Bloomberg News

AMR Attendants’ Contract Boosts Pressure for Pilots Deal

August 20, 2012

American Flight Attendants  Accept Final Contract Offer

American Airlines pilot and flight attendant unions march at the AMR Corp. headquarters in Fort Worth in this May 11, 2012 file photo. Photographer: Mike Fuentes/Bloomberg

American Airlines flight attendants’ approval of a new cost-cutting contract increases pressure for a similar accord between the bankrupt carrier and its pilots, the lone holdout on union givebacks.

The Association of Professional Flight Attendants said members voted 7,482 to 5,088 to approve the contract, joining American’s mechanics and aircraft stock clerks who accepted an offer Aug. 8. Their employer, trying to cut industry-leading labor costs as it restructures in bankruptcy, is seeking a judge’s permission to impose concessions on the pilot’s union.

“Some kind of agreement with the pilots is likely to be reached because the other groups have gone along and left them alone,” Alan Bender, a professor of airline economics at Embry-Riddle Aeronautical University in Daytona Beach, Florida, said in a telephone interview. “They don’t want to be treated punitively and American management doesn’t want to single them out for punishment if it can be avoided.”

Gregg Overman, an Allied Pilots Association spokesman, didn’t return e-mails or calls to his office and mobile phone seeking comment yesterday. The pilots rejected a tentative agreement between their board and AMR earlier this month.

“We will continue to work with the union to explore paths to a consensual deal which addresses our pilots’ priorities while working within the economic parameters of the tentative agreement,” American Chief Executive Officer Tom Horton said today in a letter to employees.

Pilots Rejection

American parent AMR Corp. (AAMRQ:US)’s 6.25 percent convertible notes due October 2014 rose 3 cents to 61.5 cents on the dollar today, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

American filed a revised motion in U.S. Bankruptcy Court in Manhattan on Aug. 17 seeking permission to void its current labor agreement with the pilots’ union after Judge Sean Lane rejected a previous request two days earlier.

The move followed a decision by the pilots union to turn down an offer that would have eliminated furloughs and given it a 13.5 percent stake in AMR after bankruptcy.

The unsecured creditors committee in American’s bankruptcy last week said it supported the offering of equity stakes in the restructured company to the unions to secure agreements. It also said it would not support cutting concessions further or adding any economic incentives.

Bruce Hicks, an American spokesman, declined to specify how the airline is working with the Allied Pilots Association now. The union has said it’s open to resuming talks.

‘Big Bugaboo’

“They’re not going to exit bankruptcy without a contract for the pilots, so that’s the big bugaboo,” Jeff Straebler, an independent airlines analyst, said in a telephone interview yesterday after the flight attendants’ vote. “The important thing for American is to go from one agreement outstanding to zero, not three to two or two to one.”

The flight attendants’ contract includes changes in pensions and work hours and an early retirement offer that may prevent more than 2,000 furloughs.

“The bankruptcy laws of this country were set up to protect corporate assets and not people,” said James Little, president of the Transport Workers Union International, which represents the mechanics and stock clerks. “Placing their futures into the hands of the bankruptcy court would have been a costly mistake for flight attendants.”

American will seek court approval of the APFA and TWU agreements and begin to implement terms, including “staffing and operational changes throughout the system,” Horton said.

Disliking Management

“We must remain strong and professional and work to heal from this very stressful process,” the flight attendants union said in a message to members. “It is important to remember who and what has caused this horrible situation: our current management team.”

The APFA and the unions for American’s pilots, mechanics, baggage handlers and other airport workers have also signed labor agreements with potential suitor US Airways Group Inc. (LCC:US) The contracts won’t take effect without a merger.

Under the contract terms, attendants will work more hours, have their pensions frozen, pay more for medical coverage and face changes in the way they’re scheduled for work and accrue vacation and sick time. Medical and life insurance coverage for retirees will be eliminated.

The workers secured an early retirement offer that will pay $40,000 to eligible employees and may eliminate the need for furloughs. Attendants will also get hourly pay raises totaling 9.5 percent over the six-year term, $1,500 lump-sum payments at signing and a 401(k) defined-contribution plan.

“With this vote behind us, our focus will be on achieving a merger with US Airways,” the union told members. “We firmly believe that the only way for American Airlines to grow and compete and perhaps even to survive is through a merger” led by US Airways’ management.

To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net; Tim Catts in New York at tcatts1@bloomberg.net.

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


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