Transport Airlines

American Airlines will have its house in order — or be owned — by the end of the year

Sep 10, 2012 2:57 am

Skift Take

If its creditors have any say in the matter, American’s years of dirty dealing with its unions is going to end up forcing it to sell to an airline that’s charmed its labor groups. Insert something about karma here.

— Jason Clampet

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The fate of American Airlines could be resolved by the end of the year.

The airline’s unsecured creditors committee said Friday that it expects AMR Corp. to complete its process of weighing a stand-alone evaluation against a possible merger by the end of the year, according to a bankruptcy court filing made Friday.

“The committee expects that this process will be completed during the current calendar year and that the committee should be in a position to support the debtor’s filing of a plan of reorganization after the company and the committee have agreed on an emergence path,” the filing said.

Also Friday, AMR’s chief executive, Tom Horton, said that the carrier is moving “into the last phase of our restructuring.” In a letter to managers and support staff, Horton thanked them for their hard work while the parent company of American has made its way through the bankruptcy process.

“While the changes are necessary to our ability to operate a lean, responsive and customer-focused company, the pace and depth of those changes asked a lot of us all,” said Horton, referencing the redesign of the carrier’s management structure which included some layoffs of non-union workers.

American recently wrapped up restructuring of its labor contracts, securing new cost-cutting deals with most of its unions and winning court approval to throw out its existing contract with pilots. The Allied Pilots Association was the only union to reject the company’s final contract offer this summer.

In its court filing, the creditors committee said it supported the contract agreements American recently reached with its flight attendants and mechanics union.

It also clarified its position on the pilots contract, saying that it still expects American to reach a new contract agreement with the pilots prior to filing a restructuring plan. However, the committee recognizes that American could propose a reorganization that does not include a pilot deal.

During Tuesday’s court hearing, creditors attorney Jack Butler told the judge that the committee will require American to have a pilots contract in place before signing off on a restructuring plan.

The comment sparked speculation that the chances for a merger between US Airways and American had increased.

“We believe the comment from Mr. Butler itself was a significant one because it now seems apparent that the UCC will not support a plan of reorganization without labor buy-in, and AMR pilots seem likely to reject whatever is proposed to them by the AMR management team,” Wolfe Trahan analyst Hunter Keay wrote in a note to investors on Friday morning. “We think that means a merger between AMR and [US Airways] while AMR is in bankruptcy is now substantially more likely.”

With American and US Airways signing a non-disclosure agreement two weeks ago, Keay estimated that a merger announcement could come within a few weeks at the earliest or by the end of the year at the latest.

US Airways has publicly campaigned that it wants to merge with AMR and reached conditional labor agreements with all three of American’s major unions this past spring.

Separately, the flight attendants at American Eagle approved a tentative agreement that includes pay raises.

The Association of Flight Attendants-CWA said that it was approved 87 percent to 13 percent with 64 percent of its 1,500 members voting. The agreement was an improvement over the carrier’s original term sheet, the union said.

“No one wanted to vote ‘FOR’ this agreement, but our members recognized that doing so was in our best long-term interest,” said Robert Barrow, AFA president at American Eagle. “After intense bankruptcy talks, we attained the best possible agreement in the worst of circumstances.”

American Eagle spokesman Bruce Hicks said the ratification will help the regional carrier achieve targeted cost savings. Eagle management had asked labor unions for $75 million in employee-related cost cuts. Eagle has already reached an agreement in principle with its pilots group who have yet to vote on it.

AMR also filed Section 1113 motions to reject its mechanics, ground instructor and dispatch union contracts at American Eagle.

The filing, made on Friday afternoon, tentatively sets a hearing date for Oct. 23. All three work groups, which includes about 1,400 employees, are represented by the Transport Workers Union.

Union spokesman Jamie Horowitz said, “We feel that this is premature and unnecessary as constructive negotiations are under way.”

Hicks said, “We intend to continue negotiating with the Transport Workers Union. We are pleased that we have an agreement with the TWU-represented fleet service clerks, but we must continue to move this process forward with the mechanics, ground school instructors and dispatchers.”

(c)2012 the Fort Worth Star-Telegram. Distributed by MCT Information Services.

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