American Airlines pulls up

FORT WORTH, Texas -- American Airlines flight attendants reversed themselves and approved $340 million in labor concessions Wednesday, pulling the world's largest carrier back from the brink of bankruptcy. American welcomed the reprieve but warned that its troubles may not be over.

The Association of Professional Flight Attendants said 10,761 votes were cast for the concessions package and 9,652 against, a 1,642-vote swing from just one day earlier, when flight attendants narrowly rejected the package of layoffs, wage cuts and reduced benefits.

After the initial rejection, the union and company had extended the balloting, saying some workers had encountered difficulty in voting and that it was a last shot at avoiding bankruptcy.

"This is not a day for rejoicing," said a union spokeswoman, Lori Bassani. "Tough times lie ahead for our airline and our members. By ratifying this agreement, we will be giving up a great deal to try to keep our airline out of bankruptcy."

Unlike pilots and ground workers, who approved concessions Tuesday, flight attendants weren't allowed to change their votes once cast. During the voting period, American sweetened the original deal by offering one-time bonuses of up to 4.5 percent in 2006 or later if the company's credit ratings improve sharply.

"The people of American Airlines have together made history," said Donald J. Carty, American chairman and CEO. "These agreements represent the most ambitious effort to consensually restructure costs ever, not only in airline history but in U.S. history."

American asked its three main unions to approve the bulk of $1.8 billion in annual labor cuts sought.

The board of directors of American's parent, AMR Corp., had been prepared to meet by teleconference Wednesday night and approve a bankruptcy filing if flight attendants had rejected the labor cuts, a company spokesman said.

The spokesman, Bruce Hicks, said the company faced credit payments of at least $50 million Wednesday and would have filed for bankruptcy to avoid those payments and conserve cash.

Airlines have been reeling for months, hurt by the sluggish economy, fallout from the Sept. 11, 2001, terrorist attacks, fears over the SARS virus and the war in Iraq. United Airlines is already in bankruptcy; US Airways only recently emerged from it.

American has struggled against low-cost competition, and AMR has lost nearly $5.3 billion in the past two years. To stay afloat, the airline asked its three biggest unions to approve $1.8 billion in labor cuts, including the layoffs of 2,500 pilots, 2,000 flight attendants and up to 1,400 ground workers.

Union leaders reluctantly backed the plan, saying cuts could be even worse in bankruptcy.

In voting that closed Tuesday, unionized pilots and ground workers approved their share of the concessions. But by the Tuesday deadline, the airline's 24,000 attendants had rejected the deal, which would cut their pay by 15.6 percent on May 1, by fewer than 500 votes out of 19,000 cast.

Altogether, American sought $660 million in annual concessions from its 12,000 pilots, $620 million from 34,000 ground workers and $340 million from the flight attendants.

Fitch ratings service said the concessions would bring American's unit labor costs in line with rivals Continental, US Airways and United.

Even with the cuts, AMR said in a statement, American's financial condition is weak and its prospects remain uncertain.

Carty said, "Given the hostile financial and business environment we find ourselves in and its inherent risks, the success of our efforts is not assured."

In Wednesday trading on the New York Stock Exchange, AMR shares rose 83 cents, or 24 percent, to $4.23 in anticipation the flight attendants would reconsider. In after-hours trading, the shares surged another 13 percent.

Contributing: Matt Curry

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