American Airlines got some welcome news from part of its workforce Tuesday as the Transport Workers Union announced that five of seven bargaining units had accepted management’s latest contract offer.
The struggling carrier, which is battling its unions in bankruptcy court in New York, now has fewer battles ahead but it still faces viral opposition, in particular from its pilots, as it tries to terminate labor contracts.
The airline is asking the bankruptcy court to allow it to abrogate contracts that it says are too costly to allow a restructuring; the just-announced agreement with the five TWU units takes those units out of the process.
“Our goal from the start has been to create options for our members and to give our members a voice in the bankruptcy process,” TWU International President James Little said in a news release. “The bankruptcy courts are designed to protect assets, not people. Some of our members found the company’s last offer to be a safer bet than waiting on the court to make a decision.”
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The airline said the latest TWU contracts would save 1,300 jobs over an earlier proposal.
“Today’s ratification announcement demonstrates American’s willingness to address the TWU’s interests and the union’s willingness to negotiate new contracts that achieve the cost savings needed for our successful restructuring,” said Bruce Hicks, a spokesman for the airline. “We realize this was a very difficult decision for our TWU-represented employees.”
American will continue negotiating with the remaining TWU bargaining units.
Meanwhile, the bankruptcy court hearing continued Tuesday with the pilots making their case under the so-called 1113 process under the bankruptcy code, arguing that they’d offered considerable cost concessions and shouldn’t have their contracts terminated. U.S. Bankruptcy Judge Sean Lane has until June 6 to rule on management’s request to abrogate the contracts.
In the second day of pilot arguments, there were once again a few American Airlines pilots in uniform attending the session, a few with signs outside the court building before the hearing began.
“We’re here to protest what’s going on at the bankruptcy hearing,” New York-based American Capt. Peter Oborski said. “They want to reject decades of bargaining history with a swipe of a pen.”
His sign read: “Time for a change of leadership.”
The hearing Tuesday centered on the way the pilots and the company value the union’s proposed concessions – a crucial factor for American, which says it must have $370 million annually over six years from the pilots to succeed with its new business plan.
But the union and the company are far apart, with pilots saying their offer was worth $270 million in reduced costs – which is still $100 million short – and the airline’s management maintaining that the value was far less than that.
“The company valuations in 1113 are absurd,” Allied Pilots Association President Dave Bates told McClatchy during a break in the proceeding. “We were willing to give upward of 1,200 pilot jobs,” through productivity improvements that would phase down the number of pilots needed. “The company valued it at $11 million; we value it at more like $100 million.”
The Allied Pilots Association lawyers and witnesses laid out their valuation technique but came under sharp questioning from the airline’s lawyers.
“There are different ways to value different elements of the contract,” Hicks told McClatchy during a court break, “and it’s always the most difficult part to reach agreement on.”
The pilots and the company are at odds over whether the high-cost APA pilots will fly regional jets, which are now flown by regional carriers under contract to American.
“Today, 10 percent of our traffic comes from our regional connection,” Hicks said. “The regional traffic is all about feeding our hubs.”
The company wants to expand the number of flights and the size of aircraft that their regional partners can fly, now limited by the APA contract.
Labor and management also disagree on the extent of code-sharing that American could do with other carriers, a way to expand the carrier’s flight map without hiring more pilots, which pilots see as a barrier to their job growth. The Fort Worth, Texas-based carrier has only limited code-sharing with Alaska Airlines and wants unlimited domestic code-sharing.
American made its case to the judge two weeks ago. The pilots will continue through this week, followed by the flight attendants’ union and the TWU units that didn’t reach agreement with the carrier.
Overhanging the proceeding is another possibility: a merger with US Airways Inc., which has secured the initial support of American’s unions.
However, Hicks said firmly that the section 1133 bankruptcy code hearing was separate from any merger prospect, even one that American now says it will consider.
“US Airways has nothing to do with the 1113 process,” Hicks said.