AMR, the parent company for American Airlines filed for bankruptcy on Tuesday, despite a history of paying massive bonuses to top executives. Most talk about the filing has centered around the idea that it was done in order to bring down labor
December 2, 2011

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AMR, the parent company for American Airlines filed for bankruptcy on Tuesday, despite a history of paying massive bonuses to top executives. Most talk about the filing has centered around the idea that it was done in order to bring down labor costs. In other words, it would seem, the company is looking to get out of its collective bargaining agreement with workers in order to cut jobs, salaries and benefits.

While American has some financial troubles, the idea that workers are primarily responsible for it doesn't pass basic scrutiny. Flight attendants protested against American earlier this year in response to the big bonuses given to top executives despite the company having troubles and while workers earned less than $40,000 a year on average while working schedules of over 70 hours a week:

The top five execs have reaped $100 million in bonuses since 2005, while the carrier lost more than $4.2 billion. In 2003, the flight attendants agreed to cuts in pay and benefits worth $340 million annually, which they say kept American out of bankruptcy.

The filing was surprising to some, considering that several of the unions covering American workers had recently reached tentative agreements on moving forward:

Prior to Tuesday’s announcement, TWU had just reached tentative agreements with American for new contracts in some of its bargaining units that were awaiting ratification by members. Other union members at American were still working without a contract extension agreement four or more years since expiration. Although TWU has been preparing for the possibility of bankruptcy for two years, Little says management never indicated during negotiations that it could be imminent. “We didn’t get any advance notice, except perhaps five minutes before the media knew about it.”

Little suggested that the board of parent company AMR may have made the bankruptcy decision against the recommendation of CEO Gerald Arpey, whose retirement AMR also announced on Tuesday.

Transport Workers Union President James C. Little's reaction:

We are very disappointed by today’s action by AMR. The Transport Workers Union will do everything possible to protect our members at both American Airlines and American Eagle. Work at both airlines will continue through the Chapter 11 reorganization.

Our union had tried to work with AMR managers to make the company more cost competitive and more efficient. In the past month we had reached tentative agreements for both flight dispatchers and fleet service workers. Fleet service is American’s largest bargaining unit. Other TWU units at both American and Eagle had previously inked agreements. Our aircraft mechanics and maintenance workers, represented by TWU, have saved the company several hundred million dollars over the past decade through boosted productivity and by bringing in work from other airlines.

While we think this bankruptcy could have and should have been avoided, it does not come as a surprise. TWU engaged special bankruptcy counsel two years ago as a contingency and our attorney Sharon Levine of the firm Lowenstein Sander PC will file claims on behalf of TWU members later today in the U.S. Bankruptcy Court for the Southern District of New York.

This is likely to be a long and ugly process and our union will fight like hell to make sure that front line workers don’t pay an unfair price for management’s failings.

We also will do everything possible to protect our passengers. American Airlines does more maintenance in-house and in the USA than any other major US-based airline. Other bankruptcies in the airline industry have seen aircraft overhaul and other repair work sent to less secure, poorly regulated maintenance facilities in third world countries. We will do everything in our power to maintain quality and safety for this airline and its passengers, while protecting the interests of our members.

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