Wednesday, August 15, 2012

Judge bars American from dropping pilots' contract - FOX 4 News

AP Airlines Writer

DALLAS (AP) -- A federal bankruptcy judge has temporarily blocked American Airlines from throwing out its contract with union pilots and imposing measures that would lower its labor costs.

Judge Sean Lane ruled in New York that American failed to prove that two parts of its proposal -- dealing with furloughs and outsourcing of flying to other airlines -- were necessary to rebuild the company. But he said American could fix those elements of its plan and try again to throw out the contract.

That's exactly what American plans to do.

American Airlines spokesman Bruce Hicks said the company would "adjust" the two provisions, make another offer to the pilots' union, and by Friday file a new bid to cancel the union's contract.

Union lawyers withheld comment while they studied the 106-page decision. Allied Pilots Association spokesman Gregg Overman said the fact that American asked the court to cancel the pilots' contract was "an admission of failure" to reach a deal with a key employee group and even to avoid bankruptcy in the first place.

The judge delayed a ruling on the fate of a contract with flight attendants, who are voting through Sunday on American's last offer to their union. Mechanics and other ground workers voted to accept offers from American, the nation's third-largest airline.

The ruling came as parent company AMR Corp., under pressure from its creditors, is beginning to study possible mergers with US Airways and other airlines. AMR CEO Thomas Horton had long preferred to emerge from bankruptcy as a stronger, stand-alone company before considering a merger.

By canceling the pilots' contract, American might have been able to cut costs deeply and make its stand-alone plan look better to creditors than a merger. Now uncertainty hangs over American's pilot costs.

Savanthi Syth, an analyst for Raymond James & Associates, said any savings that American would get from canceling the contract might be outweighed by playing up the airline's poor labor relations.

"How comfortable will creditors be for American to come out of bankruptcy without a labor contract, without labor peace?" Syth said.

While fighting with American, unions for pilots, flight attendants and ground workers all agreed with US Airways this spring on provisional labor contracts that would take effect if there is a merger while American is still in bankruptcy protection.

American said high labor costs were a factor in its slide into bankruptcy protection. The company proposed to eliminate 13,000 jobs and reduce annual spending by $2 billion, more than half from labor. The company later eased some of its demands, including dropping plans to furlough 400 pilots.

Still, 61 percent of pilots voted last week to reject American's last contract offer, which included a 13.5 percent stake in the company but also concessions on outsourcing and pay raises that some pilots considered too meager.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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