New York: AMR Corp’s American Airlines renewed a bid to cancel its contract with Pilots and impose cost cuts, revising a proposal that a bankruptcy judge rejected earlier this week.
American filed a motion in US Bankruptcy Court in Manhattan on Friday seeking permission to void the labour agreement after Judge Sean Lane on August 15 said two elements of American’s plan to reduce expenses weren’t justified.
American’s request extends the Fort Worth, Texas-based airline’s effort to reduce labour costs as part of its restructuring. American blamed its November bankruptcy on labour costs that it said exceeded competitors’ by as much as $800 million a year.
The airline said in a statement it filed the motion “to keep moving forward to achieve the savings and flexibility needed for our successful restructuring.”
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American’s flight attendants are scheduled to finish voting on a new contract with the airline on August 19. If they reject the agreement, Lane will rule on whether American can impose new terms on the union. The Transport Workers Union, which represents mechanics, baggage handlers and other ground workers at American, has ratified new contracts.
Lane’s ruling against American’s plan to impose cost- cutting on pilots came after the Allied Pilots Association on August 8 turned down a sweetened offer that would have eliminated furloughs and given them a 13.5 percent stake in AMR after it emerged from bankruptcy.
Even if Lane allows AMR to void the contract, the company would have to negotiate a long-term deal. The judge scheduled a hearing on American’s request for September 4.
“If you want to have the irrevocable anger of 8,000 pilots, this is the path to go down,” Tom Hoban, a union spokesman, said in an interview. “It doesn’t appear to be a wise strategy.”
The union is hoping American will consider returning to negotiations before Lane rules, he said.
The committee representing unsecured creditors said it “reluctantly” supports equity stakes for the three unions when American emerges from bankruptcy as long as consensual labour agreements “are reached promptly.”
“The committee will not support equity stakes or claims for any labour organization that does not ratify a collective bargaining agreement nor will the committee support any further economic value to labour organizations beyond the current proposals,” the committee said in an August 16 statement.
The wrangling over labour contracts comes as American Chief Executive Officer Tom Horton weighs potential mergers for the company’s reorganization. American’s three unions have reached tentative labour deals with US Airways Group, which backs a tie-up with American.
In his decision, the judge agreed that “significant changes” must be made to the pilots’ contract for American to reorganize. Lane said American’s plan to lift restrictions on code-sharing and pilot furloughs wasn’t justified. He invited the airline to make changes and file a new request to reject the contract.
Furloughed workers are those who have been laid off and are offered their jobs back before new employees are hired. Code- sharing is the industry practice of agreements between airlines to put each other’s codes on flights and book passengers on those planes.
American originally said it would cut 13,000 jobs, or about 18 percent of its workforce, under a plan to reduce annual operating expense by $2 billion. Labour made up $1.25 billion of the total, including $990 million sought from union workers.
The airline later modified its demands, agreeing to freeze rather than terminate employee pensions and lowering total cost reductions sought to 17 percent from 20 percent for each work group.
American has dropped any provision on possible pilot furloughs from its revised proposal. The airline will retain existing limits in its current contract, which provides furlough protection to 77 percent of pilots, said Bruce Hicks, an American spokesman.
American said in its court filing that it “materially circumscribed” the circumstances under which it would be permitted to engage in code-sharing.
“American has taken heed of the court’s decision as to deficiencies of its previously open-ended domestic code-sharing proposal and has made a revised proposal that imposes real limits,” the company said.