AMR Corp. (AAMRQ:US)’s American Airlines won court approval for a new contract with its pilots union, a deal that cuts labor costs and boosts the airline’s effort to exit bankruptcy protection.
The agreement, approved at a hearing today by U.S. Bankruptcy Judge Sean Lane in New York, comes after American secured new contracts with unions representing flight attendants and mechanics as part of its restructuring.
Lane said the agreement with the Allied Pilots Association is a significant step to resolving the bankruptcy case that began more than a year ago and helps achieve “long-term viability” for the airline.
“There is no doubt pilots represented by the APA are vitally important to the debtor’s business enterprise and thus crucial to any successful reorganization,” the judge said.
Stephen Karotkin, an attorney for Fort Worth, Texas-based American, told Lane that the pilot agreement ensures the savings the airline needs and avoids labor unrest.
The six-year agreement provides $315 million in annual cost savings and gives the union 13.5 percent of the equity in the reorganized company issued to unsecured creditors, according to court papers.
Separately, Lane also granted the airline’s request for more time to develop its bankruptcy plan, extending to March 11 American’s exclusive right to file a plan in court. The approval blocks competing plans from being proposed.
The extension comes as American’s bankruptcy exit as a standalone company is being weighed against a merger with US Airways Group Inc. (LCC:US) The pilots union backs a merger.
The review of strategic alternatives continues and is in “the final lap,” Jack Butler, an attorney for creditors, told Lane.
The case is in re AMR Corp., 11-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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