American asks bankruptcy court to reject labor contracts

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Published: March 29, 2012

American Airlines 777-200. By Rob Finlayson

American Airlines (AA) has filed a motion with a US bankruptcy court seeking to have its contracts with three unions representing nine work groups terminated, saying that its “greatest single challenge” is labor agreements that are unfavorable compared with those of its competitors.

“Collectively, American’s collective bargaining agreements [CBAs] with the unions saddle the company with the highest labor costs in the industry,” AA, which filed for Chapter 11 protection last year ( ATW Daily News, Feb. 2 ), stated in a court filing Tuesday. “Those agreements tie the company to compensation rules that are among the most expensive in the industry and to the richest active and retiree benefit package, by far, among American’s peers. Together, these CBAs generate a competitive headwind that the company cannot overcome.”

The airline, which is looking to slash about 13,000 jobs ( ATW Daily News, March 1 ), told the court that it has negotiated with the unions “for years … but those negotiations have failed to produce results.” It said that in addition to “higher direct labor costs,” AA’s labor contracts “contain an array of archaic rules and other restrictions that constrain American’s ability to generate revenues and shackle it to operations that cannot be economically justified.”

AA asked the court for an April 10 hearing on the matter. It said the leaders of the unions representing AA workers, in rejecting past offers from management, have demonstrated “a fundamental, and lamentable, misunderstanding of the market in which American operates.”

The Allied Pilots Assn. (APA), which represents AA’s 10,000 flight deck crew, accused management of “running roughshod over our contract.”

APA president Dave Bates said in a statement, “Just saying no to everything the APA leadership has proposed at the negotiating table does not constitute good-faith bargaining … We therefore urge management to rethink their strategy and join us in committing to good-faith bargaining.”

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