Rebounding Airline: White-collar bonuses blasted:

AA logs another profit

By D.R. STEWART, Tulsa World Staff Writer
4/19/2007 

AMR Corp., the parent of American Airlines, posted a first-quarter net profit of $81 million, or 30 cents a share, its fourth consecutive profitable quarter. AMR last reported four profitable quarters in a row in 2000, company executives said. A year ago, AMR reported a loss of $92 million, or a loss of 49 cents per share.

However, as AMR executives discussed the company's financial performance with industry analysts in a national conference call, an estimated 1,200 pilots, flight attendants and mechanics demonstrated their anger over executive bonuses in a rally outside AMR's corporate offices in Fort Worth. The unions estimate the bonuses, based on AMR's closing stock price of $31.96 Wednesday, will be worth $170.8 million.

"Never in my 21-year career have I seen such an outpouring of frustration and anger from every corner of this airline," Ralph Hunter, president of the Allied Pilots Association, told American employees at the rally. "With their broken promises, management has rebuilt a wall of distrust between the executive offices and our work groups. As long as this wall stands, American faces the risk of becoming just another failed enterprise shipwrecked on the rocks of corporate greed."

The pilots union, which represents 12,000 pilots at American, the Association of Professional Flight Attendants and the Transport Workers Union, which has 6,000 aircraft mechanics and related work groups in Tulsa, gave up $1.6 billion in wages and benefits a year to help American avoid a bankruptcy filing in 2003.

The wage concessions helped AMR post a 2006 net profit of $231 million, its first annual profit since 2000.

The concessions also contributed to AMR's profit in the first three months this year, company executives said.

"We have taken a different path than many of our traditional competitors to get here," Chairman and CEO Gerard Arpey said in a letter to employees Wednesday. "In many ways, it is a harder path. But in light of today's results, I am more convinced than ever that the path we have chosen is the right path for our employees, our shareholders and our customers. I hope as you reflect on everything it took to get us to this point, you are proud of all we have accomplished together."

In the first quarter, AMR had revenue of $5.4 billion, a 1.6 percent increase compared with the same period a year ago. Operating expenses totaled $5.17 billion, a 1 percent decrease compared with 2006's first quarter.

Wages, salaries and benefits in the first quarter totaled $1.67 billion, a 3.4 percent decrease compared with last year's first quarter. Aircraft fuel cost the airline $1.4 billion, a 4.3 percent decline from a year ago, as the fuel price averaged $1.84 a gallon, a 2.5 percent decrease, and consumption was 692 million gallons, a 1.8 percent decline, compared with last year's first quarter.

The airline flew 32.57 billion revenue passenger miles in the quarter, a 1.3 percent decrease, on a seat capacity reduction of 2.5 percent. A revenue passenger mile is flying one passenger one mile.

Yields, which represent average fares, rose 3.3 percent in the quarter, which was American's eighth consecutive quarter of year-over-year yield increases. American's load factor, or the percentage of seats filled, increased 0.9 percent in the first quarter to a record 78.1 percent.

AMR ended the first quarter with long-term debt of $17.5 billion, a decrease of $500 million compared with the close of 2006 and $2.2 billion less than a year ago.

At the close of the first quarter, AMR had $5.9 billion in cash and short-term investments, an increase of $700 million compared with the fourth quarter of 2006.

Arpey said AMR contributed $62 million to its employees' defined benefit pension plans in the first quarter and made an additional $118 million contribution last Friday.

In a development that will affect the Tulsa Maintenance & Engineering Center, AMR's board of directors announced last month that it will invest up to $100 million in facility, technology and process improvements to help its third-party maintenance, repair and overhaul business compete for more maintenance contracts. American's MRO business generated nearly $95 million in third-party revenue in 2006.

The good news for AMR and American, however, must be tempered with concern about management-labor relations, as was evident at the employee rally in Fort Worth Wednesday, officials said.

In 2008, the five-year contracts with unionized pilots, flight attendants and mechanics become amendable. Many of American's workers say concessionary contracts are history, that the unions will expect to share in the rewards executives are taking in the form of stock-based compensation.

"Over the last four years, American employees have given up more than $7 billion in pay and benefits," said Hunter, the pilots union president, in a prepared statement earlier this week. "Thousands of our fellow employees were laid off, and thousands remain on furlough today. During this same time period, executive compensation has increased by more than 700 percent.

"It is time to recognize the contributions of the thousands of American employees who made the real sacrifices, and it is also time to shine a spotlight of shame on the handful of executives who have monopolized the rewards."

Arpey said a rising stock price benefits all employees by generating cash for contributions to pension plans, retiree health benefits and removing the threat of layoffs.