American Airlines Seeks to Cancel Labor Contracts

DAVID KOENIG | AP Airlines Writer

DALLAS (AP) – American Airlines is asking a bankruptcy judge to break its union contracts and impose cost-cutting terms on workers.

American said it filed the request Tuesday in U.S. bankruptcy court in New York.

The airline is making good on a threat last week to seek to throw out the labor contracts, if it couldn't negotiate concessions from unions for pilots, flight attendants and ground workers.

American plans to cut 13,000 jobs and reduce wages to emerge from bankruptcy with lower costs. The company says its annual labor costs are hundreds of millions of dollars higher than those at rivals such as United Airlines and Delta Air Lines.

Thomas W. Horton, the CEO of American and parent AMR Corp., said in a letter to employees Tuesday that the company was trying to speed up the bankruptcy reorganization process and avoid the chance that American could be sold or broken up. He said that AMR's mounting losses and the rising price of oil added to pressure to act quickly.

Horton said he will continue to negotiate with the unions, but American must cut spending and job must be cut. "Failure to make the right changes is failure," he said, "and that puts all jobs at American at risk."

Union officials have charged that American never intended to bargain over cost-cutting – that it planned all along to use the bankruptcy process to throw out contracts that they bargained for.

Bankruptcy law lets companies walk away from union contracts if they show that they can't succeed under those contracts. Merely asking a court to throw out labor contracts gives companies leverage to pry concessions from unions. That's what happened with pilots at Delta six years ago.

James C. Little, president of the Transport Workers Union, which represents American's ground workers, said his negotiators were "still at the table in Dallas." If talks don't succeed, he said, "we will represent our members in court and explore all options."

AMR filed for bankruptcy protection in November after losing more than $10 billion since 2001. It wants to cut $2 billion in annual expenses, including $1.25 billion in labor costs.

The savings would come largely from cutting jobs and reducing pay and benefits. American wants to end restrictions in union contracts that prevent the company from outsourcing work done by pilots and mechanics. For example, it wants to hire regional airlines – which pay pilots less than American does – to do more flying.

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