(Reuters) – A U.S. judge on Wednesday, August 15, denied a request by American Airlines’ parent AMR Corp. to abandon collective bargaining agreements with its pilots’ union, despite AMR’s goal to save more than $1 billion a year in labor costs.
Judge Sean Lane, who is overseeing AMR’s bankruptcy restructuring, turned down AMR’s motion in part because it would give the carrier unrestricted ability to temporarily lay off pilots and engage in code-sharing. Lane said AMR failed to show that such “unfettered discretion” was necessary for its own operations or that it was common in competitors.
AMR said in a statement it would alter its motion and resubmit the request to terminate its agreements with the Allied Pilots Association by Friday.
Nevertheless, the pilots union saw the ruling as a victory. According to Keith Wilson, the President of the Allied Pilots Association, “management went well beyond what is the industry standard for bankruptcy contracts, and the judge recognized this in his decision today.”
AMR’s Official Committee of Unsecured Creditors (“Creditors Committee”), which supported the airline’s bid to abrogate its contracts, downplayed the severity of the ruling in a statement on Wednesday, saying AMR will not be hard-pressed to make the adjustments Judge Lane is seeking. In fact, the Company already made those changes in its last contract offer — which the pilots rejected.
“We expect that AMR’s revised positions will be sustained by the bankruptcy court,” said Jack Butler, the Creditors Committee’s counsel. He added that the Creditors Committee’s labor subcommittee is slated to meet on Thursday to further discuss the effects of the ruling.
Had Judge Lane granted the motion to reject the pilots contracts, AMR would have had been able to implement more dramatic cuts that would have governed in the interim, including hundreds of pilot layoffs, and the elimination of equity stake, 401(k) retirement fund contributions and raises. Instead, the pilots union’s current collective bargaining deal will remain in place for now.
Judge Lane acknowledged that serious concessions are needed from AMR’s unions, and rejected the unions’ arguments that AMR had an obligation to consider a merger with US Airways while still in bankruptcy. For more details regarding such merger potential, please see an earlier submission to this site.
AMR management said it was concerned the ruling would confuse flight attendants at the Company, who are scheduled to wrap up voting on a last and best offer from AMR’s management on Sunday. AMR has already reached consensual labor terms with its ground workers’ union, while its flight attendants’ union has until Sunday to vote on AMR’s latest offer.