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Airline Boss Didn't See Furor Coming

American Airlines CEO Donald Carty
AP
American Airlines chairman and chief executive Donald J. Carty says he thought employees would admire his plan to retain key executives, but the furor over management perks has instead left the airline dangerously close to filing for bankruptcy.

The second of American's three main unions said Monday it would hold a new election on the company's plan for cutting labor costs by $1.8 billion a year.

The Transport Workers Union joined the Association of Professional Flight Attendants in calling for another vote, increasing the possibility that the deal will be rejected. The third big union, representing American's pilots, said its board would hold an emergency session Tuesday.

All three unions voted last week to approve the concessions but say they were outraged to learn of executive perks while their members were approving big pay and benefit cuts.

American has vowed to file for bankruptcy protection if any of the unions fail to approve the cuts. Carty repeated that threat Monday.

In meetings with union leaders and reporters Monday, Carty took personal blame for not disclosing the executive perks sooner.

Last year, the AMR board approved large bonuses for seven executives, including Carty, if they stayed at the company through January 2005. It also approved $41 million in payments to a pension trust for 45 executives, including Carty, that would have been protected in bankruptcy, just like other employees' pensions.

The company has dropped the bonuses but not the pension funding.

Carty defended the payments as necessary to keep senior executives and said he thought the retention plan would win praise as more modest than plans at other airlines.

Although he didn't name them, Continental and Delta airlines have been criticized by workers for approving similar plans during a severe downturn in the industry.

"I really believed that we were going to look very good by comparison," he said. "I should have been a lot smarter."

The benefits were approved last year but only publicly disclosed last week, on the same day employees were scheduled to finish voting on concession deals.

Carty said the late disclosure in a mandatory securities filing was a mistake. He said he didn't release details sooner because he feared the public would think there was a mass exodus of senior officials from the company. There was another delay this month while the company's outside auditors reviewed tax treatment of the provisions, he said.

"All of our employees, union and nonunion alike, did what was necessary to help avoid bankruptcy, and then I stumbled," Carty said.

Union leaders said it was unclear whether Carty's apology would prevent the unions from reversing their earlier approval of concessions to head off bankruptcy.

"He was very sincere and apologetic," said James C. Little, leader of the transport workers' group, as he left the meeting with Carty. "I don't know if that's enough to satisfy the employees."

John Ward, president of the flight attendants' union, said AMR interfered in the union's election by contacting employees on the last day of voting and failed to disclose relevant information about executive perks.

"Sorry or not, APFA intends to proceed with a revote of our membership on the company's restructuring proposal," Ward said, adding that the union board would meet Tuesday to determine ground rules for the new round of voting.

Fort Worth-based AMR is scheduled to report first-quarter earnings Wednesday. Analysts expect it will post an $800 million loss.