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American reverses on severance

Under pressure from unions and Congress, the airline says it now will pay severance to 20,000 employees it has furloughed.

By KRIS HUNDLEY

© St. Petersburg Times,
published September 28, 2001


In a sudden about-face, American Airlines said it will pay severance to 20,000 employees who will be furloughed because of a decline in air travel since the terrorist hijackings Sept. 11.

American, the nation's largest airline, this week invoked an emergency clause in union contracts that allowed it to waive the normal notice period and severance pay in times of national emergency. Pressure from unions and Congress, which last week approved a special $15-billion bailout for the airline industry, apparently led to the abrupt reversal.

In a news release, American attributed the change of heart to its receipt of the first installment of the company's $900-million share of the federal aid package.

"This is something we have wanted to do but were not sure we would be able to provide given our changing circumstances and the devastating impact of the terrorist attacks on our industry and our company," the company said late Wednesday.

A day earlier, company spokeswoman Karen Watson described the elimination of severance payments as crucial to the survival of American Airlines.

"Even with the federal aid and the job reductions, the financial situation is such that airlines are in a perilous position," Watson said, defending American's initial decision. "The problem is the magnitude of the issue is so large."

Analysts estimate the airline industry will lose $18-billion as a result of the terrorist attacks and carriers have been quick to cut their schedules and work forces in response.

British Airways, which earlier said it would cut 7,000 jobs, said Thursday it will cut 190 flights weekly. Delta Air Lines said Wednesday it would ax 13,000 positions. In all, about 100,000 airline jobs have been slated for elimination.

Despite their financial straits, no airlines were willing to follow American's initial "no-severance" position. That was surprising -- and indicative of the boldness of American's move -- in an industry where competitors often act in concert on key issues.

While most carriers refused to discuss their benefit packages until they measured the response to American's move, Continental reaffirmed its commitment to paying severance to 12,000 workers slated for furlough.

Northwest Airlines reportedly considered following American's lead but backed down under union pressure. The Minneapolis-based carrier, which is also cutting 10,000 positions, said it will pay severance to the 5,500 union workers affected, though less than what is outlined in contract language.

Locally, Northwest furloughed 83 of 475 employees at its Tampa call center; at Tampa International Airport, seven baggage handlers and 16 ticket agents were given notice this week.

Continental Airlines, which is reducing its work force by 12,000, terminated 65 reservation agents at its Tampa center.

US Airways has cut 67 maintenance positions at the Tampa airport out of 11,000 targeted reductions nationwide.

While line workers are bearing the burden of airlines' financial crisis, several industry executives have agreed to forgo their salaries and benefits for the rest of the year. Among them: Continental's chief executive Gordon Bethune and president Larry Kellner, who together earned more than $9-million in compensation last year; and Leo Mullin, chairman and chief executive of Delta Air Lines, whose base salary is $795,000.

Also agreeing to forgo the remainder of his $772,500 annual salary is Donald Carty, chairman and chief executive of American Airlines. And UAL Corp., the parent company of United Airlines, said it has indefinitely suspended dividend payments as well as compensation for chief executive James Goodwin and board members for the balance of the year.

-- Information from Bloomberg News was used in this report. Kris Hundley can be reached at

hundley@sptimes.com or (727)892-2996.

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