Despite Economic Recession, Unions Want Theirs

American Airlines is scheduled to report its first-quarter financials Wednesday, and analysts expect a $400 million loss for the first three months of 2009. But some have deeper concerns that even if American has enough liquidity to get past the recession, it may not survive its next round of union contracts.

Six years ago, wage and benefit concessions by unions at American in the post-9/11 industry downturn allowed parent company AMR to avoid bankruptcy. But now, The Wall Street Journal reports that recession or not, unions are seeing red over $300 million in executive bonuses paid out in the past three years, and are vowing to be "made whole" for their sacrifices in past years.

The US DOT's Bureau of Transportation Statistics reported American's labor cost is 3.69 cents per available seat mile as of last September. Even after billions in cuts accepted by the unions in 2003, that's the highest per-seat cost among the nation's 13 largest carriers, mainly because competitors got even deeper concessions through bankruptcy.

The unions are undeterred. Pilots at American, already earning salaries near the top of the industry, are demanding a 50 percent pay raise. The Association of Professional Flight Attendants and the Transport Workers Union of America are also seeking raises for their members at American.

Aside from the direct impact on the airline's bottom line, the likelihood of higher labor costs is also costing AMR in higher interest rates when it has to borrow money.

Fitch Ratings cut the airline's credit rating last month to triple-C, indicating a risky and speculative venture.

FMI: www.aa.com