Published November 09, 2012
Bankrupt AMR Corp, parent of American Airlines, has agreed with its pilots' union on language for a new labor deal to be voted on by union members, the union announced on Friday.
AMR has been in talks with the Allied Pilots Association as it tries to reduce labor costs and emerge from bankruptcy.
The APA's board on Friday presented a "counter-proposal" to offers from AMR management, which the company accepted, according to the statement. The contract must be ratified by the union's roughly 7,500 pilots, who rejected a previous labor proposal in August.
Union spokesman Dennis Tajer would not disclose specifics on the tentative deal but said it was "industry-standard, which has been our goal all along."
Last week, Tajer told Reuters the union had been seeking a deal on par with competitors like Delta Air Lines, particularly on issues of pay and outsourcing flights to pilots not represented by the union.
AMR has already reached new collective bargaining agreements with unions representing its flight attendants and ground workers. A deal with pilots would achieve peace with all unionized workers.
AMR spokesman Bruce Hicks characterized the tentative deal as a compromise.
It "addresses the priorities identified as most important to our pilots" while also being economically feasible enough "to ensure American's successful restructuring," Hicks said in a statement.
The pilots stand to gain a 13.5 percent equity stake in a reorganized AMR. Ray Neidl, and airline analyst with Maxim Group, estimated that could come out to about $100,000 per pilot.
"So it's very important that they pass the contract," Neidl told Reuters on Friday.
AMR declared bankruptcy last November, saying it needed to cut more than $1 billion a year in labor costs. It would like to exit bankruptcy as a stand-alone firm, but needs to convince its creditors it can be viable.
Investors would view a consensual agreement as a huge step, Neidl said.
"To put good value on the equity, you need to have an agreement with the pilots," he said.
Smaller competitor US Airways Group is making an aggressive takeover push, and AMR's unions, including its pilots, have said they would prefer a merger. The unions say they already have a tentative deal with US Airways should it achieve a takeover.
The union board voted 13-2 to send the tentative deal with AMR to pilots for a vote. Union leaders will brief members on the deal in a series of roadshows ahead of a vote, a process that took about six weeks when the pilots voted on the earlier proposal in August.
The pilots are currently working under strict labor terms imposed unilaterally by AMR as part of its bankruptcy process.
AMR's unsecured creditors committee in August said it supported giving pilots an equity stake in the company, but only if they reached a prompt consensual labor deal. According to the APA's statement, Jack Butler, a lawyer for the committee, met with the union's board in Dallas on Friday for a confidential briefing.
Reached by phone, Butler said he was invited to address the board, but declined to comment on the specifics of the briefing.
"It was an extensive briefing, with lots of questions and answers on a wide variety of subjects," Butler said.
Passage of the contract may not be etched in stone. Pilots have been firm in their demands for an industry-standard deal, and the sides have been trying unsuccessfully to form a new collective bargaining agreement since 2006.
The prospect of the 13.5 percent equity stake could be an incentive. In addition to providing a payout for pilots, it would allow the union, as a shareholder, to vote against restructuring plans it did not support.
But the same equity offer did not stop the pilots from voting down the earlier labor proposal in August.
"It's up to our membership to make the final decision," Tajer said.
AMR's bankruptcy case is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463.
(Reporting by Nick Brown; Editing by Gary Hill, David Gregorio and Jim Marshall)