Reuters: Bankruptcy News: AMR unions keep focus on merger talks

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AMR unions keep focus on merger talks Apr 24th 2012, 21:35 Tue Apr 24, 2012 5:35pm EDT * At hearing, union grills AMR exec on merger talks * Union questions fairness of AMR plan seeking labor concessions * Unions have said merger with US Airways could save jobs By Nick Brown April 24 (Reuters) - The prospects of a merger for bankrupt AMR Corp took center stage on Tuesday in the second day of a court battle over the fate of the company's labor contracts. Robert Clayman, a lawyer for AMR's flight attendants' union, questioned whether AMR had a responsibility to consider a merger before pursuing a business plan that seeks major concessions from unions. But Judge Sean Lane shut down that line of questioning during Clayman's cross-examination of AMR Chief Restructuring Officer Bev Goulet after AMR lawyers said merger discussions were confidential. AMR is seeking to scrap its union contracts and temporarily impose unilateral terms while it negotiates long-term deals with its unions. The company has said it ultimately needs to save $1.25 billion a year in labor costs. Clayman had argued it was "critical" to know whether the cost-saving plan "is just a means of extracting as much money from labor as possible." "At some point after this process, the company could just turn around, and decide that in fact the better option here is a combination with another carrier," Clayman said. But Lane disagreed, saying Clayman could make his argument without demanding AMR release private detail of any merger discussions. AMR declared bankruptcy in November amid high labor costs. In order to be successful in its bid to scrap labor deals, AMR must convince Judge Lane that its unions have unreasonably shunned prior attempts to negotiate concessions cooperatively, and that the company considered alternatives to avoid the measure. Unions have argued AMR did not consider the alternative of a possible merger. Consolidation has been front-and-center in the bankruptcy since AMR's three primary unions on Friday said they had struck a deal with US Airways Group Inc to support a potential merger between US Airways and AMR. They said a deal could save more than 6,000 jobs. Executives at AMR and US Airways have said a merger is not necessarily in the works. The hearing, in U.S. Bankruptcy Court in Manhattan, is expected to last a week. On Monday, two expert witnesses testified that AMR's labor costs were the highest in the airline industry. The company's financial advisor, Rothschild Group's David Resnick, is expected to testify on Wednesday. Judge Lane will not issue a ruling right away. After the hearing ends, the company and its unions will have another two weeks to negotiate. If new terms are still not reached, the unions will have a chance to present their case in court in May. A ruling from Lane would then be expected in June. Regardless of how Lane rules, AMR must keep negotiating for a consensual long-term contract with its unions. A ruling granting AMR's request to break its contracts would allow AMR to impose its own temporary unilateral labor terms while those negotiations go on. The bankruptcy is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463. Link this Share this Digg this Email Reprints

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