American Airlines is offering to drop plans to furlough pilots as it seeks union approval for a cost-cutting deal that would help American rebuild under bankruptcy protection.
The Associated Press
The Associated Press
The airline also made concessions in other areas including pay, where it is now offering slight increases.
American disclosed the changes shortly after a federal judge granted a one-week delay in ruling on American’s request to throw out existing labor contracts.
That gives the pilots’ union more time to consider American’s final offer. It also could help American regain the upper hand in its attempt to emerge from bankruptcy as a stand-alone company.
US Airways Group Inc. wants to buy American parent AMR Corp. out of bankruptcy and has lined up support from American’s three unions representing pilots, flight attendants and ground workers.
The unions have disparaged AMR’s turnaround plan as lacking a strategy to boost revenue. The leaders of American’s unions and top executives at US Airways argue that the two carriers must combine to compete against industry giants United and Delta. American is the nation’s third-biggest airline and US Airways is fifth, just behind Southwest in passenger traffic.
But if American can win six-year cost-cutting deals with pilots, and possibly also with mechanics, it could demonstrate to creditors that it has a workable plan to reduce costs and come out of bankruptcy as a profitable operation. That’s been the goal of AMR CEO Thomas Horton.
On Thursday, U.S. Bankruptcy Judge Sean Lane in New York approved a one-week delay in his ruling on whether American can break its current labor contracts and temporarily impose its own terms on workers. If the judge had approved American’s request, the company planned to eliminate nearly 12,000 union jobs including 400 pilots.
American offered the pilots better terms — stock in the “new” AMR, pay raises of 15 percent over five years, and no furloughs. A company official said it could afford the pay raises by cutting back on proposed profit sharing for pilots. Instead of cutting annual pilot labor costs by $370 million, American would trim about $315 million.
The union board rejected the offer Wednesday without giving pilots a chance to vote. The next day, the union asked for more time to discuss details of the company’s proposal, and the judge went along.
It’s unlikely that American can negotiate voluntary cuts with flight attendants but might be able to with mechanics, whose spokesman had no comment Friday.
Whether American cuts labor costs through voluntary deals with the unions or by a judge’s order, industry experts said it will be in a better position to control its own fate in bankruptcy instead of being overpowered by US Airways.