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.
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.