AMERICAN AIRLINES MANAGEMENT VOLUNTARILY CANCELS RETENTION AGREEMENTS
FORT WORTH, Texas – American Airlines today said its senior management has voluntary cancelled retention plans put in place to retain key executives.
"These retention agreements were created more than a year ago, immediately after the events of Sept. 11[sup]th[/sup], when the industry was struggling and our Board of Directors had serious concerns about our ability to retain our senior management," said Don Carty, American’s chairman and CEO. "The goal was to give senior officers an incentive to stay with the company when many were being offered more generous packages to go elsewhere."
Carty said that during talks on achieving employee cost savings agreements he held discussions with union leaders about his concerns on retaining the most effective members of the management team in light of the number of people who either have left the company or chose to retire early. However, he did not explicitly describe what plans were put in place.
"I have apologized to our union leaders for this and for the concern it has caused our employees," Carty said. "Those executives who have made the personal commitment to remain with American during this financial crisis, myself included, are not here solely for monetary reasons and we have all agreed to give up these retention payments in order to give our employees confidence in management’s on-going commitment to shared sacrifice."
Another issue of concern among employees was the company’s Supplemental Executive Retirement Plan or SERP. American said its SERP was established in 1985 and, unlike its other employees’ retirement plans, was never funded. This past October, during a cycle in which the company was contributing to employee pension plans, it made an initial payment – the first ever – to the plan, which remains underfunded.
The SERP is a common tool used in a broad range of industries to help protect a portion of the pension benefits that executives have already earned. American did not add benefits or enhance the program, in contrast to some of its competitors, nor did it allow funds to be withdrawn except through the normal retirement process.
"I have always committed to doing our best to fund the pension plans for our employees and their families, even as we lost money through difficult financial times," Carty said. "My ultimate goal is to provide pension security for all employees, including the management team."
Because the SERP represents a benefit already earned, in some cases over a period of 17 years, American said the initial payment to the SERP remains in place.