Print | Share | Reprint

AMR cleared to reject pilots' CBA

by Jamie Mason | Published September 5, 2012 at 5:38 PM

American Airlines parent AMR Corp. can reject its collective bargaining agreement with the Allied Pilots Association.

Judge Sean Lane of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan approved the airline's request on Tuesday, Sept. 4, court papers said.

"There's no reliable forecast for what to expect next in light of Judge Lane's decision today to grant AMR management's revised motion to reject our contract," APA president Keith Wilson said in a letter to pilots Tuesday.

He went on to warn that "management won't be able to restructure successfully without first reaching a consensual agreement with us."

According to APA spokesman Gregg Overman, the union is not in negotiations with AMR regarding a new CBA.

AMR has one CBA with APA that covers 10,700 active and inactive pilots.

AMR renewed its request to reject the CBA with its pilots on Aug. 17 after Lane denied the airline's request to reject the CBA on Aug. 15 because of two defects, court papers said.

The defects had to do with the debtor's request to free itself entirely of the limits in the existing agreement on the number of pilots it could furlough and the debtor's request to enter into any domestic codesharing relationship whenever the company saw a business advantage in doing so, court papers said.

The court found that the furlough proposal wasn't necessary because the existing agreement already permitted a significant number of furloughs and exceeded the number of furloughs in the debtor's business plan, court filings said.

In its revised proposal to reject the CBA, the debtor withdrew its prior proposal on furloughs.

Lane also ruled that the domestic codesharing proposal wasn't necessary because it failed to comply with the debtor's business plan and "with the codesharing flexibility possessed by competitive carriers when they were in American's market position."

AMR modified its codesharing proposal to permit codesharing on Alaska Airlines; prohibit AMR from placing its code on Alaska flights between Hawaii, Dallas-Fort Worth, Los Angeles, San Francisco and Chicago; and permit AMR to codeshare on Hawaiian Airlines inter-island flights if it averages 10 flights per day, among other codesharing terms.

According to court documents, with the two specific exceptions, the court found that the debtor had satisfied the statutory standards to reject its CBA with the union, because it had made proposals necessary for the company's reorganization, had bargained in good faith with the union over the proposals and had shared all the information necessary for APA to evaluate the proposals.

The union objected to the request to reject its CBA on Aug. 30, stating that the new proposal still demands at least $370 million per year in cost savings from the pilots, which "greatly exceeds what the company has determined and announced is now necessary and appropriate for American's successful reorganization."

AMR filed for Chapter 11 protection on Nov. 29.

American Airlines is a major U.S. passenger airline and freight carrier providing service to 160 destinations in North America, the Caribbean, Latin America, Europe and Asia. It blamed its bankruptcy on weak financial performance since 2009, which has left the company behind its major network rivals, many of which restructured and emerged from bankruptcy before 2009.

AMR is the only major U.S. airline that has not previously sought Chapter 11 protection.

AMR was hurt further by the uncertain economic outlook, volatile fuel prices, its uncompetitive cost structure and its diminishing financial condition, which had been the subject of industry analyst reports and the cause of speculation about a possible bankruptcy filing.

Harvey Miller of Weil, Gotshal & Manges LLP is lead debtor counsel, and Tom Roberts at Weil is the debtor's lead corporate counsel. Stephen Karotkin, Alfredo R. Pérez and Stephen A. Youngman at Weil are also debtor counsel.

Rothschild is AMR's financial adviser.

Share:

Tags: Allied Pilots Association | American Airlines | AMR Corp.

Consumer & Retail

AMR cleared to reject pilots' CBA

Free preview

Meet the journalists

Jamie Mason

Senior Editor: Out of Court Restructuring

Movers & Shakers

Video

Coming back for more

Sectors