May 27 (Bloomberg) -- AMR Corp.'s American Airlines, the carrier preparing to cut thousands of jobs to save money, rejected a proposed contract from its pilots union, saying the plan would boost recurring costs by at least $3 billion.

The plan would be ``a crippling disadvantage'' by adding to the industry's highest labor costs, American said today. American said the Allied Pilots Association proposal would require an immediate $1 billion pension-fund contribution.

American's response to the 7-month-old proposal follows last week's announcement of a 12 percent cut in U.S. seating capacity to counter surging fuel prices and slowing demand. The airline hasn't said how many jobs will be eliminated.

``For all airlines, the conditions are considerably more hostile than they were just a few months ago,'' Jeff Brundage, senior vice president of human resources at Fort Worth, Texas- based American, said in an interview today.

The airline and the union for its 12,000 pilots have been in contract talks since September 2006. The National Mediation Board began overseeing negotiations earlier this month. The pilots' current accord began eligible for changes this month.

``It's their standard negotiating style; just say no,'' union spokesman Karl Schricker said in an interview regarding American's action. ``That's not a negotiation.''

American also is in talks with the Transport Workers Union, which represents 25,000 mechanics and other workers. The union on May 17 rejected a two-year contract offer that included a 5 percent lump-sum payment on the date of signing and a 3.5 payment a year later. Those talks haven't resumed.

The airline avoided bankruptcy in 2003 when employees including pilots and mechanics agreed to $1.8 billion in annual concessions.

AMR gained 52 cents, or 8.2 percent, to $6.84 at 4:01 p.m. in New York Stock Exchange composite trading.

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

Last Updated: May 27, 2008 16:54 EDT