Union workers say they were caught off guard when AMR Corp. filed for bankruptcy Tuesday.
Local 565 Transportation Workers Union treasurer Michael Hatfield was getting ready for work when he heard the Fort Worth-based parent company of American Airlines had declared Chapter 11 bankruptcy.
"I was in the shower," Hatfield said. "I saw it on your morning news show."
The news shocked many North Texas union workers.
"It's devastating both personally and professionally," said Tom Hoban, Allied Pilots Association spokesman.
He said the news is devastating because the bankruptcy throws a wrench in the union's contract negotiations with American Airlines.
"It's potentially devastating," Hoban said. "In the restructuring process, we're undoubtedly facing significant pay cuts, reduction in benefits and changes to workload and retirement."
Laura Glading, president of the Association of Professional Flight Attendants, said she thinks the filing will also hurt her workers.
"Do I expect the company will try to reduce benefits and possibly reduce benefits and possibly reduce our pay? I think so," she said.
Union representatives say labor costs were not a significant part of American's problems, pointing to rising fuel costs and revenue projections.
But industry analysts do not agree with that assessment.
"It's really a matter of, American's costs are way higher than their competitors' costs," said Mike Davis, a professor at Southern Methodist University's Cox School of Business. "American has to get their costs down, and labor is a huge part of that cost."
American's labor costs are higher than its competitors'.
Analysts say the airline spends $3,000 per flight hour on salary and benefits compared to United's $2,800, Delta's $2,500 and U.S. Airways' just less than $2,000.
Those three airlines have been through bankruptcy, allowing them to restructure union contracts.
A member of the Transportation Workers Union speaking on background said the timing of the announcement was a surprise, but that the union had been working for almost two years with a bankruptcy attorney.
The TWU worker said the attorney had been working to help the union make a "contingency plan" to protect the worker's interest in case American Airlines filed Chapter 11 bankruptcy.
When the bankruptcy filing was made, the TWU source said the union's attorney immediately filed a "notice of appearance" in a New York court. The TWU source in Washington, D.C. said the filing should make "any documents related to bankruptcy available to us."
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