Posted on March 22, 2012 at 6:40 PM
NEW YORK (AP) — American Airlines will ask a federal bankruptcy judge next week to throw out its union contracts if it can't reach cost-cutting deals with labor unions.
American's lead bankruptcy lawyer, Harvey Miller, said Thursday that the company and unions have bargained in good faith, but he doesn't expect them to reach compromises.
Union officials disputed the lawyer's comments. They said that American planned all along to ask the court to toss out their collective-bargaining agreements.
American and parent AMR Corp. filed for bankruptcy protection in November. Last month, the airline made cost-cutting proposals to the unions that include the elimination of 13,000 jobs, the outsourcing of maintenance work, hiring regional airlines to do flying now handled by American pilots, and increasing working hours for many employees.
Miller said in court Thursday that, despite seven weeks of negotiations, "There has been no evidence that we can make strong progress, and time is of the essence." He said the company is still interested in bargaining, but without deals it will have no choice but to ask the judge to cancel the union contracts.
Under federal bankruptcy law, judges can let companies break union contracts if the company first negotiates with its unions and then shows that it needs relief from the contracts to be successful.
Unions for pilots, flight attendants and ground workers have been expecting the company to seek to break the contracts, which they said would destroy morale among American's 73,000 employees.
Tom Hoban, a spokesman for the Allied Pilots Association, said American was only posturing, not negotiating, at the bargaining table.
"It's been take-it-or-leave-it from the beginning. They want the court to do their dirty work for them," Hoban said. He said breaking the pilots' contract would result in "a demoralized pilot group that's been beaten to a pulp."
The president of the flight attendants' union, Laura Glading, said American was resorting to a tactic "that will only breed resentment and turmoil."
In a letter to employees Thursday, American senior vice president of personnel Jeffrey Brundage said the company had shown flexibility in negotiations by dropping a plan to terminate pensions — to freeze or cap them instead — and trying to minimize pay cuts. He said any delay in cutting costs could risk thousands of jobs, but there still was time for the unions to agree on concessions.
William Swelbar, an airline researcher at MIT and director of Hawaiian Airlines' parent company, said American's request would give the unions an incentive to speed up negotiations with the company rather than gamble on a judge approving even deeper concessions. A negotiated deal, he said, "allows the union to pick its poison."
However, the move could increase labor's animosity toward management, said Gary Chaison, a professor of industrial relations at Clark University in Massachusetts.
Seeking to throw out decades of bargaining "is regarded by the union as a declaration of war" that effectively ends any hope of cooperation with the company, Chaison said. Unions will seek to undo the court's decision in the next round of bargaining after bankruptcy protection ends, he said.
American says it needs to cut costs by $2 billion per year, with $1.25 billion of that coming from labor. American's much-smaller regional affiliate, American Eagle, said Wednesday that it needs to shave an additional $75 million per year from its labor costs.
A hearing on AMR's bankruptcy case took place Thursday in New York before federal Judge Sean H. Lane. Among the items on the agenda was a lawsuit by the pilots' union that challenges American's legal ability to use the bankruptcy process to cancel its contract.