American Says Pilot Accord Possible as ‘Window of Opportunity’ Is Closing

AMR Corp. (AMR)’s American Airlines and its pilots union said they may reach a labor agreement within days as the third-largest U.S. carrier seeks to end losses that have spurred bankruptcy speculation.

A “window of opportunity is closing” to settle on new contract terms after talks that began in 2006, American said yesterday in an e-mailed statement, without elaborating. Allied Pilots Association President David Bates said he was “very hopeful” an accord could come within a week.

That would allow AMR directors to review any agreement on Nov. 16, their final scheduled meeting of the year, or to consider other actions absent a deal. Fort Worth, Texas-based American fell short in stepped-up negotiations for a tentative contract before an October board meeting.

“It’s paramount,” Vicki Bryan, senior bond analyst with Gimme Credit LLC, said in an interview today. “The numbers are red. There is red everywhere you look, no matter how far out you look. The only thing they can do is get costs down, and the most expensive costs they have control over are their labor costs.”

American has the highest bills for compensation as a percentage of sales among U.S. airlines. AMR is poised for a fourth straight annual loss and was buffeted last month by intraday stock plunges of as much as 41 percent on concern that it would seek court protection. Bankruptcy “isn’t a goal or preference,” the company has said.

Stock Performance

AMR fell 4.3 percent to close at $2.24 in New York trading as broad U.S. indexes slumped. The shares have tumbled 71 percent this year for the worst performance among 10 carriers in the Bloomberg U.S. Airlines Index.

With bargaining in the “deciding phase,” American is crafting formal proposals on pay and job protection and seeking operational flexibility and productivity gains, Sue Gordon, an airline spokeswoman, said in the statement. American began posting some of its proposals on a public website for the 8,700 APA pilots to see in full.

“The time to act is now,” Gordon said in the e-mail. “We believe we can reach a tentative agreement with the APA in the days ahead.” She declined to comment beyond the statement.

“I am delighted there is a sense of urgency,” Bates said in an interview. “After five years of bargaining, our pilot group is ready for a new contract. The fact that the company is highly motivated is matched by our motivation. I’m pushing my team as hard as I possibly can.”

The union board meets Nov. 15 through 17.

Compensation, Scope

The two sides still must agree on compensation and so- called scope issues, which include expanding American’s ability to put its flight codes on domestic trips flown by other carriers. Pilots have historically seen such arrangements as a threat to their jobs, because American would be booking some passengers on competitors’ planes.

Pilots are a bellwether work group in industry labor talks, and American’s negotiations have focused on the APA in recent weeks. A tentative agreement was reached Oct. 26 with 10,400 baggage handlers and other airport ground workers, and American also is seeking a new contract with flight attendants.

Talks between the company and pilots resumed Nov. 7 after a weekend recess. American stepped up negotiations last month as an unexpected increase in pilot retirements created staffing shortages, and the company said Oct. 17 that the two sides had made “significant progress.”

To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net; Thomas Black in Dallas at tblack@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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