American Airlines goes back to bankruptcy court in bid to cancel contract with union pilots

Associated Press

DALLAS - American Airlines is going back to court to throw out its contract with union pilots after making changes to satisfy the bankruptcy judge.

If it wins in court, American could cut annual spending on pilots by more than $300 million and do more revenue-sharing deals with other airlines.

American parent AMR Corp. filed a motion in U.S. bankruptcy court in New York on Friday, two days after a judge denied American's first attempt to cancel the pilots' contract. The judge rejected the company's demand for unlimited power to furlough pilots and make so-called code-sharing deals.

AMR now proposes to limit possible furloughs to about 1,750 or less than one-fourth of its pilots, a ceiling set in the pilots' current contract. It seeks to greatly expand code-sharing but not on all routes. Pilots view code-sharing as potential outsourcing of their jobs.

A hearing on AMR's new proposal is scheduled for Sept. 4.

Meanwhile flight attendants are scheduled to complete voting Sunday on their last contract offer from American. If they reject the offer, American will ask the court to throw out that contract too.

Under federal bankruptcy law, companies can nullify union contracts if they convince a judge that the move is necessary for a successful turnaround. American claims that its labour costs are higher than competitors, and it is seeking to impose cost-cutting measures that pilots rejected in a vote last week.

The committee representing AMR's unsecured creditors threw its weight behind the company's strategy.

The committee said Thursday night that it was satisfied AMR's revenue growth and performance since it filed for bankruptcy protection in November, and it opposed any improvement in financial terms for workers beyond those that American has already offered to its unions.

US Airways is pursuing a merger with AMR and reached contingent contracts with American's pilots, flight attendants and ground workers. AMR officials have had a chilly response to US Airways' overtures.

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