Coverage of the merger between American Airlines and US Airways

AA, Pilots Return to Court

Fight over rejecting contract continues Tuesday

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    NEWSLETTERS

    American Airlines returns to court on Tuesday in a contentious fight to throw out its contract with pilots and impose cuts -- a move the pilots say would be "professional Armageddon" but the airline argues is necessary to return to profitability.

    American Airlines returns to court on Tuesday in a contentious fight to throw out its contract with pilots and impose cuts -- a move the pilots say would be "professional Armageddon" but the airline argues is necessary to return to profitability.

    The hearing, in U.S. bankruptcy court in New York, comes after the airline struck concessionary deals with its two other major labor groups, which represent flight attendants and ground workers.

    If Judge Sean Lane rejects the pilots' contract, American said it would impose cuts already outlined in a "term sheet," a detailed list of proposals that pilots rejected.

    AA, Pilots Return to Court

    [DFW] AA, Pilots Return to Court
    American Airlines returns to court on Tuesday to throw out its contract with pilots and impose cuts.

    "We will begin to implement the terms from the term sheet that will enable us to achieve our necessary cost savings and continue moving forward toward a successful restructuring," AA spokesman Bruce Hicks said in a written statement.

    The Allied Pilots Association said the cuts would be deep, increasing the number of hours pilots  work and stopping some retirement benefits, leading to fewer jobs and the slashing of other benefits.

    "It's professional Armageddon and doesn't bode well for mending the relationship with this management team going forward," said APA spokesman Tom Hoban.

    Two weeks ago, Lane ruled American had shown that significant changes were needed in its labor contracts but declined to scrap the pilots' deal, saying the airline had overreached on the issues of furloughs and outsourcing.

    Hicks said American has now addressed the judge's concerns, leaving the current contract terms in place on furloughs and proposing less code-sharing -- deals with other airlines that essentially outsource jobs.

    Fort Worth-based American is asking the judge to limit Tuesday's hearing to those two issues.

    Meanwhile, American continues talking with Tempe, Ariz.-based US Airways about a possible merger.

    Pilots say they would fare better if US Airways were to take over American.

    "We have an agreement with US Air. We have since April," Hoban said. "U.S. Airways wants to run an airline."

    In the next few months, US Airways is expected to present its own reorganization plan of how a combined airline would benefit employees, customers and creditors.

    On Friday, British Airways confirmed it also had signed a non-disclosure agreement to engage in merger talks with American, but those negotiations may be complicated by a law restricting foreigners from owning more than 25 percent of a U.S. airline.

    Tuesday's hearing is expected to last just several hours. The judge would most likely announce his decision in the following few days.

    Dallas attorney Mark Ralston, a bankruptcy expert, said he expects American to win.

    "I think the judge is going to accept the modifications and reject the agreement," he said.

    Ralston noted that the imposed cuts would be temporary and the airline and the pilots will ultimately have to negotiate a new contract, a process complicated by the tense relationship between both sides.

    "Let's face it -- American and its labor have had a contentious relationship for a long time," he said.

    Leaders of the pilots' union are making preparations to call a strike vote if the airline implements cuts but acknowledge it would be difficult to strike while the company remains in bankrupcty.

    Editor's Note: NBC 5's Scott Gordon is in New York for Tuesday's hearing, which is set to begin at noon Texas time. Follow his updates on Twitter @ScottGordonNBC5.


    American Airlines Merger:
    Complete coverage of the merger between American Airlines and US Airways into the newly-formed Fort Worth-based company, American Airlines Group (AAL). Click here for more.