American Reverses Severance Policy, Airline Chiefs Work For Free

September 28, 2001 (PLANSPONSOR.com) - Congress's approval of a $15 billion federal aid package for the airline industry means American Airlines can now pay severance to the 20,000 workers its laid off in the wake of the recent terrorist attacks, which led to a sharp decline in air travel.

The move is a reversal from steps taken this week by American Airline that invoked an emergency clause in union contracts, allowing the airline to waive the normal notice period and severance pay in times of national emergency.

The airline however, did an about turn when it received the first installment of the company’s share of the bailout package.

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Pay “Grade”

Meanwhile, top executives at the nation’s major airlines are doing their part agreeing to forego their salary for the rest of the year. First was Donald Carty, CEO of AMR, owner of American Airlines and Trans World Airlines, who has subsequently been joined in that approach by:

  • Delta Air Lines CEO Leo Mullin
  • UAL’s CEO James Goodwin and the firm’s directors
  • Gordon Bethune, the CEO of Continental Airlines
  • US Airways Group Chairman Stephen Wolfe and CEO Rakesh Gangwal
  • Southwest Airlines, where Chairman Herb Kelleher, CEO Jim Parker and President Colleen Barrett, as well as the airline’s board of directors, have agreed to forego all compensation.

Southwest remains the only major airline not to announce deep staff cuts.

Sticking Around

Additionally, US Airways employees were told that Wolfe, Gangwal and General Counsel Lawrence Nagin would all remain with the firm, rather than take advantage of a chance to take buyouts worth between $8 million and $21 million. They were entitled to do so between October 12 and November 11 because of last year’s shareholder approval to sell the company to United Airlines a deal eventually blocked by the government.

In fact, among the largest airlines, just Northwest Airlines and America West have not yet announced a reduction in pay for top executives.

Mounting Layoffs

Following the attacks on the World Trade Center and the Pentagon, analysts  forecasts for the industry have been grim and carriers have had to cut their flight schedules, and some 100,000 jobs are expected to be cut. Among them:

  • British Airways, will cut 7,000 jobs, and 190 weekly flights
  • Delta Air Lines will give 13,000 positions the chop.
  • Continental will furlong 12,000 workers, and
  • Northwest Airlines will cut 10,000 positions

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