Unions say airline warns of urgency

Posted on Tue, Apr. 08, 2003 By Trebor Banstetter Star-Telegram Staff Writer

FORT WORTH - American Airlines will file for bankruptcy protection next week if any of its three unions rejects plans for $1.6 billion in concessions, union leaders told members Monday.

Airline employees are pondering whether to approve the new contracts, which will mean hefty pay cuts, layoffs and tightened work rules. For pilots and ground workers, voting is expected to be completed on Monday. Flight attendants will have until 10 a.m. on April 15, union officials said.

"A 'no' vote will trigger a bankruptcy filing the day following the voting deadline," Jim Little, international vice president of the Transport Workers Union, told members Monday. "This is a fact that has been bluntly stated by the company, without reservation."

Also Monday, American announced that it will cut its May flight schedule more deeply than expected. Bookings have been down because of the war in Iraq as well as the continued economic slowdown, airline officials said.

The airline's domestic routes will be cut 2 percent more than originally planned next month, and international flights will be down 13 percent more than planned, airline officials said.

It was another sign that despite the recent progress with labor, American's ability to stay out of bankruptcy court remains uncertain.

"The network carriers will have to be restructured," Ray Neidl, airline analyst for Blaylock & Partners, said in a note to investors. "The question is will it be in or outside of bankruptcy."

Union officials said that American has given them little reason to doubt that a bankruptcy filing will soon follow if union members reject the concessions.

"The company has alluded to the fact that if one of the employee groups were to fail to ratify the agreements, they would certainly file," said George Price, a spokesman for the Association of Professional Flight Attendants.

Although American executives have raised the specter of bankruptcy before, airline officials have declined to disclose when a filing might take place.

But Little of the Transport Workers Union, which represents 34,000 mechanics and other ground workers, said the airline has informed the union that a Chapter 11 filing would take place almost immediately after any negative vote.

"Anyone who thinks a 'no' vote will result in additional negotiations or, better yet, an unchanged contract, has ignored the news and ignored the facts," he said in his message to union members. "Bankruptcy is certain without these concessions in place."

American has warned its unions that bankruptcy lenders would demand an additional $500 million in annual labor concessions in a Chapter 11 case.

"We have made it clear that we need ratification from all three unions in order to continue to avert bankruptcy," said Bruce Hicks, an American spokesman. "If the union members don't ratify [the concessions], there won't be any return to the negotiating table."

American came within minutes of filing last week when a vote by leaders of the pilots' union to accept a tentative concessions agreement kept the airline temporarily out of bankruptcy.

Fort Worth-based American, the largest employer in North Texas, has lost $5.2 billion in the past two years, and is expected to lose $800 million during the first three months of 2003.

The carrier, which is the world's largest, has been struggling with a steep downturn in business travel and fierce competition from discount airlines such as Southwest Airlines and AirTran Airways.

Last year, the carrier launched a campaign to cut $4 billion in annual costs and return to profitability. In addition to asking employees for $1.8 billion in labor costs, executives say they cut $900 million in operating expenses last year and hope to cut $1.1 billion more over the next several years.

American's flight schedules will be slashed even further next month, officials said. With the new cuts announced Monday, the carrier's domestic flight network will be down 10.7 percent from its size May 2002, and its international network will be down by 5.5 percent, said Tara Baten, a company spokeswoman.

Baten emphasized that none of American's routes will be eliminated.

"These are selected frequency reductions," she said. "No destination will lose service altogether."

The cuts are "in line with reductions we're seeing throughout the industry due to the war in Iraq and economic conditions," Henry Joyner, American's senior vice president of planning, said in a statement.

Baten said the airline does not yet know if the additional cuts will mean more layoffs.

The reductions will affect some routes from Dallas/Fort Worth Airport, Baten said. Fewer flights will be available to Miami; Chicago; San Jose, Calif.; San Juan, Puerto Rico; Calgary, Alberta; and LaGuardia Airport in New York.

International routes from D/FW that will be affected include Caracas, Venezuela; Tokyo; Paris; Frankfurt; London; and Mexico City.

Baten could not say how many flights to each city will be eliminated.