Nov. 1 (Bloomberg) -- Frontier Airlines Inc., after changing its proposal for a labor agreement to make outsourcing aircraft maintenance less likely, can reject a contract with unionized machinists, a judge said.

U.S. Bankruptcy Judge Robert Drain in New York yesterday approved the Denver-based discount carrier's request to throw out its contract with the International Brotherhood of Teamsters as part of its effort to restructure under Chapter 11 protection. Plane cleaners represented by the Teamsters aren't covered by the decision.

The decision came after Drain spurred further talks between Frontier and the union by chastising the carrier's attorneys at the hearing, saying the airline's negotiators in the labor talks ``don't get it.''

``I'm very tempted to rule against you,'' Drain told Frontier's lawyers. ``I have the opinion all written.''

Though the additional talks that followed Drain's comments didn't produce an agreement with the Teamsters, the concessions Frontier made were enough to win his approval. Frontier is making ``every reasonable effort to avoid outsourcing,'' the judge said.

The Teamsters represent 115 mechanics at Frontier. The company and the union agreed to a target of 129. Frontier will keep a pool of so-called casual workers who will be available if the union doesn't have enough members to conduct aircraft maintenance checks.

Frontier filed for bankruptcy in April after its credit- card processor, First Data Corp., began withholding a larger portion of ticket sales, reducing the company's cash flow.

Outsourcing

The airline said it needs to cut costs by negotiating new labor contracts as part of its turnaround. It originally sought to eliminate 130 machinist jobs and outsource maintenance of its fleet of Airbus SAS jets while cutting pay and benefits for other workers.

The Transportation Workers Union yesterday ratified a five- year contract with Frontier that extends wage and benefit concessions. Earlier in October, the Frontier Airline Pilots Association agreed to extend interim pay cuts through Dec. 1.

Frontier is struggling to reorganize in bankruptcy after jet fuel jumped 25 percent in the first quarter and the economy slowed. It faces competition at its Denver hub from UAL Corp.'s United Air Lines and Southwest Airlines Co.

A $75 million loan from some of Frontier's unsecured creditors to fund operations in bankruptcy requires the airline to obtain pay and benefit concessions from union workers. The airline also must meet cost-cutting goals to attract more funding needed to exit bankruptcy, according to the court filing.

The case is In Frontier Airline Holdings Inc., 08-11298, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Christopher Scinta in New York at cscinta@bloomberg.net.

Last Updated: November 1, 2008 00:01 EDT