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Flight Attendants Approve Concessions

American Airlines flight attendants Judy Skene, left, and Denise Locke, center, disagree with flight attendant Robert Powell as they stand in front of the flight attendant union office in Euless, Texas, Wednesday, April 16, 2003.
AP
American Airlines flight attendants approved $340 million in labor concessions Wednesday, pulling the world's largest carrier back from the brink of bankruptcy.

The Association of Professional Flight Attendants said 10,761 votes were cast for the concessions package and 9,652 against.

The vote marked a reversal from one day earlier, when flight attendants narrowly rejected the package of layoffs, wage cuts and reduced benefits.

``This is not a day for rejoicing,'' said a union spokeswoman, Lori Bassani. ``Tough times lie ahead for our airline and our members. By ratifying this agreement, we will be giving up a great deal to try to keep our airline out of bankruptcy.''

But the union and company extended the balloting, saying some workers had encountered difficulty in voting and that it was a last shot at avoiding bankruptcy.

Unlike pilots and ground workers, who approved concessions Tuesday, flight attendants weren't allowed to change their votes once cast. During the voting period, American sweetened the original deal by offering one-time bonuses of up to 4.5 percent in 2006 or later if the company's credit ratings improve sharply.

American asked its three main unions to approve the bulk of $1.8 billion in annual labor cuts sought.

``The people of American Airlines have together made history,'' said Donald J. Carty, American chairman and CEO. ``These agreements represent the most ambitious effort to consensually restructure costs ever, not only in airline history but in U.S. history.''

The board of directors of American's parent, AMR Corp., had been prepared to meet by teleconference Wednesday night and approve a bankruptcy filing if flight attendants had rejected the labor cuts, a company spokesman said.

The spokesman, Bruce Hicks, said the company faced credit payments of at least $50 million Wednesday and would have filed for bankruptcy to avoid those payments and conserve cash.

American says it must cut annual costs by $4 billion — including $1.8 billion in spending on its 99,000 employees — to remain afloat and compete with low-cost carriers.

In voting that closed Tuesday, unionized pilots and ground workers approved their share of the concessions, saying they feared even deeper cuts if they forced the company into bankruptcy. The company said bankruptcy would force it to cut 10,000 more jobs.

But by the Tuesday deadline, the airline's 24,000 attendants rejected the deal, which would cut their pay by 15.6 percent on May 1, by fewer than 500 votes out of 19,000 cast.

In Wednesday trading on the New York Stock Exchange, AMR shares rose 83 cents to $4.23 in anticipation the flight attendants would reconsider. In after-hours trading, the shares surged another 13 percent.

Fitch ratings service said the concessions would bring American's unit labor costs in line with rivals Continental, US Airways and United. The latter two were able to reduce costs through the bankruptcy process.

Over the past two weeks, employees voted whether to ratify agreements struck March 31 — on the brink of an earlier bankruptcy deadline set by the company — that called for layoffs for 2,500 pilots, about 2,000 flight attendants and up to 1,400 ground workers.

American sought $660 million in annual concessions from its 12,000 pilots, $620 million from 34,000 ground workers and $340 million from flight attendants.

Over the past two years, Fort Worth-based AMR has lost nearly $5.3 billion as it struggled with a weak economy and terrorism, which dampened travel demand. Additionally, competition from low-cost airlines kept fares lower that American wanted.

As CBS News Correspondent Anthony Mason reports, the entire airline industry has been hemorrhaging money, wounded by war, SARS and a weak economy. More than 100,000 industry employees have been laid off since 9/11.

"The U.S. airline industry is probably in the worst shape it's ever been in," says Jim Corridore who conducted a Standard & Poors study on the industry.

Corridore forecast that the top 10 carriers in the U.S. were on a course to lose $6.5 billion this year. And that was before the war. Now it could be more than $10 billion.

"But given that we are seeing the worst environment in aviation history, I don't think the cuts are going to necessarily be enough to save all the companies that are currently competing in the industry," says Corridore.

In other words, expect more bankruptcies. Some carriers could even be forced to liquidate. And don't expect a quick recovery. After the last gulf war, it took two years for business to take off again.