Editorial: American Airlines’ black eye deserved

Thursday, April 24, 2003 | 11:20 a.m.

Recently the management of American Airlines extracted significant wage concessions from unions as the airline sought to prevent bankruptcy. The unions agreed to pay reductions that would save American $1.6 billion annually. But late last week the unions found out -- only after they had already agreed to the concessions -- that seven airline executives were receiving large retention bonuses to stay on. In addition, 45 executives were guaranteed pensions even if the company went into bankruptcy, a sum that could total $41 million. The airline's CEO, Donald Carty, apologized for failing to disclose the pay and benefits, adding that executives would now get rid of the retention bonuses -- but not give up the guaranteed pensions. In response, the unions may rescind the contracts. The company, whose board is meeting today to consider filing for bankruptcy and p ossibly removing Carty as CEO, has created this mess.

If the unions void the contracts, they could hurt themselves in the long run. The company would almost certainly file for bankruptcy and the union's membership could face greater hardships. More layoffs could occur and the company could slip deeper into debt to the point where the airline has to be liquidated. Nevertheless, it's easy to understand the employees' anger. To prevent a disaster, the company should immediately forgo the pension benefits for the executives. Even if the company agrees to do that and the unions agree to keep the wage concessions in place, its failure to disclose its perks will have a debilitating effect on its relationship with its workers. The actions of American's executives are deplorable and show just how out of touch they are with their employees and with the public, whose cynicism about corporate America continues, with reas on, to grow.