TEXAS VIEW: American faces turbulent ascent

There is no such thing as a painless corporate reorganization, especially one that lands in bankruptcy court and puts jobs and employee retirement plans at risk.

This is very bitter medicine, and American Airlines owes it to employees, local communities and itself to be sure that all of its restructuring steps — many of which are deeper than previously proposed — are absolutely necessary. That's not too much to ask of an airline that has meant so much for so long to the North Texas economy.

In a meeting with this newspaper's editorial board Thursday, American chief executive officer Tom Horton described the plan as “a very powerful restructuring story” that will allow the airline to be profitable and competitive the day it emerges from bankruptcy.

After a decade of losses, he said, the carrier had to stop the bleeding quickly, so Wednesday the airline proposed sweeping cost-cutting proposals. The company has its sights on cutting spending more than $2 billion per year and raising revenue by $1 billion per year as its route back to profitability.

One doesn't have to be an aviation economist to understand the magnitude of the challenges ahead for American, its employees and the Dallas-Fort Worth area. If American and its unions can't agree on labor cuts, the company could ask a bankruptcy judge to impose changes on workers. If American ends its four pensions, as threatened, some older employees would face an uncertain future and the already cash-strapped federal agency that guarantees employee pensions would be saddled with the bulk of American's $18 billion worth of pension liabilities.

All North Texans should be concerned by these possibilities. Dallas/Fort Worth International Airport and the carrier's global reach from its hub here have contributed heavily to the growth of our region, which enjoys much of the airline's more than $26 billion annual financial benefit within Texas.

To prosper, American has to match rivals who have emerged from bankruptcy with lower pay and benefits for employees, leaner workforces and, sometimes, better terms for their airplanes, facilities and debt. American has considerable “people assets” and rightly will be asked to prove that terminating its pension plans is its only option. Delta dumped only its pilots’ plan and kept the rest, while Northwest and Continental emerged from bankruptcy with all employee pension plans intact.

American has made an overture to mend its fissure with workers with these promises: no executive bonuses until employees receive profit-sharing checks, no wage cuts, and 401(k)s with a company match to replace the terminated pensions. Bitterness remains within the carrier's rank-and-file over cuts they took in 2003 while airline executives received stock incentives.

American faces much turbulence. For the sake of the airline, its employees and North Texas, the carrier must come out of this bankruptcy ready to compete.