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American Airlines May Need More Concessions
Friday March 18, 10:43 pm ET
American Airlines May Need More Worker Concessions Due to Cash Crunch, Agency Says

FORT WORTH, Texas (AP) -- A cash crunch could force American Airlines to seek more employee concessions by year's end, a credit ratings agency has warned.
The report was issued this week by Chicago-based Fitch Ratings, which lowered its outlook on American's debt to "negative" from "stable." The firm predicted Fort Worth-based American's cash reserve could get squeezed in 2006 unless fuel prices drop, costs go down or revenue improves.

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"American again faces extreme cost challenges this year," Fitch analyst William Warlick said in the report, noting that airfares are unlikely to increase and fuel prices are expected to remain high. "Large operating losses this year will lead to heightened liquidity pressures moving into 2006."

Other major carriers, such as Continental Airlines Inc. and Northwest Airlines, have moved to reduce labor costs. That could force American to follow suit to remain competitive, Warlick said, mentioning changes to American's pensions as a possibility.

Reopening collective bargaining agreements probably would not be popular with labor leaders, as officials with American's unions have said they aren't interested in discussing further cuts in wages or benefits.

"We're not inclined to talk about any more concessions," said Jim Little, international executive vice president of the Transport Workers Union of America, which represents mechanics and ground workers.

No concession plans are on the table, American officials said.

"We've said we would look under every stone and around every corner to lower our operating costs," said Tim Wagner, an American spokesman. "We've expressed no desire to go back to employees for more cost savings."

But he said, "Our labor groups understand the head winds we're facing, especially with extremely high fuel costs."

Earlier this week, American and the presidents of its three major labor unions came together to ask Congress for pension relief.

The airline and union presidents said Wednesday that companies should get more time to make up unfunded liabilities in their pension plans and companies.

They also said companies that freeze plans through negotiations with workers should get relief over companies that terminate plans in bankruptcy.

Other carriers, including Delta Air Lines Inc. and bankrupt US Airways Group Inc., have sought to freeze or terminate defined-benefit plans in favor of defined-contribution plans in which workers, the company or both contribute to workers' retirement accounts.

United Airlines' parent, UAL Corp., is trying to shed its plans, which would be taken over by the Pension Benefit Guaranty Corp., the federal agency that insures defined-benefit pensions. Workers and retirees could receive 20 to 50 percent less in benefits than they were promised by United.

American, a unit of Fort Worth-based AMR Corp., was joined by the Allied Pilots Association, the Association of Professional Flight Attendants, and the Transport Workers Union, which represents American's mechanics, ramp workers and other employees.