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.