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  • Pilots at American Airlines approve new contract, could speed consideration of merger

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    Published 12/07/2012 15:03:42

    DALLAS - Pilots at American Airlines approved a new labour contract, which could clear the way for consideration of a merger with US Airways.

    The pilots' union announced Friday that 74 per cent of its members voted to ratify the contract. Pilots rejected a similar offer in August, but union leaders lobbied hard for passage the second time around.

    Under the contract, pilots will get pay raises and own 13.5 per cent of American Airlines' parent AMR Corp. after it emerges from bankruptcy protection.

    Union officials and analysts say the vote gives AMR creditors certainty about the company's labour costs, making it easier for them to weigh which gives them more money — American on its own, or getting bigger through a merger with US Airways.

    "This contract represents a bridge to a merger with US Airways," said union spokesman Dennis Tajer. He said the vote "should not in any way be viewed as support for the American stand-alone plan or for this current management team."

    American also hailed the vote as a key step in its turnaround after years of heavy losses.

    The pilots' vote "gives us the certainty we need for American to successfully restructure," said AMR spokesman Bruce Hicks. He added that "the modernization of our company is well under way, and we remain focused on emerging as a competitive, world-class airline."

    AMR and American filed for bankruptcy protection in November 2011. With the pilots' deal in hand, the company could exit Chapter 11 early next year, a faster reorganization than those in the last decade at United Airlines and Delta Air Lines.

    Friday's vote filled in the last unknown piece in AMR's labour-cost puzzle. It will help AMR creditors weigh the company's plan to emerge from bankruptcy protection on its own versus a merger that would leave US Airways' executives running the combined operation. US Airways has vowed that if it prevails, it will keep the American Airlines name and be based in American's hometown of Fort Worth, Texas.

    American has about 7,500 active pilots plus a few hundred others on furlough. The union said the vote to ratify the contract was 5,490 to 1,951.

    The 6-year contract will raise pilots' pay by 4 per cent on signing and 2 per cent per year after that, with an adjustment in the third year to bring pay in line with that at other big airlines. The union will get 13.5 per cent of the stock in the new AMR when it emerges from bankruptcy, which analysts estimate would amount to at least $100,000 per pilot.

    In exchange, pilots will fly more hours and American will get more flexibility to outsource flying to other airlines.

    American, which has already frozen pension plans and made other changes in benefits and work rules, is trying to use the bankruptcy process to cut annual labour costs by 17 per cent or about $1 billion.

    In recent months flight attendants and ground workers have ratified separate contracts that reduced benefits and outsourced thousands of jobs. Both groups won incentives that encouraged several thousand workers to take early retirement.

    In February American announced plans to cut 14,000 jobs. After negotiations with the unions, that number fell to about 10,000. Voluntary departures will reduce layoffs to 3,000, according to Hicks, the AMR spokesman.

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    Follow David Koenig at http://www.twitter.com/airlinewriter

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