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Unions pressuring airlines on bonuses

Workers who took pay cuts during industry's slump are furious about rewards for executives.

April 14, 2007|Peter Pae | Times Staff Writer

When the airline industry went into a deep slump after the 2001 terrorist attacks, American Airlines' pilots, flight attendants and mechanics agreed to billions of dollars in cuts in wages and benefits to keep the carrier afloat.

Now AMR Corp., American's parent, is back in the black, so much so that 874 top executives will receive more than $150 million in stock bonuses next week.

As for the 57,000 rank-and-file employees, they're seeing red.

"We made huge sacrifices," said Dana Davis, an 18-year American employee and spokeswoman for the Assn. of Professional Flight Attendants.

The airline's 18,000 attendants took an across-the-board 16% pay cut and gave up vacation days. "We're not getting anything back for it," Davis said.

Flight attendants staged a protest at the carrier's Fort Worth headquarters Friday. On Tuesday, they'll conduct so-called informational picket lines at Los Angeles International Airport and 15 others around the country. Some will carry signs saying: "We Shared the Pain/Time to Share the Gain" and "Pulling Together or Pulling Apart?"

For The Record
Los Angeles Times Wednesday April 18, 2007 Home Edition Main News Part A Page 2 National Desk 1 inches; 37 words Type of Material: Correction
Airline unions: An article in Business on Saturday about unions pressuring airlines on executive compensation said American Airlines had issued $38 million in stock options to its employees. It should have said employees received 38 million options.

After five years of multibillion-dollar losses, airlines began making money in 2006 and executives are cashing in, setting the stage for contentious negotiations with employees whose labor contracts start expiring later this year.

"It's going to get nasty," said Michael Boyd, an industry consultant. The airlines "have really messed this up. The employees worked hard, gave back and it looks like management is basically saying, 'Thanks for the giveback, suckers.' "

At United Airlines Inc., which emerged from Chapter 11 bankruptcy protection in February, workers were infuriated when they learned about Chief Executive Glenn Tilton's 2006 shares and options package, potentially worth $38 million.

Unions representing United's pilots and flight attendants on Friday urged members who hold stock in the company to vote against management's nominees for the board, including Tilton.

Flight attendants at Northwest Airlines Corp., angered by a potential payout of $380 million to 400 executives, are seeking court permission to strike. The attendants and other employees want to fight contract terms imposed during Chapter 11 proceedings that cut their wages by $1.1 billion. On Friday, a U.S. Bankruptcy Court judge denied requests by the union for a reversal of company-imposed pay cuts.

For its part, American says the executive bonuses, part of a stock-based performance share plan, are necessary to retain managers. And, the airline says, it's a logical way to reward managers for turning American around. The carrier was one of the few to avoid bankruptcy.

Since March 2003, when American's share price was $1.41, the stock has climbed to more than $30. Last year, the carrier, which hadn't turned a profit since 2000, recorded net income of $231 million.

American says it is one of the few large carriers that maintains a pension plan for employees.

"Our employees have among the best compensation packages in the airline industry," company spokesman Andy Backover said.

He added that American in 2003 gave employees $38 million in stock options that are now valued at about $1 billion. About half of the options have been exercised.

The wage and benefit cuts that American employees agreed to in 2003 totaled $1.6 billion. The unions calculate that in the four years since, the cumulative effect has reduced workers' compensation by about $6 billion.

Daniel Pedrotty, an expert on corporate governance for the AFL-CIO, said American's executive bonuses weren't outrageous, considering the outsized executive compensation packages awarded in some other industries. The actual value of the bonuses will depend on share prices Wednesday, the day the incentive awards are distributed, but it will work out to about $200,000 per executive if the pool is equally divided.

"It's not that big, but it does set the tone for how these managers are bringing the company through a challenging time," Pedrotty said. "What gets the employees angry is the hypocrisy. [The executives] think bonuses are too expensive -- except for them."

Delta Air Lines Inc. stands in contrast. Its chief executive, Gerald Grinstein, has refused to take any extra cash, stock awards, stock options or a pay raise. And Grinstein cut his salary in half during the carrier's bankruptcy proceedings, to $338,000 a year, among the lowest for any major U.S. corporation.

Delta's relations with employees are fairly smooth. But at American, tensions are escalating.

On Thursday, American sent letters to its unions warning them not to disrupt operations or otherwise violate federal laws that govern relations between airlines and their workers.

The letter angered some union members.

"We've never been disruptive, never unprofessional," said John Nikides, a 23-year veteran who chairs the flight attendant union's Los Angeles chapter. "It sounds like a tactic on their part to portray us as merely disgruntled employees."

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