AMR Confronts the Bears
Last week, the Allied Pilots Association, which represents American's 11,000 pilots, picketed the Transportation Department in Washington to oppose global aviation alliances, specifically American's bid for antitrust immunity.
Generally, American pilots seem hard-wired to oppose whatever the airline does. Perhaps that is understandable, given simmering anger over two executive compensation deals. American narrowly avoided bankruptcy in 2003 because unions agreed to $1.6 billion in concessions. Days later, the carrier revealed it had secretly established a trust fund to shield pensions for 45 executives if there were a bankruptcy. Former CEO Don Carty quickly resigned.
Additionally, since 2005, nearly 900 managers have collected about $200 million in awards linked to share price. "If you lose the trust of your employees, they put the brakes on," says Mann, who consulted for APA in 2003. "The prospect of change with a management team you don't trust is not a good prospect."
But what can Arpey do? He succeeded Carty after the trust fund's existence was revealed. Pilots had already rejected the concept of stock as part of their pay package. And even the federal government seems largely unable to rescind pay promises to executives.Arpey seems a confident but dispassionate, lay-out-the-facts manager, trusting to an innate belief that his well-managed company makes good decisions, and that the rest of the world will eventually realize that the only proper course is to follow American's lead. For instance, American was early to reduce capacity, cutting back by 11% between the end of 2007 and the end of 2009. The industry has benefitted from similar moves. American was first to impose a first-bag fee in May 2008; it waited stoically for weeks, until someone finally matched. Again, the industry has benefitted. Now Arpey believes regulators will see reality on antitrust immunity. "If the facts matter, we'll be approved this fall," he said during the September conference call. "I think the facts do matter," he added, hopefully. -- Written by Ted Reed in Charlotte, N.C. .
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