AMR Creditors Urge Unions To Agree Contracts

August 17, 2012

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AMR's creditors committee urged pilots' and flight attendants' unions to promptly reach consensual contracts with the bankrupt parent of American Airlines, saying those employees would do far better in agreed deals than if the court abrogated contracts.

The creditors committee, whose labour subcommittee met on Thursday, said in a statement American couldn’t afford to sweeten its latest contract offers. Any additional concessions would endanger a successful Chapter 11 bankruptcy reorganisation for the airline and it would oppose them.

The committee spoke out a day after Judge Sean Lane denied a request by American to abandon collective bargaining agreements with its pilots' union, an unexpected decision and setback for bankrupt AMR in its quest to save more than USD$1 billion a year in labour costs.

Judge Lane, who is overseeing AMR's Chapter 11 bankruptcy restructuring, turned down American's motion in part because it would give the carrier unrestricted ability to temporarily lay off pilots and engage in code-sharing.

American has said it plans to alter its motion and resubmit the request to terminate its agreements with the Allied Pilots Association, the union representing pilots, by Friday.

The pilots' union last week overwhelmingly rejected American's best and final contract offer, which would have imposed about USD$315 million in cost cuts on them.

In order to support prompt, consensual agreements between American and its unions, the creditors committee said it has also agreed to "reluctantly support" the company's proposals to offer equity stakes in a reorganised company to the labour groups.

"However, the committee's support will continue only to the extent that consensual agreements are reached promptly," it said.

American management has expressed concern that Judge Lane's ruling on Wednesday could confuse flight attendants at the company, who are scheduled to wrap up voting on a last and best offer from management on Sunday.

American has already reached consensual terms with its ground workers' union.

Judge Lane is scheduled to consider American's revised motion during the week of September 3.