American Airlines Dumps Executive Bonuses

DAVID KOENIG
AP Business Writer

DALLAS – After sharp criticism from its rank-and-file, American Airlines dropped a plan Friday to award bonuses to select top executives if they stay at the embattled airline until 2005.

But the world’s biggest airline is leaving in place a supplemental pension plan for a broader group of top executives that would be protected even if American filed for bankruptcy.

The bonus and pension plan had caused an uproar among American employees, who learned of the perks this week after they approved costs cuts of about $10 billion over six years, which the company said it needed to avoid bankruptcy.

“I have apologized to our union leaders for this and for the concern it has caused our employees,” chairman and chief executive Donald J. Carty said in a statement. “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 ongoing commitment to shared sacrifice.”

Leaders of the airline’s three biggest unions had warned they might try to have the concessions thrown out because American didn’t tell them about the executive perks until workers voted on concessions, including pay cuts of 15.6 percent to 23 percent.

Company officials defended the perks as necessary to prevent senior executives from taking better offers elsewhere. They were disclosed in a Securities and Exchange Commission filing.

The news that senior executives would give up their future bonuses but not the supplemental pensions only partly mollified employees who were critical of the perks.

“That’s great; that’s the only responsible thing that could be done,” said George Price, spokesman for the flight attendants’ union. But, he said, disclosing the perks only after most employees had voted on concessions “is outrageous.”

“The damage is done. The element of trust with senior management of this company has been destroyed,” Price said.

Price said his union would go ahead with its lawyers’ review of the executive perks and the timing of their disclosure, which he said might have affected the outcome of the concessions vote. The unions regard May 1, the effective date for the pay cuts, to be a deadline for resolving the dispute.

The bonuses, equal to twice their salary, were offered to Carty and five other senior executives. A seventh official was offered a bonus of 1 1/2 times salary.

Under the plan, Carty, who has a base salary of $811,000, would have received a $1.6 million bonus.

The company also made a payment to partially fund a supplemental pension trust for 45 executives and shield those benefits in case of an AMR bankruptcy.

The company has never disclosed how much it put into the extra pensions.