FORT WORTH — A federal bankruptcy court in New York ruled late Tuesday that American Airlines can void its contract with pilots.
That clears the way for the Fort Worth-based carrier to impose its own term sheet including new work rules for members of the Allied Pilots Association until both sides can negotiate a new collective bargaining agreement.
“The pilot contract is the underpinning of our profession,” said Tom Hoban, APA spokesman. “What this ruling does is it gives the corporation the ability to essentially tear that contract into pieces and that includes work rules, pay retirement, healthcare, you name it. It puts us in a very bad position.”
- Read the Allied Pilots Association statement about the ruling
- Read American Airlines' statement about the ruling
No other airline pilot labor union has ever had its contract canceled during bankruptcy which leaves a lot of uncertainty about what the immediate next steps will be between both groups. American’s other unions, the Association of Professional Flight Attendants and Transport Workers Union, have already agreed to amended contracts.
“There is no sense of accomplishment in this outcome,” said Bruce Hicks, American Airlines spokesman. “We worked very hard to reach a consensual deal with our pilots, just as we did with each represented employee group. However, the pilots rejected the tentative agreement on August 8, so it is time to move forward.”
"You're at one of these junctures, where it could go really well if somebody's bold and someone accepts the bold move or it could become disastrous," said Mark Drusch, a former airline executive, who's now the Chief Supplier Relations Officer for Fareportal.com
If American doesn't draw pilots back on board with an attractive offer, Drusch said, it could have trouble attracting investors for the new airline that emerges from bankruptcy.
"What American has to do is get a hold of the leadership of the APA and say 'Look, this other one didn't pass. I can jam this down. Here's how far we're willing to go. We suggest you accept it. It's a lot better than what we have the legal right to impose," he added.
An attorney for the Unsecured Creditors Committee told Judge Sean Lane Tuesday afternoon that both sides — the pilots and American — will reach a consensual agreement on a new contract before American exits Chapter 11 protection, likely sometime next year.
If American Airlines overreaches with cuts when it imposes its term sheet, the Allied Pilots Association said it still might send out a strike ballot to its members.
“We will be sharing the implementation plan with the APA, and will communicate details of the plan to pilots in the coming days,” Hicks added. “Our goal remains to reach a consensual agreement with our pilots, and we are resolute in our efforts to put American Airlines in a position to win and create new opportunities and a brighter future for our people.”
Last Friday, American confirmed that it had entered into a non-disclosure agreement with US Airways and the parent company of British Airways. The non-disclosure agreement lets both companies see confidential and financial information to see if a merger would be beneficial.
The Allied Pilots Association and the Association of Professional Flight Attendants have been pressing American to merge as the best way for the airline to survive and compete after it emerges from Chapter 11.
American and the APA have a six-decade relationship.
“We appreciate Judge Lane’s thoughtful consideration of our renewed Section 1113 motion regarding the pilot contract. But, there is no sense of accomplishment in this outcome. We worked very hard to reach a consensual deal with our pilots, just as we did with each represented employee group. However, the pilots rejected the tentative agreement on August 8, so it is time to move forward.
“Judge Lane’s ruling is very important because it will allow us to implement the changes that are necessary for our successful restructuring. We will be sharing the implementation plan with the APA, and will communicate details of the plan to pilots in the coming days.
“Our goal remains to reach a consensual agreement with our pilots, and we are resolute in our efforts to put American Airlines in a position to win and create new opportunities and a brighter future for our people.”
"We agree with the testimony of the lead attorney for the Unsecured Creditors’ Committee, who emphasized during today’s hearing that “there has to be a deal between AMR and APA” before the company exits restructuring. He further emphasized that prospects for a consensual agreement will be enhanced if AMR management takes a circumspect approach to exercising their new right to impose terms of employment on our pilots.
"The APA leadership does not believe that AMR can complete a successful restructuring without first reaching an agreement with the pilots we represent. That agreement must appropriately recognize and reward our members as pilots for a major U.S. carrier."