Less than two months after American Airlines asked workers to accept $1.25 billion in cost cuts, the airline asked the Bankruptcy Court in New York on Tuesday to allow it to reject collective bargaining agreements with its major unions so it can move forward with its proposed restructuring.
American wants to change the terms of its union contracts, eliminating thousands of jobs and changing work rules. Affected are contracts with the Allied Pilots Association, the Association of Professional Flight Attendants and the Transport Workers Union. In all, the company seeks to reject nine contracts.
Union officials said they were not surprised by American's Section 1113 motion, as the request is known, saying the company never intended to reach new agreements with its workers.
"Although we remain convinced that a consensual agreement is in the best interests of all of our airline's stakeholders, it's becoming apparent that management does not share this view," pilots union President David Bates said in a letter to pilots.
On Feb. 1, American laid out a restructuring proposal that included laying off 13,000 workers, changing pension benefits and closing its Alliance maintenance facility in far north Fort Worth. Since then, the company and its unions have been unable to negotiate consensual agreements.
Last week, American executives indicated that they would take the contract issue to court this week if it didn't quickly reach agreements. The motion filed Tuesday does not include contracts at its American Eagle subsidiary.
American told the court that it is necessary as part of its restructuring to reject the contracts and that it has spent years trying to negotiate cost cuts with its unions.
"First, American Airlines will not survive if it does not restructure," the filing said. "Second, while American has been staggering with billions in losses and a crushing debt load, its longtime competitors have reorganized in Chapter 11 and have thrived: Delta, United, and US Airways were all profitable in 2011.
"Third, although American's financial peril has multiple sources, the greatest single challenge is its labor agreements."
American has suggested an April 10 hearing date for the court to listen to arguments related to its motion.
In a letter to employees, CEO Tom Horton said the best outcome for the company is consensually negotiated new contracts.
"This will remain the ultimate objective of all parties as we proceed, and we will continue to work with our union negotiating committees to reach agreement."
Separately, the company asked the court for permission to keep some information in its motion sealed from the public, saying it "contains sensitive and confidential information."
The unions said American's court motion does not mean that they have stopped negotiations.
"The 1113 motion does not change the fact that our negotiators are still at the table in Dallas trying to work out an agreement with AMR," said TWU International President Jim Little. "If we are unable to reach an agreement, we are fully prepared to vigorously represent our members in court and explore all options."
Delta filed to reject its pilots contract during bankruptcy proceedings, but the two sides reached an agreement before the court decided on the motion. United Airlines also filed to reject its union deals while it was under bankruptcy protection and also came to agreements before the court made a decision.
The Association of Professional Flight Attendants told its members that AMR will succeed with its court motion only if it convinces the judge that the contract changes are necessary.
"In reality, its draconian demands are none of those things. We will use every available resource to preserve flight attendants' healthcare, wages and benefits. In the end, we believe that we will force the company back to the table to negotiate and reach an agreement," union president Laura Glading said in a statement Tuesday.
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