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American Airlines Wins Approval of Cost-Cutting Contracts

AMR Corp. (AAMRQ)’s American Airlines won bankruptcy court approval of new cost-cutting labor agreements with unions for flight attendants and mechanics, which will get equity stakes in the airline.

Six-year contracts were approved today by U.S. Bankruptcy Judge Sean Lane in Manhattan, who said “labor peace” was valuable to the bankrupt airline.

“This is a very wise thing to do to resolve the dispute in this way,” Lane said.

The accords secure savings that Fort Worth, Texas-based American says are critical for its restructuring. Pilots are now the airline’s only union that hasn’t agreed on concessions.

Lane last week approved American’s request to reject the collective-bargaining agreement with pilots and impose cost cuts. The ruling came after the pilots rejected a proposed contract.

Excluding any cuts involving pilots, American has won concessions from unions that will shrink the number of job cuts, to 7,625 from a planned 10,975. Savings from unions will be as much as $900 million a year and as much as $1.1 billion when nonunion workers are included.

Flight Attendants

The agreement with the Association of Professional Flight Attendants gives the union 3 percent of the equity issued to unsecured creditors when AMR exits bankruptcy, according to court papers.

The Transport Workers Union, representing groups including mechanics and baggage handlers, is to get 4.8 percent of the equity distributed to creditors. Lane today approved contracts with mechanics and aircraft stock clerks. Five other groups represented by the TWU previously reached agreement with American.

The case is In re AMR Corp., 11-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net.

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.

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