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CEO Woes At American Airlines

American Airlines CEO Donald Carty
AP
A possible bankruptcy filing is expected to top the agenda when American Airlines board members meet Thursday, reports CBS News Radio.

Wednesday, the carrier announced a first quarter loss of more than a billion dollars.

The board will also consider the fate of chief executive Donald J. Carty as management tries to assuage labor leaders angry over executive perks that could scuttle cost-cutting agreements reached last week.

Board member David Boren plans to call for Carty's replacement, saying most directors had been led to believe that the chairman and CEO had disclosed executive bonuses to union leaders before employees approved $1.8 billion in annual concessions.

"Mr. Carty has lost the credibility and trust necessary to effectively lead the company through challenging times," Boren told the Tulsa World.

A spokesman said American had no comment on the remarks made by Boren, the president of the University of Oklahoma and a former U.S. senator.

On Wednesday, American's parent, AMR Corp., reported a worse-than-expected $1.04 billion first-quarter loss, and Carty and other executives met with union leaders in an effort to salvage the concessions deals, which American says it needs to avoid bankruptcy.

Two elected officials who met with both sides Wednesday said the Fort Worth-based airline was prepared to file for bankruptcy if it can't resolve differences with labor groups.

Employees remain angry after learning late last week about executive bonuses and pension payments that would be protected in bankruptcy. Two of the three unions now want new votes on concessions that Carty insists are necessary to ward off a Chapter 11 bankruptcy filing.

Analysts say the labor unrest has increased pressure on the company's board of directors to remove Carty.

U.S. Rep. Martin Frost, D-Arlington, and Rep. Pete Sessions, a Dallas Republican, both said a possible bankruptcy filing would be on the board's agenda Thursday. The meeting time was as yet undetermined.

"If it is left unresolved, there's a pretty good chance the board will approve a Chapter 11 filing," Frost said.

A person involved in Wednesday's negotiations, who spoke on condition of anonymity, said American was considering sweetening its original offers to the unions to stop new elections or to speed up the voting process.

Unions representing flight attendants and ground employees were planning 30-day elections, while the pilots' union is threatening to withhold formal approval of its earlier vote.

The quarterly loss was equivalent to $6.68 per share, compared with a loss of $1.56 billion, or $10.09 per share, in last year's first quarter. Analysts surveyed by Thomson First Call had expected a loss of $6.08 per share, or $948 million.

Carty blamed the first-quarter results on weak travel demand caused by the sluggish economy, war in Iraq and the SARS outbreak. He also said high fuel prices and low fares contributed to results that were "truly dreadful."

"All told, it's a perilous climate and our success is far from assured," he said in a statement.

None of American's unions have demanded Carty's resignation, but some members of the pilot's union board believe the CEO should go, said spokesman Steve Blankenship.

"We're not having to do much. This guy is setting himself up to fail," Blankenship said. "The issue is clearly on the AMR board's shoulders."

Carty has apologized for not disclosing the executive perks sooner. The company canceled the bonuses but not the $41 million in pension funding for 45 executives.