Worker morale is top priority at American Airlines Inc. these days. CEO Gerard J. Arpey was thrust into the top job after predecessor Donald J. Carty's fiasco over hiding fat executive bonus and pension deals from employees while they voted on concessions to avoid bankruptcy. Now, Arpey faces distrustful employees, who feel that management duped them into swallowing huge cutbacks. "People are being asked to work harder for less pay. That obviously does not create an environment for happiness," conceded Arpey in an early May session with reporters. He reiterated the point at American's annual meeting on May 21, where he said that none of the company's turnaround initiatives "can fully succeed until we build trust and teamwork back into the company."
This could take a Herculean effort with pilots like Thomas W. Hoban. Even before the pilots approved the pay and benefit reductions in April, he had been badly battered by the new realities of the airline industry. After a decade with the company, Hoban had just moved up to a $157,000-a-year captain's post on an MD-80 jetliner when the terrorists struck on September 11. The workforce cuts that followed the post-attack travel slump busted him back to co-pilot on a Boeing (BA) 777, slicing his pay to $137,000.
The new austerity will knock Hoban back again, to about $95,000. He also will have to work several more days a month under the new work rules the pilot's union approved. Nor is he likely to get back into the captain's seat any time soon. "I'm going to be a first officer for many years to come," says the Michigan native, who's 42.
Hoban believes his future is tied to American's, but he was among the 31% of American's pilots who voted against the cuts. He did so mainly because he believed that bankruptcy was inevitable no matter what employees did. Those fears were heightened on May 15, when American said it may still seek bankruptcy protection, which could spur management and creditors to come after workers for yet more givebacks. "I don't believe in giving them two bites of the apple," says the trim, boyish-looking former Marine, who doubts he will ever again make $157,000 at American.
He and his family are starting to make some adjustments to their comfortable lifestyle in Arlington, Tex. -- near Dallas-Fort Worth International Airport. The new Chevy Suburban Hoban bought after his promotion to captain is for sale, which will leave the family with a 13-year-old Honda Accord. The vacation house in Angel Fire, N.M., may go on the block, too. Hoban and his wife, Yvonne, recently refinanced their Brady Bunch-style ranch house to cash out some of the equity and help ease their sharp income fall.
Hoban is also working on a second career. Other pilots he knows are turning to mortgage lending and even pool cleaning; he's studying to become a licensed real estate appraiser, hoping it will give him the flexibility to work when he's not piloting. Yvonne, meanwhile, is gearing up to look for full-time work -- supplanting the home businesses she started so she could spend more time with their two children, 10 and 7.
Hoban is willing to give Arpey the benefit of the doubt. "I think he understands the employee relationship problem we have here and the impact it has on the bottom line," he says. The mood already has improved since Carty's exit. It went a long way when, in Arpey's first days, he apologized to employees for their sacrifices and praised them for American's solid operational performance. If Arpey can lift morale and alter the bitter labor relations, his legacy will go beyond just averting bankruptcy. By Wendy Zellner in Arlington, Tex.