Says Management Windfall Could Exceed Year's Profits

The Allied Pilots Association, collective bargaining agent for the 12,000 pilots of American Airlines, expressed its outrage over executive bonuses scheduled for payout in April it says could match or even exceed the airline’s fiscal year 2006 net profit of $231 million announced by parent company AMR.

According to a release from APA, based on Tuesday’s closing price of $40.23 per share for AMR stock, the April bonuses will total some $218 million. The exact amount of executive bonuses depends on the price of AMR stock on April 18. APA says a disproportionate share of the company's profits will go to around 50 senior executives.

"It’s clear that American Airlines’ financial performance has improved substantially, thanks in large measure to the deep sacrifices by our pilots and other employees beginning in 2003," said Captain Ralph Hunter, APA President. "The $1.1 billion improvement in AMR’s results would not have been possible without the $1.6 billion in annual concessions agreed to by AA non-management employees, who are the real heroes behind American’s return to profitability. While line employees are still carrying the burden of these massive cuts in pay and benefits, it is insulting for senior managers to be receiving a windfall that may equal or exceed all of our airline’s earnings in 2006."

Raising questions about the airline's performance over the past year, Hunter questioned whether management has performed to a level warranting the bonuses.

"It is particularly egregious to pay large bonuses when our airline has been experiencing such serious operational problems. Aren't bonuses normally paid for a job well done?"

Hunter cited the widely publicized incidents that occurred on Dec. 29, 2006 -- such as American Airlines Flight 1348, which sat on the tarmac in Austin, Texas for some eight hours with no food or water and overflowing toilets. Hunter claims the Captain elected to taxi to the terminal, against on-duty managers’ refusal to provide a gate. He says the incident is symptomatic of a management team more concerned with its compensation than with improving the airline’s lagging operational performance.

According to Hunter, when APA contacted management to ask how it planned to prevent such operational miscues in the future, management justified its performance by noting that no one was hurt on December 29.

"Safe transportation is the absolute minimum our passengers expect and deserve. Not injuring anyone is a wholly unsuitable measure of success," Hunter said.

Hunter also decried management's announcement the airline had improved its position with two key performance and customer satisfaction rating organizations. Although American did improve over previous ratings, it still ranked fourth on a DOT dependability rating, and fifth in a public opinion survey.

Hunter said, "We believe the airline would be better served by management focusing on how to improve customer service, rather than celebrating mediocrity."

Hunter also blasted management for the airline's failure to capture a DFW-Beijing route recently opened by the DOT. Four airlines bid for the route which United eventually won.

APA had attempted unsuccessfully to grab some concessions from the company in exchange for changes in duty day limitations.  Limits on the time a pilot may fly in APA's current labor agreement with American makes a direct DFW-Beijing flight impossible.

Hunter said, "The China route award was within American’s grasp, yet management made little more than superficial attempts to negotiate the necessary pilot contractual provisions to make it happen."

Instead, American amended its proposal to add a stop in Chicago. Hunter says the concessions APA asked for were less expensive than the amended route proposal the DOT eventually rejected.

Hunter concluded by saying, "Management’s recent decisions are costing American Airlines millions in lost opportunities. They should stop rewarding themselves for their failures."

FMI: www.alliedpilots.org