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Pilots Won't Move Up Talks With American: Union is Upset Over Airline's $100 Million in Executive Bonuses

Posted on: Tuesday, 7 March 2006, 12:00 CST

By Eric Torbenson, The Dallas Morning News

Mar. 7--American Airlines Inc.'s pilots' union isn't willing to negotiate new productivity improvements ahead of schedule because it's upset about executive bonuses to be paid next month.

The Allied Pilots Association board passed a resolution Friday stating that it wouldn't start talks to revise work rules until American's "management has demonstrated that their long-term goals and objectives for American Airlines are aligned with those of the pilots."

At issue: nearly $100 million in payouts due in April to American managers. The carrier, which is owned by AMR Corp., is proceeding with the payments despite a grievance from pilots and other unions.

"While we all believe that a cooperative relationship is preferable to an adversarial one, AMR management has chosen to roll the dice on whatever element of trust it had built up over the past three years and right now the odds favor complete collapse of confidence in the process," said Denny Breslin, chairman of the union's communications committee.

The airline said it's still talking with the pilots, but not in a formal negotiation. American has tried hard to improve relations with its unions.

"We're aware that they passed the resolution," said spokeswoman Lisa Bailey. "We're going to continue to try to talk to the pilots about issues of mutual concern."

In November, the union authorized its negotiating committee to talk with the airline to help improve American's pilot productivity, though the talks never officially began.

Then in January, American's unions became upset over a long-term payout plan for about 1,000 of American's executives.

The $100 million in bonuses was triggered by a sharp two-year rise in AMR shares but comes when the airline is struggling to earn an annual profit.

The bonuses will affect all top executives except for chairman and chief executive Gerard Arpey, who opted out of the plan. However, Mr. Arpey is set to collect from the plan in 2007.

The unions filed a collective grievance over the payouts, and arbitration hearings start today to determine if the payout plan violates contract language.

Pilot costs

Pilot costs are becoming a bigger concern for American as its competitors dramatically lower their pilot wages, benefits and retirement payouts.

Last week, Northwest Airlines Inc. pilots reached a tentative agreement to cut $358 million a year from its pilot costs, a pact that still requires pilot approval. Delta Air Lines Inc. is headed to arbitration with its pilots' union over further cuts, and United Airlines Inc. lowered its pilot costs sharply in the three years it recently spent in bankruptcy protection.

Realizing its pilots weren't as efficient as competitors in some ways, American last year launched a project with the help of employees to benchmark its costs to both its traditional competitors and its low-cost foes such as Dallas-based Southwest Airlines Co.

That project, called the Performance Leadership Initiative, produced results that showed the carrier could save money by getting its pilots to fly more hours per month. That could happen if work rules affecting scheduling and reserve travel were made more restrictive, as they are at other carriers.

A concession?

In some ways, more restrictive rules would allow pilots to earn more money by flying more hours each month, but some pilots said they thought new work rules would be a concession. The group gave up $660 million in annual pay and benefits to American in 2003.

The two sides have the option on May 6 of starting formal talks under the Railway Labor Act governing airline labor relations, Mr. Breslin said. Either side can start the talks.

The APA resolution precludes any formal talks until that time -- leaving open the potential for side letters of agreement between the union and the airline that could modify the existing contract.

The airline and union have used side letters to modify the current contract, which began in May 2003.

That deal, as with the other major labor contracts at American, doesn't become changeable until 2008.

Shares of AMR rose 2 cents Monday to $24.90.

E-mail etorbenson@dallasnews.com

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Source: The Dallas Morning News

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