American faces pilots' walk-out

Last-ditch talks began yesterday to try to avert a potentially crippling pilots' strike at American Airlines. A walk-out would ground American, the largest domestic carrier in the US, and bring misery to travellers.

American, which is seeking regulatory approval of its proposed partnership across the Atlantic with British Airways, has warned that a walk-out would cost it in the region of $1bn (pounds 610m) a month, which would wipe out recent profits.

Unless a settlement is achieved at so-called "super-mediation" talks in Washington DC under federal government auspices, the pilots' union, the Allied Pilots' Association, has vowed to declare a strike at midnight this Friday. Union officials have put the likelihood of a strike at about 50-50.

A strike could have a damaging ripple effect throughout the US economy. American accounts for about 20 per cent of US passenger travel and has a large share of freight and mail traffic. Most concerned are cities that are American hubs, like Miami, Chicago and its home base, Dallas-Fort Worth.

It would also cast a chill over the Caribbean and Latin America, two regions where American is the pre-eminent US carrier.

In preparation for the worst, American has already prepared redundancy notices for 90,000 employees who would be placed on emergency unpaid leave. Also grounded would be American Eagle, the carriers commuter subsidiary.

The company, which is headed by the irascible Robert Crandall, has also drawn $1bn from an existing credit line and borrowed an additional $1bn - with its entire fleet as collateral - to provide it with a cash cushion to ride through a strike.

At issue is the pilots' demand for an 11.5 per cent pay rise over the four-year life of a new contract. American, which reported record profits in 1996, is offering 5 per cent. "We are faced with two disastrous alternatives - unacceptably high costs or cessation of operations," Mr Crandall wrote in a memo to employees.

For travellers, it is a nightmare scenario. Friday also marks the start of a public holiday, the "President's Day" weekend, and the start of half- term for many schools. A strike could leave thousands of travellers either unable to travel or stranded away from home.