American Airlines

June 4, 2014

American Airlines CEO peppered with questions

Retirees picket outside the shareholders meeting in New York to complain about changes to travel benefits.

American Airlines Chief Executive Doug Parker was peppered with questions about retiree travel benefits and labor contract issues Wednesday at the carrier’s annual shareholders meeting in New York.

It was the first such meeting since AMR Corp. and US Airways merged in December, and shareholders have a lot to be happy about. Since the merger, shares of American Airlines Group (ticker: AAL) have soared by about 75 percent, gaining 3 percent Wednesday to close at $42.82.

But some retirees are upset about a change to their travel benefits and picketed outside the meeting, held at a law firm in Manhattan. They complained that they do not like having lower priority than active employees when it comes to getting available seats.

Before the merger, retirees had equal status with active employees.

“As we put the merger together, we set about considering everything to put together the best nonrevenue program in the world,” Parker said. “The difficulty is that we have to prioritize a list of people, of who gets the seat first, and therein lies the rub.”

As Parker conducted the formal part of the shareholder meeting to elect the board of directors, he was asked about the company’s contract proposal to pilots at its regional subsidiary Envoy Air. This year, Envoy pilots rejected the offer, which included a pay scale freeze in exchange for the right to fly larger regional aircraft.

“How can you justify a contract offer like that?” a shareholder asked.

Parker said the contract would have made Envoy competitive with other regional carriers. American is using more third-party regional carriers to provide short-haul flights.

Parker was also asked why the company chose to hold its meeting in New York instead of near its headquarters in Fort Worth.

“We have a shareholder meeting in New York because that is where our shareholders are,” Parker said. “There are a lot more in New York and Boston than other places.”

During the meeting, Parker acknowledged former American Chief Executive Tom Horton, who stepped down as chairman of American Airlines Group on Tuesday. Horton’s departure was set as part of the restructuring plan and merger.

“On behalf of the board and particularly myself, I want to thank Tom for his leadership and graciousness in getting us through this transition period,” Parker said.

According to a recent Securities and Exchange Commission filing, Horton, who guided American through bankruptcy reorganization, received more than $19 million in executive compensation last year, including an $11.9 million cash severance payment.

During his tenure as CEO, which started when the company filed for Chapter 11 bankruptcy, Horton downsized the airline’s maintenance operations by closing the Alliance maintenance base and trimmed its labor costs by 17 percent.

He also renegotiated American’s debt and aircraft financing, getting favorable terms for the airline with Boeing and Airbus as part of the carrier’s 400-plus plane order.

And for the first time in almost 40 years, he unveiled a new livery and logo for American, dropping the traditional “AA” logo with an eagle for an American flag tail design.

Horton joined American in 1985 in the finance department and was named chief financial officer in 2000, negotiating the purchase of Trans World Airlines. He left American in 2002 to take the top finance spot at AT&T and worked through the telecommunications firm’s merger with SBC Communications. He returned to American in 2006.

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