AMR Urges Unions to Step Up Pace of Talks to Cut $1.25 Billion in Costs

AMR Corp.’s American Airlines (AAMRQ) urged its unions to speed up talks to secure $1.25 billion in labor cost reductions or put a successful restructuring in bankruptcy at risk.

American, the third-biggest U.S. airline, said union leaders should recognize the urgency of the situation and the need to reach agreements “in a matter of weeks.” The company made the comments yesterday in an update posted on a negotiations website.

“Our challenge is clear -- work quickly to restructure our contracts, achieve the targeted cost savings and begin implementing the changes so we can emerge from restructuring in the near term,” American said. Remaining on the current path will “jeopardize our business plan and ultimate success.”

If the Fort Worth, Texas-based carrier fails to reach agreements with the unions, American can ask the court to void current contracts and impose the new terms, which it outlined on Feb. 1.

American yesterday also rejected proposals from two unions that were designed to reduce 13,000 planned job cuts, saying incentives for workers to leave early would boost spending and not provide savings for the bankrupt carrier.

“As currently structured, these early-out incentives would significantly increase costs and do not address the company’s need for sustainable cost savings and efficiency,” American said in a response to early out plans offered by the Association of Professional Flight Attendants and the Transport Workers Union.

Voluntary Retirements

The APFA had estimated that as many as 3,000 members would retire under its proposal. American said it was willing to consider other plans to reduce the number of involuntary terminations if they don’t worsen the carrier’s cost structure.

American wants to place some jobs with third-party vendors, freeze pensions, extend work hours and make other changes to reduce labor costs that it has said are $800 million above those of its peers.

The APFA program would have provided full pensions and medical coverage to workers retiring early and allowed American to immediately begin hiring 500 new workers at lower salaries. The airline wants to cut 2,300 jobs from among the 16,000 attendants represented by the union.

The TWU, which represents mechanics, baggage handlers and other airport ground workers, proposed a one-time payment of $75,000 and certain health and other benefits for members who chose to leave. American’s plan calls for 8,800 job cuts within the union, which represents more than 23,000 workers. AMR filed for bankruptcy on Nov. 29.

The carrier also is in talks with the Allied Pilots Association, whose board has said it wants American to freeze pensions instead of terminating them.

American’s plan to secure $1 billion in new annual revenue after leaving bankruptcy is built upon securing the $1.25 billion in labor cuts and $750 million in other cost reductions, Chief Commercial Officer Virasb Vahidi said on Feb. 21.

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

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

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