Unions Force Airline Bosses to Scrap Pay Deal

American Airlines last night scrapped a bonus scheme for its top executives after the plan sparked fury among union leaders at the cash-strapped carrier.

Details of the bonus scheme were filed with the securities and exchange commission shortly after the three main unions agreed to $1.8bn in pay cuts and other concessions. The plan had been to reward the top six executives with a bonus twice the size of their basic salaries if they stayed with the airline until 2005.

When they learned of the compensation plan, union officials had threatened to tear the agreements up and leave the airline facing little choice but to file for bankruptcy.

Don Carty, chief executive of the airline's parent AMR Corporation, said: "I have apologised to our union leaders for the concern it has caused our employees.

"Those executives who have made the personal commitment to remain with American during this financial crisis are not here solely for monetary reasons and we have all agreed to give up these retention payments in order to give our employees confidence in management's ongoing commitment to shared sacrifice."

But a separate plan detailed in the SEC filing late Tuesday for a trust fund to protect the pension plans of top executives should the company go bankrupt has been left in place.

The reversal of the plan may have come too late to repair the relationship between management and the unions. John Little, a senior member of the Transport Workers Union, had earlier warned that the package could derail the airline's rescue plans. He said failure to disclose the package during negotiations was a "material breach of its obligations to provide relevant information".

Pilots had agreed to $660m in cuts, mechanics and ground workers accepted $620m and flight attendants $340m.

John Ward, president of the Association of Professional Flight Attendants, said of the package: "It's the equivalent of an obscene gesture from man agement to employees, especially after the gut-wrenching decision thousands of flight attendants and other union employees at American Airlines made in just the last two days to drastically change their lives and keep this company out of bankruptcy."

American has lost $5.3bn in the past two years after the September 11 attacks, the expansion of low-cost rivals and poor demand.