American Air, Flight Attendants Fail to Reach Contract Agreement

AMR Corp. (AAMRQ)’s American Airlines and its flight attendants’ union failed to agree on cost cuts, clearing the way for a judge to rule on whether the bankrupt carrier can void their contract to help reduce labor spending by $1.25 billion a year.

Talks ended yesterday after two days, the Association of Professional Flight Attendants said in a statement late last night. American and the union began the last-ditch negotiations at the urging of U.S. Bankruptcy Judge Sean Lane. Another bankruptcy judge oversaw the meetings.

The failure extends American’s history of discord with employees. Industry-leading labor costs were cited when the carrier sought bankruptcy protection on Nov. 29, after failing to reach contracts with its major unions in talks going back as far as 2006. Those labor groups agreed on contract terms with Tempe, Arizona-based US Airways Group Inc. (LCC) in April, conditioned on a merger between the airlines.

“I firmly believe a merger is the right move for this company,” APFA President Laura Glading said in the statement. “A strong company will provide more job security than even the best agreement American can offer as a standalone.”

American didn’t immediately respond to a request for comment after normal business hours.

US Airways, which hasn’t yet made a formal bid for American, has said it’s meeting with the carrier’s bankruptcy creditors to build support for a combination.

After Fort Worth, Texas-based AMR filed for Chapter 11, American sought to cut flight attendant costs by $230 million a year, or 20 percent, an amount the APFA argued in court was more than the company needed.

The Allied Pilots Association is set to start three days of mediated negotiations on June 4, while the Transport Workers Union will hold talks June 11-12 for units representing American mechanics and stock clerks. Members of five other TWU units approved agreements with the airline on May 15.

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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