Staff Bonus Likely in ’07

By Trebor Banstetter, Fort Worth Star-Telegram, Texas

Mar. 9–American Airlines employees could receive as much as a month’s extra pay at the end of the year under a profit-sharing program that airline executives expect to be triggered this year.

If the airline reaches financial targets, the profit-sharing bonuses would be the first paid to employees since 2001. With 25,000 employees in North Texas, American is the region’s largest employer.

“Having an energized and involved work force has brought undeniable benefits,” Jeff Brundage, American’s senior vice president of human resources, told airline analysts Thursday at the company’s Fort Worth headquarters.

The bonus program for nonmanagement employees has three elements.

One is based on customer-service performance and can provide modest payouts each quarter. Another is based on the airline’s pretax profit margin and pays bonuses of up to 10 percent of an employee’s annual wages. Third, American would distribute 15 percent of pretax profits above $500 million to employees.

Wall Street analysts expect the airline to exceed that goal considerably; the consensus estimate is that American will post a 2007 profit of $5.25 per share, or about $1.3 billion. The airline earned a $231 million profit last year, after losing nearly $8 billion during the previous five years.

Brundage told analysts that the bonuses from profit-sharing and the annual incentive plan could range from one to four weeks of an employee’s salary.

Tom Horton, the airline’s chief financial officer, said the company is setting aside money each month in anticipation of a payout at the end of 2007. But he cautioned that it’s still early in the year.

“There are a lot of unknowns out there,” he said, citing volatile fuel prices and the economy. “However, as the situation looks now, we see this as another example of how our stakeholders are benefiting from our recovery.”

The employee-bonus disclosure comes as American executives have increasingly been criticized for a slate of stock-based bonuses for about 1,000 top managers and executives.

Labor leaders, particularly those with the pilots union, have blasted the executive bonuses, which are paid primarily in company stock and were worth about $94 million last year.

The management bonuses, which are based on the airline’s stock performance, will be paid out again in April and would be worth about $210 million at current share prices. Many labor leaders have complained that the management bonuses were a slap in the face to rank-and-file workers, who accepted $1.8 billion in wage and benefit cuts in 2003.

Airline officials also told analysts:

A proposed “open skies” agreement between the United States and the European Union could hurt American because it would bring more competition into London’s Heathrow Airport.

The airline plans to roll out a new voice-recognition system for its telephone reservations service that attempts to guess callers’ questions based on their flight information.

A new luggage-tracking initiative, dubbed “bagfinder,” aims to help locate mishandled bags faster.

Shares of AMR Corp., American’s parent company (ticker: AMR), closed at $33.30 per share Thursday, up 13 cents.

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Trebor Banstetter, 817-390-7064 tbanstetter@star-telegram.com

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Copyright (c) 2007, Fort Worth Star-Telegram, Texas

Distributed by McClatchy-Tribune Business News.

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