Carty on 6 year concessions

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Dec 21, 2002
American Airlines workers told they must make concessions

By Tom Stieghorst
Business Writer
Posted March 21 2003

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Workers at American Airlines must swallow givebacks through 2009 to assure Wall Street''s cooperation in the airline''s financial recovery, Chairman Donald Carty told an employee group at Miami International Airport on Thursday.

Carty also said the Iraq war will prompt small trims to American''s schedule in April, mostly on flights to Europe, but that falling fuel prices in the past four days offer an unexpected ray of hope for the nation''s beleaguered airline industry. Later in the day, American announced that it would cut international flights by 6 percent in April.

The lanky, white-haired chairman spoke to about 250 employees, in part to explain the need for the $1.8 billion in annual savings American wants from its unions. About 9,400 people work for the airline in South Florida, its third-largest hub.

Many employees are skeptical the airline needs a six-year deal, said Luis Rodriguez, a union representative from Local 501 of the Transport Workers Union in San Juan, Puerto Rico. Why not re-look at it two or three years from now? he asked.

Carty said that wouldn''t fly on Wall Street. We need the resources of the financial community, he said. Without a longer term contract of six years we''re not going to have the confidence of the financial markets and be able to borrow the money we will need.

American has hired bankruptcy lawyers and could file for Chapter 11 protection if its cash levels fall under $1 billion, analysts say.

With the concessions, Carty said the business plan calls for profits by 2007 and a reduction in its debt levels to about 60 percent of total capital compared with nearly 100 percent now. The toughest part will be the next 12 to 24 months, Carty said. That is as stretched as we will ever be.

Asked about the bankruptcy of United Airlines, Carty said the notion that United might liquidate is hard to believe, but conceded, They seem to be struggling a lot.

Carty said that United''s folding would be a mixed blessing for American, its chief rival in Chicago and nationwide.

American stands to gain more business than any other carrier if United stops flying, but Carty noted that 60 gates at Chicago''s O''Hare International Airport would suddenly be open for other airlines. Would that be better than United or worse? Carty said.

Carty said other airlines face a Catch-22 if United liquidates. For example, United''s route network in Asia would for sale. In theory the Asian routes are worth a lot of money, but no airline has the money to buy them. We certainly don''t. We have enough debt.

Asked about sacrifices by management, Carty said the job cuts in management will be bigger than in any other group. But he defended the front line managers. Could we be leaner? We''re exploring it, but there''s a feeling we''re getting closer and closer to the bone.

Carty also said that while American doesn''t want to create a separate low-fare brand, it is exploring the possibility of sub-brands such as an American Airlines Super Saver service that could be offered on some of its Boeing 757 aircraft.

While none of the labor leaders representing pilots, flight attendants or mechanics have yet agreed to a new contract, Carty said they have all agreed in principal that savings of the magnitude management is seeking are needed.

He said the talks are the most cooperative he''s seen in 30 years. All of us are enormously uncomfortable with the sacrifices that are entailed, he said.

Tom Stieghorst can be reached at [email protected] or 305-810-5008.
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AT JFK, they are replacing 2 GF''s that are retiring keeping the General Foremen numbers at 6. SIX GENEREAL FOREMEN for about 70 trips a day. No reduction in management at JFK in maintenance.
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