Reuters: Bankruptcy News: UPDATE 3-U.S. judge denies American Air request to scrap pilot contracts

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UPDATE 3-U.S. judge denies American Air request to scrap pilot contracts Aug 16th 2012, 00:45 Wed Aug 15, 2012 8:45pm EDT * American says will alter, resubmit motion * Judge cites unfettered ability to furlough pilots, codeshare * Flight attendants still voting on last offer (Adds comment from analyst, American) By Nick Brown and Karen Jacobs NEW YORK, Aug 15 (Reuters) - A U.S. judge on Wednesday denied a request by American Airlines parent AMR Corp to abandon collective bargaining agreements with its pilots' union, an unexpected decision and setback for bankrupt AMR in its quest to save more than $1 billion a year in labor costs. In a lengthy written ruling in U.S. bankruptcy court in Manhattan, Judge Sean Lane, who is overseeing AMR's restructuring, turned down American's motion in part because it would give the carrier unrestricted ability to temporarily lay off pilots and engage in code-sharing. Lane said AMR failed to show that such "unfettered discretion" was necessary for its own operations or that it was common in competitors. AMR said it would alter its motion and resubmit the request to terminate its agreements with the Allied Pilots Association by Friday. "We will ask Judge Lane to consider our request expeditiously," American said in its statement The pilots union saw the ruling as a victory. "Clearly management went well beyond what is the industry standard for bankruptcy contracts, and the judge recognized this in his decision today," union President Keith Wilson, named to head the Allied Pilots Association last week after his predecessor resigned, said in a statement. While Wednesday's ruling does not directly impact merger efforts, it underscores the instability in AMR's labor situation. That could boost creditor support for a merger with US Airways, which has already reached tentative labor deals with AMR's main unions.. Regardless of how Lane had ruled, AMR would have had to keep negotiating for a deal with pilots. Had Lane granted the motion, AMR would have had been able to implement more dramatic cuts that would have governed in the interim, including hundreds of pilot layoffs, and the elimination of equity stake, 401(k) retirement fund contributions and raises. Instead, the union's current collective bargaining deal will remain in place for now. Lane acknowledged that serious concessions are needed from AMR's unions, and rejected the unions' arguments that AMR had an obligation to consider a merger with US Airways while still in bankruptcy. AMR management said it was concerned the ruling would confuse flight attendants at the company, who are scheduled to wrap up voting on a last and best offer from American management on Sunday. "We just want to make sure the flight attendants don't misinterpret Judge Lane's ruling on the pilot agreement in relation to how they choose to vote this week," Denise Lynn, American senior vice president for people, told reporters. AMR has already reached consensual labor terms with its ground workers' union, while its flight attendants' union has until Sunday to vote on AMR's latest offer. The case is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463. (Editing by Bernard Orr and Eric Meijer) Link this Share this Digg this Email Reprints

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