, D.C., bunking in the same spartan college dorm rooms, for individual meetings with members of Congress and their aides.

Labor leaders, who knew the bonus program had been created by AMR's board, were surprised by the size of the planned payments, almost $2 million for one executive alone. The unions contend the program violates a 2003 agreement establishing annual incentives that were to align management compensation with pay for line employees.

As the company and officials from unions representing the flight attendants, pilots and mechanics prepared for three days of meetings with a neutral arbitrator near the company's headquarters, the flight attendants removed their logo from a joint newsletter updating workers on the collaborative effort. It also stopped posting a link to the document on its Web site. The union previously suspended meetings tied to the effort.

"It's not a detour, it's a roadblock," Hutto-Blake said of the planned April payouts. "I want to get on with the work but, right now, I've got a roadblock."

The airline is "sorry" the flight attendants removed "their name and participation from this issue," spokeswoman Lisa Bailey said. "We look forward to working with them on future issues."

The Allied Pilots Association dropped plans Friday to discuss contract changes that would boost productivity, saying it would not resume until the bonus issue is resolved. The union has not given details of what kinds of changes were to be considered. Its board agreed to the talks in November.

"The fact that managers signed on to a program that enriches them, and the people who made the change possible are left out in the cold, that leaves a bad taste in the mouth of labor," said Denis Breslin, a pilots union spokesman.

The unions, which represent 81 percent of the company's 77,700 U.S. employees, filed grievances over the payments in January.

The meetings in Washington last summer represented a high point for Arpey's "pull together, win together" strategy, according to company officials and union leaders.

"That's where working together really got legs," Jeff Brundage, senior vice president for human resources, said in an interview last year. "It became a mantra for not doing business the way we always had."

Arpey's predecessor, Don Carty, resigned in April 2003 when management perks and benefits came to light after workers agreed to $1.8 billion in job, pay and benefit cuts that saved the company from a bankruptcy filing.

American's cooperation with unions since then has "significantly differentiated" the airline from Delta and Northwest, said Jamie Baker, a JP Morgan Securities analyst in New York. Both carriers filed for bankruptcy in September.

Among the five largest U.S. airlines, American is the only one never to have gone bankrupt.



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