American Airlines seeks to cancel labor contracts

AP News
Posted: Mar 27, 2012 5:39 PM
American Airlines seeks to cancel labor contracts

American Airlines asked a federal bankruptcy judge Tuesday to break its labor contracts and impose cost-cutting terms on workers, a move aimed to pressure unions to accept concessions.

Thomas W. Horton, the CEO of American parent AMR Corp., said the company was trying to speed the bankruptcy-reorganization process and avoid the chance that American could be sold or broken up.

AMR's mounting losses and rising oil prices are adding pressure to act quickly, Horton said.

American plans to cut 13,000 jobs and reduce wages to help itself emerge from bankruptcy with lower costs. The company said Tuesday that there are many reasons for its financial problems but "the greatest single challenge is its labor agreements." American's labor costs are higher than those at rivals such as United Airlines and Delta Air Lines.

Union officials have charged that American never intended to reach an agreement over cost-cutting _ that it planned all along to use the bankruptcy process to dump labor contracts.

Bankruptcy law lets companies walk away from union contracts if they show that they can't succeed under those contracts and that talks with the unions have failed. Merely asking a court for that power gives companies leverage to pry concessions from workers.

In most airline bankruptcies over the past decade, the companies and unions agreed to new contracts with concessions, including lower wages. Only occasionally, such as with Northwest Airlines flight attendants, did the company impose its own terms on workers.

Horton said American would keep negotiating with its unions but must cut spending and jobs.

"Failure to make the right changes is failure," he said, "and that puts all jobs at American at risk."

Union leaders immediately criticized the company's move.

Laura Glading, president of the Association of Professional Flight Attendants, said the union would fight to protect health care, wages and benefits. She complained that the company rejected her union's proposal for early-retirement bonuses, which she said would have saved money and avoided layoffs.

David Bates, president of the Allied Pilots Association, said that throwing out contracts would cause lasting damage.

"Will this be an airline that our pilots want to fly for?" Bates said. "Will this be an airline that American Airlines' customers will want to patronize with their hard-earned travel dollars?"

American asked the U.S. bankruptcy court in New York to let it break contracts with the pilots, the flight attendants and the Transport Workers Union, which represents mechanics and bag handlers. The airline asked for an April 10 hearing date.

The pilots' union sued the company last month, claiming that another federal law covering airline-industry negotiations prohibits American from using bankruptcy to break contracts. The court has not ruled.

AMR filed for bankruptcy protection in November after losing more than $10 billion since 2001. It wants to cut $2 billion in annual expenses, including $1.25 billion in labor costs.

The savings would come largely from cutting jobs and reducing pay and benefits. American also wants to end restrictions in union contracts that prevent the company from outsourcing work done by pilots and mechanics. For example, it wants to hire regional airlines _ which pay pilots less than American does _ to do more flying.


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