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Slow Going

Talks between American Airlines, unions showing little progress  Apr 12, 2009

Negotiations on new contracts between AMR Corp., the parent of American Airlines, and its unionized mechanics, pilots and flight attendants are moving at a glacial pace, participants say.

In a stagnant economy and an industry losing billions of dollars a year, no one expects any sudden breakthroughs.

But the extended negotiations, the reported deterioration in labor-management relations and the continued payout of millions of dollar in stock-based executive bonuses — the latest of which is expected this week — could have long-term consequences for the company, union and industry officials said.

"Have we made significant or substantial progress? No," said Mark Burdette, American's vice president of employee relations, about contract talks with American's pilots. "We have nine tentative agreements and 62 items still on the table. ... It's not stubbornness on our part. We're trying to craft agreements that are win-win, good for the company and the pilots."

Scott Shankland, a negotiator for the 11,500-member Allied Pilots Association, sees it differently.

"It's been 2 1/2 years — in July, it will be three years" since negotiations began, Shankland said. "Management realizes a new pilot contract is going to be more expensive than the current pilot contract.

"So, every day they can delay that contract is money saved for the company."

After months and — in the cases of the pilots and mechanics — years of negotiations with American, union officials say their workers feel unappreciated and cheated by the company.

"No group of workers has done more to boost AMR's bottom line than the mechanics and other related workers," said Don Videtich, international representative of the Transport Workers Union.

"We not only granted concessions in 2003 to the tune of $310 million annually, we brought in hundreds of millions in new revenue through outside maintenance contracts and higher productivity.

"AMR wouldn't be flying without us."

Steve Luis, president of TWU Local 514 in Tulsa, said worker morale is suffering.

"I have worked for American 23 years and the lack of trust between union and management is at a level that is very alarming to me," Luis said.

Union leaders contrast negotiations with American with those between Southwest Airlines and its unions.

At Southwest, unionized baggage handlers, mechanics, flight attendants and pilots have at least tentative agreements on new contracts calling for wage increases. The agreements were reached in negotiations conducted "incredibly smoothly," a Southwest union spokesman said.

"Negotiators came in feeling (Southwest) was a company that rewards people, allows them to thrive and to eat the competition's lunch," the union spokesman said. "You can't expect people to do more and more and more and to receive no additional compensation — especially when executives are getting bonuses."

Shankland, the pilots' negotiator, said Southwest's management style and its relations with workers are in stark contrast with American's.

"Southwest believes in prioritizing employees, believing it's an investment in the company — and they expect a return on their investment," Shankland said. "At American Airlines, labor is considered a cost. We want to be treated as allies in the company, but management treats us as adversaries.

"And that's the difference.: AMR is run by a bunch of accountants while Southwest has leaders."

American's union contracts were forged under the threat of a bankruptcy filing by American in 2003.

The unions agreed to contracts calling for $1.62 billion a year in wage and benefit concessions to keep the company from canceling wage, benefit and pension agreements in bankruptcy court. The contracts became amendable in May 2008.

American's Burdette said the airline's pilots, flight attendants and mechanics are at or near the top of the airline industry's wage scale. He concedes many of American's competitors have been through bankruptcy, which voided wage, benefit and pension agreements.

AMR lost $2.07 billion in 2008.

This week, industry analysts expect the company to report a first-quarter loss of between $300 million and $400 million.

"We have to be competitive," Burdette said. "In the current economic climate, if we were to restore all concessions it's reasonable to assume we would be in the same position we were in in 2003. We lost almost $2 billion last year. If we put back $1.3 billion in costs (wages, benefits) — with lower passenger traffic, lower fares — it wouldn't be long before we would be out of cash."

AMR ended 2008's fourth quarter with $3.6 billion in cash and short-term investments.

Union officials said AMR would have a stronger cash position had it not paid out more than $300 million in executive bonuses the last few years.

Frank Bastien, spokesman for the 19,000-member Association of Professional Flight Attendants, said the union gave up $340 million a year in wages and benefits since 2003. APFA's goal is "restore and more" lost wages and benefits.

"We have made great sacrifices to make this company successful and keep it out of bankruptcy," Bastien said.

"We have seen corporate executives reap the benefits with executive bonuses. We think they have taken their share of rewards from our sacrifices, and now it's our turn to get back as much as we can."

Talks between American Airlines, unions showing little progress
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