AMR Gets Bankruptcy Boost as Pilots Ratify Contract

Friday, 07 Dec 2012 02:41 PM

 

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American Airlines pilots approved their first new contract in more than nine years, helping the carrier secure $1.06 billion in annual labor-cost cuts as parent AMR Corp. restructures in bankruptcy.

The accord was approved by 74 percent of those voting, the Allied Pilots Association told members Friday. The six-year contract will give pilots a 13.5 percent stake in the post- bankruptcy company and annual pay raises while freezing their pension and requiring longer work hours.

Pilots are the last work group to accept pay, benefit and work-rule changes, a step toward AMR’s completion of its reorganization plan. Creditors have been awaiting a resolution on labor costs to allow a comparison of the Fort Worth, Texas-based carrier’s stand-alone plan for leaving bankruptcy with a merger bid by US Airways Group Inc.

“This ratified agreement should not in any way be viewed as support for the American stand-alone plan or for this current management team,” said Dennis Tajer, a union spokesman. “We continue to support an American-US Airways merger as the best way to strengthen our airline and enhance our pilots’ long-term career prospects.”

The airline’s 8,000 pilots rejected a previous tentative agreement with 61 percent of the vote, prompting American to throw out the existing contract and begin imposing changes to lower spending. American and its pilots last agreed on a contract in 2003, and talks on a new deal began in 2006.

American’s Response

“This agreement addresses the priorities identified by the APA during collaborative talks,” said Denise Lynn, American’s senior vice president-people. “Today’s ratification gives us the certainty we need for American to successfully restructure, providing opportunity and growth for all of our people and stakeholders.”

US Airways sent AMR a merger proposal in mid-November that called for creditors to receive a 70 percent stake in a combined airline, the Wall Street Journal reported today, citing people familiar with the matter that it didn’t identify.

AMR said industry-leading labor costs helped push it into bankruptcy on Nov. 29, 2011. The company sought to pare expenses 17 percent for each work group, including $315 million a year from pilots. The company is eliminating 10,000 positions, with all but 1,800 of the cuts coming through early-out programs and attrition.

APA and American’s other unions agreed in April to contract terms with US Airways, contingent upon a merger. American retains the exclusive right to file a reorganization plan until Jan. 28. A request for an extension to March 11 is pending before the U.S. Bankruptcy Court in Manhattan.

The case is in re AMR Corp., 11-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

© Copyright 2014 Bloomberg News. All rights reserved.

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