AMR Corp. faltered in a bid to persuade its largest unions to make concessions in bankruptcy when American Airlines pilots rejected the company’s final contract offer, setting up a showdown in court.
The proposed pilot accord, sweetened with promises of an equity stake in a restructured AMR and no furloughs, was opposed by 61 percent of the Allied Pilots Association members voting, the union said in a statement. Mechanics and aircraft stock clerks ratified new contracts.
AMR’s pilot dispute now goes back to U.S. Bankruptcy Judge Sean Lane, who has said he will rule by Aug. 15 on the company’s plan to void its current labor agreements. Union concessions are a pillar of AMR’s effort to exit Chapter 11 as a stand-alone carrier and fend off a US Airways Group Inc. takeover bid.
“It’s a strong statement from the pilots union that they are 100 percent behind a merger,” Fred Lowrance, an Avondale Partners LLC analyst in Nashville, Tennessee, said in an interview. “The pilots union will be out there pushing harder for a serious look at a merger.”
US Airways extended its advance after the pilot vote, rising 4.5 percent to $10.39 at 3:40 p.m. in New York. The shares have almost doubled this year through Tuesday to lead gains among U.S. carriers.
“We are disappointed with the outcome of today’s APA voting results, as ratification of the pilot tentative agreement would have been an important step forward,” said Bruce Hicks, an American spokesman. “We must now await a ruling by Judge Lane that will allow the company to implement the changes necessary to move forward in our restructuring.”
US Airways declined to comment on the pilot vote, said Todd Lehmacher, a spokesman.
American has more than 8,000 pilots, who are considered a bellwether work group in airline labor negotiations because they are the highest-paid union employees.
Many APA members “had a hard time” voting for the contract because they perceived it as a show of support for Chief Executive Officer Tom Horton, even though an accord would produced “the shortest route to a US Airways merger,” Tom Hoban, a union spokesman, said in an interview.
Mechanics accepted their contract with 50.3 percent of the vote, and aircraft stock clerks voted 79 percent for their accord, according to the Transport Workers Union. American has about 11,000 mechanics and 1,200 clerks who restock planes.
“Nobody is happy with a concessionary agreement, and our members are still waiting to see a business plan that instills confidence,” TWU International President Jim Little said in a statement. “But this result is a lot better than what our members would have faced with a court-imposed solution.”
AMR had pared its demands in the latest proposals to unions because reaching consensual accords would speed progress through Chapter 11. Even if Lane permits new terms to be imposed on pilots, AMR would still need to win a long-term labor deal with the union.
“It potentially lengthens the bankruptcy process,” Avondale’s Lowrance said of the pilots’ refusal. He rates US Airways as market outperform.
Flight attendants will finish balloting Aug. 19 on American’s last offer, while five other TWU groups including baggage handlers and other airport ground workers approved contracts on May 15.
The pilot rejection builds on American’s history of union- management discord, which includes a failure to reach a contract agreement in more than five years of negotiations that preceded AMR’s Nov. 29 bankruptcy filing.
“It all comes down to just the absolute toxic nature of the relationship with management,” said Robert Mann, a former American executive who is now president of consultant R.W. Mann & Co. in Port Washington, New York. “It has a lot to say about the ultimate success of a stand-alone plan with that degree of discord with the front line.”
Under the proposal voted down by pilots, union members would have received a 13.5 percent equity stake in AMR after its restructuring and not faced any furloughs, instead of the 400 initially planned by the third-largest U.S. airline.
“It’s a combination of things, and a lot of it has to do with the anger and frustration that’s really been pent up since the 2003 near-bankruptcy contract,” APA’s Hoban said. American won $1.6 billion in concessions from union employees that year to avoid a Chapter 11 filing only to end up in court in 2011.
“You’ve got a group that’s simply not willing to give any more in that regard,” Hoban said.
The agreement ratified by the TWU’s mechanics reduced concessions made by that work group to $156 million from $210 million, while givebacks for aircraft clerks fell by $4.5 million to $13.6 million.
Mechanics will get a 3 percent pay increase when the six- year contract is signed. Clerks will receive a 3.5 percent boost.
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