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US Airways Accords Aid Labor in AMR Talks, Union Banker Says

April 24 (Bloomberg) -- US Airways Group Inc.’s tentative contract agreements with the Transport Workers Union at American Airlines boosted the labor group’s leverage in talks with the bankrupt carrier, a TWU banker said.

The TWU, representing 24,000 workers at AMR Corp.’s American, last week joined unions for the airline’s pilots and flight attendants in reaching contract terms with Tempe, Arizona-based US Airways. The accords are contingent upon a merger of the two airlines.

The US Airways agreement is part of TWU’s strategy to keep all options open as it seeks to protect jobs for its members, said Peter Kaufman, president of Gordian Group LLC. The union remains in talks with American, even as it argues in court today against the airline’s attempt to reject existing contracts and replace them with terms cutting $1.25 billion in annual labor spending, he said.

“The fact that we’re having those discussions with US Airways is certainly helping our negotiating leverage with American Airlines on the stand-alone-plan labor deal,” Kaufman said in an interview with Bloomberg Television today. He wouldn’t comment on specifics of the US Airways agreement.

American, based in Fort Worth, Texas, has said it will stick with a plan to emerge from bankruptcy restructuring as an independent carrier, and US Airways hasn’t yet made a merger offer to its rival.

Business Judgment

Beverly Goulet, AMR’s chief restructuring officer, testified in U.S. Bankruptcy Court in Manhattan today that the proposed $990 million in annual cost reductions from union employees is necessary for AMR to successfully reorganize. The $1 billion in additional revenue the airline is seeking isn’t enough to return the company to profitability, she said.

“It’s our best business judgment that that’s what’s necessary,” she said of the union cuts.

Goulet, who also serves as American’s vice president of corporate development and treasurer, is testifying as part of AMR’s effort to win court approval to reject labor contracts.

TWU “is supportive of that dialogue moving along,” Kaufman said of the US Airways’ overtures. A combination of the two carriers would pass United Continental Holdings Inc. as the world’s largest airline, ranked by passenger traffic.

TWU is working with American to complete language on the airline’s “last and final” concessionary contract offers to seven work groups represented by the union, the airline and union said. Those agreements are expected to be sent out next week for a vote by members, with results expected around May 14, Jamie Horwitz, a TWU spokesman, said today.

American’s original proposal, given to TWU on Feb. 1, called for cutting 13,000 jobs, including 4,300 mechanics and maintenance workers and 4,200 baggage handlers and other airport ramp employees represented by TWU. The carrier also said it would close a major maintenance base in Fort Worth, and outsource some jobs at a second base in Tulsa, Oklahoma.

To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net; Betty Liu in New York at bliu17@bloomberg.net

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

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