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US: Labor Objects to Executive Bonuses at American

Associated Press
January 9th, 2006

Leaders of two unions at American Airlines have objected to stock-based bonuses that executives of the money-losing carrier are due to receive in April.

Last week, the company provided more details about bonuses for about 1,000 executives, from the airline's No. 2 official to midlevel managers. Four officials would get payouts of more than $1 million, if parent AMR Corp.'s stock price holds steady or increases before April.

The bonuses, first spelled out in 2003, were increased because AMR's stock price increased more than any other major U.S. carrier through the end of 2005.

The company also estimated last week that stock options granted to all employees in 2003 could be worth more than $500 million when they vest, also in April. Those stock options were granted when workers took pay cuts to help the company avoid bankruptcy.

Still, leaders of unions for American's pilots and flight attendants said the executive bonuses were poorly timed because AMR has lost more than $7 billion since the beginning of 2001.

"Saying that many of our pilots are outraged would be a significant understatement," said Ralph Hunter, president of the Allied Pilots Association in a letter to his members on Monday. "Your entire APA leadership is equally displeased."

Hunter said, "It is absolute insanity to pay out seven-figure bonuses at a time when the company is suffering nine-figure losses, mired in eleven-figure debt, and seeking further help from its employees to survive for the long term."

AMR has lost more than $7 billion since the beginning of 2001, when the airline industry went into a slump that resulted in several carriers filing for bankruptcy protection. AMR has cut costs sharply, largely through layoffs and pay cuts, but analysts still expect the company to lose about $675 million for the year when final 2005 figures are released this month.

In 2005, AMR's shares more than doubled, rising from just over $11 per share to $22.23 by year's end. On Monday AMR shares rose 13 cents to close at $22.79 on the New York Stock Exchange, near their 52-week high of $23.53.

Tommie Hutto-Blake, president of the Association of Professional Flight Attendants, told her members in a message posted Friday that the "very poor timing of management bonuses" wasn't in the best interests of the company and employees.

Hutto-Blake said her union was protesting the bonuses by pulling out of base briefings with management scheduled for this week. She did, however, commend Chairman and Chief Executive Gerard J. Arpey for not taking part in the bonus plan.

AMR has disclosed the management bonuses in regulatory filings since 2003, although it hasn't put a dollar figure on the total cost. Executives will be paid in cash based on AMR's stock price in April.

At AMR's current stock price, bonuses would range from about $2,000 to about $1.7 million for Daniel P. Garton, the airline's executive vice president for marketing. Three other executives would get about $1.4 million.

Lisa Bailey, a spokeswoman for American, said the unions were preparing to ask the company for more information about the plans.

Last week, Senior Vice President Jeff Brundage said in a letter to managers that was also sent to union leaders that the bonuses rewarded managers for "superior performance." He said the plan, in which executives depended on bonuses for a high percentage of their compensation, held managers accountable for the company's fate.

The company has not estimated the total cost of all the executive bonuses. A spokeswoman said last week that such information might be disclosed when AMR releases final 2005 financial results.



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