Print | Share | Reprint

AMR to ask court to reject union contracts

by Lou Whiteman | Published March 23, 2012 at 10:30 AM

Bankrupt American Airlines Inc. on Thursday, March 22, warned employees it would seek court approval to reject its existing union contracts next week if the airline is unable to secure new deals with its work groups in the days to come.

Fort Worth-based AMR Corp., parent of American, filed for Chapter 11 protection in November largely due to its need to cut costs, and the airline has been seeking $1.25 billion in annual savings from labor. The airline earlier this month offered a key concession to labor groups when it pledged to freeze but not terminate the pension plans of non-pilot employees, but has so far been unable to reach new deals with its workers.

American senior vice president Jeff Brundage in a letter to workers Thursday said the company has been flexible, noting its revised plan to deal with pensions and healthcare benefits, but expressed frustration with the lack of progress in talks.

"We have always been clear that restructuring requires we act with urgency," Brundage wrote. "Continued delay and distractions are not only counterproductive, but come at real risk to the jobs and livelihoods of thousands of employees."

Union officials urged continued negotiations, but said they were ready for a fight. James C. Little, president of the union representing ground workers at the airline, in a statement said that "we have always been prepared to fight for our members" and said that while they would prefer to strike a deal, "our lawyers also are preparing to defend our members and their families before the judge."

Gregg Overman, communications director for the company's pilots union, said his group is concerned American will try to use the bankruptcy court to "impose what we believe would be below industry-standard terms of employment" on pilots, saying the union "remains committed to seeking a consensual agreement."

Labor was expected to be the major bankruptcy battleground for American, which until last year was the only pre-deregulation era airline not to have restructured inside bankruptcy court. Brundage in his letter to employees said that the company has lost $10 billion over the past decade, and said it faces "mounting financial pressures and real threats in the market" from competitors such as Delta Air Lines Inc. and United Continental Holdings Inc., which have been through bankruptcy.

An airline labor source called the company's threat to file what is known as a Section 1113 motion in court to terminate the labor deals "expected," and said that the threat, coupled with the offer not to terminate pensions, are part of the negotiating process.

"First they showed the carrot, now we see the stick," the source said. But given the tension between workers and management dating back to well before the bankruptcy filing, the airline faces an uphill battle to secure new deals.

Share:

Tags: American Airlines | AMR Corp. | bankruptcy | restrucuturing

Restructuring

AMR to ask court to reject union contracts

Free preview

Meet the journalists

Lou Whiteman

Senior Writer: Transportation

Movers & Shakers

Video

Coming back for more

Sectors