American was FORT WORTH, Texas >> American Airlines Chief Executive Officer Don Carty came within 30 minutes of filing the biggest airline bankruptcy in history Monday as hours passed with no word on whether the carrier's pilots would accept cuts in pay, benefits and jobs.
minutes from
bankruptcy
With no word from a union, the
Continental won’t seek concessions
carrier was 30 minutes from filingBy Mary Schlangenstein
Bloomberg NewsAt 4:55 p.m. Texas time, Carty called Allied Pilots Association President John Darrah and told him American parent AMR Corp. would file for Chapter 11 in less than half an hour, according to Sam Mayer, a pilot involved in the talks, along with another person close to the events at AMR.
"We literally had John Darrah on the speaker phone screaming at us: 'I need a decision from you guys. You've got to vote on this. They are going bankrupt,"' said Mayer, a pilots' union board member who attended the meeting. "He had Carty on the phone in his other ear telling him the lawyers were walking to the courthouse."
Within minutes, the union's board approved a tentative agreement providing $660 million in savings, including an initial 23 percent pay cut and elimination of as many as 2,500 pilot jobs at the world's largest airline. The pilots were the last union to deliver their share of $1.8 billion in labor savings Carty asked for in February.
AMR spokesman Bruce Hicks said company executives spoke to Darrah by phone several times on Monday. He declined to provide details of the discussions.
The pilot union board voted 12-6 to accept the plan, completing AMR's efforts to gain agreements by March 31 and avoid becoming the third major U.S. airline to seek bankruptcy protection in less than a year. The reprieve may be short-lived as the war in Iraq curbs air traffic and an economic slump persists.
AMR "is still at risk for bankruptcy," said James Corridore, a Standard & Poor's analyst. "The industry environment is so poor right now that even with these labor cost reductions, they are going to be seeing large losses."
Carty himself said on Monday that AMR still faces the threat of Chapter 11.
"Let there be no mistake, we're not out of the woods yet," Carty told workers in a message on the company's Web site. "There are still a few things we must accomplish in the near-term if we're going to avoid the fate of several of our competitors."
UAL Corp.'s United Airlines, the world's second-largest carrier, filed for Chapter 11 bankruptcy in December, Hawaiian Airlines filed last month and Air Canada secured court protection from creditors yesterday. US Airways Group Inc., which filed for bankruptcy in August, emerged from court protection on Monday.
The war may increase losses among U.S. carriers by $4 billion this year and lead to 70,000 more layoffs and 2,200 fewer daily flights, an industry trade group has said.
American posted a $3.5 billion loss last year, contributing to a record $11.3 billion in combined losses from the 10 biggest U.S. carriers as corporate travel fell and airlines cut fares to 15-year lows in the past year.
American will combine the labor savings with $2 billion in other cost cuts for the $4 billion in annual reductions it needs to take on growing low-fare carriers.
The pilots' union board voted on the concessions even though some provisions hadn't been completed, said Mayer, who voted against the plan. As the deadline approached, union leaders were forced to vote without understanding the full impact of the concessions, Mayer said.
"At one point, I stood up and said, 'I'll give $1,000 to anybody who can tell me what we're voting on,"' said Mayer, head of the union's pilots based at New York's LaGuardia airport. "It was a no-win, ugly situation."
BACK TO TOP |
HOUSTON >> Continental Airlines Inc., the fifth-largest U.S. carrier, won't ask workers for wage cuts or contract changes because rivals getting those labor savings aren't a threat, Chief Executive Officer Gordon Bethune said. Continental won’t
seek concessions"We're committed to do this without wage concessions or givebacks or any of the things that you would ask labor for," Bethune said in an interview. "We're not asking people to give us money. We're trying to save ourselves by doing things smarter."
Bethune said he's skeptical of claims by other carriers that they will achieve significant cost savings. Continental's labor expenses are lower and probably will stay that way because its more flexible contract terms increase worker productivity, he said.
"We pay people very fairly, but for that they fly a lot of hours," said Bethune, who is also chairman. "That's the nut that United is trying to crack."
Continental earlier this week said it will need more job cuts this year than the 1,200 that the company announced in March. The Houston-based airline at the same time said it would scale back flight capacity for the U.S. summer season by 2 percent from the year-earlier period because of the drop in travel demand caused by the war in Iraq.
Bloomberg News