Expert To Help In AA's Fight For Life

If you work at American Airlines, now might be a good time to start sweating. American, which is losing $5 million a day as struggles to stay afloat, has hired a well-known bankruptcy lawyer to fight what may be a beheamoth battle for its own survival.

The Dallas Morning News reports American's parent company, AMR Corp., has hired Harvey Miller, a managing director at the investment banking firm Greenhill & Co., to help plan for a possible bankruptcy filing.

Expert: Miller Worked More Major Bankruptcies Cases Than Anyone

"He has always been someone companies hire when they're thinking about filing for bankruptcy," Lynn LoPucki, a law professor at the University of California, Los Angeles, told the newspaper. "He's been lead counsel on more major bankruptcy cases than anyone else."

The world's largest airline has turned to its unions for help in cutting costs. American, based in Fort Worth (TX), hopes to slice out $4 billion a year from its budget. That includes $1.8 billion in annual labor cost savings. Transport Workers Union officials are scheduled to start negotiations today (Monday) over American's proposal to save the company $620 million each year.

Talks are also on tap between American and the Association of Professional Flight Attendants. Further, American is negotiating with pilots for $660 million in savings.

Men Of Experience

Besides Miller, who played a major role in bankruptcy cases involving Houston-based Continental Airlines, Bethlehem Steel and Dallas' Braniff International, American has hired two of Miller's former colleagues at the New York law firm Weil, Gotshal & Manges, which he left about five months ago, according to the newspaper.

Miller, who was hired several months ago, worked with American two years ago as it tried to take over TWA. The lawyer and his associates advised TWA to go into bankruptcy, which made it a more attractive purchase by freeing any buyer from its contract liabilities. Miller worked with Eastern chief executive Frank Lorenzo when that airline went bankrupt in 1989.

LoPucki said the decision to hire bankruptcy attorneys could signal that American is trying to figure its options under a possible reorganization in federal court. The stock of American parent AMR has dropped amid these reports, which included word that the airline is trying to line up $2 billion in financing.

Fiddling While Rome Burns?

Donald Carty, American chief executive, reassured employees on Friday that there is still time for American to clean up its financial mess.

"We still have the opportunity to fix our structural problems and make ourselves into a formidable competitor," Carty said in his recorded hot line message to employees.

Asking Congress For Help

Meantime, the AMR Labor Coalition, comprised of the five unions representing American Airlines and American Eagle employees, last week emphasized the need for government relief from the multitude of taxes and security fees now levied on the industry, many of which were imposed in the aftermath of the September 11, 2001, terrorist attacks.

“The difficulty our industry is now experiencing is largely due to the dramatic increase in taxes and fees levied on the carriers,” said Captain John E. Darrah, APA President.

“Overall, our industry’s tax burden has increased more than 70 percent since the early 1990s, and something must be done quickly to reverse this devastating trend. This crisis is fast becoming a major public policy disaster that could ultimately affect tens of millions of Americans—a crisis that Congress can and must address," Darrah said.

“Labor givebacks alone cannot save the airline industry from collapse,” said James Little, Vice President of the Transport Workers Union. “Congress must act swiftly to enable the industry to recover.”

AMR Labor Coalition representatives also noted that the cost of fuel continues to rise, and will likely increase further in the event of an Iraqi war, putting additional cost pressure on the carriers when they can least afford it.

“The September 11 attacks were aimed at the heart of our country’s business and government institutions, not just at the airline industry,” said John Ward, President of the Association of Professional Flight Attendants. “Yet the airlines are being forced to underwrite a disproportionate share of the security costs incurred since 9/11, which just doesn’t make sense—particularly since the airlines themselves were direct victims of the attacks and especially hard hit.”

 “The airline industry accounts for nearly 10 percent of Gross Domestic Product. If American Airlines were to declare bankruptcy, fully one half of the nation’s domestic flying would be performed under Chapter 11 protection,” said Captain Herb Mark, Chairman of the American Eagle Master Executive Council, ALPA.

“Our government should have ample motivation to spur recovery in an industry so vital to the national economy.”

In addition to relief from taxes and security fees and the 4.3-cent-a-gallon jet fuel tax, the AMR Labor Coalition is also calling for Congressional assistance with protecting workers’ pension benefits, as well as extended unemployment benefits, retraining assistance and COBRA subsidies for the 100,000-plus workers already furloughed since September 11, 2001.

FMI: www.amrcorp.com