When does a raise - Not mean a raise?


Aug 20, 2002
Carty: Time, money almost out
FORT WORTH - With the deadline on a concessions vote rapidly approaching, American Airlines executives continued to threaten bankruptcy Thursday if the deals are rejected. But union members indicated that a new offer to add extra pay to the back end of the proposed contracts wouldn't sway their decision.
A board member of the Allied Pilots Association called the offer basically meaningless, and an official with the Association of Professional Flight Attendants described it as an empty bag.
Few employees who gathered at separate meetings for pilots and ground workers Thursday had much to say about the proposed temporary raises, disclosed by American late Wednesday. Raises of up to 4.5 percent could kick in during the last three years of the six-year contracts if the airline's credit rating improves significantly. But the raises would be in effect for just one year.
While some workers said that the potential raises were better than nothing, most were more concerned about double-digit wage cuts, job security and the duration of the contracts.
At a union gathering, Scott Rice, a 39-year-old pilot, said he would support the cuts only if the airline shortens the new contracts to four years. Otherwise, he said, I'm voting no.
By late Thursday, only the Transport Workers Union, which represents mechanics and ground workers, had added the incentives to its proposed concessions package. Board members of the pilots' and flight attendants' unions were still reviewing the offer, union sources said, and would likely make a decision today.
Meanwhile, Don Carty, American's chief executive, warned employees of the airline's Alliance Airport maintenance base that rejecting the $1.6 billion concessions deal will guarantee the airline a trip to bankruptcy court next week.
There is simply no more time and no more money, Carty told several hundred workers at a town hall meeting at the Doral Tesoro Hotel near Alliance Airport in Fort Worth.
Afterward, he told reporters that he remains optimistic that the deals will be approved.
The airline has told union leaders it will close the Alliance base, which employs 2,300 people, if it files for bankruptcy reorganization and is forced to shrink. Still, many employees said they remain unconvinced that they should support concessions.
I kind of like working here, Melvin Aguilar, an Alliance ground worker, told Carty. But don't threaten us with bankruptcy. Don't threaten us with layoffs.
Carty wants workers to accept new six-year contracts that would cut labor costs by 26 percent annually. The new deals would mean significant cuts in wages and benefits and about 6,000 layoffs, but airline executives say the measures are vital to the company's survival.
American has lost $5.2 billion in the past two years and is expected to lose $800 million during the first three months of 2003 as it struggles with a steep downturn in business travel and fierce competition from discount airlines such as Southwest Airlines and AirTran Airways.
American executives first raised the possibility of additional raises and other incentives last week, when union leaders said the concession deals were in jeopardy.
Many union members have been threatening to vote against concessions because of their duration, which is longer than typical contracts and could stretch to eight years because of the time needed to negotiate a new contract.
Airline executives offered the potential for temporary, one-year raises of up to 4.5 percent during the final three years of the contract, but only if American's debt rating is increased to the level it held before Sept. 11, 2001.
Jeff Brundage, American's vice president of employee relations and a key negotiator, said in an interview Thursday that the incentives could go beyond raises. If the company meets the financial targets, he said, union leaders could open negotiations on a variety of contract points, such as vacation time, sick days and work rules.
However, no changes would be allowed to base pay levels, he emphasized. Any raises would be temporary and would last only one year.
Leaders with the pilots union initially declined the offer last week, said Sam Mayer, who heads the New York chapter of the Allied Pilots Association and is a union board member.
He said that the union's financial analyst had reviewed the proposal and concluded that it was extremely unlikely that debt rating agencies would lift American's rating to its pre-9-11 level within the next few years.
The airline's rating is currently considered below investment grade, often called junk status.
The odds of them hitting this target are slim to none, Mayer said. Our analyst told us it's like being promised a million dollars on the second Tuesday of every week. It's just not going to happen.
Analysts said Thursday that it would be difficult -- although not impossible -- for American's rating to be restored to investment-grade level during the second half of the decade. The airline would have to see great increases in profit and cash flow and would have to pay off a substantial portion of its debt before being lifted out of junk status.
Clearly it would be a considerable challenge, said Philip Baggaley, a debt analyst at the Standard & Poor's rating service. American has never been rated as low as they are right now.
Last year, only nine corporations saw their ratings lifted from junk to investment grade, said Kamalesh Rao, an economist at Moody's Investor Services, another debt rating service. Seventy companies, meanwhile, were downgraded to junk status, he said.
Obviously the airline industry is mired in huge financial problems, Rao said. But he added that it doesn't mean that they won't ever get there.
Flight attendants also did not embrace the proposed incentives, union officials said.
This empty bag was not met with the greatest of enthusiasm when it was presented to union leaders last week, said Dana Davis, a spokeswoman for the Association of Professional Flight Attendants, in a message to members.
Nonetheless, both unions were still reviewing and considering the offer late Thursday. One union source pointed out that even if the company's goals are unlikely to be reached, union members have little to lose if the raises are included in the contracts.
And American officials noted that the incentives were meant to address fears that the airline would not share its success with employees if it became extremely profitable before the contracts expired.
This was always intended to address how we would share the wealth if we became wildly successful beyond expectations, said spokesman Bruce Hicks.
He also pointed out that American is offering stock options and a profit-sharing program that is not tied to any financial targets, in addition to the temporary raises and contract changes.
As workers pondered whether to approve concessions, the Transport Workers Union resumed electronic voting Thursday night after a one-day delay. Voting had been halted while union leaders worked out a minor dispute with the airline over the language of the contract.
And ground workers who met with Carty peppered him with questions about concessions, American's financial situation and the airline's future, and emphasized that the concessions would be a big sacrifice.
I've already put my wife and kids [for sale] on eBay, crew chief Jesus Falu said jokingly. My cat's on the way, too.
One employee caused an exasperated Carty to close the meeting by repeating a barnyard epithet. After the worker's lengthy comments about a grievance, which included his description of an American employee's graphic response to a complaint, Carty responded that if you talked to him the way you just talked to me, I'd say it was a [expletive] problem, too.
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Some worry American deals won't fly with workers
Rejection could bring bankruptcy filing Monday

Just four days before American Airlines' unions begin tallying the most important labor ratification votes in carrier history, some airline executives and union leaders were worried Thursday about increasing signs of employee disenchantment with the proposed concessions.
If any of 10 groups reject their tentative deals, the Fort Worth-based carrier could file for bankruptcy protection as soon as Monday. The pilots will be the first to report that day after closing the vote at 4 p.m. Dallas time. The tallies will be finished Tuesday.
The airline and its three major unions reached last-minute deals March 31 for $1.62 billion in annual concessions. Employees' anger at the process and results has grown since the unions began presenting the grim terms over the Internet and at "road show" meetings around the country.
All the unions have factions of fired-up members who will oppose almost anything put in front of them, but it's the flight attendants and mechanics who are causing the biggest concern, labor leaders and airline consultants say.
"Everybody's holding their breath right now," said Brad Bartholomew, a self-employed labor consultant who watches American's unions. "At no time in airline history has there been as much attention on a set of labor votes as there is on these."

American has surveyed employees about its struggle to survive, but it hasn't asked how they would vote on the concessions. Without such polling, it's nearly impossible to know how close the votes will be because concession supporters within the rank and file aren't as likely to voice their opinion as detractors.
There are no visible pro-concession groups within the unions, making it harder to gauge the "yes" vote.
But many employees have been vocal about their intentions to vote no, despite repeated warnings that bankruptcy would force deeper cuts and more layoffs.
"You can only kick a man so many times before he comes back up and hits you in the face," said Reuben Ramirez, a mechanic who said he intends to vote against the deal, which would cut his pay 17 percent.
Mr. Ramirez said he intended to adorn his Chevy Tahoe with the slogan "I'm Done with Don" – in reference to American chief executive Donald Carty – and drive around the hotel where Mr. Carty was to meet with ground workers Thursday.
"I'm hard-headed, I guess," Mr. Ramirez said.
Some changing minds

Other American employees said they intend to vote no because the airline is headed for bankruptcy even with the concessions in hand.
Pilot Jim K. Walton said he initially resigned himself to approving the agreement, which would cut his pay by 23 percent in the first year and reduce vacation and sick pay. But he changed his mind, saying that "Mr. Carty is scrambling to lock his employees into an onerous, ridiculous contract before he goes into bankruptcy."
"I believe you have to work with management as a team, but I don't believe American has a viable business plan," 17-year flight attendant Chris Everard told a reporter Thursday. "I am 98 percent sure I will be voting against" the agreement.
The unions and airline have said that as difficult as the concessions are to swallow, a bankruptcy filing would require an additional $500 million in reductions each year. Those cuts would eat into pension benefits, which are untouched by the current deals, and force American to cut several thousand more jobs.
E-mail messages on the pilots' internal Web site indicate that Allied Pilots Association members are likely to approve their $660 million in annual cuts, even though many will hold their nose as they vote.
Some angry union officials have urged pilots to bombard American officers and board directors with messages asking for the six-year deal to be shortened. The airline has said it wouldn't renegotiate any part of the deal.
The airline did make a deal with the Transport Workers Union late Wednesday to boost pay by 4.5 percent for 12 months starting in 2006 if the company's credit rating improves.
The two other unions also are considering that deal.
Flight attendants' votes

Many flight attendants said they voted against the concessions even before the Association of Professional Flight Attendants held a four-hour webcast Wednesday to urge ratification.
"There's a group of us out there who would vote against it even if they got a raise," said one former union official. "But I still think it will pass 60 to 40 [percent]."
The flight attendants, unlike the pilots and the eight labor groups under the Transport Workers Union, can't change their votes after they are cast. Union spokesman George Price said Thursday that his board was considering ways to change the rules to allow vote switching.
"There's definitely been some voiced concerns out there," Mr. Price said. "But we've also seen a lot of support because the alternative is not pretty."
The transport union held its own emotional town hall meeting Thursday afternoon in Fort Worth with Mr. Carty. The mechanics – the last of the union's eight groups to settle March 31 – expressed the most frustration with the deal and are considered the most likely to reject the concessions.
"This is the end of the road for a lot of people," union member Mel Aguilar said in a sometimes-testy question-and-answer period with Mr. Carty. "Some of those folks spend 12 hours a day together, and our desire is to be able to go home with our heads held high and tell our children we did our best. It's not about the money."
The Transport Workers Union suspended voting Wednesday night in a dispute over the proposed contract's language but reopened telephone balloting at 10 p.m. Thursday night after resolving the issue.
Mechanics told Mr. Carty on Thursday that morale is terrible at the maintenance base at Fort Worth Alliance Airport. Company officials have said the base could be eliminated if American goes bankrupt.
"I don't see anything at American that even hints at a cooperative spirit," said Dain Cunningham, a 13-year employee.
Mr. Carty's message to them was the same as it was to a ground workers' group he addressed in Kansas City, Mo., on Wednesday. A no vote, he said, is a vote for bankruptcy.
And bankruptcy remains a possibility, he added, even if the concessions are approved.
American executives say they're prepared for the worst if the votes go badly but aren't going to budge on the deals.
"We want to provide real hopes, not false hopes," said Jeff Brundage, senior vice president for labor relations and policy.
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It appears the Pilots, F/A's, and Mechanics will reject their proposals and the TWU Joint Commitee will ratify.

Chapter 11 by Tuesday Evening.

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