American Airlines gives employees a pay rise sending share price down 5%

Flight attendants’ wages will go up by 5 per cent on average, while pilots will see a bump of 8 per cent

Chief executive Doug Parker said the decision is part of a "philosophical change" at the airline. (iStockphoto)

American Airlines has announced pay rises for its pilots and flight attendants but investors don't like it. The carrier's share price fell more than 5 per cent on Thursday.

Flight attendants’ wages will go up by 5 per cent on average, while pilots will see a bump of 8 per cent, American announced on Wednesday.

It said the additional pay will cost around $1bn over three years.

While employees will no doubt welcome the raise, investors were less pleased. Airlines are battling with higher fuel and maintenance costs as fares remain steady. Pay increases outside of formal contract negotiations are extremely rare in the US aviation industry.

American announced on Thursday that its profits had slumped by 67 per cent, while embattled United Airlines said earlier this month that is earnings were down 69 per cent. Delta’s fell 36 per cent and Southwest Airlines' dropped 31 per cent.

Chief executive Doug Parker said the decision is part of a "philosophical change" at the airline.

"Today's news is about doing the right thing and doing so not because we are contractually required to or because we are locked in a contentious contractual battle," he said in a letter to employees on Thursday.

"We must continue moving past the days of discontent as we build a new American where team members trust each other and work together with our customers' care in mind," he said.

The move comes after American employees complained that pay rates had fallen behind those of competitors.

Before the raise, pilots were paid about 8 per cent less than the industry’s highest rates, and flight attendants earned 4 per cent less, American said.

Unions still need to approve the action but this is seen as a formality because American said it’s not asking for any concessions in return.