Bloomberg News

AMR Labor Talks Race Clock as Court Deadline Nears on Accord

June 27, 2012

American Airlines’ pilots union is deliberating whether to let members vote on the bankrupt carrier’s last contract offer ahead of a court-imposed deadline for a decision today.

Separately, another round of negotiations was set next week with unions for flight attendants and mechanics. The flurry of labor activity is occurring ahead of a second court deadline June 29, when U.S. Bankruptcy Judge Sean Lane plans to rule on whether American can void existing contracts and impose new terms to help cut annual labor spending by $1.25 billion.

A decision to throw out the labor agreements would be the first such action by a bankruptcy court since Northwest Airlines Corp. flight attendants saw their contract abrogated in 2007. It would bring to a head failed negotiations between the airline and its unions dating back as far as 2006.

“I don’t think anybody anticipates any kind of extension” of the June 29 deadline, Tom Hoban, an Allied Pilots Association spokesman, said today in an interview. “We’re hearing it’s a firm deadline and nobody should anticipate a grace period.”

Voiding contracts would allow American’s parent company, Fort Worth, Texas-based AMR Corp., to change wages and work rules immediately, and would put the unions’ bankruptcy claims at risk. The airline and labor groups still would have to negotiate for longer-term contracts that would remain in place once the carrier leaves court protection.

A pilots’ contract never has been abrogated by a U.S. bankruptcy court, Hoban said.

US Airways Plan

Lane has indicated he wants to rule on voiding contracts for the APA, Association of Professional Flight Attendants and two Transport Workers Union groups at the same time, and would delay action if the pilots’ union members get to vote, said Bruce Hicks, a spokesman for the carrier.

Resolution of the labor-cost issue also will affect how soon potential suitor US Airways Group Inc. (LCC:US) can put a merger plan before American’s creditors. Once American finalizes its labor expenses, it can fully detail its standalone plan to the creditors committee in its bankruptcy. That proposal then could be weighed against any offer from Tempe, Arizona-based US Airways.

US Airways already has reached contract agreements with American’s unions, pending a merger. It hasn’t yet formally made a merger offer.

APFA Talks

“We return to the table knowing that the best possible chance for our company’s survival will be with a pre-exit merger with US Airways,” Leslie Mayo, an APFA spokeswoman, told members in an e-mail. “We negotiate with that goal in mind.”

American will resume negotiations with APFA July 3 to July 5, the union said. Talks with mechanics and aircraft stock clerks, the only TWU groups not to reach agreements, are set for the same dates, Jamie Horwitz, a union spokesman, said today. American said it was still working to finalize dates for the TWU talks.

Five TWU-represented work groups that earlier accepted contract offers are negotiating with American today over a reduction in the value of concessions. A 15 percent cut in the total sought from pilots triggered a clause in the TWU agreements that guaranteed any benefits offered to other unions would be extended to them. The groups include almost 11,000 baggage handlers and other airport ground workers.

The case is In re AMR Corp. (AAMRQ:US), 11-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan)

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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