NEW YORK--A judge on Thursday approved a new collective-bargaining agreement between American Airlines parent AMR Corp. (AAMRQ) and more than 10,000 of its Transport Workers Union of America workers, as the company continues to make progress on new deals with its other union employees.
Judge Sean H. Lane of U.S. Bankruptcy Court in Manhattan signed off on AMR's deal with the non-mechanics in the TWU, which was reached in May during a trial with AMR and its three main unions over whether the company could terminate their contracts. Judge Lane had been set to rule on the terminations of the other union contracts by Friday but now will hold off until Aug. 8 after the Allied Pilots Association said they'd send the company's latest offer for a member vote.
AMR, which wrapped up the trial with the unions last month, had said that it wants reach agreements with the unions but that it had to terminate the contracts and go through with the court trial in case no deals are reached. Lane said last month that he would rule by June 22 on whether the contracts can be canceled, but the pilot vote pushed that date back. The August date also gives AMR more time to negotiate deals with the mechanics in the TWU and the Association of Professional Flight Attendants.
The deal with the TWU workers, who make up less than half of the 24,000-plus member union, will help AMR shave about $162 million from its labor costs. In a press release earlier this week, the TWU said that even though the non-mechanics have accepted the deal, they will continue to pursue "me too" clauses in the new contract that allow them to get the benefits of other bargaining units that get better deals.
AMR was seeking $1.25 billion in labor cuts, $990 million of which it expected to come from the unions representing its pilots, mechanics and flight attendants.
In its latest offer to the pilots, the company proposed to reduce costs by $315 million per year instead of $370 million. It also said it wouldn't furlough any pilots, after saying it would furlough 400 of them in the original deal. The company also said it would raise pay by a higher amount and give pilots a 13.5% unsecured claim in its bankruptcy case.
The unions have said they favor a merger with suitor US Airways Group Inc. (LCC), which has offered what workers have deemed better terms than American. But AMR has said it wants to pursue a standalone plan first while keeping the option for a merger open.
Of the major U.S. airlines, AMR until late last year was the only one that hadn't filed for bankruptcy. The others used their Chapter 11 proceedings to cut costs, including labor costs. The industry also consolidated with two large mergers: those of Delta Air Lines Inc. (DAL) and Northwest and the more recent combination that created United Continental Holdings Inc. (UAL).
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)
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