DALLAS, April 30 (UPI) -- The major challenges facing the new management team at American Airlines are rebuilding employee trust following a bitter labor dispute and restructuring the carrier's operations, airline analysts say.
American avoided another bankruptcy bullet last Friday and even new Chief Executive Officer Gerard Arpey admitted at the end of the dramatic week that the company was "not out of the woods," facing stiff financial challenges like most other airlines today.
Rebuilding employee trust must be the top priority for Arpey and his team, according to Richard Gritta, a professor of finance and transportation at the University of Portland, who studies the airline industry.
"They need to create trust in workers and that is damn tough," he said. "There is a lack of respect that is still pervading this because of the bitterness."
The bitterness lingers from last week's disclosure that previous AMR Chairman and CEO Don Carty failed to disclose to union leaders a plan for executive retention bonuses and a pension trust before their members approved wage and benefit concessions. He later apologized to workers and canceled the bonuses, but not the pension trust.
Angry leaders of the pilots, flight attendants and ground workers were on the verge of taking another vote or not signing the agreements when Carty resigned in a board meeting, clearing the way for the unions to go ahead with the critical givebacks after further negotiations with the company.
Without the $1.8 billion in concessions from union workers and the rest of the 100,000 employees at American, the company said it would file for bankruptcy. American attorneys were reportedly poised to file bankruptcy papers in New York several times during a two-week period.
Arpey, who was Carty's right-hand man, has promised to rebuild trust as he restructures the airline. He has won initial praise from some union leaders for his last-minute negotiations with unions.
"It will come as no surprise to anyone that there is a definite need to rebuild trust within our company, not just between unions and management but between every member of the AMR family, and that starts at the top," Arpey told workers last Friday.
John Ward, president of the Association of Professional Flight Attendants, praised Arpey's role in late-night negotiations that persuaded the union's board of directors to approve $340 million in concessions and avoid a bankruptcy filing.
"For the first time in a long time flight attendants received an attentive, open ear from management," he said.
Arpey promised to continue and expand his personal practice of looking outside of the management team for ideas and to listen to workers.
"I cannot possibly know what is happening at this airline exclusively from the sixth floor of this headquarters building," he said.
The APFA was the last of the three major unions to approve the concessions. The union leaders had earlier decided to submit the issue to another vote after learning of the company's failure to disclose the executive perks.
Michael Boyd, an airline consultant based in Evergreen, Colo., said that trust and restructuring were the top priorities facing American management.
"They can no longer point to labor and say we need labor concessions," he said. "The ball is entirely in management's court. They must rebuild faith in the employees and that's going to take a long time. The stunt that Carty and his senior management and his board pulled has shattered employees."
Then the managers need to figure out "what to do to get more revenue" on the airplanes, Boyd said, which means, marketing, sales, product promotion and delivery. He said that the current market wouldn't support the air transportation system as it now exists.
"They may have to look at what they are getting and what it's costing and they may be an airline that is as big as they are today but they are going to be doing things a lot differently," he said.
Although trust is an important issue, it isn't the only challenge facing American, which reported a $1.04 billion loss in the first quarter, about $10 million per day. Business has been off since the Sept. 11, 2001, terrorist attacks.
Terrorism, the Iraq war, higher fuel prices and even severe acute respiratory syndrome have affected boardings at American, which serves 149 cities in North America, the Caribbean, Latin America, Europe and the Pacific.
American boarded 7.6 million passengers in March, down 8.1 percent from March 2002, according to its most recent traffic report.
Under the concessions, about 7,000 union workers begin receiving pink slips this week. They will also swallow wage cuts ranging from 15 percent to 23 percent and work rules changes in some cases.
Gritta said American must take a close look at its route structure, possibly trimming routes that are not profitable. But a lot depends on economic conditions in the next few months.
"If the economy starts to pull back up significantly enough and the SARS thing goes away and the threat of terrorism doesn't impede people from flying, then I think things can improve, slowly.
"I think once that starts to happen management has to take a hard look at how they finance and be more cautious in the future," he said.
