) executives have struggled to keep the nation's largest airline out of bankruptcy. And on Apr. 16, with the last of three unions approving deep contract concessions, American avoided, at least for now, that painful step.
But even as they hoped for the best, top executives, including CEO Donald J. Carty, were preparing for the worst. Late last year, they moved to protect part of their own pensions and deferred compensation in the event of bankruptcy. In a securities filing on Apr. 15, American revealed that last October, it had created a "secular trust" designed to keep retirement benefits out of the hands of creditors, as Delta Air Lines Inc. (DAL
) and other companies have also done.
American also terminated its deferred compensation plan for executives at the end of last year. The money -- earned by executives but deferred for tax reasons -- was paid out to them, and they took the tax hit. Without the move, the deferred pay would have been available to creditors. American wouldn't say how much money or how many people were involved. A spokesman says the changes were made to retain key execs.
By sidestepping bankruptcy, none of these safeguards seems to matter. But Carty has made it clear to workers that the airline, coping with high fuel prices and slack traffic, might have to file later. Indeed, the belief that bankruptcy is inevitable led some pilots to vote against concessions, for fear they'll simply be negotiating from a lower base in Chapter 11. The company has indicated that if it files, it plans to do so in Manhattan, where judges have a reputation for taking a friendly view of executive severance packages. If bankruptcy comes to pass, managers will have given their wallets some protection. By Wendy Zellner in Dallas and Mike France in New York