April 13 (Bloomberg) -- American Airlines and the union for its 16,000 flight attendants have suspended negotiations over $230 million in cost reductions the carrier said it needs to successfully reorganize in bankruptcy.
The break comes as AMR Corp.’s American prepares for an April 23 court hearing on its request to throw out existing labor contracts and impose new terms. The airline’s pilots union said “no progress” is being made in similar talks with the carrier.
The breakdowns continue stalemates over contracts between the Fort Worth, Texas-based carrier and its unions from talks that began as long ago as September 2006. Negotiations may continue through the 51-day court process to consider letting a company void existing contracts as unions seek more acceptable cuts.
“The worst nightmare for a union is to have a bankruptcy judge determine their collective-bargaining agreement terms,” Gary Chaison, a professor of labor relations at Clark University in Worcester, Massachusetts, said in an interview today. “This may be a bargaining ploy, but bargaining ploys are not very attractive to bankruptcy judges.”
American, the third-biggest U.S. carrier, asked the court overseeing its bankruptcy for permission to void union contracts on March 27 after failing to negotiate concessions that would pare a combined $1.25 billion from labor spending each year. The changes include eliminating 13,000 jobs.
The Association of Professional Flight Attendants has declined to negotiate because the concessions American wants are worth more than the $230 million value placed on them by the airline, said Leslie Mayo, a union spokeswoman.
“We’re not willing to bring anything that is undervalued to our members,” she said. “Until American is able to bring something to the table that will give us something our members will ratify, we will continue to work internally” to prepare for the legal fight over the contract rejection.
The flight attendants’ union wants American to reduce the $230 million it’s seeking, something the carrier cannot do, said Bruce Hicks, an American spokesman. The airline is seeking a 20 percent reduction in costs from each work group, the amount it determined is needed to secure competitive labor spending.
“It’s their choice,” he said of the APFA’s decision not to negotiate.
The flight attendants’ union may face a tough job of proving to the bankruptcy court in Manhattan that American has not negotiated in good faith, Chaison said.
“It’s going to be risky because it’s difficult to define what good-faith bargaining is,” he said. “I don’t know if they can marshal the evidence to make that case. It’s a pretty heavy standard.”
American met briefly this week with negotiators for the Allied Pilots Association in talks that focused on two issues, Hicks said. The two sides are to meet next week to resume discussions on contract clauses that govern the number and size of aircraft that can be flown for American by regional carriers.
“There’s no real progress being made, period,” said Tom Hoban, spokesman for the pilots union. “They clearly want to go through this process of abrogating contracts. That appears to be their endgame with all three employee groups.”
American wants a $370 million annual cost reduction from pilots, and about 400 furloughs.
The carrier’s “number one goal” is to reach consensual agreements on the concessions, Hicks said.
The Transport Workers Union, the biggest labor group at American, has held talks with the carrier on an ongoing basis, said Jamie Horwitz, a TWU spokesman. American wants to cut spending among workers represented by the union by $390 million a year and eliminate more than 8,500 jobs. The union’s negotiators and local presidents will be in Dallas next week for continued work, he said.
“They’re getting to the nitty-gritty of the actual contract language now,” Horwitz said. “Before, they were discussing just broad concepts. Now they’re working on details.”
The case is In re AMR Corp., 11-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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