American To Idle 2,500 Pilots

American Airlines passenger aircraft are seen at Lambert International Airport in St. Louis, Tuesday, Aug. 13, 2002. In the past year American has overhauled flight schedules at its hubs to use planes and employees more efficiently, reduced the number of different jets it flies to cut maintenance costs and tested a new fare structure to offer lower prices for business travelers _ each move a nod to the Southwest Ailines method.
About 2,500 American Airlines' pilots will lose their jobs over the next year, some through retirement, as part of the union's $660 million in annual concessions to save the company from bankruptcy, union officials said Tuesday.

Pilots' salaries also will be slashed 23 percent in the first year, beginning May 1, and 17 percent each year thereafter, said John E. Darrah, president of the 12,500-member Allied Pilots Association.

But the agreement also includes 1.5 percent annual pay raises beginning in May 2004, profit sharing of up to 15 percent annually and stock options. Pilots will retain medical disability but will see some health-care benefit changes.

Pilots have 14 days to ratify the new contract, which would be in effect six years.

"I don't think anybody's thrilled with the significant pay cuts and furloughs ... but the alternative clearly would be even worse," union spokesman Gregg Overman said Tuesday.

Layoffs affecting about 21 percent of American's pilots will be based on seniority, but "even one (layoff) is too many," Overman said. Those pilots can be recalled within two years if the airline decides to add jobs.

American Airlines took a huge step toward preventing bankruptcy Monday by reaching tentative cost-cutting agreements with the pilots and two other key unions representing flight attendants and mechanics.

The company secured from labor leaders the $1.8 billion in concessions — including $350 million from the Association of Professional Flight Attendants and $620 million from the Transport Workers Union — needed to avert a Chapter 11 filing.

George Price, spokesman for the flight attendants, said he would not disclose layoff numbers, salary cuts or other details of the agreement until all union members were notified.

American chairman Donald J. Carty praised union leaders, saying their actions "have enabled us to avoid an immediate filing with the bankruptcy court."

The news lifted shares of American by 34 percent Tuesday morning as investors considered a bankruptcy filing much less likely now.

The airline had been negotiating with unions for weeks. Over the weekend, the company reached tentative agreements with six groups of ground workers, totaling 2,500 employees. The company previously reached a tentative deal with 16,300 baggage handlers.

However, until Monday afternoon, there were still no deals with the three most important labor groups in its work force of 99,000.

Pilots last week said negotiations hit a snag after American suddenly said that 1,000 job cuts would not count toward the union's plan for layoffs and salary cuts totaling $660 million.

"Clearly, this agreement will be controversial across the full spectrum of our membership. As a stand-alone, it is apparent that we gave a tremendous amount of concessions," Darrah told pilots in a statement Monday night.

Carty also said he would cut his base salary by a third, decline a bonus for the third straight year and ask the board of American parent AMR Corp. to reduce the compensation of other senior officers. Carty had a base salary of $585,813 in 2001. He took a pay freeze late in 2001 and in 2002.

AMR has lost nearly $5.3 billion in the past two years and has faced increasing competition from low-fare carriers, which can afford to offer cheaper ticket prices because their labor costs are lower. American says it faces competition from low-fare carriers on about 80 percent of its routes. That has kept fares down, reducing potential revenue.

Shares of AMR were up 72 cents Tuesday morning to $2.82 on the New York Stock Exchange.