AA in Bankruptcy Court: Airline Wants to Cut Contracts, Unions Want a Merger

  • Joe Wertz

American Airlines and its labor unions squared off Monday in federal bankruptcy court.

The airline’s lawyers argued cutting labor costs was necessary to remain competitive, while union lawyers suggested a merger with US Airways.

American is asking its three unions to give up about $990 million a year in wages and benefits, the Tulsa World reports.

The company says it is saddled with higher labor costs than competitors and must eliminate 13,000 union jobs, freeze or terminate pension plans, curb health benefits, and change work rules, the Associated Press reports.

American can’t make the cuts without union approval unless the bankruptcy court lets it throw out the union contracts.

The complexity of the case was underscored over the weekend when the Transport Workers Union, representing 26,000 American Airlines mechanics, filed a motion to exclude the committee of unsecured creditors from the trial on AMR’s motion to reject the collective bargaining agreements, writes the World’s D.R. Stewart.

Last week, US Airways made deals with American Airlines to win support for a merger. The unions said those agreements were better than what American is proposing in its bankruptcy restructuring.

American’s executives would prefer to keep the airline independent. Thomas Horton, CEO of American parent AMR Corp., said US Airways’ union gestures would not affect its bankruptcy restructuring plan.

“As you know, US Airways recently revealed its non-biding arrangements with our unions, which is part of an attempt to force a merger with American,” Horton said in an email to employees, the World reports. “While these tactics are not surprising … nothing changes as a result of these announcements …”