American Airlines Union Agrees Deal

The Allied Pilots Association (APA) reached a tentative deal with the American Airlines management on Wednesday. The agreement is for a steep cost-cutting contract that aims to avoid a threat by the carrier to abandon current contracts in bankruptcy and impose tougher terms. The two sides have announced that the union’s board voted nine to seven to allow their members to consider the best and final offer in a ballot.

Last week, the APA board members rejected a proposal from American Airlines parent, AMR Corp., but the six-year contract was reconsidered over the last several days. There haven’t been any details released about the tentative agreement, but proposed terms disclosed include annual pay increases, a stake in the new airline, no layoffs and $315 million in yearly cost savings – down from $370 million.

The response of the APA’s members is expected in the coming weeks. This has prompted the judge overseeing the case to delay a ruling on if it would allow the carrier to abandon the pilots’ contracts. Years of bitter negotiations would come to an end if the pilots approve the deal, and a measure of stability would be introduced to the airline’s bankruptcy. This extra certainty would allow the two sides to shift their focus to the carrier’s planned emergence later in the year. It’s also likely to clear the way for the airline’s mechanics and flight attendants to reach new contract deals, and the carrier is due to meet with those unions next week.

American Airlines says they acknowledge that there are no easy decisions with this, but they are confident their pilots will carefully consider the proposed contract, which will be a watershed in its restructuring if it’s approved. They think the deal addresses their pilots’ needs and achieves the goals in their business plan. It further shows their commitment to reaching consensual agreements with their unions, the airline added.

American Airlines is seeking to cut costs by over $1.2 billion a year from its unions. This was a key factor in its decision to seek Chapter 11 protection last November from lenders. It’s not known for certain if the company will emerge later this year as a standalone company or as part of a merger. The parent company is under pressure from unions to merge with US Airways and says it will explore consolidation. However, the carrier’s management would rather exit bankruptcy as a standalone company.

After the APA announcement, the Transport Workers Union (TWU) revealed on Thursday that it modified a recently approved contract with American Airlines so workers can get more of the same things as the pilots in the proposed contract. The union’s representatives had approved new agreements on May 15 that included a me-too clause. This said that the union members would get better contracts if another one of the carrier’s unions got better terms.

TWU international president Jim Little said that the me-too clause created a path for more reductions in what American Airlines asked for. This strategy worked like it was intended. Their members appreciate that they were wise in negotiating the clauses and that AMR Corp. kept its word. Now they will try to build on the progress to reach consensual deals for their other members, he added.

American Airlines spokesman Bruce Hicks said that, since they reduced the cost savings target in their negotiations and tentative deal with the APA, they met with the TWU to make similar adjustments. They are happy to have been able to work with the union to determine and agree on items to adjust in the contracts, he added.