American Asks For Deep Cuts, Layoffs

Leaders of the Allied Pilots Association, the union representing flight crews at American Airlines, have approved a resolution to sit back down at the bargaining table with the carrier, hoping to agree on deep cuts to pay and benefits, work-rule changes and perhaps even massive lay-offs.

American spokesman Todd Burke said executives are "very pleased the pilots are moving ahead rapidly in this process."

What About The Pension Fund?

Lest American management gets too giddy about the agreement, APA leaders say they'll work hard to protect pension benefits and keep to a minimum the number of pilots laid off by the world's largest airline.

The question is, will it be enough? American is reportedly struggling to dodge bankruptcy court. An APA audit released last week (and later disclaimed by the union) indicated American's parent corporation, AMR, has only three months' worth of operating capital left. After that, it's goodbye blue skies and hello, Chapter 11.

In fact, Friday, credit rating agency Standard & Poor's lowered the airline's rating, citing growing worry that the world's largest carrier could file for Chapter 11 bankruptcy protection in the coming months.

AA: Cuts Should Be Permanent
APA: Return To Profitability, Return The Bennies

Hoping to stave off the process servers, American told its workers last month that it needs to cut $1.8 billion in labor costs.

American has also been meeting with leaders of the Transport Workers Union and the Association of Professional Flight Attendants in recent weeks to discuss the need for concessions.

Those two unions have contracts in place that would have to be changed. In the resolution, pilots union leaders said a bankruptcy filing could result in an even greater number of layoffs and that pilots would lose much of the control over their contract in court.

But the pilots also emphasized that all concessions would be contingent on a future economic benefit to employees if the company returns to profitability. The union's vow to protect pilots' lucrative pensions comes as rival carrier US Airways -- which entered bankruptcy court last year -- faces a dramatic cut in its pension plan.

American wants the labor cuts to be permanent.

The airline asked the pilots for $660 million in annual savings when it set the $1.8 billion goal for all employees. Union leaders did not set any cost-cutting targets.

Any concessions would have to be approved by the union's full membership before taking effect.

American Taking On Water

Union leaders also said that they would still need assurances that concessions would "reasonably ensure the short-term survival and long-term viability of American Airlines."

Treading water as fast as it can, American is, without a doubt, in danger of drowning in a sea of red ink. The airline lost $5.2 billion over the past two years, victim of the 9/11/01 terror attacks and still-profitable discount carriers like Southwest Airlines. American is expected to lose $800 million more during the first quarter of 2003. Its stock hit a new low on Friday, down 90% over the past year.

FMI: www.aa.com, www.alliedpilots.org