Airline chief sent packing

Published on Friday 25 April 2003 01:00

AMERICAN Airlines has ousted chief executive Don Carty after employees rebelled over his failure to disclose executive bonuses and pensions, and sources said the world’s largest airline may file for bankruptcy within days.

In a move that followed sharp criticism of Mr Carty’s silence about executive perks while workers were accepting deep wage cuts, American’s parent company AMR said it was replacing him with current president and chief operating officer Gerard Arpey.

Mr Arpey joined American as a financial analyst in 1982 and became a corporate officer in 1989. Edward Brennan, former chairman of Sears Roebuck, was named executive chairman of the airline.

American may file for Chapter 11 bankruptcy protection in New York within days, according to sources, who said the timing depends on whether the carrier’s flight attendants, who have been reluctant to endorse deep pay cuts, accept the plans. If American does seek court protection, it would be the largest bankruptcy filing in airline history, outstripping that of second place rival United Airlines last December.

The other two major unions at American - pilots and mechanical workers - have agreed to vote for wage cuts after securing a deal from the company that would alter profit-sharing terms, reduce the terms of the deal to five years from almost six years, and allow contracts to be open for renegotiation after three years.

The flight attendants union did not agree to the changes by last night’s deadline, and American is likely to give the group until Monday to reach a decision.

Earlier this month, members of the three unions ratified concession deals aimed at saving the carrier 1.1 billion a year in staff costs. Two of those unions called for a new vote on the deals and another - the flight attendants’ - threatened not to ratify the concessions, aimed at keeping American out of bankruptcy, because of anger over executive perks.

What ultimately brought down Mr Carty was his failure to tell the airline’s unions of special pension trust funding and retention bonuses for executives until after rank-and-file workers agreed to steep pay cuts.