American bonuses cause outrage

Story Tools Chapter 11 Bankruptcy: What it means Under U.S. law, a company that cannot meet payments on its debt can apply to the United States Bankruptcy Courts, which are a part of the District Courts of The United States, for protection from its creditors. If granted Chapter 11 protection, the business can continue to operate while it works with creditors to try to lighten its financial burden.   The company has up to 180 days to present and get acceptance  from creditors for its reorganisation. The court can increase or reduce the time period if necessary.   Assuming creditors approve, a company can come out of Chapter 11 if the court is satisfied it has a viable financial plan. Any claims against the company are pardoned or rescheduled.   A  Chapter 11 is usually bad news for shareholders who are likely to see the value of their shares reduced to virtually nothing. The company could be handed over to creditors, because debt is usually converted into stock. As more stocks flood the market, existing shareholders own less of the business.   But some companies in Chapter 11 bankruptcy are able to have their shares continue trading for weeks or even months after filing.   There is no equivalent of Chapter 11 outside the U.S. If a company goes bankrupt it stops trading and goes out of business. While Chapter 11 allows the existing management to pilot the business, in Europe the courts typically appoint an administrator to find a buyer or sell assets to pay creditors.

FORT WORTH, Texas (CNN) -- Outraged by news that troubled American Airlines had planned to give its executives bonuses, flight attendants rescinded their approval of wage cuts, and plan to vote again, a union official said late Friday.

No date for the new vote was set. Wednesday, the flight attendants agreed to more than $10 billion in wage concessions over six years. The airlines had said it would file for bankruptcy if the union failed to approve the cuts.

Thursday, one day after approving the cuts, the union learned for the first time that American, in October 2002, had granted 45 of its officers special supplemental retirement benefits that would be out of the reach of creditors if the company filed bankruptcy, said John Ward, president of the Association of Professional Flight Attendants (APFA).

"This taints the agreement that was ratified just two days ago in a wrenching process for our members," Ward said in a statement. "Every APFA member -- those who voted for the agreement and those who voted against it -- are outraged by this action, as am I."

In addition, the company divulged that it had approved cash retention bonuses to its top six executives in March 2002, Ward said.

American Airlines said Friday that its top management had canceled the bonus plans.

"I sent a letter to CEO Don Carty today condemning both the SERP (Supplemental Executive Retirement Program) and the retention bonuses and expressing my outrage that the company had indicated to the press that the union groups had been briefed on these programs," Ward said Friday.

He said he received a letter from Carty apologizing for failing to fully brief the flight attendants.

"So much for 'fair sharing' of the pain of the company's restructuring," Ward said in his letter to Carty. "So much ... for a new company 'openness.'"

The Allied Pilots Association voted Tuesday to take concessions to avoid bankruptcy and also were outraged by the revelation that the executives would get bonus and a special retirement plan.

The pilots accepted the apology Carty issued Friday.

"These retention agreements were created a year ago in March 2002 when, after the events of September 11, the industry was struggling and our board of directors had serious concerns about our ability to retain our senior management in light of the potential loss of several key executives," Carty said in a letter to employees.

He apologized "for any misunderstanding about the benefits made available to members of senior management."

"My mistake was failing to explicitly describe those retention benefits, and because of that, many employees felt they were kept in the dark," Carty said. "Please know that it was never my intention to mislead you. I offer you my sincere apology, as I have to."

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