NEW YORK (CNN/Money) - Don Carty has resigned as CEO and chairman of AMR, the parent company of stuggling American Airlines said Thursday, following accusations that Carty failed to tell three unions about a series of management perks.
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| AMR CEO Don Carty announced his resignation late Thursday. |
AMR's board said it accepted the resignation of Carty, whose five years at the helm of the world's biggest airline coincided with the toughest period in aviation history.
Carty will be replaced by Gerard J. Arpey, AMR's 44-year-old president, who becomes CEO. Edward A. Brennan, a 69-year-old retired CEO of Sears, Roebuck and Co., was named chairman.
The new leadership takes over an airline that could still file for bankruptcy. Reuters, citing sources, reported that American will file for Chapter 11 protection on Friday or Monday unless its flight attendants agree shortly to accept pay concessions.
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News of the impending move in Bankruptcy Court in New York comes after AMR's board met throughout the day in Texas to consider the fate of the airline, which has been embroiled in a big dispute with unions.
Some progress appeared to occur Thursday when union leaders representing American Airlines pilots and ground workers said they will honor concession agreements, with slight modifications, that could avert bankruptcy.
But it wasn't clear whether the third key union, the Association of Professional Flight Attendants, would join in following lingering anger over management perks.
The Transportation Workers Unions and the Allied Pilots Association say that with some slight modifications they are going along with pacts voted on last week that would save the airline $1.6 billion.
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 American Airlines CEO Don Carty apologizes to the employees and to the union leaders over controversial compensation plans and asks for forgiveness.
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The three unions earlier threatened to pull out of the deals after finding out that management had approved retention bonuses and pension guarantees for the airline's top executives.
James C. Little of the TWU, said in a letter Thursday that honoring the votes is the only way to avert a bankruptcy for the struggling airline that would be harmful to the union members.
"We must do everything in our power to limit exposure of our contracts and our members in bankruptcy proceedings," Little wrote in a letter to union members.
New modified agreements between the two unions and management give the pilots and ground workers a concession deal one year shorter in duration along with various performance incentive pay.
Carty's parting words
Carty, 58, became CEO and Chairman in 1998. Three year later, the Sept. 11 terrorist attacks, followed by war in Iraq and the SARS virus, devastated the airline business, which lost billions of dollars last year. Two airlines, UAL Corp's United and US Airways, filed for bankruptcy protection in 2002.
Carty this week publicly apologized for "past communications mistakes" involving the controversial compensation plans, saying said he "failed" in not giving the airline's three main unions "full details" about a series of bonuses and pension guarantees awarded to the brass.
On Thursday he said in a statement that "it is now clear that my continuing on as chairman and CEO of American Airlines is still a barrier that, if removed, could give improved relations -- and thus long-term success -- the best possible chance."
Edward Brennan, the new chairman, had been an AMR board member and was associated with that company for 39 years, AMR said Thursday.
The new CEO, Gerard Arpey, began as a financial analyst for American in 1982 and became a corporate officer in 1989, the company said.
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"The appointment of Ed and Gerard will enable the company, its unions and its employees to begin to build a bridge back to the path that promised a new culture of collaboration, cooperation and trust," Carty said.
Shares of AMR Corp (AMR: Research, Estimates), based in Fort Worth, Texas, fell 14 cents to $3.90 in after hours trading, widening their loss over the last 52-weeks to 82 percent.
-- Reuters contributed to this report
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